2006: Worst year in Ford's 103 year history

[XR Martin]

This aint good. Seven unnamed plants to close....

Ford Motor Co. posted a net loss of $12.7 billion, or $6.79 a share, in 2006.
That tops Ford’s worst year on record, which was 1992, when the automaker posted a $7.39-billion loss. It also tops General Motors Corp.’s $10.6-billion loss in 2005.

Ford’s staggering, historic loss comes after the company bled $5.8 billion, or $3.05 per share, during the last three months of the year. That was on top of the $7 billion in losses through September.

Special charges related to the company’s ongoing restructuring efforts also cost the company $9.9 billion, or $5.29 a share.

Declining sales of SUVs and F-Series pickup trucks in the United States played a key role in the company’s decline — as evidenced by the free fall of sales revenue in North America. Sales plummeted $11.2 billion to $69.4 billion from $80.6 billion in 2005.

Gains in the rest of the world only slightly offset that loss. Overall, Ford’s worldwide automotive revenues fell $10.2 billion from $153.5 billion in 2005 to $143.3 billion.

“We fully recognize our business reality and are dealing with it,” Ford CEO Alan Mulally said in a statement. “We have a plan, and we are on track to deliver.”

In all, 2006 will go down at one of the saddest and difficult periods in Ford’s 103 years of operation.

Last year began with Ford’s dramatic unveiling of its "Way Forward" revival plan. That strategy was proven to be inadequate over the summer and was revamped in the fall.

It now calls for closing 16 plants and eliminating 44,000 hourly and salaried jobs, among other actions. Seven of the plants have not been identified.

Throughout the year, consumers kept rejecting Ford’s most profitable vehicles — the Ford F-Series and SUVS — as they sought out more fuel-efficient models.

In August, the automaker announced it would slash production of 168,000 of those vehicles. It was the largest production cut in more than two decades and would result in downtime at three local factories and seven others nationwide.

Meanwhile, 38,000 employees, 46% of the company’s hourly workforce, preliminarily decided to take buyouts and voluntarily leave the company.

The Ford family also had a bumpy year: The dividend was suspended and the great-grandson of company founder Bill Ford stepped aside as CEO in September, retaining his title as chairman. In his place, he installed an automotive industry outsider, Boeing’s Alan Mulally.

Then, Ford rolled the dice on a huge gamble that might someday cause the Ford family to lose control of the company. Ford took out more than $25 billion in loans, using nearly everything it owns, including the trademark for the blue oval logo, as collateral. The money was desperately needed to survive through 2009, when Ford expects it will burn through $17 billion in cash and post a small profit.

And finally, the launch of a critical new vehicle, the Ford Edge crossover, was delayed until the last weeks of the year. The response has been good, but not nearly the blockbuster hit Ford needs to get its mojo back.

No matter how bad today’s results are, employees, dealers and the state of Michigan should prepare for things to get even worse.

In late November, Ford filed a document with the U.S. Securities and Exchange Commission that warned: "In 2007, we anticipate a deterioration in overall total company earnings."

Not everyone agrees it will be that bad, of course.

David Healy, an automotive analyst with Burnham Securities, recently wrote that "assuming that Ford’s thin new product lineup swells successfully and that the necessary corporate shrinkage in employment and capacity is carried out on schedule, next year’s results ... will probably show a significant improvement over this year’s."

But even he recognizes that a positive outlook for Ford has a lot of “ifs” attached, and he doesn’t recommend buying Ford stock.

“Anything is possible,” he said. “However, we’d prefer to watch from the sidelines.”