Ford Earns $1.1 Billion in Third Quarter, Up 11 Percent
19 October 1999
Ford Earns $1.1 Billion in Third Quarter, Up 11 Percent; 14th Consecutive Quarter of Improvement
DEARBORN, Mich., Oct. 18 -- Ford Motor Company reported record third
quarter earnings of $1,114 million, or 90 cents per diluted share of common
and Class B stock, up 11 percent -- the company's 14th consecutive quarter
of improved operating earnings. These earnings include a non-recurring
profit reduction of $125 million to adjust post-retirement healthcare and
life insurance liabilities at Visteon Automotive Systems to reflect an
actuarial valuation completed during the third quarter of 1999. Third
quarter 1998 earnings were $1,001 million, or 80 cents per diluted share.
For the first nine months of 1999, Ford reported record earnings of
$5,431 million, or $4.39 per diluted share. In the first nine months of 1998,
Ford earned $21,028 million, including a non-cash gain of $15,955 million
resulting from the spin-off of The Associates and Ford's share of
The Associates earnings of $177 million. Excluding these items, Ford earned
$4,896 million in the period.
"We continued our strong earnings momentum, despite very competitive
markets worldwide, by building our brands, leveraging the synergies offered by
our global scale and maintaining a rigorous cost discipline," said Jac Nasser,
president and chief executive officer. "Our consumer strategy will build
consumer loyalty to our broad portfolio of products and services and grow the
company from today's very strong base. We are transforming Ford to maximize
the returns on our brand, manufacturing and technology investments to add
superior shareholder value."
Ford continues to strengthen its portfolio of brands, and took several
initiatives in the third quarter, and early in the fourth quarter, that will
sharpen the company's consumer focus and build shareholder value.
These include:
* Establishing strategic business units to accelerate the company's
consumer-driven transformation and growth strategy.
* Negotiating new tentative labor agreement with the United Auto Workers
and ratified contract with the Canadian Auto Workers.
* Increasing the common and Class B stock dividend by nine percent.
* Creating a marketing alliance with The Hartford and Ford Credit to
offer Ford Motor Company-branded insurance products for Ford, Lincoln
and Mercury owners.
* Becoming Microsoft Corp.'s first partner in a proposed new MSN(TM)
CarPoint(TM) joint venture that will create a better way for consumers
to configure and order vehicles on the Internet.
* Achieving more than half a million confirmed customer orders in Europe
for the Ford Focus less than 12 months since its introduction.
* Establishing a new Jaguar Formula One racing team.
* Launching two all-new models in North America -- the Ford Focus and
Ford Excursion -- and unveiling a re-styled and upgraded 2000-model
year Ford Fiesta at the Frankfurt Motor Show.
* Signing a cooperative agreement with PSA Peugeot Citroen to develop
direct-injection diesel engines for passenger cars and commercial
vehicles in Europe.
AUTOMOTIVE OPERATIONS
Net income from worldwide automotive operations was $690 million in the
third quarter of 1999, including the $125 million adjustment for retiree
benefits. This compares with earnings of $646 million in the third quarter of
1998.
For the first nine months of 1999, net income from automotive operations
was $4,272 million, including the retiree benefits adjustment, compared with
net income of $3,932 million in the year-ago period.
Automotive revenue in the third quarter of 1999 was $31.3 billion, up
$4.8 billion. After-tax return on sales (ROS) was 2.2 percent in the third
quarter, down 0.3 points. The decline was more than accounted for by the
retiree benefit adjustment. For the first nine months, automotive revenue was
$99.2 billion, up $12.3 billion. ROS was 4.3 percent, compared with an ROS of
4.6 percent in the first nine months of 1998.
At the end of the third quarter, automotive cash was a record
$25.7 billion, up from $22.9 billion in the same period a year ago. Net cash
was $12.9 billion, down from $13.1 billion a year ago. Ford's strong
operating cash flow largely offset the company's spending on acquisitions.
Total costs were down $300 million in the quarter, marking Ford's eleventh
consecutive quarter in which total costs were lower at constant volume and
mix, compared with the year-ago period. In the first nine months of 1999,
Ford reduced its total costs by $700 million at constant volume and mix.
North America: Automotive earnings were $1,004 million in the third
quarter of 1999, up $104 million, or 12 percent from a year ago. Ford's third
quarter ROS in North America was 4.5 percent, equal to 1998.
Nine-month earnings were a record $4,561 million in 1999, versus $3,565
million in the same period a year ago, up 28 percent. For the first nine
months of 1999, ROS was 6.3 percent, up 0.6 points compared with 1998.
Record Ford Motor Company and industry sales in the United States in the
first nine months of the year have been driven by a firm job market, good
income growth, relatively high consumer confidence levels and low borrowing
costs. In addition to higher volumes, Ford's year-to-date and third quarter
results reflect an improved mix of light trucks and luxury cars, and lower
total costs, offset in the third quarter by costs related to employee
separation programs.
Europe: Automotive results were a loss of $171 million in the third
quarter of 1999, compared with a loss of $273 million in the year-ago period.
For the first nine months of 1999, automotive earnings in Europe were
$83 million. In the first nine months of 1998, Ford earned $267 million.
Based on the present forecast, Ford does not expect to achieve its 1999
milestone for Europe to improve operating earnings year-over-year. The lower
nine month results reflect lower volumes, vehicle mix and market share for
Ford-branded vehicles, primarily Mondeo and Fiesta, offset partially by lower
total costs, the success of the Ford Focus, improved results at Jaguar and the
contribution of Volvo Car. The improvement in third quarter results reflect
lower costs and improved share of premium vehicle segments, offset partially
by lower share for Ford-branded vehicles.
South America: Automotive results were a loss of $72 million in the third
quarter of 1999, compared with a loss of $44 million a year ago. For the
first nine months of 1999, Ford lost $357 million in South America, compared
with a loss of $75 million in the same period a year ago.
Ford's sales volume in South America in both the third quarter and the
first nine months of 1999 continue to be adversely impacted by the weak local
economy of Brazil, the largest vehicle market in the region. Ford has also
suffered periodic work stoppages in Brazil. Nevertheless, Ford remains
committed to the region, and expects to break ground on a new assembly plant
in the Brazilian state of Bahia in the fourth quarter. This plant will
utilize state of the art technology and manufacturing processes to build an
all new vehicle.
VISTEON AUTOMOTIVE SYSTEMS
In the third quarter of 1999, Visteon Automotive Systems earned $155
million and ROS was 3.6 percent. These earnings exclude the effect of the
adjustment for retiree benefits which has been reflected retroactively in
Visteon's financial statements. In the third quarter of 1998, Visteon earned
$148 million and ROS was 3.6 percent. Visteon's earnings are included in
Ford's current and historical automotive results.
For the first nine months of 1999, Visteon earned $640 million, excluding
the retiree benefits adjustment, and ROS was 4.5 percent. Year-to-date,
Visteon also won future new business contracts worth $1.7 billion annually.
Non-Ford customers account for 36 percent of the new business contracts. In
the first nine months of 1998, Visteon earned $574 million and ROS was
4.3 percent.
FORD CREDIT
Ford Credit earned $317 million in the third quarter of this year, up
$45 million, or 16 percent, from a year ago. Earnings in the first nine
months of 1999 were $952 million, up $102 million, or 12 percent, compared
with a year ago. Compared with the third quarter of 1998, the increase in
earnings reflects higher financing volumes and improved credit loss
performance, offset partially by costs related to employee separation
programs.
HERTZ
The Hertz Corporation earned a record $139 million in the
third quarter of 1999, compared with $119 million a year ago. Ford's share of
Hertz' third quarter 1999 earnings was $113 million. In the first nine months
of 1999, Hertz earned a record $276 million, up $47 million; Ford's share was
$224 million.
Ford Motor Company and Subsidiaries
HIGHLIGHTS
Third Quarter Nine Months
1999 1998 1999 1998
(unaudited) (unaudited)
Worldwide vehicle unit sales of
cars and trucks (in thousands)
- North America 1,050 993 3,507 3,174
- Outside North America 549 496 1,795 1,835
Total 1,599 1,489 5,302 5,009
Sales and revenues (in millions)
- Automotive $31,338 $26,494 $99,192 $86,879
- Financial Services 6,635 6,146 18,948 19,634
Total $37,973 $32,640 $118,140 $106,513
Net income (in millions)
- Automotive $690 $646 $4,272 $3,932
- Financial Services
(excl. The Associates) 424 355 1,159 964
Subtotal 1,114 1,001 5,431 4,896
- The Associates - - - 177
- Gain on spin-off of
The Associates - - - 15,955
Total $1,114 $1,001 $5,431 $21,028
Capital expenditures (in millions)
- Automotive $1,931 $1,908 $5,024 $5,668
- Financial Services 150 147 435 398
Total $2,081 $2,055 $5,459 $6,066
Automotive capital expenditures as a
percentage of sales 6.2% 7.2% 5.1% 6.5%
Stockholders' equity at September 30
- Total (in millions) $26,921 $23,718 $26,921 $23,718
- After-tax return on
Common and Class B
stockholders' equity 16.8% 17.2% 28.7% 28.0%
Automotive net cash at September 30
(in millions)
- Cash and marketable
securities $25,703 $22,911 $25,703 $22,911
- Debt 12,819 9,822 12,819 9,822
Automotive net cash $12,884 $13,089 $12,884 $13,089
After-tax return on sales
- North American
Automotive 4.5% 4.5% 6.3% 5.7%
- Total Automotive 2.2% * 2.5% 4.3% * 4.6%
Shares of Common and Class B Stock
(in millions)
- Average number
outstanding 1,209 1,212 1,210 1,211
- Number outstanding
at September 30 1,208 1,210 1,208 1,210
Common Stock price (per share)
(adjusted to reflect The Associates
spin-off)
- High $58-5/8 $61-7/16 $67-7/8 $61-7/16
- Low 46-1/4 40-5/8 46-1/4 28-15/32
AMOUNTS PER SHARE OF COMMON AND CLASS B
STOCK AFTER PREFERRED STOCK DIVIDENDS
Income assuming dilution
- Automotive $0.56 $0.52 $3.45 $3.16
- Financial Services
(excl. The Associates) 0.34 0.28 0.94 0.78
Subtotal 0.90 0.80 4.39 3.94
- The Associates - - - 0.14
- Premium on Series B
Preferred Stock
repurchase - - - (0.07)
- Gain on spin-off
of The Associates - - - 12.89
Total $0.90 $0.80 $4.39 $16.90
Cash dividends $0.46 $0.42 $1.38 $1.26
* Total Automotive after-tax return on sales, excluding a $125 million
profit reduction for Visteon postretirement health care and life insurance
liabilities, was 2.6% in the third quarter of 1999 and 4.5% for the first nine
months of 1999.