Ford Posts Record Second Quarter Operating Earnings of $2.5 Billion; 13th Consecutive Quarter of Operating Improvement
14 July 1999
Ford Posts Record Second Quarter Operating Earnings of $2.5 Billion; 13th Consecutive Quarter of Operating Improvement
DEARBORN, Mich., July 14 -- Ford Motor Company
earned $2,338 million in the second quarter of 1999, or $1.89 per diluted
share of common and Class B stock. These earnings include the results of
Volvo Car, which was acquired on March 31, and a one-time profit reduction of
$146million, or $0.11per share, related to the acquisition. Under U.S.
accounting rules, Ford was required to write-up the value of inventory
acquired to fair value, resulting in a one-time increase in cost of sales in
the second quarter of 1999.
On an operating basis, a measure that excludes the Volvo Car inventory-
related profit reduction, Ford's second quarter earnings were a record $2,484
million. Earnings in the second quarter of 1998 were $2,381million. On a
per-share basis, second quarter 1999 operating earnings were $2.00 per share,
up nine cents, or 5 percent, from last year's second quarter. Ford now has
posted improved operating results for 13consecutive quarters.
"Throughout its history, Ford Motor Company has been constantly evolving
to improve its competitive position, deliver consistent financial results and
provide better value to consumers," said President and CEO Jac Nasser. "Our
strong earnings momentum over the last 13 quarters is the result of our
intense drive to improve quality, lower costs and become more nimble.
Progress in these areas has given us the confidence to pursue our 21st century
vision of becoming the world's leading consumer company for automotive
products and services. What this means, in practice, is that Ford wants to
become the 'and' company -- one that delivers the highest quality products AND
the best customer satisfaction AND the best shareholder returns."
During the second quarter, Ford announced several major consumer-focused
initiatives, including:
-- In Europe, Ford will introduce low emissions powertrains five years
ahead of regulatory requirements. These powertrains, initially
available in the Ford Ka and Ford Fiesta in early 2000, will be at
least 50 percent cleaner than what next year's European Union standard
requires.
-- All pickup trucks in the U.S. and Canada will be Low Emission Vehicles
beginning with the 2000-model year Ford F-Series and 2001 Ford Ranger.
This action will bring a significant number of Ford trucks into
compliance with an initial U.S. Environmental Protection Agency
standard proposed for the 2004 model year.
"Ford has moved ahead of the industry to bring clean air technologies to
high-volume production quickly and cost effectively to make real contributions
to environmental quality. It's simply the right thing to do," Nasser said.
AUTOMOTIVE OPERATIONS
Worldwide net income from automotive operations was $1,931million in the
second quarter of 1999, down $120 million from the second quarter of 1998.
Excluding the one-time $146 million profit-reduction related to the Volvo Car
acquisition, worldwide automotive earnings were a record $2,077million, up
$26million.
Worldwide automotive revenues increased 15 percent from the second quarter
of 1998 to a record $35.9billion, and after-tax return on sales (ROS) was
5.4percent, down 1.2 points. Automotive cash was a record $24 billion at the
end of the second quarter, up from $22.3 billion in the same period a year
ago. Net cash was $12.6billion, down from $14.1 billion a year ago because of
acquisition spending.
In the first half of 1999, earnings from automotive operations increased
9 percent to $3,582million. The Volvo Car inventory-related profit reduction
was more than offset by a $165million first quarter gain on the sale of
AutoEuropa. In the first half of 1998, automotive operations earned
$3,286million. Worldwide automotive revenues in the first half of 1999 were a
record $67.9 billion, up 12 percent compared with the first half of 1998, and
ROS was 5.3 percent, down two-tenths of a point.
Total automotive costs declined $300 million at constant volume and mix in
the second quarter of 1999, compared with the same period a year ago. Year-
to-date, costs are down $400million. Thecompany's full-year milestone is to
reduce total costs by $1 billion compared with 1998.
North America: Automotive earnings in North America in the second quarter
of 1999 were a record $1,969million, up $314 million from a year ago. ROS was
7.7percent, up four-tenths of a point.
For the first half of 1999, earnings in North America were a record
$3,557million and ROS was 7.1percent. The full-year milestone for 1999 is to
achieve a ROS greater than 5 percent. In the first half of 1998, earnings in
North America were $2,665 million and ROS was 6.2percent.
Vehicle sales in the U.S. in the first half of 1999 set a new all-time
industry record, with the annual selling rate reaching 17.1 million units.
Ford expects full-year sales to exceed the record of 16.3 million units set in
1986.
"There are so many positive factors at work in the U.S. economy right now.
We're confident vehicle sales will remain strong through the balance of 1999
and into the year2000," Nasser said. "Ifslightly higher short-term interest
rates help to prolong the economic expansion, that's great news for consumers
and our shareholders."
Among the other drivers of Ford's North American results is exceptional
productivity. Inthe 1999Harbour Report, a widely-recognized analysis of
manufacturing productivity in the North American automotive industry,
Fordplants ranked first in nine of 12 vehicle segments evaluated.
Europe: Including a $125 million share of the Volvo Car inventory-related
profit reduction, automotive earnings in Europe in the second quarter of 1999
were $89 million, compared with $310million in the same period a year ago.
Excluding the one-time profit reduction related to the Volvo Car acquisition,
earnings in Europe were $214 million.
These results reflect lower volumes and market share for Ford-branded
vehicles, principally FordFiesta and Mondeo, and lower export volumes, offset
partially by the success of the Ford Focus and higher volumes at Jaguar.
First half 1999 earnings totaled $254 million, including the AutoEuropa
gain and the Volvo Car inventory-related profit reduction, compared with $540
million a year ago. Although Volvo Car will contribute to operating earnings
in 1999, it will be a challenge for Ford to achieve its full-year 1999
milestone for Europe, which is to grow earnings compared with 1998.
"Ford Motor Company's market share is up in Europe, but restoring our
profits in the region to a more robust level will take time and a continued
focus on great products, quality and lower costs," Nasser said.
South America: Ford lost $120 million in South America in the second
quarter of 1999, compared with earnings of $14 million a year ago. First half
losses totaled $285 million, compared with losses of $31million a year ago.
Industry sales in Brazil, Ford's largest market in the region, were down more
than 20 percent in the first half of 1999, compared with a year ago, and the
Brazilian economy is expected to remain weak for the balance of this year.
"Ford's problems in Brazil are not intractable, but meaningful improvement
will take creativity and ingenuity on our part, a continued focus on costs,
and government policies that encourage sustainable economic growth," Nasser
said. "The core of our strategy includes a new, highly competitive
manufacturing facility in Brazil, improved service and distribution, and new
products designed to meet the needs of our South American customers."
VISTEON AUTOMOTIVE SYSTEMS: In the second quarter of 1999, Visteon earned
a record $282million, compared with $241million a year ago, and ROS improved
six-tenths of a point to 5.7percent. Visteon's earnings are included in the
company's automotive results.
In the first half of 1999, Visteon earned a record $490 million, up
$60 million compared with the first half of 1998, and won future new business
contracts worth $1.1 billion annually. ROS in the first half of 1999 was five
percent, up three-tenths of a point from the same period a year ago. Visteon
is on-track to achieve its full-year 1999 milestones, which are to grow
earnings and win $2billion in new business contracts.
FORD CREDIT: Earnings were $335 million in the second quarter of 1999, up
$35 million, or 12percent, from a year ago. Return on Equity (ROE) in the
second quarter of 1999 was 12.3 percent, up four-tenths of a point. The
earnings growth reflects higher financing volumes, improved credit loss
performance and lower taxes, offset partially by lower net financing margins.
Earnings in the first half of 1999 were $635 million, up $57million, or 10
percent, compared with a year ago. Ford Credit is on track to meet its
1999full-year milestone to grow earnings by 10percent compared with 1998. ROE
in the first half of 1999 was 11.8 percent, up one-tenth of a point compared
with the first half of 1998.
HERTZ: The Hertz Corporation earned a record $88 million in
the second quarter of 1999, compared with $75million a year ago, up
17 percent. Ford's share of Hertz' second-quarter 1999 earnings was
$71 million.
Hertz' earnings in the first half of 1999 were a record $137 million, up
$27 million, or 24 percent compared with a year ago. Ford's share of Hertz'
first half 1999 earnings was $111 million. Hertz is on track to meet its
1999full-year milestone to post record earnings.
Ford Motor Company and Subsidiaries
HIGHLIGHTS
Second Quarter First Half
1999 1998 1999 1998
(unaudited) (unaudited)
Worldwide vehicle unit sales of
cars and trucks (in thousands)
- North America 1,237 1,124 2,457 2,181
- Outside North America 691 669 1,246 1,340
Total 1,928 1,793 3,703 3,521
Sales and revenues (in millions)
- Automotive $35,921 $31,309 $67,854 $60,385
- Financial Services 6,361 5,980 12,313 13,488
Total $42,282 $37,289 $80,167 $73,873
Net income (in millions)
- Automotive $1,931 $2,051 $3,582 $3,286
- Financial Services
(excl. The Associates) 407 330 735 609
Subtotal 2,338 2,381 4,317 3,895
- The Associates - - - 177
- Gain on spin-off of
The Associates - - - 15,955
Total $2,338 $2,381 $4,317 $20,027
Capital expenditures (in millions)
- Automotive $1,755 $1,659 $3,093 $3,760
- Financial Services 140 153 284 251
Total $1,895 $1,812 $3,377 $4,011
Automotive capital expenditures as a
percentage of sales 4.9% 5.3% 4.6% 6.2%
Stockholders' equity at June 30
- Total (in millions) $26,242 $23,070 $26,242 $23,070
- After-tax return on Common and
Class B stockholders'
equity 36.9% 43.0% 35.0% 33.2%
Automotive net cash at June 30
(in millions)
- Cash and marketable
securities $23,959 $22,276 $23,959 $22,276
- Debt 11,406 8,220 11,406 8,220
Automotive net cash $12,553 $14,056 $12,553 $14,056
After-tax return on sales
- North American
Automotive 7.7% 7.3% 7.1% 6.2%
- Total Automotive 5.4% 6.6% 5.3% 5.5%
Shares of Common and Class B Stock
(in millions)
- Average number
outstanding 1,211 1,212 1,211 1,211
- Number outstanding at
June 30 1,210 1,212 1,210 1,212
Common Stock price (per share)
(adjusted to reflect The Associates
spin-off)
- High $67-7/8 $59-1/8 $67-7/8 $59-1/8
- Low 52-5/8 41-11/64 52-5/8 28-15/32
AMOUNTS PER SHARE OF COMMON AND
CLASS B STOCK AFTER PREFERRED
STOCK DIVIDENDS
Income assuming dilution
- Automotive $1.56 $1.65 $2.89 $2.65
- Financial Services
(excl. The Associates) 0.33 0.26 0.59 0.49
Subtotal 1.89 1.91 3.48 3.14
- The Associates - - - 0.14
- Premium on Series B
Preferred Stock repurchase - - - (0.07)
- Gain on spin-off of
The Associates - - - 12.90
Total $1.89 $1.91 $3.48 $16.11
Cash dividends $0.46 $0.42 $0.92 $0.84