FORD MOTOR COMPANY, the world’s second-largest vehicle maker, last night sharply reduced its full-year earnings outlook and gave warning of more job cuts to offset slumping sales in the US.
The company, which has given warning that its core automotive operations may not be profitable this year, cut its full-year profit outlook from between $1.25 and $1.50 a share to between $1 and $1.25. The company has now lowered its forecast for profits in 2005 twice, having suffered 12 consecutive months of falling sales.
Ford also said that in addition to the elimination of 2005 bonuses for salaried management employees worldwide, it would suspend pension matching grants for salaried employees and cut another 5 per cent of its payroll in North America, equal to about 1,700 jobs.
“We’re taking steps to immediately reduce our salariedrelated costs,” said Don Leclair, the chief financial officer. Ford announced 1,000 job cuts in April. “Challenges continue to mount,” Mr Leclair added.
Ford and General Motors, its larger rival, are reeling from a dramatic slowdown in sales of their mid-size and large sport utility vehicles (SUVs), which used to drive their growth. Demand for the fuel-thirsty vehicles has fallen because of changing consumer sentiment in the face of rising petrol prices.
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Both companies have seen their credit ratings downgraded to junk status, sharply increasing their borrowing costs, and have been losing market share to cheaper Asian rivals. Ford’s total debts were $161 billion (£88 billion) at the end of March, while GM has borrowings of $292 billion.
In addition to its planned layoffs in North America, Ford said it was “evaluating options for reducing personnel-related costs outside North America”. The company did not elaborate. But Tim Ghriskey, chief investment officer with Solaris Asset Management, said Ford was clearly looking at a more sweeping turnaround strategy.