Improving Automotive Operations Drive Ford To Record First Quarter Earnings of $1.7 Billion, Up 15%
16 April 1998
Improving Automotive Operations Drive Ford To Record First Quarter Earnings of $1.7 Billion, Up 15%
DEARBORN, Mich., April 16 -- Continued improvement in
automotive results raised Ford Motor Company's operating earnings
for the first quarter to $1.7 billion, or $1.36 per diluted share of common
and Class B stock. The 1998 results compare with earnings of $1.5 billion, or
$1.20 a diluted share in the first quarter of 1997, and exceed the previous
first quarter record of $1.6 billion set in 1989.
The operating results shown above exclude a one-time gain of $16 billion,
or $12.94 per diluted share, resulting from the spin-off of Associates First
Capital , and a one-time earnings per share reduction of $.07 per
share resulting from the premium paid to repurchase Ford's Series B preferred
stock. Including both one-time factors, Ford's reported first quarter
earnings were $17.6 billion, or $14.23 per diluted share.
Ford has increased its year-over-year earnings for eight consecutive
quarters and posted five straight quarters in which total automotive costs
have declined (at constant volume and mix) compared with the year-earlier
period. In the first quarter, Ford's total automotive costs declined by
$400 million year-over-year (at constant volume and mix).
AUTOMOTIVE OPERATIONS
Ford's first-quarter net income from worldwide automotive operations was
$1.235 billion, up $231 million from a year ago, or 23 percent. Vehicle unit
sales of cars and trucks were 1,721,000, up 40,000 units or two percent.
Automotive return on sales in the first quarter improved nine-tenths of a
point to 4.3 percent worldwide. Total automotive cash was $21.3 billion at
the end of the quarter and net cash was $13.1 billion, both records. "Ford's
automotive results continue to improve because of an intense focus on the
business fundamentals. We continue to strengthen our product line, quality is
better, costs are down and major processes are being re-engineered," said
Chairman and CEO Alex Trotman.
North America: In North America, automotive operations earned
$1.0 billion, essentially flat with a year ago. North American automotive
return on sales was 5.0 percent. This solid level of profitability reflects
strong acceptance of new products and continuing progress on cost and quality
performance. During the quarter, Ford accelerated production of the new
F-Series Super Duty truck line.
"The underpinnings of the economic expansion in North America remain
intact, which is good news for the auto industry. In the U.S., industry
volume in the first quarter was 15.3 million units. We continue to project
full-year industry volumes to be between 15 million and 15.5 million units,"
Trotman said.
Europe: In Europe, which continues to be an intensely competitive market,
Ford earned $230 million, up from $105 million a year ago.
"Europe continues to be extremely challenging," Trotman said. "Industry
volumes are strong, but intense price competition has not abated. We will
continue to focus on improving quality and reducing our total costs in Europe
to achieve our 1998 profit target."
South America: Ford lost $45 million in South America, compared with a
loss of $47 million a year ago.
"The successful launches of the Ka, Fiesta, Ranger, F-Series and Courier
have reestablished Ford as a major presence in South America, but economic
conditions in Brazil have reduced industry volumes," Trotman said. "Our goal
remains to breakeven in South America this year, but it will be hard to
achieve."
FINANCIAL SERVICES
Financial Services earnings in the first quarter, excluding The
Associates' earnings and the one-time gain resulting from the spin-off, were
$279 million, compared with $273 million a year ago on a comparable basis.
Ford Credit earned $278 million in the first quarter, an improvement of
$2 million versus last year's first quarter. Compared with the first quarter
of 1997, earnings reflected improved portfolio yields, lower borrowing costs
and higher financing volumes, offset by higher depreciation expense on leased
vehicles.
"Loan volumes, operating costs and interest margins are at good levels.
However, depreciation expense for leased vehicles continues to be a drag on
profits. As a result, based on the present outlook, our goal of 10 percent or
greater earnings growth for Ford Credit in 1998 will be very difficult to
achieve," Trotman said.
The Hertz Corporation reported record first-quarter earnings
of $35 million, versus $20 million earned in the same period a year ago.
Ford's share of Hertz' first quarter 1998 earnings was $29 million.
The Associates reported record earnings of $281 million for the first
quarter, compared with $238 million a year ago. Ford's share of The
Associates earnings was $177 million, reflecting Ford's 80.7 percent ownership
stake through March 12, the record date for the spin-off. Going forward,
Ford's results no longer will include earnings of The Associates.
SUMMARY OF FIRST QUARTER 1998 COMPARED WITH 1997
Overview
. Total company operating earnings were a record $1.691 billion, compared
with $1.469 billion.
. Diluted operating earnings per share were $1.36, compared with $1.20.
. Worldwide sales and revenues were $36.6 billion, compared with $37.3
billion.
. Stockholders' equity was $21.5 billion, compared with $27.3 billion.
Automotive
. Net income from worldwide automotive operations was $1.235 billion,
compared with $1 billion in the first quarter of 1997.
. North American automotive operations earned $1.01 billion, compared
with $1.02 billion.
. Outside North America, automotive operations earned $225 million,
compared with a loss of $16 million.
. Worldwide vehicle unit sales were 1,721,000 compared with 1,681,000.
. Combined car and truck share in the U.S. was 24.5 percent, compared
with 25.1 percent.
. Combined car and truck share in Europe was 11.5 percent, compared with
11.5 percent.
Financial Services
. Financial Services earnings were $456 million, excluding the one-time
gain of $15.955 billion related to the spin-off of The Associates,
compared with $465 million.
. Ford Credit earned $278 million, compared with $276 million.
. The Associates reported a record $281 million, compared with $238
million a year ago. Ford's share was $177 million through March 12.
. Hertz earned a record $35 million, compared to $20 million. Ford's
share was $29 million.
Automotive Balance Sheet
. Net cash was a record $13.1 billion, compared with $7.8 billion.
. Cash and marketable securities was a record $21.3 billion, compared
with $16 billion.
. Debt was $8.2 billion, compared with $8.2 billion.
. Capital spending was $2.1 billion, compared with $1.6 billion.
Ford Motor Company and Subsidiaries
HIGHLIGHTS
First Quarter
1998 1997
(unaudited)
Worldwide vehicle unit sales of
cars and trucks (in thousands)
- North America 1,059 1,066
- Outside North America 662 615
Total 1,721 1,681
Sales and revenues (in millions)
- Automotive $ 29,076 $ 30,037
- Financial Services 7,508 7,277
Total $ 36,584 $ 37,314
Net income (in millions)
- Automotive $ 1,235 $ 1,004
- Financial Services (including
income of The Associates through
March 12, 1998) 456 465
Subtotal 1,691 1,469
- Gain on spin-off of The Associates 15,955 -
Total $ 17,646 $ 1,469
Capital expenditures (in millions)
- Automotive $ 2,101 $ 1,613
- Financial Services 98 126
Total $ 2,199 $ 1,739
Automotive capital expenditures as a
percentage of sales 7.2% 5.4%
Stockholders' equity at March 31
- Total (in millions) $ 21,497 $ 27,252
- After-tax return on Common and
Class B stockholders' equity 24.8% 22.1%
Automotive net cash at March 31
(in millions)
- Cash and marketable securities $ 21,277 $ 15,967
- Debt 8,178 8,202
Automotive net cash $ 13,099 $ 7,765
After-tax return on sales
- North American Automotive 5.0% 4.9%
- Total Automotive 4.3% 3.4%
Shares of Common and Class B Stock
(in millions)
- Average number outstanding 1,210 1,190
- Number outstanding at March 31 1,213 1,191
Common Stock price (per share)
(adjusted to reflect The Associates
spin-off)
- High $43-7/8 $23-3/8
- Low 28-15/32 20-35/64
AMOUNTS PER SHARE OF COMMON AND
CLASS B STOCK AFTER PREFERRED
STOCK DIVIDENDS
Income assuming dilution
- Automotive $ 0.99 $ 0.82
- Financial Services (including
income of The Associates through
March 12, 1998) 0.37 0.38
Subtotal 1.36 1.20
- Premium on Series B Preferred Stock
repurchase (0.07) -
- Gain on spin-off of The Associates 12.94 -
Total 14.23 1.20
Cash dividends $ 0.42 $ 0.385
SOURCE Ford Motor Company