- Strong liquidity with total cash, including automotive cash, marketable securities, loaned securities and short-term VEBA assets, of $23.6 billion.
In a separate announcement, Ford said it would restate financial results from 2001 through the second quarter of 2006 to correct the accounting for certain derivative transactions under Statement of Financial Accounting Standards (SFAS) 133, Accounting for Derivative Instruments and Hedging Activities.
These corrections are not reflected in the preliminary results announced today for Ford's 2006 third quarter. The company expects to finalize restatement amounts for this and previous periods by the time it files its Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2006. Financial statements pertaining to the 2006 third quarter will be provided at that time.
* The financial results discussed herein are presented on a preliminary basis; final data will be included in our Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2006 ("Form 10-Q Report"). ** Earnings per share from continuing operations, excluding special items, is calculated on a basis that includes pre-tax profit and provision for taxes and minority interest. See table following "Safe Harbor/Risk Factors" for the nature and amount of these special items and a reconciliation to GAAP. Summary of Preliminary Results
For the third quarter, Ford Motor Company reported a net loss of $5.8 billion, or $3.08 per share. This compares with a net loss of $284 million, or 15 cents per share, in the 2005 third quarter.
Excluding special items, the third quarter loss from continuing operations was $1.2 billion, or 62 cents per share, compared with a loss of $191 million, or 10 cents per share, a year earlier.
The performance from continuing operations primarily reflected operating challenges in the company's North America, Asia Pacific and Africa, and Premier Automotive Group operations. Performance also included continued profitability in South America and at Ford Credit. Though it lost money during the quarter, Ford Europe showed a year-over-year improvement in operating results and remained poised to deliver full-year profitability.
Special items included in the quarter's net loss primarily reflected the costs associated with restructuring efforts, primarily in North America, as well as the revaluation of long-lived assets related to automotive operations in North America and Jaguar/Land Rover. On an after-tax basis, special items reduced third-quarter earnings by a total of $4.6 billion or $2.46 per share. The total pre-tax effect of these special items was $5.3 billion. (See appendix at the end of this press release for a detailed explanation of special items and other changes during the period.)
In addition, effective this quarter, the company established a valuation allowance of $2.2 billion against deferred tax assets primarily at its North America and Jaguar/Land Rover operations. The valuation allowance was established because of the cumulative losses the company has incurred and the financial outlook for these operations.
Alan Mulally, Ford's president and chief executive officer, said he and his senior management team are committed to creating a viable Ford Motor Company business going forward.
"These business results are clearly unacceptable," Mulally said. "We are committed to dealing decisively with the fundamental business reality that customer demand is shifting to smaller, more efficient vehicles. Our focused priorities are to restructure aggressively to operate profitably at lower volumes, and to accelerate the development of new, more efficient vehicles that customers really want.
"We have great global assets and resources that we will leverage to significantly improve our product strategy, our production efficiency and quality. This will enable us to meet customer expectations for distinctive vehicles much more cost effectively. These actions will lead to profitable growth of our business over the long term."
The following discussion of the preliminary results of our Automotive sector and Automotive business units is on a basis that excludes special items. See table following "Safe Harbor/Risk Factors" for the nature and amount of these special items and a reconciliation to GAAP.
On a pre-tax basis, worldwide Automotive sector losses in the third quarter were $1.8 billion. This compares with a pre-tax loss of $1.3 billion during the same period a year ago.
Worldwide automotive sales for the third quarter declined to $32.6 billion from $34.7 billion in the same period last year. Worldwide vehicle unit sales in the quarter were 1,511,000, down from 1,531,000 a year ago.
North America: In the third quarter, Ford's North America automotive operations reported a pre-tax loss of $2.0 billion, compared with a pre-tax loss of $1.2 billion a year ago. The decline was largely attributed to lower volumes and unfavorable mix, primarily associated with lower industry volume and lower market share, and higher incentives. Cost reductions were a partial offset. Sales were $15.4 billion, down from $18.2 billion for the same period a year ago.
South America: Ford's South America automotive operations reported a third-quarter pre-tax profit of $222 million, an improvement from a pre-tax profit of $96 million a year ago. The improvement was primarily explained by higher volume and favorable pricing. Sales for the third quarter improved to $1.5 billion from $1.2 billion in 2005.
Ford Europe: Ford Europe's third-quarter pre-tax loss was $13 million compared with a pre-tax loss of $55 million during the 2005 period. The improvement came from higher vehicle sales, partially offset by higher pension-related costs, lower profits from operations in Turkey and negative net pricing. During the third quarter, Ford Europe's sales were $7.3 billion, compared with $6.4 billion during third quarter 2005.
Premier Automotive Group (PAG): PAG reported a pre-tax loss of $593 million for the third quarter, compared with a pre-tax loss of $108 million for the same period in 2005. The decline was explained by adverse cost performance, primarily reflecting adjustments to Jaguar and Land Rover warranty accruals and lower volume at all operations, excluding Aston Martin. Improvements in overhead costs were offset by increases in advertising. Third-quarter sales for PAG were $6.5 billion, compared with $6.8 billion a year ago.
Asia Pacific and Africa: For the third quarter, Asia Pacific and Africa reported a pre-tax loss of $56 million, compared with a pre-tax profit of $21 million a year ago. The decline primarily reflected lower production and dealer inventories, adverse mix, and higher incentives, partially offset by cost reductions. Sales were $1.6 billion, compared with $1.9 billion in 2005.
Mazda: During the third quarter of 2006, Ford's share of Mazda pre-tax profits and associated operations was $40 million, compared with $112 million during the same period a year ago. The decline primarily reflected the non- recurrence of mark-to-market gains on Mazda convertible bonds during 2005, which have now been entirely converted to equity.
Other Automotive: Third-quarter results included a pre-tax profit of $553 million in Other Automotive, compared with a loss of $241 million a year ago. The year-over-year improvement relates to tax-related interest and higher portfolio returns.
FINANCIAL SERVICES SECTOR
For the third quarter, the Financial Services sector earned a pre-tax profit of $448 million, compared with pre-tax profits of $1.1 billion a year ago.
Ford Motor Credit Company: Ford Motor Credit Company reported net income of $262 million in the third quarter of 2006, down $315 million from net income of $577 million a year earlier. On a pre-tax basis from continuing operations, Ford Motor Credit earned $428 million in the third quarter, compared with $901 million in the previous year. The decrease in earnings was attributed to lower financing margins, higher depreciation expense and the impact of lower average receivable levels.