Ford cuts earnings outlook, shares skid

[notiCIas]

Ford cuts earnings outlook, shares skid

No. 2 automaker's cuts necessary but not sufficient to boost flagging U.S. sales, analysts say.

June 21, 2005: 6:49 PM EDT

DETROIT (Reuters) - Ford Motor Co. slashed its full-year earnings outlook Tuesday and said it was planning more job cuts and belt-tightening measures as it struggles to offset slumping U.S. vehicle sales.

The nation's No. 2 automaker, which has warned that its core automotive operations may not be profitable this year, said its full-year profit outlook was being cut to a range of $1.00 to $1.25 a share, down from a previous forecast of $1.25 to $1.50.

It was the second lowering of the 2005 earnings outlook at Ford, whose U.S. sales have dropped for 12 straight months.

Ford (Research) stock sank 4 percent in after-hours trading after rising about 0.5 percent in regular New York Stock Exchange trading.

In addition to the elimination of 2005 bonuses for salaried management employees worldwide, Ford said it was suspending 401(k) matching grants for its salaried workers and also planning to cut another 5 percent, or about 1,700, of its salaried jobs in North America.

The job cuts are in addition to 1,000 salaried positions Ford said it was targeting for cuts in April.

"We're taking steps to immediately reduce our salaried-related costs," Chief Financial Officer Don Leclair said in a statement.

"Challenges continue to mount," said Leclair, referring especially to Ford's troubled North American automotive operations.

Both Ford and its larger cross-town rival General Motors Corp. (Research) have been reeling this year from a dramatic slowdown in sales of their mid- and large-size sport/utility vehicles.

The fuel-thirsty SUVs, former profit engines for Detroit's automakers, have entered the slow lane of the U.S. vehicle market as consumer sentiment changes in the face of high gasoline prices.

Ford and GM, corporate giants wounded by a cut in their credit ratings to "junk" status just last month, have been losing sales and U.S. market share even as more nimble Asian rivals report strong gains.

In addition to its planned job cuts in North America, Ford said it was "evaluating options for reducing personnel-related costs outside North America."

It did not elaborate.

But Tim Ghriskey, chief investment officer with Solaris Asset Management, said Ford was clearly looking at more sweeping turnaround efforts as it struggles to return its auto operations to sustainable profit.

"This is an initial foray into perhaps more restructuring moves to come. It's certainly a good start, but well anticipated by Wall Street analysts," Ghriskey said, pointing to Ford's lowered earnings projection being in line with analysts' expectations.

Wall Street analysts, on average, had been expecting Ford to earn $1.19 a share this year, excluding one-time items such as its costly bailout of former auto parts subsidiary Visteon Corp. (Research), according to Reuters Estimates.

Ford cited "supplier-related challenges" as well as lower car sales as a factor behind its lower profit view.

"They're making the point that the salaried personnel are taking the brunt of this restructuring. The next step is to trying to get the union to acquiesce to some changes as well," Ghriskey added.

He was referring to the United Auto Workers union whose binding contracts with Detroit's traditional Big Three automakers include virtual bans on plant closings, mass layoffs or unilateral cuts in health care and other benefits that are the gold standard of the manufacturing sector.

"It's real. It's big, but it's also a prelude to going back to the union," analyst David Healy of Burnham Securities said of the cuts Ford unveiled Tuesday.

"The 400-pound gorilla is North America. That's the big swing item and that's where they've got to cut costs," he said.

Given the troubles facing U.S. automakers, will GM get booted from the Dow?