This summary is based on the fourth quarter fiscal 2008 earnings call conducted by Ford Motor Co. (F) on 29 January, 2009.
Management:
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President and CEO: Alan Mulally
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EVP and CFO: Lewis Booth
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VP and Treasurer: Neil Schloss
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Vice Chairman and CFO of Ford Motor Credit: K.R. Kent
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Director of IR: Bill Agney [ph]
Key Investors Issues
- Revenue was $29.2 billion, down 36% from $45.5 billion a year ago.
- Net loss was almost $5.9 billion or $2.46 a share, including about $1.4 billion of pre-tax special charges from a loss of $2.8 billion or $1.33 a share in 2007.
Full Year Highlights:
- Revenues were down $34.6 billion to $139.3 billion in the prior year.
- Net loss was $14.6 billion or $6.41 a share.
Fourth Quarter Highlights
Revenue was $29.2 billion, a $16.3 billion decrease from $45.5 billion a year ago primarily explained by lower volume, the sale of Jaguar Land Rover, and exchange translation.
- Net loss was almost $5.9 billion or $2.46 a share, including about $1.4 billion of pre-tax special charges from a loss of $2.8 billion or $1.33 a share in 2007 on sharpening lower industry volumes and access to reduced dealer stocks to keep them in line with near term demand and expectations.
- The firm ended with $13.4 billion of cash, down about $21 billion from year-end 2007 levels, with almost $16 billion of that decline occurring during the first nine months of the year.
- In North America, the firm recorded a charge of $329 million largely related to the personnel reduction programs in the US.
International operations incurred $280 million of charges related to personnel reduction programs, primarily related to implementation of Volvo’s and Asia Pacific’s restructuring plans.
- The firm recognized a gain of $82 million due to the planned reductions in the number of employees and job security benefits reserve, primarily due to the utilization of these employees at other plant locations.
- It recorded a charge of $224 million for accelerated depreciation related to AAI lease buyouts at our area and facility and recognized the $201 million loss on the sale of a portion of the investment in Mazda.
- Volume and mix was about $2.8 billion unfavorable primarily due to a decline in industry volumes from the impact of lower dealer stocks across all of the automotive operations, partly offset by market share improvements.
Net pricing was about $200 million unfavorable explained by declines in Volvo and in North America, offset partly by improvements in Europe and South America.
- Net interest and related fair market value adjustments were $200 million unfavorable primarily due to lower cash balances and lower interest income rates.
- Warranty expense was over $100 million lower as a result of improved quality and manufacturing and engineering costs were over $1.5 billion lower, largely reflecting the continued benefit of restructuring actions in North America.
- Spending related costs improved by about $1.3 billion, primarily reflecting lower expense related to North America asset impairment with the non-recurrence of accelerated depreciation and amortization for facilities that were recently closed.
- Pension and retiree health care expenses were about $1.2 billion lower, primarily reflecting health care efficiencies and the effect of the US hourly retiree health care VEBA agreement.
- Overhead costs were over $1 billion lower primarily due to restructuring actions.
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US industry volumes were down 35% from the year ago, and the other major markets were down 12% to 27% while cost reductions provided a significant offset to these declines.
- The firm reduced automotive costs by over $1.4 billion, compared to 2007, with $1.2 billion of that improvement occurring in North America.
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Ford’s South America earned an operating profit of $105 million, $313 million decrease from a year ago reflecting lower industry volume and higher material costs, partly offset by favorable net pricing.
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Ford Europe: incurred a $330 million operating loss, a $553 million decline from a year ago.
- The decline was more than explained by lower industry volume, unfavorable exchange, and lower dealer stocks, partly offset by cost reductions.
- Wholesales were 378,000 units, down 109,000 units from a year ago while industry SAAR for the 19 markets that Ford tracked was 14.8 million units, down19% from a year ago.
- In addition, the Russian industry SAAR was 2.7 million units, down 300,000 units or 10% from a year ago.
- Revenue was $7.6 billion, a $2.8 billion decrease from a year ago, primarily due to lower volume and unfavorable currency translation partly offset by favorable mix.
Volume and mix was $500 million unfavorable more than explained by the decline in industry volume and lower dealer stocks partially offset by improved market share as industry volume decline reflects significant economic weakening.
- Net pricing was $100 million favorable compared to a year ago on favorable vehicle pricing, primarily in Britain and Germany, in part to offset unfavorable currency exchange effects.
- Cost decreased by $200 million, reflecting lower warranty costs driven by continued progress in quality, lower manufacturing and engineering costs to allow capacity and demand, and reduction in pension costs, partly offset by higher commodity costs.
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Volvo incurred a $736 million operating loss, compared with a breakeven a year ago reflecting lower industry volume, unfavorable net pricing, and unfavorable exchange.
- Wholesales were 80,000 units, down 47,000 units from a year ago with the reduction explained by the sharply lower industry volumes primarily in the UK and Europe and reduction in market share.
- Revenue was $3.3 billion, a $1.8 billion decrease from a year ago primarily explained by lower volume and favorable net pricing and unfavorable currency translation.
Volume and mix was $500 million unfavorable, primarily reflecting lower industry volume and market share.
- Net pricing was $200 million unfavorable compared to a year ago, primarily reflecting an increase in spending in Europe and Russia, but lower residual values in the US.
- Cost decreased by over $100 million largely explained by actions taken to reduce structural costs.
- During 2008 the Volvo initiated restructuring actions reduced total personnel levels by 6,000 people or around 25% and these actions were largely implemented by the end of the fourth quarter.
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Ford Asia Pacific and Africa incurred an operating loss of $208 million, a $218 million decline from a year ago on lower industry volume again, unfavorable exchange, and adverse product mix.
- Wholesales were 99,000 units, a decrease of 46,000 units compared with 2007, primarily reflecting industry weakness in both markets and lower dealer stocks.
- Revenues, which excludes sales of the joint venture in China, was $1.4 billion, a $300 million decrease from a year ago more than explained by lower volume and unfavorable currency translation.
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Financial services incurred an operating loss of $384 million, a $653 million decline from a year ago.
- The decline was primarily explained by higher provision for credit losses, market valuation adjustments to derivatives, and lower volume.
