Ford Earnings On Target

Ford Motor Co. met Wall Street projections for third-quarter profits, but revenue and total sales decelerated, the company reported Wednesday.

Ford (F), the No. 2 U.S. automaker, earned $1 billion, or 80 cents a share, compared with adjusted earnings of $906 million, or 73 cents a share, in the year-ago period. Analysts polled by First Call were expecting 79 cents, but some observers on Wall Street raised their hopes just ahead of the report for an even higher number.

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Ford's 10 percent year-over-year increase in profits came despite a drop in overall revenue to $32.64 billion from $33.9 billion a year ago. Total vehicle sales, moreover, skidded to 1.49 million from 1.59 million.

Ford's improved earnings despite slower sales "has given us a glimpse of what we can accomplish for our customers and shareholders,'' said Alex Trotman, chairman and CEO. "We have exciting new products, and are continuing to improve quality and lower our total costs. We have strengthened our balance sheet, increased our dividend, and year-to-date, our total return to shareholders has outperformed the market by a wide margin.

"We believe we are well positioned heading into 1999,'' Trotman said.

Like Chrysler (C) and General Motors (GM), which reported results earlier this week, Ford experienced rocky results overseas. In South America, the company lost $44 million in the third quarter, a reversal from the $133 million gain a year earlier.

A bigger surprise, though, was Ford's $273 million loss in Europe. Analysts expected a far lower loss in that region.

Offsetting weakness in international sales were strong sales domestically. Combined car and truck sales set a third-quarter record, with a number of new models on their way to showrooms, Ford said.

"While some regions of the world face very challenging economic situations, the fundamentals for the automotive industry in the U.S., our largest market, continue to be solid,'' Trotman said.

"A firm job market, relatively high consumer confidence levels and low borrowing costs are all positivfactors," he said. "In addition, the Federal Reserve has ample room to lower interest rates to compensate for the adverse effects of global economic volatility sparked by the crisis in Asia.''

On a relative basis, Ford's results surpassed those of GM but lagged behind Chrysler's.

General Motors, which reported Tuesday, suffered a loss of $809 million, or $1.28 a share, compared with a profit of $1.07 billion, or $1.35 a share, in the year-earlier quarter.

Results were hampered by a damaging eight-week summer strike, which cost GM $1.2 billion, or $1.89 a share. Sales backed up to $34.4 billion from $41.9 billion a year ago.

Analysts were expecting GM to lose 98 cents a share on an operating basis, but the company posted a somewhat better figure: an 87-cent-a-share loss.

Like Ford, GM predicted improved results heading into 1999, though both companies warned that overseas turmoil could have a dampening effect on sales

Aside from strike-related losses, third-quarter net results also included an after-tax charge of $271 million, or 41 cents a share, related to the sale of GM's Delphi seating, coil-spring and lighting subsidiary.

Had it not been for the Delphi charge and the effects of the strike, GM said, it would have earned $697 million, or $1.20 a share, in the third quarter, still coming in short of year-earlier earnings.

The automaker also restated 1997 third-quarter results to reflect the $10.1 billion sale of its Hughes Electronics defense unit last December. Excluding earnings from Hughes, GM earned $973 million, or $1.29 a share, on sales of $40.2 billion in that quarter.

Meanwhile, Chrysler, which acknowledged benefiting from the GM strike, tallied $682 million, or $1.02 a share. That beat Wall Street estimates by 15 percent.

Chrysler, whose merger with Germany's Daimler-Benz (DAI) is expected to close next month, was projected to earn 87 cents a share, according to First Call. The No. 3 U.S. auto maker earned $441 million, or 66 cents a share, in the year-ago period.

Chrysler sales totaled $15 billion, compared with revenue of $13.2 billion in the third quarter of 1997.

The latest results were boosted by strong sales of new models. A $2 billion stock-buyback program also helped by reducing the number of outstanding shares by 7 percent in the past year.

Written By Jeffry Bartash