Ford's Costs Down, Income Up

Good News for Automaker, but Ad Spending Slashed

By Published on .

Most Popular
DETROIT ( -- Helped by a $100 million global cut in auto advertising and sales promotions, Ford Motor Co. trimmed its costs in the first quarter by $1.7 billion, including $1.2 billion in North America.

The results showed signs the turnaround plan is on track at the automaker, which reported worldwide net income of $100 million for the first quarter, an improvement of $382 million from the year-ago period, when it posted a net loss of $282 million.

Don Leclair, exec VP-chief financial officer, who cited the $100 million figure, said Ford is on track to trim $5 billion in costs this year.

Cutting losses
Ford's North American auto operations reported a pre-tax loss of $45 million for the first quarter, a significant improvement over a $613 million loss a year ago.

"Our plan is working and we continue to show signs of progress," CEO Alan Mullaly said in a teleconference with analysts and the media.

But Ford's global Volvo arm, based in Sweden, reported a pre-tax loss of $151 million vs. a profit of $94 million in the first quarter of 2007. The automaker said the drop was mainly due to unfavorable volume and mix, and changes in currency exchange rates, partially offset by cost reductions.

Mr. Leclair said the automaker's U.S. market share for its Ford, Lincoln and Mercury brands slid by three-tenths of a percent to 15% in the first quarter vs. a year ago, due to Americans' shift from full-size pickups and sport-utility vehicles, segments in which Ford is strongly represented. In the second quarter in North America, he expects less improvement than in the first due to the move to smaller vehicles.

Shrinking workforce
Ford is in the process of reducing its hourly workforce by 4,200 workers in the U.S., part of the 40,000 total plant workers trimmed in the U.S. since the end of 2005.

"We will continue to right-size the business" in North America, Mr. Mullaly said. He said he's looking forward to upcoming launches this year, the Ford Flex crossover wagon, Ford F-150 full-size pickup and Lincoln MKS sedan.

The operating results excluded Jaguar and Land Rover because Ford's sale of the two brands is pending. Mr. Mullaly said he expects to close that deal to India's Tata Motors Ltd. in the second quarter.

The CEO also touted Ford's initial vehicle quality improvements in North America, up by 8% in its most recent survey, putting Ford at parity with Honda and Toyota as the best in the industry. The Ford brand is touting that quality parity in the new "Drive One" ad blitz that broke this month from JWT Team Detroit.
In this article: