Fibonacci

gavril's got the GM news covered - now it's Ford's turn....

Ford Shares, Bonds Drop After Cut in Profit Forecast (Update10)
2005-04-11 14:17 (New York)


By Bill Koenig
April 11 (Bloomberg) -- Ford Motor Co.'s shares and bonds
fell after Chief Executive William Clay Ford Jr. cut the
company's 2005 profit forecast amid plunging sales of U.S.
pickups and sport-utility vehicles.
Shares of Ford, the second-biggest U.S. automaker, dropped
as much as 8.5 percent. The yield for Ford's 7 percent notes
maturing in 2013 widened to its highest level ever. Fitch Ratings
joined Standard & Poor's in changing its outlook on Ford to
``negative,'' and analysts cut their ratings on Ford stock.
Ford Motor said after the close of regular trading April 8
that it expects its auto operations to ``break even at best.''
The company backed off a Jan. 25 forecast of $1.5 billion in
pretax auto profit and a corporate target of $7 billion for 2006,
set three years ago. Ford and rival General Motors Corp., which
cut its 2005 earnings forecast on March 16, have been losing
market share to Toyota Motor Corp. and other Asian competitors.
``I think there's some very, very long-term problems taking
place here,'' said Dan Genter, president of Los Angeles-based RNC
Genter Capital Management, which manages $2 billion, including
Ford and GM bonds. The bond market is telling Ford and GM
``there's real concern,'' he said.
GM's and Ford's U.S. sales have each fallen 5.2 percent this
year. Ford's market share in the first quarter dropped almost a
point, to 19.5 percent. Sales of its high-profit Explorer sport-
utility vehicle have plunged 25 percent as U.S. gasoline prices
climb to record highs. Sales of Ford's F-series pickups, the
nation's best-selling vehicle, are down 9.4 percent.

Shares Fall

Ford shares fell 64 cents, or 5.8 percent, to $10.39 at 2:13
p.m. in New York Stock Exchange composite trading after earlier
dropping to $10.09. The shares traded at their lowest levels
since May 2003.
Ford's decline rippled through automotive stocks. Shares of
GM, the world's largest automaker, fell 58 cents, or 2 percent,
to $28.92 in New York Stock Exchange composite trading. Auto
supplier stocks fell, too.
The extra yield, or spread, for Ford's 7 percent notes
maturing in 2013 widened by 100 basis points from trading on
April 7 to as much as 435 basis points, the highest level since
the bond was issued in September 2003, according to Trace and
Bloomberg data. Its price fell to 89.84 cents on the dollar and
yield rose to 8.72 percent.
Fitch Ratings today changed its outlook on Ford to
``negative.'' Fitch rates the automaker's senior debt at BBB+, or
three levels above junk. Mark Oline, a Chicago-based managing
director and credit analyst at Fitch, said any lowering would
probably be ``a one-notch downgrade.''

Standard & Poor's

Standard & Poor's, which rates Ford debt BBB-, one level
above junk, changed its outlook to ``negative'' 20 minutes after
Ford's April 8 announcement. The change means Ford rating is more
likely to be downgraded than left unchanged.
``The rating could be lowered at any point if we came to
doubt that Ford was on a trajectory to realizing,'' an
improvement, S&P analyst Scott Sprinzen said in a statement.
Scott Merlis, an analyst with Thomas Weisel Partners today
cut his rating on Ford to ``peerperform'' from ``outperform.''
Caylon Securities (USA) Inc. analyst Joseph Amaturo lowered his
rating on Ford to ``neutral'' from ``add.''

End of Gains

The steady financial gains made by Ford Motor under Bill
Ford, 47, are over. The Dearborn, Michigan-based company went
from a $5.45 billion loss in 2001 to a $3.49 billion profit in
2004 after cutting more than 30,000 jobs.
In addition to falling truck sales, new cars have yet to
deliver a boost. Bill Ford set the goal 2006 goal for $7 billion
in pretax profit in January 2002, within three months of ousting
predecessor Jacques Nasser. At the time, he said the company
would get ``back to basics'' by building great vehicles and
rebuilding frayed relations with workers, dealers and parts
suppliers.
Ford Motor pared its 2005 forecast to $1.25 to $1.50 a share
from a projection of $1.75 to $1.95. Ford doesn't make forecasts
on a net-income basis. The forecasts also exclude some costs the
company considers one-time items.
The reduction in the forecast means a decline of $1 billion
in net income from the mid-point of the previous 2005 projection,
according to an estimate by CreditSights Inc. Ford spokesman
Glenn Ray didn't immediately return a phone message seeking
comment.
Ford has about $98 billion of bonds outstanding, $19 billion
of which are denominated in euros. Ford is the second-biggest
debtor in the benchmark Lehman Credit Index, behind General
Electric Co.

`Disaster'

``What a disaster,'' said Sean Egan, managing director at
Egan-Jones Ratings Co., an independent debt-rating firm in
Haverford, Pennsylvania, in an interview. Bill Ford's ``$7
billion target was something he's been focused on since taking
the helm. It's his Nirvana.'' Egan-Jones Ratings rates Ford's
debt at BB-, three levels below investment grade.
J.P. Morgan today reduced its earnings per share estimate
for Ford by 18 percent to $1.35 for this year and by 26 percent
to $1.45 for 2006.
Shares of Johnson Controls Inc., the world's largest
automotive-seat maker, fell as much as 2.2 percent. Shares of
Lear Corp., the world's largest maker of automotive interiors,
fell as much as 4 percent, and shares of American Axle &
Manufacturing Holdings Inc. declined as much as 5.1 percent
As recently as Jan. 25, Bill Ford congratulated himself and
his managers at a New York meeting with investors for living up
to promises he'd made each year since he took over in 2001.
``We'll do it again,'' he vowed.
The automaker's newest car models have gotten a mixed
reception. Sales of a redesigned Mustang sports car rose 16
percent in the first quarter. The Flat Rock, Michigan, plant that
produces the car is running overtime. Sales of the Five Hundred
sedan and Freestyle wagon got off to a slow start, with the
Chicago plant that produces them working at only 85 percent of
capacity.

Leaning on Finance Arm

To earn $7 billion in a year, Ford needed to begin making
more profit from building cars and trucks than from lending money
to car buyers. In 2004, Ford Motor Credit Co., its auto-loan
unit, accounted for more than more than 80 percent of the
automaker's profit.
Bill Ford said in the statement on April 8 that his company,
founded by his great-grandfather, is ``not immune to the broad
economic challenges we all face in our industry.'' The statement
cited rising gasoline and steel prices and increased health-care
costs.
Ford and Detroit-based GM are losing customers to foreign
competitors. Toyota's share of the U.S. market rose to 13 percent
in the first quarter from 11.9 percent a year earlier, according
to Autodata Corp. of Woodcliff Lake, New Jersey. Toyota sales
increased 9.1 percent during the period.

Overcapacity

``There's still an issue of overcapacity,'' said Gary Dugan,
head of equity research at Barclays Investment Services in
London, which manages $98 billion and is Ford's largest investor.
``The industry has no pricing power at all, and therefore any
increase in input prices can't be passed on to customers and
provides a very significant squeeze on profitability.''
Ford continues to emphasize cost cutting as sales slide.
Ford told employees last week it will offer buyouts and early
retirements to U.S. salaried workers to eliminate 1,000 jobs. The
company ``must work aggressively on our cost base to meet our
financial targets,'' Executive Vice President Greg Smith said in
an e-mail to employees on April 4.

Jobs Eliminated

Those cuts came after Bill Ford eliminated 33,811 jobs, or
9.4 percent of his company's workforce from 2002 through 2004,
according to U.S. regulatory filings.
Bill Ford, in his Jan. 25 presentation to analysts in New
York, said cost cutting ``is the one lever we can pull.'' He also
said at that time cost cutting has limits. ``As many of you have
reminded us, you can't cost-cut your way to prosperity.''

--With reporting by Jeff Green and Jeff Bennett in Southfield,
Michigan, Alan Ohnsman in Los Angeles, Walden Siew in New York,
Alan Katz in Paris, Melanie Bull, Nigel Stevenson and John Dawson
in London, and Fabienne Lissak in Paris. Editors: Nol, Versical,
Kraus, Stets, Rule, Stets, Versical

Story illustration: For a breakdown of Ford's bond maturities and
outstanding bond debt,

biker

Like GM, Ford put its hopes on making its money on gas guzzling trucks and SUV at the expense of ignoring the traditional car market. Well now, it's gonna bite them in the a$$.

bl^5

They made a KILLING on the SUV's though, so they can more than afford to take a bite in their BIG OL' AZZES while they put some concentration back into the car arena. Ford's gonna be alright!

GM, well, that's a whole 'nother story!

Loseit

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jackasses