Tag Archive | "Ford Motor Co."

Ford’s Mulally Says Economy Is ‘Biggest Concern,’ Sees Second-Half Pickup

Ford Motor Co. Chief Executive Officer Alan Mulally said that while the economy is the automaker’s main concern, he expects conditions to improve in the second half of the year.

“Our biggest concern of course is that the economy has slowed a little bit from where we thought it would be,” Mulally said today in a Bloomberg Television interview. “Having said that, most of the economists believe that it’s going to start picking up in the second half with everything that’s been put in place, both monetarily and fiscally.

“We believe with the economy coming back we’re going to exceed our performance from last year,” he said.

Ford, the second-largest U.S. automaker, said today its global sales will rise 50 percent by 2015 to 8 million vehicles a year as it delivers more small cars and boosts revenue in Asia.

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Automakers Reduce U.S. Incentives in April to Five-Year Low

Automakers reduced spending on discounts and incentives for U.S. customers in April by 14 percent to an average $2,320 per vehicle, the lowest in more than five years, as sales climbed.

Ford Motor Co. average spending on discounts and promotions declined 20 percent from a year earlier to $2,399, Woodcliff Lake, New Jersey-based Autodata Corp. said yesterday. Chrysler Group LLC lowered spending 23 percent to $2,806, and General Motors Co. reduced incentives by 8.1 percent to an estimated $3,068 per vehicle.

Industrywide light-vehicle sales ran at a seasonally adjusted annual rate of 13.2 million in April, Autodata said, accelerating from a year earlier and exceeding the 13 million pace that was the average estimate of 12 analysts surveyed by Bloomberg. Incentives are likely to continue dropping in the coming months due to Japan-related supply shortages, said Jesse Toprak, vice president of industry trends at TrueCar.com.

“The outlook for incentives is that they are going to be down dramatically,” Toprak, whose auto-pricing website is based in Santa Monica, California, said yesterday in a telephone interview.

General Motors Co. reduced incentives by $272, or 8.1 percent from a year earlier, to an estimated $3,068 per vehicle. Toyota Motor Corp., the world’s largest automaker, reduced spending $60, or 3.1 percent, to an estimated $1,885 per unit, Autodata said.

Honda Motor Co., fourth in the U.S. sales by volume, raised incentives to $2,171, 8.7 percent more than a year earlier, according to Autodata. Nissan Motor Co. reduced discounts by 33 percent to $1,998.

The last month that industrywide average incentive spending was lower was October 2005 at $2,204 per unit, David Lucas, an analyst for Autodata, said in an e-mail.

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Ford Says $2.55 Billion First-Quarter Profit May Be Year’s Best

Ford Motor Co. the second-largest U.S. automaker, said the $2.55 billion first-quarter profit it reported yesterday may be the company’s biggest this year as costs increase.

Ford will face $4 billion in higher expenses for commodities, new-product development, engineering, manufacturing and advertising this year. The company also said earnings from its Ford Credit finance unit will be $1.1 billion lower because of changes in lease depreciation and credit-loss reserves, reported Bloomberg.

“There are factors that you have to take into account as you get to the latter part of the year that will possibly result in our profits being lower than the first quarter,” Chief Financial Officer Lewis Booth said yesterday in an interview. “There are factors that we think will perhaps make the first quarter look like a very good quarter.”

Net income rose 22 percent from $2.09 billion a year earlier as fuel-efficient new models won higher prices, Dearborn, Michigan-based Ford said yesterday in a statement. Excluding some items, profit was 62 cents a share, beating the 50-cent average of 14 analysts’ estimates compiled by Bloomberg. Sales rose 4.7 percent to $33.1 billion.

The net income marks Ford’s most profitable first quarter since a $17.6 billion net income in 1998 that included a $16 billion gain from the spinoff of the First Associates Capital Corp. consumer finance unit.

Ford rose 12 cents to $15.66 yesterday in New York Stock Exchange composite trading. The shares have declined 6.7 percent this year.

Chief Executive Officer Alan Mulally has revived the automaker with a focus on fuel economy and raised U.S. prices twice this year as the cost of gasoline gained 26 percent. The prices consumers paid for Ford vehicles rose $900 million worldwide in the first quarter, the automaker said.

The cost of developing new models and improving the Ford and Lincoln brand images will add $2 billion to structural costs this year, Booth said.

“We are going to grow the business,” Booth said. “But growing the business does bring along with it some costs.”

The cost of commodities used in Ford’s cars and trucks will rise $2 billion this year, Booth said. Ford had $300 million in additional commodities expenses in the first quarter and expects an additional $1.7 billion in costs for the remainder of the year, he said.

“We’re seeing some signs of steel beginning to stabilize, the rest of commodities, given the economic activity around the world, we expect to carry on going up,” Booth said. “Even steel is stabilizing at a significantly higher level than last year.”

Ford said its quality performance in the first quarter was “mixed,” falling short of a goal to improve. The automaker said it expects a mixed quality performance for the year, instead of an improved one.

Some of the quality problems have been in the automaker’s touch-screen audio, navigation and communications system, known as MyFordTouch and MyLincolnTouch, Booth said.

“We had a bunch of issues, which were a little disappointing,” Booth said. “The quality issues were more a combination of launching a lot of new products and our volumes going up, rather than necessarily isolated on certain areas.”

Ford still hopes to do well in J.D. Power & Associates’ initial quality survey, where it was the top-ranked mainstream auto brand last year, Booth said.

Ford’s U.S. sales rose 16 percent in the first quarter, excluding the Volvo Cars unit it sold last year, and it outsold General Motors Co. (GM) last month for the second time in 13 years. Ford’s U.S. market share in the quarter fell to 16.2 percent from 16.8 percent as it cut discounts 9.1 percent while GM raised them 11 percent, according to Autodata Corp. in Woodcliff Lake, New Jersey.

Most of Ford’s price improvement came in North America, where net prices rose $700 million on a mix of lower incentives and higher vehicle prices, the automaker said. Ford’s first- quarter sales of $33.1 billion topped eight analysts’ average estimate for $30.8 billion.

Mulally said heated leather seats are one of the top options ordered on the Fiesta subcompact, which traditionally would have been a car sold without such expensive features. As fuel prices rise, consumers are moving to smaller models while still expecting the amenities they had in larger vehicles, he said.

“This is a tremendous change in the auto industry,” Mulally said. “We believe people are making a lifestyle choice and we’re going to see that trend by consumers continue.”

The automaker boosted North American production by 14 percent to 657,000 cars and trucks. Ford has lost 12,000 to 14,000 vehicles of production in Asia this year because of the earthquake in Japan and may lose more, Booth said. There has been no lost production in North America and the quake will have no “material” impact on Ford’s earnings, Booth said.

Pretax profit in the company’s European operations more than doubled to $293 million.

Ford Credit will distribute about $3 billion to the parent company this year, up from expected distributions of about $2 billion the company projected in January, Ford said.

“Ford Credit’s leverage is very low at 7-to-1,” Booth said. “We think we need to improve Ford Credit’s leverage, and we think the auto company can use the cash.”

Ford’s automotive operations had $21.3 billion in cash on March 31, up from $20.5 billion on Dec. 31. The company, which reduced debt by $14.5 billion last year, had automotive debt of $16.6 billion, down from $19.1 billion on Dec. 31. The automaker said it reduced automotive debt by $2.5 billion in the first quarter.

Ford has more debt than rivals because it borrowed $23 billion in late 2006 before credit markets froze, allowing it to avoid the bailouts and bankruptcies that befell the predecessors of GM and Chrysler Group LLC in 2009.

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Ford To Post Highest Earnings Since 1998 On Sales Of Fuel-Efficient Autos

Ford Motor Co. the second-largest U.S. automaker, may report its largest first-quarter profit since 1998 tomorrow as fuel-efficient new models helped sales gain amid surging U.S. gasoline prices.

Profit excluding some items may have climbed to 50 cents a share, according to the average of 14 analysts’ estimates, from 46 cents a year earlier. Net income may have risen to $2.1 billion, the average of three analysts’ estimates compiled by Bloomberg, and the most since a $17.6 billion profit in the first quarter of 1998.

Chief Executive Officer Alan Mulally has worked to boost fuel economy, and sales of more efficient new models such as the Fiesta subcompact and Explorer sport-utility vehicle have risen as gas prices gained this year. Investors remain concerned that surging fuel costs may hurt consumer confidence and car sales, said Gary Bradshaw, a fund manager at Hodges Capital Management.

“I don’t feel as good as I would if I was filling up at the pump for $2.89 instead of $3.89 a gallon,” said Bradshaw, whose Dallas-based firm owns about 200,000 Ford shares. “I still think Ford’s lineup will weather the storm. They’re better prepared this time.”

The rising gas prices have contributed to an 8.1 percent decline in Ford’s shares this year that was worsened by the automaker’s fourth-quarter profit trailing analysts’ average estimate by 38 percent, said Brian Johnson, a Chicago-based analyst with Barclays Capital.

“There’s a healthy level of worry out there,” said Johnson, who rates Ford “overweight” and predicts first- quarter profit of 57 cents a share. “It would be good for them to actually come in with a good number. It would be helpful in putting to rest fears” about fuel prices and the March 11 earthquake in Japan.

While the quake has prompted Ford to sporadically shut down some factories to conserve components that are in short supply, Mulally has said the disaster won’t affect earnings.

“Even though we might slow down or even stop temporarily some of these specific operations, it would have no material impact,” he told reporters in Detroit on April 13. “We have not said anything about any of this affecting our earnings.”

Mulally said Ford is better able to cope with rising fuel prices than in 2008, when an overdependence on trucks and sport- utility vehicles hurt the automaker’s sales as U.S. gasoline peaked at $4.11 a gallon. Regular unleaded gasoline averaged $3.84 a gallon in the U.S. on April 20, a 34 percent gain from a year earlier, according to AAA.

Ford, which had $30.1 billion in losses from 2006 through 2008, earned $6.56 billion last year as Mulally expanded the lineup with a focus on fuel economy. The Fiesta gets as much as 40 miles per gallon in highway driving, and the redesign of the Explorer sport-utility vehicle boosted its fuel efficiency about 30 percent, Mulally said.

Explorer sales more than doubled in the first quarter, and Fiesta deliveries in March were more than twice its sales in January.

“With the fuel prices moving up, we now have the vehicles that people want,” Mulally said. “The largest vehicles are slowing down a little bit, but all these smaller ones from Ford are now available.”

Ford rose 34 cents, or 2.3 percent, to $15.43 in New York Stock Exchange composite trading on April 21. The shares gained 68 percent in 2010.

Ford may benefit from the earthquake because it is having a greater impact on the production of Japanese automakers such as Toyota Motor Corp., Johnson said. That will give Ford an opportunity to sell more of its new small models and command higher prices because fuel-efficient cars are in short supply.

“We estimate Toyota’s production will be cut by more than 50 percent, which creates a share gain and pricing opportunity for Ford,” Johnson said. “Ford has better cars and better price points on their product line” than during the last fuel price surge in 2008.

The average price consumers paid for Ford’s models rose 2.6 percent in the first quarter, George Pipas, the automaker’s sales analyst, said on an April 1 conference call. Consumers paid an average of $31,508 for Ford models in the first quarter, a 3.9 percent gain from $30,319 last year, according to Santa Monica, California-based researcher Edmunds.com.

“We’re fairly comfortable that their earnings power will be turning around,” said Johnson, who estimates share gains and higher prices may add $1.6 billion to Ford earnings this year.

Ford fell short of its U.S. retail market share goal in the first quarter, according to the automaker’s federal filings. Ford had 13.6 percent of the U.S. retail auto market in the quarter, which excludes sales to fleet buyers, trailing the 14.1 percent target set by the company’s board.

Ford’s total U.S. market share fell to 16.2 percent from 16.8 percent, according to Autodata Corp. of Woodcliff Lake, New Jersey. Ford’s U.S. sales rose 16 percent in the first quarter, excluding the Volvo Cars unit it sold last year, and trailed the industrywide gain of 20 percent, Autodata said.

Ford, which surpassed General Motors Co. (GM) in sales in March for the second time in 13 years, won’t resort to heavy discounts to reverse its share losses, Mulally said. GM increased sales incentives 11 percent in the first quarter, while Ford reduced them 9.1 percent, according to Autodata.

“The most important thing about our plan is profitable growth,” Mulally said. “We will always be very disciplined about our production and our pricing and have the pricing reflect the real demand and inherent value of the product.”

Ford’s pretax profit may rise to $2.24 billion in the first quarter, from $2.14 billion last year, according to the average of five analysts’ estimates. Revenue may fall to $30.8 billion, the average of eight analysts’ estimates, from $31.6 billion last year.

Ford avoided the government bailouts and bankruptcies that befell the predecessors of GM and Chrysler Group LLC in 2009. Ford borrowed $23 billion in late 2006, after Mulally arrived from Boeing Co. and before credit markets froze. The automaker put up all major assets as collateral, including the Ford logo, and used the funds to develop the more fuel-efficient lineup.

“I’m betting with Ford management, that they’ve made the right calls for the long term and have good products,” Bradshaw said. “These higher prices for oil may be here forever and we’re just going to have to deal with it.”

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Ford Said To Have Closed 20 Percent Of Metropolitan Lincoln Dealership Locations

Ford Motor Co. has cut about 20 percent of its metropolitan Lincoln dealerships in the past six months as it seeks to revive its luxury line and boost sales at the remaining stores, said a person familiar with the situation.

The automaker now has about 400 Lincoln dealers in the nation’s top 130 metropolitan markets, said the person, who asked not to be identified revealing internal data. Ford told Lincoln dealers in October that it planned to eliminate 175 of its 500 metro Lincoln outlets, reported Bloomberg.

“Our vision is to substantially reduce the number of dealers to become competitive,” Mark Fields, Ford’s president of the Americas, said Oct. 5 after meeting with Lincoln dealers in Dearborn, Michigan, where Ford is based. “We need to make sure our dealers are competitive in their throughput so they can provide the experience our customers expect.”

Ford executives are meeting today and tomorrow in Dearborn with the 12-member Lincoln dealer council to review plans for upgrading customer service and redesigning models to reverse declining sales, the person said. Lincoln sales have fallen 11 percent this year, while the overall U.S. auto market has gained 20 percent, according to Autodata Corp.

Lincoln sales have plunged almost two-thirds from their 1990 peak and averaged 1.4 cars sold a week for each dealer in the first quarter, according to Autodata, based in Woodcliff Lake, New Jersey. Lincoln, which was last the top-selling luxury brand in the U.S. in 1999, sold 36 percent as many models as Daimler AG’s Mercedes-Benz in the U.S. in the first quarter.

“With Lincoln, we’re clearly in a transition period,” Ford Chief Executive Officer Alan Mulally told reporters April 13 after a speech in Detroit. “Our commitment to the dealers now is that we’re going to make a fantastic family of vehicles that will be very competitive. We’re all going through some transition as it takes time to get these vehicles to market.”

Ford has said it plans to introduce seven new or significantly redesigned Lincoln models, including a small car, by 2014. The automaker has overhauled Lincoln’s design theme to outfit vehicles with prominent, split-bow grilles and is dedicating design, engineering and marketing staff to the brand, rather than having it share with Ford.

Ford had planned to unveil a new look for Lincoln in a concept car at the New York auto show this week. The automaker delayed that introduction indefinitely after hiring Cadillac stylist Max Wolff in December as Lincoln’s new chief designer, people familiar with the plans have said.

Ford hasn’t revealed a timeline for when it expects to reach its goal of about 325 Metro Lincoln dealers. Ford also has about 700 Lincoln dealers in rural areas, which aren’t targeted for closing.

Ford had reduced its metro Lincoln dealer count to 434 by February, Ken Czubay, vice president of U.S. sales, said at the time. The cuts are aimed at discouraging Lincoln dealers from competing against each other on price so they can take on the luxury brands of other automakers.

Since October, Ford has been meeting with Lincoln store owners to lay out new expectations, including upgraded customer service and renovated showrooms, at a cost of as much as $2 million per store, dealers have said.

Ford is offering to buy out Lincoln dealers or pair them with Ford franchises, where sales have risen 25 percent this year.

Beginning Aug. 31, Lincoln dealers have to meet new standards for staffing, training and begin providing owners with perks such as car washes. Ford is seeking to upgrade the buying experience to emulate Bayerische Motoren Werke AG, Toyota Motor Corp’s Lexus and Mercedes-Benz. Lincoln dealers who fail to meet the new standards may not receive as much financial support from Ford, the person said.

Mulally is seeking younger buyers and a bigger slice of the more-profitable premium-car market with models such as the MKZ gasoline-electric hybrid sedan and touch-screen technology to operate phone, stereo, navigation and climate controls.

Since arriving from Boeing Co. in 2006, Mulally has sold Jaguar, Land Rover, Aston Martin and Volvo to focus solely on Lincoln for the automaker’s luxury strategy.

“The whole plan was that we divest ourselves of the other premium brands,” Mulally said. “We had all these other luxury brands and we didn’t invest as much in Lincoln.”

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Ford Missing Market-Share Goal Adds Pressure To Cut Prices

Ford Motor Co., after increasing its share of the U.S. light-vehicle market for the last two years, is falling short of its retail goal this year, which may put pressure on the automaker to offer larger discounts.

Ford in the first quarter had 13.6 percent of the U.S. retail auto market, which excludes sales to fleet buyers, according to researcher Edmunds.com. That trailed the 14.1 percent target Ford’s board set for executives to match or exceed this year, according to the Dearborn, Michigan-based automaker’s government filings, Bloomberg reported.

Ford’s share slipped as General Motors Co. increased sales incentives 11 percent in the first three months of the year, according to Autodata Corp. of Woodcliff Lake, New Jersey. Ford, which reduced discounts by 9.1 percent in the first quarter, saw its total U.S. market share fall to 16.2 percent from 16.8 percent a year earlier, Autodata said.

“We believe Ford’s management could be forced to become more aggressive with incentives to avoid additional market share loss,” Joseph Amaturo, an analyst with the Buckingham Research Group who rates Ford “neutral,” said in an April 12 research note. “We are increasingly concerned about net-price erosion.”

Chief Executive Officer Alan Mulally, who has emphasized profits over market share, said Ford will maintain pricing discipline.

“The most important thing about our plan is profitable growth, so that leads us to tremendous discipline on everything about the business,” Mulally told reporters April 13 in Detroit. “The number one thing is to match the production capacity to the real demand.”

Ford, which earned $6.56 billion last year, failed to achieve its market share targets globally and in the Americas, according to its proxy statement filed this month. Ford achieved 44 percent of its corporate market-share goal and 58 percent of its target for the Americas, the proxy said.

Ford has said its market share in Europe fell to 7.6 percent last year from 8.9 percent in 2009 as it resisted matching competitors’ discounts. The automaker said its retail market share in the U.S. last year was 14.1 percent, trailing the board’s 14.2 percent target.

Mulally said Ford will continue to avoid the heavy, profit- eroding discounts that U.S. automakers used in the past to keep factories running.

“We will always be very disciplined about our production and our pricing and have the pricing reflect the real demand and inherent value of the product,” he said.

Ford hasn’t met its retail market-share target in any month since October, when it sold 14.5 percent of the cars and trucks purchased by individual consumers, according to automotive researcher R.L. Polk & Co. of Southfield, Michigan. Ford’s retail share fell to 13.2 percent in February, the most recent month Polk has analyzed.

In March, Ford raised incentives and surpassed GM in monthly U.S. sales for the second time in the last 13 years, said Michelle Krebs, a West Bloomfield, Michigan-based analyst for Edmunds.

“GM’s retail share was higher than Ford’s in March, despite Ford beating GM in total,” Krebs said. “Not good if Ford resorts to incentives as well as high fleet percentages again – old habits.”

Ford should continue to put a priority on profits over market share, said Brian Johnson, a Chicago-based analyst for Barclays Capital.

“Anyone would like to improve market share; the question is how do you go about doing that without resting on the easy crutch of incentives,” said Johnson, who rates the shares “overweight/neutral.” “They were well ahead of plan on profit, cash flow, pricing and cost reduction, even if market share was a bit low.”

Ford’s total U.S. market share rose to 16.7 percent last year from 14.4 percent in 2008, according to Autodata, as new models such as the Fusion sedan and Fiesta subcompact attracted buyers. Ford’s share gains in 2009 and 2010 represented the first consecutive annual improvements since 1992 to 1993, the company said.

Ford also gained consideration from car buyers when it avoided the bankruptcies and government bailouts that beset the predecessors of GM and Chrysler Group LLC in 2009.

Ford’s board used market-share targets for 8.33 percent of its formula for determining cash bonus and performance stock grants for top executives. The board’s compensation committee said U.S. retail share is “the best measurement” of consumer acceptance.

Global profits before taxes accounted for 30 percent and automotive operating cash flow accounted for an 30 percent, according to the proxy. Business unit profit before taxes accounted for 15 percent of the formula, while cost performance and quality each represented 8.33 percent.

Ford executives’ performance exceeded every target except market share, according to the filing.

Compensation for Ford’s five top-paid executives rose 64 percent to $75.9 million last year from $46.4 million in 2009, according to the proxy. That included incentive bonus awards paid at 180 percent of the target on the corporate level and 181 percent for the Americas region.

The board’s compensation committee wrote that it “considered our outstanding 2010 performance-to-metrics and our execution of our One Ford Plan as the primary reasons for paying out the award to the full extent that they were earned.”

Ford shares, which climbed 68 percent in 2010, fell 10 cents to $14.71 at 4 p.m. in New York Stock Exchange composite trading. The shares have dropped 12 percent this year.

Mulally’s 2010 compensation rose 48 percent to $26.5 million, including salary, bonus, stock, option awards and other pay. Ford last month also gave Mulally $56.5 million in stock for the turnaround since he joined the automaker from Boeing Co. in 2006. He halted three years of losses and led Ford to $9.28 billion in net income in the last two years.

“I am very pleased that we continue to align the compensation with the business performance of Ford,” Mulally said April 13 when asked about criticism of his pay package by the United Auto Workers union. “This is the way it should be.”

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