Stuck in Reverse

Ford Reports Huge Loss, Enters Key Phase of Overhaul

Ford Motor Co. yesterday reported a $5.8 billion loss in the third quarter, its worst quarterly result in 14 years.

While the nation's second-largest automaker has taken a series of steps to repair its troubled operations, its outlook appears to be darkening. Analysts say that the company is fighting for its life and that its survival depends on a financial recovery in the next two years.

"Ford Motor Company is in the midst of a serious financial crisis," said Gary Chaison, professor of industrial relations at Clark University. "I find Ford's picture very discouraging."

As part of its turnaround strategy, the company recently sped up plans to close factories and reduce its workforce. It has hired a new chief executive and acknowledged that it was slow to react to consumer trends. Company officials say they are revamping Ford's vehicle line with an emphasis on more fuel-efficient models. The company's loss in the quarter was largely due to restructuring costs, but analysts said signs of a turnaround have yet to appear.

"Things are likely to get worse before they get better," said David Healy, auto industry analyst at Burnham Securities Inc. "They are not out of the woods yet. They are not even into the woods."

The company said poor vehicle sales and sliding U.S. market share also contributed to the quarterly loss.

Ford has $23.6 billion in cash but is burning through it at the rate of almost $11 billion a year, Healy said, adding, "They can't keep that up indefinitely."

Ford's quarterly loss equates to $3.08 per share. A year ago, the company reported a loss of $284 million, or 15 cents per share, in the third quarter. Revenue in the latest quarter dropped by $4 billion from last year, to $36.7 billion.

Alan R. Mulally, Ford's new chief executive, called yesterday's results "unacceptable."

Ford's lost $6.7 billion in the first quarter of 1992 as a result of changes in how it accounted for health-care expenses, the company said.

The Detroit automaker is suffering from a meltdown in profits after the end of the 1990s sales boom of sport-utility vehicles. In a series of turnaround announcements this year, Ford has pledged to cut $5 billion in operating costs on an annual basis and eliminate one-third of its salaried workforce, and has offered buyouts to 74,000 hourly workers.

Ford recorded $5.3 billion in pretax charges, which included the costs of writing down assets and implementing various employee layoff programs. Ford also reported losses in Europe, Asia-Pacific and the Premiere Automotive Group of luxury brands.