Ford Boosts Outlook, Restructures Jaguar
By Poornima Gupta
DETROIT (Reuters) - Ford Motor Co. raised its earnings outlook on
Friday due to strength from its financial services sector even as it
announced the end of car production at a Jaguar plant in Britain and its
withdrawal from Formula One racing.
The world's third-largest automaker, which will cut 1,150 jobs at the
British plant or 15 percent of money-losing Jaguar's work force, cited lower
costs from its automotive operations and strong results at Ford Credit for
its higher earnings outlook.
Ford, whose shares rose on Friday morning, said it expects
third-quarter earnings of 10 cents to 15 cents per share, up from a prior
estimate of break-even to 5 cents per share.
The automaker also raised its full-year outlook for the fourth time
this year to $1.90 to $2 earnings per share, up from a previous estimate of
$1.80 to $1.90.
The quarterly and annual estimates exclude the costs of the Jaguar
actions and other special items, which are expected to reduce full-year
earnings by 25 cents a share.
"The market is likely to be only modestly excited about the upward
(third-quarter earnings) revision, as a chunk of it appears to stem from
finance earnings," Himanshu Patel, analyst with J.P. Morgan Securities Inc.,
said in a note to clients.
Wall Street analysts, on average, have been expecting earnings of 9
cents per share in the third quarter and $1.99 for the full year, according
to Reuters Estimates.
In addition to ending final assembly operations at its Browns Lane
plant in Coventry, England, by the end of 2005, Ford said it aims to produce
about 127,000 Jaguar cars through the end of 2004, about 10 percent lower
than its annual capacity.
"(Jaguar) volume has grown but it's been less than we expected and
less than we needed to support the cost and infrastructure," Ford of Europe
chief Mark Fields said on a conference call.
The troubles at the iconic car brand are another blow to Britain's
once-illustrious automotive industry. Ford bought Jaguar, known for its
leaping cat hood ornament, in 1989. The U.S. automaker resurrected Jaguar,
for which Ford President Nick Scheele was honored with a knighthood.
But in recent years, Jaguar has faltered due to a lack of diesel
engines for Europe, and lackluster sales of its entry-level X-Type sedan.
Falling sales in the United States, its largest market, have also hit the
brand along with the popularity of sport utility vehicles and sterling's
strength against the dollar.
"It (the actions) will not fix Jaguar immediately, but we do expect a
sequential improvement in Jaguar results," Ford Chief Financial Officer Don
Leclair said on the conference call.
However, he said that Ford's luxury vehicle brands of Jaguar, Volvo,
Land Rover and Aston Martin should approach break-even levels in the fourth
quarter, excluding the special items.
Leclair said that he still expected the division, along with Lincoln
brand, to account for a third of Ford's automotive profit by 2006. Turning
around Jaguar is part of Ford's strategy to achieve its mid-decade target of
$7 billion in annual pretax profit overall.
"Overall, the Jaguar restructuring plan seems to have teeth, although
the company continues to temper expectations for any quick fix to Jaguar by
noting that it will be a medium-term turnaround," J.P. Morgan's Patel said.
The job cuts and Formula One decision together are expected to result
in a pretax charge of $450 million. Ford said $375 million of the charge
will be booked this year and the balance will be taken next year.
Most of the charge this year will be taken in the third quarter,
Ford shares were up 29 cents, or 2.1 percent, at $14.24 on the New
York Stock Exchange in afternoon trading on Friday.
Yet another $.02 worth from a proud owner of a 1970 Mach 1 351C @