Ford Earns a Record $6.9 Billion in 1997
27 January 1998
Ford Earns a Record $6.9 Billion in 1997, up 56%; Global Competitive Position Strengthened by Lower Total Costs, Improved Product Quality
DEARBORN, Mich., Jan. 27 -- Ford Motor Company
earned a record $6.9 billion in 1997, an increase of 56 percent over earnings
of $4.4 billion in 1996. Earnings per diluted share of common and Class B
stock were $5.62, compared with $3.64 in 1996. Total revenues grew
4.5 percent to $154 billion.
Fourth-quarter earnings, also a record, were $1.8 billion, up 49 percent
and the seventh consecutive quarter of year-to-year improvement.
"It was a very good year," said Chairman and Chief Executive Officer Alex
Trotman. "We exceeded all of our financial goals for 1997 and delivered a
57 percent total return to our shareholders. Revenues grew, automotive
returns were up, quality improved sharply, customer satisfaction was up and
total costs came down." At constant volume and mix, total automotive costs
declined $3 billion in 1997.
"Our cost improvement came from the fundamental reprocessing of our
business that we call Ford 2000," Trotman said. "A continued strong focus on
total cost reductions, quality improvements, and efficiencies -- using best
practices and economies of scale throughout the organization -- contributed to
the excellent results."
"We're replacing low-margin, slow-selling products with higher margin
products that are in hot demand," he said. In North America and Europe, Ford
took steps in 1997 to rebalance its manufacturing capacity to produce a richer
product mix. New products in 1997 included Jaguar XK8, Puma, Courier, Lincoln
Town Car and Navigator, Grand Marquis, Crown Victoria, and Ka in Brazil. Five
vehicle lines were discontinued, and the heavy truck business was sold.
AUTOMOTIVE OPERATIONS SET NEW RECORDS
Full-year net income from automotive operations was a record $4.7 billion,
up from $1.6 billion earned in 1996. Worldwide automotive return on sales was
3.9 percent, up 2.5 points from 1996 and the best since 1989.
In the U.S., Ford earned a record $3.7 billion in 1997, up from $2 billion
earned in 1996. Outside the U.S., Ford earned $1 billion, compared with a
loss of $352 million in 1996. Ford's European automotive operations earned
$273 million, compared with a loss of $291 million in 1996. Greater
efficiencies and lower separation costs more than accounted for the
improvement. In South America, Ford earned $40 million, compared with a loss
of $642 million in 1996. The improvement stemmed from the strong acceptance
of new products, growth in unit sales of 41 percent in Brazil and Argentina
and lower costs from higher efficiencies and rebalancing manufacturing
capacity.
"In Europe, Ford made real progress in 1997," Trotman noted, "but the
European market is still a struggle for everyone. In South America, we made
great strides with new products, greater efficiencies and increases in
quality. We'll continue to build on this momentum in 1998, but the present
economic environment means that breaking even will be difficult."
In the rest of the world, Ford earned $695 million, reflecting strong
results in Australia, Canada and Mexico. In Canada, Ford achieved truck
leadership for the second year in a row and sales growth for the third year in
a row.
FINANCIAL SERVICES EARN $2.2 BILLION
Ford's financial services businesses earned $2.2 billion in 1997, compared
with a record $2.8 billion in 1996.
Ford Credit earned $1 billion, compared with $1.4 billion in 1996. The
decline reflects primarily depreciation expenses on leased vehicles and higher
credit losses, partly offset by lower operating costs and higher financing
volumes.
The Associates earned a record $1 billion, the 23rd
consecutive year of increased earnings, compared with $857 million a year ago.
Ford's full-year share was $832 million. Hertz earned a record
$202 million, the fifth year of increased earnings. In 1996, Hertz earned
$159 million. Ford's full-year share was $168 million.
FOURTH QUARTER
Ford earned a record $1.8 billion in the fourth quarter, or $1.45 per
diluted share of common and Class B stock. The 1997 results compare with
$1.2 billion or 99 cents in 1996.
U.S. automotive operations earned a record $1.2 billion, compared with
$628 million a year ago. Outside the U.S., automotive operations earned
$148 million, compared with a loss of $238 million in 1996.
Ford's financial services businesses earned $455 million in the fourth
quarter, compared with $814 million a year ago. The fourth quarter of 1996
included a one-time favorable impact of $204 million from the Budget Rent a
Car transaction.
Ford Credit earned $218 million, compared with $385 million in 1996. The
Associates earned an all-time record of $278 million, compared with
$234 million. Ford's fourth-quarter share was $224 million. Hertz earned
$35 million, compared with $36 million in 1996. Ford's fourth-quarter share
was $28 million.
DELIVERING VALUE TO SHAREHOLDERS
A number of steps were taken in 1997 to increase shareholder value. Both
earnings and cash flow set records. The dividend was increased, an initial
public offering of Hertz was completed, and Ford's automotive components
businesses were organized as a new entity, Visteon. Ford also announced that
it would distribute its remaining 80.6 percent interest in The Associates to
Ford shareholders. The plan is before the Internal Revenue Service to
determine that the distribution will be free of U.S. income taxes. A ruling
is expected in the first quarter of 1998.
"Our Ford 2000 strategy is working," Trotman said. "We've improved our
global competitiveness -- better quality, lower costs and faster speed to
market. In 1998, we'll continue to focus on these same fundamentals to drive
the business."
SUMMARY OF 1997 COMPARED WITH 1996
Overview
. Total earnings were a record $6.9 billion, up 56 percent from earnings
of $4.4 billion in 1996.
. Diluted earnings per share were $5.62, compared with $3.64 a share.
. Worldwide sales and revenues were $154 billion, compared with
$147 billion.
. Stockholders' equity at year-end was $30.7 billion, compared with
$26.8 billion.
Automotive
. Net income from worldwide automotive operations was a record
$4.7 billion, compared with $1.6 billion in 1996.
. Net income from U.S. automotive operations was a record $3.7 billion,
compared with $2 billion.
. Automotive operations outside the U.S. earned $1 billion, compared with
a loss of $352 million in 1996. In Europe, Ford earned $273 million,
compared with a loss of $291 million in 1996. In South America, Ford
earned $40 million, compared with a loss of $642 million last year.
. Worldwide return on sales was 3.9 percent, compared with 1.4 percent in
1996. In the U.S., return on sales was 4.6 percent, compared with
2.7 percent.
. Worldwide vehicle unit sales were 6,943,000 in 1997, compared with
6,653,000 in 1996.
. Combined full-year car and truck market share in the U.S. was
25 percent, compared with 25.2 percent. In the fourth quarter, U.S.
market share was 24.9 percent, compared with 26.2 percent in 1996.
. Combined car and truck share in Europe was 11.4 percent, compared with
11.8 percent.
Financial Services
. Financial services earned $2.2 billion, compared with a record
$2.8 billion in 1996.
. Ford Credit earned $1 billion, compared with $1.4 billion.
. The Associates earned a record $1 billion, compared with $857 million.
. Hertz earned a record $202 million, compared with $159 million in 1996.
Automotive Balance Sheet
. Net cash was a record $12.7 billion, compared with $7.3 billion.
. Cash and marketable securities was a record $20.8 billion, compared
with $15.4 billion.
. Debt was $8.1 billion, compared with $8.1 billion.
. Capital spending was $8.1 billion, compared with $8.2 billion.
Ford Motor Company and Subsidiaries
HIGHLIGHTS
Fourth Quarter Full Year
1997 1996 1997 1996
(unaudited)
Worldwide vehicle unit sales of
cars and trucks (in thousands)
- United States 987 1,006 4,016 3,897
- Outside United States 804 747 2,927 2,756
Total 1,791 1,753 6,943 6,653
Sales and revenues (in millions)
- Automotive $31,897 $31,505 $122,935 $118,023
- Financial Services 8,055 7,328 30,692 28,968
Total $39,952 $38,833 $153,627 $146,991
Net income (in millions)
- Automotive $ 1,341 $ 390 $ 4,714 $ 1,655
- Financial Services 455 814 2,206 2,791
Total $ 1,796 $ 1,204 $ 6,920 $ 4,446
Capital expenditures (in millions)
- Automotive $ 2,389 $ 2,413 $ 8,142 $ 8,209
- Financial Services 162 93 575 442
Total $ 2,551 $ 2,506 $ 8,717 $ 8,651
Automotive capital expenditures as a
percentage of sales 7.5% 7.7% 6.6% 7.0%
Stockholders' equity at December 31
- Total (in millions) $30,734 $26,762 $ 30,734 $ 26,762
- After-tax return on Common and
Class B stockholders' equity 24.1% 18.4% 24.4% 17.6%
Automotive net cash at December 31
(in millions)
- Cash and marketable
securities $20,835 $15,414 $ 20,835 $ 15,414
- Debt 8,176 8,156 8,176 8,156
Automotive net cash $12,659 $ 7,258 $ 12,659 $ 7,258
After-tax return on sales
- U.S. Automotive 5.8% 3.2% 4.6% 2.7%
- Total Automotive 4.2% 1.3% 3.9% 1.4%
Shares of Common and Class B Stock
(in millions)
- Average number outstanding 1,201 1,187 1,195 1,179
- Number outstanding at
December 31 1,202 1,188 1,202 1,188
Common Stock price (per share)
- High $50-1/4 $33-7/8 $ 50-1/4 $ 37-1/4
- Low 41-1/2 30-3/8 30 27-1/4
AMOUNTS PER SHARE OF COMMON AND
CLASS B STOCK AFTER PREFERRED
STOCK DIVIDENDS
Income assuming dilution
- Automotive $ 1.08 $ 0.32 $ 3.82 $ 1.33
- Financial Services 0.37 0.67 1.80 2.31
Total 1.45 0.99 5.62 3.64
Cash dividends $ 0.420 $ 0.385 $ 1.645 $ 1.47
SOURCE Ford Motor Company