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Ford Profit Plunges As SUV Sales Drop

Firm May Sell Hertz Rental Business, Will Launch More Efficient Models

By Greg Schneider
Washington Post Staff Writer
Thursday, April 21, 2005; Page E02

Ford Motor Co. yesterday posted net income of $1.21 billion (60 cents per share) for the first quarter, down sharply from the corresponding period a year earlier but better than Wall Street expected.

The company said profit suffered because high gasoline prices have caused consumers to abandon big sport-utility vehicles -- which carry the heftiest profit margins -- more quickly than anticipated. High health care costs and unfavorable currency exchange rates also hurt income, the company said.

An Arizona Ford dealer advertises a "huge" inventory. Slow sales were a company-wide problem in the quarter. (Tom Story -- Bloomberg News)

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In the quest to trim costs and focus on the core business of building automobiles, Ford executives said yesterday that they are considering seeking a sale of rental car subsidiary Hertz Corp.

Ford's results were considerably better than the $1.1 billion loss that General Motors Corp. reported the day before. Ford's profits were down 38 percent from $1.95 billion (94 cents) during the first three months of 2004. Revenue was up 1 percent, at $45.14 billion.

Ford's credit arm continued to power the company's profits, with $710 million in net income -- up from $688 million in the corresponding quarter a year earlier. Every segment of the company's automotive business made money except for Premier Automotive Group, a collection of the prestige brands Jaguar, Land Rover, Volvo and Aston-Martin, which posted a pretax loss of $55 million, down from a pretax profit of $33 million a year earlier.

While Ford's North American auto business was profitable, its pretax profit, excluding special items, of $663 million was a steep drop from nearly $2 billion posted in last year's first quarter, thanks partly to the market's shift toward cars and smaller "crossover" SUVs.

That shift caused Ford's share of the U.S. market to fall to 17.8 percent, down nearly a percentage point from a year earlier. "We're disappointed in our first-quarter U.S. market share," Ford Chief Financial Officer Donat R. Leclair said in a conference call with reporters and financial analysts.

Chairman and chief executive William Clay Ford Jr. said during the same call that new products coming out later this year -- such as the Ford Fusion sedan and Mercury Mariner Hybrid SUV -- are aimed squarely at the market's new appreciation for more fuel-efficient vehicles.

Nonetheless, Ford said yesterday that he expects the company to do no better than break even and possibly post a loss during the second quarter of the year. "We're very proud of our progress," he said, "but also extremely aware of the challenges we face."

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