updated 1/20/2005 12:24:32 PM ET 2005-01-20T17:24:32

Ford Motor Co., the nation’s second-biggest automaker, said Thursday it swung to a profit of $104 million in the fourth quarter from a loss of $793 million a year ago, when it incurred heavy charges for restructuring in Europe and a new agreement with its top supplier hurt the bottom line.

As its larger rival General Motors Corp. announced a day earlier, Ford said its finance arm contributed the bulk of its income while its automotive business lost money in the quarter.

The fourth-quarter profit amounted to 6 cents a share compared with a loss of 43 cents a share in the October-December period a year ago.

Excluding special items, Ford earned $555 million, or 28 cents a share, in the quarter, down 7 percent from a year ago but ahead of Wall Street forecasts. The consensus of analysts surveyed by Thomson First Call was for earnings of 27 cents a share.

Revenue for the quarter was $44.7 billion, down from $45.9 billion a year ago.

For the full year, Ford’s worldwide automotive sector earned a pretax profit of $850 million, up from $153 million a year ago but short of the company’s goal of $1 billion. The gain reflected pricing improvements and lower overhead and engineering costs

“While this was at the lower end of our target range, it was less than our expectation,” Don Leclair, Ford’s executive vice president and chief financial officer, said in a conference call. “This was primarily explained by adverse exchange (rates) and higher manufacturing launch and commodity costs.”

Ford’s financial services sector earned a pretax profit of $1 billion in the quarter, up dramatically from $144 million a year ago. For the full year, excluding special items, Ford’s financial services sector reported a record pretax profit of $5 billion, up $1.7 billion over 2003, driven by strong profits at Ford Motor Credit Co. and Hertz Corp.

For all of 2004, Ford earned $3.5 billion, or $1.73 a share, a dramatic increase from a profit of $495 million, or 27 cents a share, in 2003. Full-year revenue for 2004 was $170.8 billion, up $7.2 billion from $163.6 billion last year.

“In 2004, our company gained momentum, delivering more revenue and earnings, more new products and more innovative breakthroughs,” Chairman and Chief Executive Bill Ford said in a statement. “We also confronted operation challenges with our Jaguar brand and high industry marketing costs.”

Ford incurred a $56 million charge in the fourth quarter related to an ongoing restructuring within its luxury Premier Automotive Group, which includes Volvo, Land Rover, Jaguar and Aston Martin. Led downward by troubled Jaguar, the group’s fourth quarter pretax loss was $255 million, compared with a profit of $114 million a year ago.

“Clearly, we’re not happy with our results at PAG,” Leclair said. “We have a lot of work to do, but our plans are in place and the PAG team is committed to improving.”

Ford’s fourth-quarter earnings also included a $390 million charge related to Visteon Corp., its former auto parts arm. Ford and Visteon announced agreements in late 2003 aimed at untangling pricing and cost-sharing issues.

The company offered no earnings forecasts, but Bill Ford said “we’re going to build on our successes as we launch more new products in 2005 and beyond.”

Some analysts have said Ford’s U.S. business should get a lift in 2005 from several new vehicles launched late in 2004, including the Five Hundred flagship sedan, Mustang muscle car and Escape hybrid SUV.

Ford Motor’s top executives are scheduled to disclose 2005 earnings milestones at a meeting Tuesday in New York.

But Leclair offered several “continuing challenges” for the coming year, including commodity price increases, rising health care costs and the intensely competitive global automotive business.

For all of 2004, Ford’s North American automotive operations reported a full-year pretax profit of $1.5 billion, down from $1.8 billion in 2003.

Ford said its market share in the U.S. fell from 19.2 percent in 2003 to 18 percent in 2004, hurt in large part by increased competition from Asian rivals.

Despite intense competition that typically means heavy consumer incentives, Ford said net pricing per vehicle improved by 2.4 percent in the fourth quarter, from $21,976 in 2003 to $22,737 last year. For the year, net pricing improved 1.3 percent — from $21,730 in 2003 to $22,475 in 2004.

Ford also announced Thursday it will pay profit sharing to its hourly employees in the United States on March 9. The average payment is $600. The company also expects to pay modest performance bonuses to eligible salaried employees, and based on present business conditions merit increases will be paid in the United States and Canada to all eligible salaried employees.

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