Ford Earns $6.6 Billion Before Charges in 1998, Up 10 Percent
21 January 1999
Ford Earns $6.6 Billion Before Charges in 1998, Up 10 Percent
Momentum Continues with 11th Consecutive Quarter
Of Improved Operating Earnings
DEARBORN, Mich., Jan. 21 -- Ford Motor Company
earned $5,939 million in 1998, or $4.72 per diluted common and Class B share,
excluding earnings from The Associates and the gain that resulted
from Ford's spin-off of that company. Excluding these and other one-time
factors, Ford's operating earnings were $6,570 million, up $582 million, or
10 percent on a comparable basis; earnings per share were $5.30 per share, up
$0.44 per share.
"The transformation of Ford continued to gain momentum in 1998," said
Jacques Nasser, president and chief executive officer. "Our quality is the
best it has ever been, we improved our operating efficiency and our products
continue to be well received by customers. As a result, we were able to
achieve our eleventh consecutive quarter of improved operating earnings.
"We delivered a total return to investors of 89 percent, which placed the
performance of Ford stock in the top quartile of S&P 500 companies for the
second year in a row," Nasser added. "Maintaining this level of performance
for shareholders over time is one of our financial milestones. To continue to
deliver, we know we must increase our consumer focus, strengthen our brands,
provide the best total value to consumers, develop leaders at all levels of
the company and be responsible in corporate citizenship."
Ford's 1998 operating earnings of $6,570 million exclude previously
announced one-time charges for employee separation programs and asset write-
downs totaling $631 million ($0.51 per share), earnings from The Associates of
$177 million ($0.14 per share), the one-time gain resulting from The
Associates spin-off of $15,955 million ($12.90 per share) and a one-time
earnings per share reduction ($0.07) for the premium paid to repurchase Ford's
Series B preferred stock.
Ford's reported 1997 earnings were $6,920 million ($5.62 per share).
Comparable 1997 operating results were $5,988 million ($4.86 per share). This
excludes Ford's share of earnings of The Associates, which were $832 million
($0.68 per share), and a net gain of $100 million ($0.08 per share) for one-
time actions.
FOURTH QUARTER 1998
Ford reported earnings of $1,043 million ($0.84 per share) in the fourth
quarter of 1998. Excluding one-time charges, Ford earned $1,674 million
($1.35 per share) -- Ford's eleventh consecutive quarter of year-over-year
operating improvement. Net income for the fourth quarter of 1997, excluding
The Associates, was $1,572 million ($1.27 per share).
AUTOMOTIVE OPERATIONS
Reported full-year 1998 earnings from automotive operations were $4,752
million. Excluding one-time charges, earnings were $5,377 million, up $494
million. Ford's reported automotive after-tax return on sales (ROS) was
4 percent in 1998. Excluding one-time charges, ROS was 4.6 percent, up
0.6 points.
For the full-year, total costs were down $2.2 billion at constant volume
and mix. This exceeded Ford's full-year milestone, which was to lower total
costs by $1 billion.
Reported net income from automotive operations in the fourth quarter of
1998 was $820 million. Excluding one-time charges, earnings were $1,445
million, up $104 million. Reported ROS was 2.6 percent in the fourth quarter
of 1998. Excluding one-time charges, ROS was 4.5 percent, up 0.3 points.
North America: Reported full-year 1998 automotive earnings in North
America were $4,612 million. Excluding one-time charges of $363 million,
earnings were $4,975 million, up $416 million. Reported full-year ROS was
5.3 percent. Ford's full-year 1998 milestone was to earn a 5 percent ROS in
North America. Excluding charges, ROS was 5.8 percent, up 0.6 points.
The earnings improvement for the full year was driven by improved quality,
lower costs and favorable product mix, offset partially by higher marketing
costs and the fourth quarter charges.
Reported fourth quarter 1998 automotive earnings in North America were
$1,047 million. Excluding one-time charges, earnings were $1,410 million, up
$57 million. Reported ROS in North America was 4.5 percent. Excluding
charges, ROS was 6.0 percent, up 0.1 points.
"In 1998, Ford posted its best retail sales in the United States in
20 years, and all-time U.S. sales records at Ford Division and Jaguar," Nasser
said. "Our outlook for 1999 is for another strong U.S. market. We expect
U.S. industry volumes will range between 15 million and 15.5 million units,
the sixth year in a row of industry volumes greater than 15 million units."
Europe: Reported full-year earnings for Europe in 1998 were $193 million.
Excluding charges of $137 million, earnings were $330 million, up $13 million.
Ford's 1998 full-year milestone was to be profitable. Ford's 1999 full-year
milestone for Europe is to grow earnings.
Ford reported a loss of $74 million in the fourth quarter of 1998.
Excluding charges, Ford earned $63 million, down $95 million from a year ago.
The decline in fourth quarter earnings reflects lower volumes, lower export
sales and launch costs for the Ford Focus, offset partially by cost
reductions.
"We are determined to improve our results in Europe by continuing to lower
our costs, improve our quality and grow the business with new vehicles such as
the Ford Focus," said Nasser. "The Focus, which is now in production, has
received numerous accolades for its styling, packaging, value and driving
dynamics, and was named European Car of the Year."
South America: Reported full-year 1998 results in South America were a
loss of $226 million. Excluding charges of $81 million, full-year automotive
results were a loss of $145 million, down $185 million. Ford disclosed in the
third quarter that it did not expect to achieve its milestone of breaking even
in South America in 1998 as a result of significantly lower volumes. In
Brazil, Ford's largest market in the region, industry volumes in 1998 were
down about 20 percent from 1997.
In the fourth quarter of 1998, Ford reported a loss of $151 million in
South America. Excluding charges, Ford lost $70 million, up $1 million from
the prior year.
"Economic and market conditions in Brazil continue to be difficult,"
Nasser said. "For 1999, we have established a milestone of improving our
operating results in South America, but we are not expecting to be profitable
there."
Visteon: The earnings of Visteon Automotive Systems, Ford's automotive
components enterprise, are included in the company's automotive results. In
1998, Visteon reported earnings of $712 million, up $194 million, or
37 percent, from 1997. In the fourth quarter of 1998, Visteon earned $132
million, compared with $48 million a year ago. Visteon's milestone for 1999
is to grow its earnings and obtain $2 billion in new business.
FORD CREDIT
Reported earnings in 1998 were $1,084 million, up $53 million or
5 percent, which was below the 1998 milestone of achieving 10 percent earnings
growth. Excluding charges of $6 million, earnings were $1,090 million, up
$59 million. The increase in full-year earnings reflects improved credit loss
performance, lower taxes and higher financing volumes, offset partially by
higher depreciation expense on leased vehicles.
In the fourth quarter of 1998, Ford Credit reported earnings of
$234 million, up 7 percent. Excluding charges, earnings were $240 million, up
$22 million or 10 percent.
"We believe Ford Credit can improve on the earnings momentum it showed in
the fourth quarter and achieve its 1999 full-year milestone of 10 percent
earnings growth," Nasser said.
HERTZ
The Hertz Corporation reported its fifth consecutive year of
record earnings and seventh consecutive year of increased earnings. Net
income was $277 million in 1998, up 37 percent, compared with earnings of
$202 million in 1997. Ford's share of Hertz' 1998 earnings was $224 million.
In the fourth quarter of 1998, Hertz earned a record $48 million, up
37 percent compared with earnings of $35 million in the same period a year
ago. Ford's share of Hertz' fourth quarter 1998 earnings was $39 million.
The Hertz 1999 full-year milestone is for the company to deliver record
earnings.
Ford Motor Company and Subsidiaries
HIGHLIGHTS
Fourth Quarter Full Year
1998 1997 1998 1997
(unaudited)
Worldwide vehicle unit sales of
cars and trucks (in thousands)
- North America 1,197 1,118 4,370 4,432
- Outside North America 617 673 2,453 2,515
Total 1,814 1,791 6,823 6,947
Sales and revenues (in millions)
- Automotive $32,204 $31,897 $119,083 $122,935
- Financial Services 5,699 8,055 25,333 30,692
Total $37,903 $39,952 $144,416 $153,627
Net income (in millions)
- Automotive $ 820 $ 1,341 $ 4,752 $ 4,714
- Financial Services (excl.
The Associates) 223 231 1,187 1,374
Subtotal 1,043 1,572 5,939 6,088
- The Associates - 224 177 832
- Gain on spin-off of
The Associates - - 15,955 -
Total $ 1,043 $ 1,796 $ 22,071 $ 6,920
Capital expenditures (in millions)
- Automotive $ 2,445 $ 2,389 $ 8,113 $ 8,142
- Financial Services 106 162 504 575
Total $ 2,551 $ 2,551 $ 8,617 $ 8,717
Automotive capital expenditures as a
percentage of sales 7.6% 7.5% 6.8% 6.6%
Stockholders' equity at December 31
- Total (in millions) $23,409 $30,734 $ 23,409 $ 30,734
- After-tax return on Common and
Class B stockholders'
equity 17.8% 24.1% 25.4% 24.4%
Automotive net cash at December 31
(in millions)
- Cash and marketable
securities $23,805 $20,835 $ 23,805 $ 20,835
- Debt 9,834 8,176 9,834 8,176
Automotive net cash $13,971 $12,659 $ 13,971 $ 12,659
After-tax return on sales
- North American Automotive 4.5% 5.9% 5.3% 5.1%
- Total Automotive 2.6% 4.2% 4.0% 3.9%
Shares of Common and Class B Stock
(in millions)
- Average number outstanding 1,210 1,201 1,211 1,195
- Number outstanding at
December 31 1,209 1,202 1,209 1,202
Common Stock price (per share)
(adjusted to reflect The Associates
spin-off)
- High $59-7/8 $33-9/16 $61-7/16 $33-9/16
- Low 38-13/16 27-23/32 28-15/32 20-3/64
AMOUNTS PER SHARE OF COMMON AND
CLASS B STOCK AFTER PREFERRED
STOCK DIVIDENDS
Income assuming dilution
- Automotive $ 0.66 $ 1.08 $ 3.76 $ 3.82
- Financial Services (excl.
The Associates) 0.18 0.19 0.96 1.12
Subtotal 0.84 1.27 4.72 4.94
- The Associates - 0.18 0.14 0.68
- Gain on spin-off of
The Associates - - 12.90 -
Total $ 0.84 $ 1.45 $ 17.76 $ 5.62
Cash dividends $ 0.46 $ 0.42 $ 1.72 $ 1.645