Ford Motor Co posted disappointing fourth-quarter earnings after a charge for debt payments, higher costs to launch new vehicles and a loss in its European operations, sending its shares down 6.3 percent.
Excluding one-time items, Ford posted an operating profit of 30 cents per share for the fourth quarter, well below the 48 cents per share analysts had forecast on that basis.
“People now are going to expect Ford to come out with great earnings,” said Bernie McGinn, chief investment officer at McGinn Investment Management, who owns Ford shares.
“They expect Ford to come out with great cars and be able to sell these cars,” he added. “Anything that comes out that’s a tad disappointing, even if it’s a tad disappointing inside a great story, is going to be punished.”
Ford Chief Financial Officer Lewis Booth said that analysts appeared to have underestimated the additional cost of launching new vehicles like the Explorer SUV and a new model year of F-Series trucks.
In addition, Ford’s European operations, which had been expected to be profitable in the fourth quarter, posted an operating loss of $51 million as Ford’s market share in the region dropped to just below 8 percent from nearly 9 percent.
But Booth said the steps Ford had taken to pay down debt in 2010 moved the company toward its goal of returning to an investment grade credit rating.
“We’re going to continue to work on the balance sheet,” Booth told reporters. “I think the test — or the question — is when we get to investment grade,” he said.
Separately, Ford raised its forecast for North American production in the current quarter and its outlook for full-year industry sales in 2011.
Fourth-quarter net income totaled $190 million, or 5 cents per share, including a $960 million charge to pay down debt. That compares with a year-earlier profit of $886 million, or 25 cents per share.
Full-year net income was $6.6 billion, or $1.66 per share, an increase of $3.8 billion from 2009, and the biggest net profit since 1999.
Ford mortgaged most of its assets to borrow $23.5 billion in 2006, a move that allowed it to finance new product development while not having to accept the life-saving government bailouts taken by its U.S. rivals GM and Chrysler Group.
The automaker said it had reduced its debt by $14.5 billion in 2010, reducing its annual interest costs by over $1 billion.
Ford shares were down $1.21, or 6.3 percent, at $17.58.
Shares in Ford, widely considered the strongest of the U.S. automakers, had gained more than 50 percent from the end of the third quarter.
@Reuters
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