Ford Lowers ’05 Profit Outlook
Ford Motor Co. slashed its 2005 earnings forecast Friday and warned it no longer expected to reach its 2006 profit goal, citing higher costs, becoming the second big U.S. automaker in less than a month to paint a bleak picture about its future.
The No. 2 U.S. automaker said it expected its 2005 profit to be at least 14% lower than anticipated and did not expect to hit its 2006 profit goal of $7 billion before taxes, in part because of higher raw material and healthcare costs.
The profit warning, which was announced after the market closed, caused Standard & Poor’s to cut its debt rating outlook on Ford and its finance arm to “negative,” bringing the automaker a step closer to a downgrade to “junk” status. A downgrade to junk could raise borrowing costs significantly.
Ford faces many of the same problems as rival General Motors Corp., which warned last month that it would post its weakest first-quarter earnings since 1992 and that profit this year could miss forecasts by as much as 80%.
“Historically high prices for steel and crude oil, escalating healthcare expenses and a weak U.S. dollar presented formidable challenges as we entered 2005,” said Don Leclair, Ford’s chief financial officer.
The automaker cut its 2005 earnings forecast to a range of $1.25 to $1.50 a share from its previous estimate of $1.75 to $1.95 a share.
The revised forecast excludes the effect of special charges, which are estimated to be 8 to 10 cents a share for the full year. Analysts on average expect Ford to post earnings of $1.68 a share in 2005.
But despite rising costs, the automaker said that first-quarter earnings per share would exceed previous guidance of 25 cents to 35 cents and that full-year automotive operating cash flow was still expected to be positive.
The company will report its quarterly results April 20 and said it would provide an overview of its future then.
Shares of Ford were down nearly 6% during after-hours trading Friday. They had fallen 27 cents to $11.03 on the New York Stock Exchange.
