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Wednesday, 5 December, 2001, 17:06 GMT
Ford warns of steep losses
Ford Explorer SUV
Recalling Firestone tyres on the Explorer contributed to the loss
Ford has predicted losses almost four times larger than Wall Street had predicted, in the latest of a series of gloomy pronouncements from the auto giant since a boardroom reshuffle.

Rising unemployment and an increase in bankruptcy filings since 11 September are expected to lead to more car repossessions and, consequently, higher credit losses, chief financial officer Martin Inglis said.

This would push the car maker's losses higher during the last three months of the year.

The outlook has forced Ford to increase the credit loss reserves for its finance company by a "few hundred million dollars", Mr Inglis said.

"It will be a challenge for our credit company going into next year," he said.

Shocked analysts

The world's second largest auto firm said its losses would hit the equivalent of $0.50 (0.35) a share for the last three months of the year.

Analysts had expected Ford to post a loss of about $0.14 a share.

Earlier, the company had forecast a trading improvement from the third quarter's loss of $0.28 per share.

Ford's statement came two days after the firm revealed it was sacking about 600 blue-collar workers in New Jersey.

It also came ahead of a forthcoming shake-up which is expected to include an announcement of plant closures in the US next year.

Revamp ahead?

Ford is dealing with the worst financial crisis it has seen in almost a decade, just over a month after the firm replaced chief executive Jacques Nasser with Bill Ford.

A loss for the October to December period would represent Ford's third successive quarter of deficit, the company's worst trading record since 1992.

While the US car market has proved buoyant, sales have been supported by discounts and cheap financing deals.

Car sales fell off "noticeably" once offer periods ended on 20 November, the firm has admitted.

Making matters worse; the marketing costs related to zero-interest and low-interest finance offers in the wake of 11 September were higher than expected, Mr Inglis said.

Ford has also lost out through a recall linked to Firestone tyres.

And the company's sports utility vehicle, Explorer, was recently awarded the lowest rating possible for bumper performance in low-speed crash tests.

US carmakers are facing growing competition from European rivals, many of whom - including Ford's own European unit - have carried out previous productivity improvement drives involving plant closures and mass lay-offs.

Restructuring plan

Insiders say Ford will in January reveal a shake-up of its North American business, based around its experience of a European revamp.

In Europe, costs were slashed by $900m in the last two years and involved cutting five factories.

However, although Ford is believed to be eager to close some of its 21 North American assembly plants, it is bound by a moratorium on plant closures, as agreed under a contract between the big three auto firms in Detroit and the United Auto Workers union.

The contract puts a ban on plant closures until September 2003.

UBS Warburg analyst Saul Rubin predicted that Ford would mothball up to three plants, pending their closure once the moratorium ends.

Other cost cutting measures announced earlier this week include the suspension of the company's employee retirement plan and the elimination of merit pay hikes for 2,200 of its senior managers.

Ford's share prices slipped 37 cents lower by mid-morning trading on Wall Street to $17.37.

See also:

03 Dec 01 | Business
Ford cuts more jobs as sales flag
29 Nov 01 | Business
Low-speed crash tests hit Ford
29 Nov 01 | Business
Ford 'to cut thousands of jobs'
16 Nov 01 | Business
Ford job cut threat
30 Oct 01 | Business
Ford chief Jacques Nasser ousted
17 Oct 01 | Business
Ford reports huge loss
16 Sep 01 | Business
US motor industry suffers shortages
20 Aug 01 | Business
Jobs reprieve at General Motors
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