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Last Updated: Wednesday, 20 April, 2005, 16:52 GMT 17:52 UK
Ford sees profits fall to $1.2bn
Ford trucks on a dealer's forecourt
Trucks and SUVs are losing their lustre for US buyers
US car giant Ford Motor saw its profits fall almost 40% in the first quarter, as falling US sales and rising prices for raw materials ate into margins.

The company said its net profit was $1.21bn (630m), on sales of $45.1bn.

The news comes less than a month after Ford warned it would fail to meet 2005 profit targets, and would miss its long-term annual profit goal of $7bn.

But its performance contrasts with that of arch-rival GM, which a day earlier said it lost $1.1bn in the same period.

Both car makers are facing intense difficulties in their home market, as rising fuel costs and flagging consumer spending hit home.

They now rely on loans and other financial products to make most of their money, while they struggle to deal with huge healthcare costs and rising prices for raw materials.

Long-term strategy

Following the results, Ford's shares rose 3.5% in pre-opening trading on Wall Street.

Despite the firm's sliding profits, analysts had expected the results to be even worse.

Ford is in the middle of a multi-year restructuring, aimed at cutting costs and returning the car maker to health.

The plan that we launched in 2002 has led to profits and positive cash flow
Bill Ford, Ford chairman and chief executive

The company said the strategy was working, even though it had had to push back its profit targets and was expecting a narrow loss in the three months to June.

"The plan that we launched in 2002 has led to profits and positive cash flow," said Bill Ford, the firm's chairman and chief executive.

Its carmaking operations are certainly in the black, ending the quarter with $800m more cash than it started.

GM, in contrast, bled more than $3bn in cash during the same three months, more than 10% of its liquid assets.

Loans, not cars

Even so, Ford's results indicate that its core business of building and selling vehicles is struggling.

Ford Motor Credit, the arm of the group which lends money to customers, saw profits rise $22m to $710m.

But profits from its automotive business were $579m, down by more than two thirds from the year before on sales that rose only 1% to $39.3bn.

North America - accounting for more than half of overall sales - was the main culprit, while profits and sales in South America, Europe and Asia all improved.

Ford's premium European brands such as Land Rover, Jaguar and Aston Martin made a loss.

Its stock of cars in North America also rose, and the firm is now cutting back on production.


BBC NEWS: VIDEO AND AUDIO
Why Ford has lost sales in the US



SEE ALSO:
GM loses $1.1bn as car sales slow
19 Apr 05 |  Business
Ford suffers from profit worries
11 Apr 05 |  Business
Ford fighting to keep its shine
06 Mar 05 |  Business
GM, Ford cut output as sales fall
02 Mar 05 |  Business
Ford gains from finance not cars
21 Jan 05 |  Business


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