Ford Motor Co., the nation’s second-largest automaker, said Tuesday it expects lower earnings in 2005 largely because of a decline in profits at its financial services arm, which contributed heavily to the bottom line in 2004.
Ford said it anticipates full-year 2005 earnings per share of $1.75 to $1.95, excluding special items, down from $2.11 a share in 2004. The current Wall Street forecast, according to Thomson First Call, is for full-year earnings of $1.84 a share.
Still, company executives, meeting with analysts in New York, said the automaker remained on track to post a $7 billion pretax profit in 2006. That milestone was announced as part of a five-year turnaround bid launched in January 2002, when Ford was mired in losses and plagued by eroding sales, questions about vehicle quality and the Firestone tire crisis.
The company also said automotive profits could double this year given a slew of new products and better results at its luxury car division.
“Last year our reinvigorated cycle plan kicked in, and we introduced more new vehicles around the world than at any other time in our 100-plus years,” chairman and chief executive Bill Ford said. “Looking ahead, just stabilizing our business isn’t enough. Our objective is to win. For 2005 and beyond, we’re going to build great products, a strong business and a better world.”
But executives said 2005 likely is to get off more slowly than last year.
In the first quarter of 2005, Ford said it anticipates earnings per share in the range of 25 to 35 cents, far below the current Wall Street estimate of 60 cents a share.
Chief financial officer Don Leclair said several factors will contribute to the expected slow start, including lower vehicle production in North America — 920,000 units versus 1 million a year ago — and continued higher health care and commodity costs.
Ford beefed up dealer stocks early in 2004 because of planned model changeovers at certain plants later in the year.
Leclair noted the increased expenses “will have their full impact starting in January, while our cost-reduction ... efforts will gain momentum during the year.”
The company said it expects its automotive business to generate a pretax profit in the range of $1.5 billion to $2 billion this year versus a pretax profit of $850 million in 2004 — in each case excluding special items.
The anticipated increase in automotive profits reflects significantly improved profits at Ford’s troubled Premier Automotive Group and flat-to-improved performance in North and South America, Europe and Asia Pacific and Africa/Mazda.
The luxury PAG division, which includes Volvo, Land Rover, Jaguar and Aston Martin, posted a pretax loss of $740 million in 2004, dragged down largely by Jaguar. PAG is in the midst of an aggressive restructuring.
Ford’s $850 million pretax profit from its worldwide automotive sector last year was up from $153 million in 2003 but short of the company’s goal of $1 billion. The gain reflected pricing improvements and lower overhead and engineering costs.
Ford said it expects profits at its financial services sector to decline sharply this year. The current forecast is for earnings of $3.5 billion to $3.7 billion, excluding special items, down from a record pretax profit of nearly $5 billion in 2004, excluding special items.
The company said it expects results for Ford Motor Credit to be down from 2004, reflecting in part lower volume and rising interest rates.
Ford grew its market share in Europe, South America and Asia Pacific last year, but its business in the all-important U.S. market was off nearly 5 percent. Some analysts have said Ford’s U.S. sales should get a lift in 2005 from several new vehicles launched in 2004, including the Five Hundred flagship sedan, Mustang muscle car and Escape hybrid SUV.