Ford hit by $5bn loss

Ford will reduce its workforce by 35,000 people

Ford suffered a $5.07bn (£3.52bn) loss during the last three months of 2001.

During the same period a year earlier, the company clocked up $1.1bn profits.

The losses lend support to its new chief executive, Bill Ford's, plan for wholesale restructuring of the venerable car firm.

The October-to-December loss included a $4.1bn charge to pay for the restructuring.

Crisis after crisis

Ford's losses are perhaps unsurprising after a year when the company appeared to lurch from crisis to crisis.

Problems with quality, expensive recalls, and a $2bn loss on a faulty tyre scandal involving tyre maker Bridgestone, led to the abrupt departure of the company's chief executive Jacques Nasser late in the year.

Adding to the company's woes was a $1bn loss on its stockpile of the precious metal palladium as Ford engineers found ways to avoid using it in catalytic converters.

The price of palladium fell by nearly 75%.

From the ground up

Mr Ford, the company's new boss and a scion of the original Ford family, faces a tough job trying to pull the company around.

His plans to cut 35,000 jobs and 16% of capacity, strip four models out of the product line-up and close five plants, will incur a charge in 2002 of $5.7bn, or $4.1bn after tax.

Also on the agenda is a sell-off of non-core businesses, which include the Kwik-fit European car repair chain and the US chains Collision Team and Greenleaf, a car recycling operation.

Adaptable management

Ford's recent strategy has been to get involved in every aspect of the motor industry, from making cars to selling them, as well as organising finances for its customers and even offering repairs and breakdown services.

Andrew Campbell, Motor industry expert at Ashridge Consultants told the BBC's World Business Report that this strategy made sense as car owners' main expenditure is not the actual purchase price but maintenance costs.

"The strategic foolery of that is that the businesses that gets you into - everything from petrol retailing to changing tyres - are so different from the business of making and assembling cars that the management skills are unlikely to fit well together," he said.

Optimistic outlook?

If all goes according to plan, the idea is to break even this year and return to profit by the middle of the decade.

But that assumes no reduction in overall US automobile demand and a steady 19% market share for Ford - assumptions which have not reassured more pessimistic analysts.

Several analysts have predicted a 12% fall in US car sales this year, and Ford's market share at home is gradually being eroded both by arch rival GM and by non-US brands.

Credit rating agencies are not keen either, with Standard & Poor's recently dropping its outlook for Ford's debt to "negative" from "stable" and an outright downgrade from Fitch.