GM, Ford and Chrysler Sales All Lag Estimates

Ford surprises with $1B profit;without goverment Intervention

DEARBORN, Mich. (AP) -- Ford, the only Detroit automaker to dodge direct government aid and bankruptcy court, surprised investors with net income of nearly $1 billion in the third quarter and forecast a "solidly profitable" 2011.
The automaker said Monday earnings were fueled by U.S. market share gains, from cost cuts. Ford's shares rose 68 cents, or 9.8 percent, to $7.68 in morning trading.
The latest results signal that Ford's turnaround is on more solid ground. The company lost more than $14.6 billion last year and hasn't posted a full-year profit since 2005. While it made a profit in the second quarter, that was mainly due to debt reductions that cut its interest payments.
Ford, based in Dearborn, Mich., reported third-quarter net income of $997 million, or 29 cents per share. Its profit forecast for 2011 was a step above previous guidance of break-even or better for the year.
Ford's key North American car and truck division posted a pretax profit of $357 million, the division's first quarter in the black since early 2005. Ford cited higher pricing, lower material costs and increased market share for the improvement.
Excluding one-time items, Ford earned 26 cents per share, blowing away analysts' expectations of a loss of 12 cents.
The earnings came despite an $800 million revenue drop. But Ford said it cut costs by $1 billion during the quarter, accomplished through layoffs in North America and Europe, reduced pension and retiree health care costs and improvements in productivity and product development.
Chief financial officer Lewis Booth said the company took in $1.3 billion more than it spent in the quarter, an improvement over its $1 billion cash burn in the second quarter.
"That's a huge deal," Booth said.
Ford's plan to create demand and get better prices for its products, coupled with cost cuts, gave the company confidence that it will make money in 2011, Booth said.
But Ford still faces obstacles in its turnaround. Last week, workers overwhelmingly rejected an agreement with the United Auto Workers that would have brought Ford's labor costs in line with rivals General Motors Corp. and Chrysler LLC. Workers objected to clauses limiting their right to strike and freezing entry-level wages, and felt the company was healthy enough and didn't need further concessions.
The rejected deal also would have changed rules so skilled tradesmen such as electricians and pipefitters work in teams and perform more than one task.
Rejection of the deal isn't likely to place Ford at an immediate cost disadvantage to its crosstown rivals because savings from the concessions are longer-term, said Gary Chaison, a professor of labor relations at Clark University in Worcester, Mass. Neither the company nor the UAW has released any cost savings numbers.
The third-quarter profit makes it extremely unlikely that the company will push to head back to the bargaining table before the current UAW contract expires in the fall of 2011, and union leaders also are unlikely to take another deal to the membership, Chaison said.
"I think the company has no credibility asking for concessions now, and I think the leadership is quite embarrased for making a case for concessions," he said.
Chaison said Ford could make some noise about moving new vehicle production to Canada, where unionized workers on Sunday approved a package of concessions, but it's more likely that Ford will live with the current contract until 2011.
The other area where Ford has a cost disadvantage is debt. Ford reported $26.9 billion in debt, up $800 million from the second quarter.
The company avoided the same fate as rivals Chrysler and GM by mortgaging its factories and even the familiar blue oval logo to borrow $23.5 billion before credit markets froze last year.
Ford didn't quantify the impact of Cash for Clunkers, which offered buyers rebates to trade in their vehicles. The program helped Ford cut costly incentives and raise production.
It also won buyers; the fuel-efficient Ford Focus sedan and Ford Escape, a small SUV, were among the top five sellers under clunkers. Ford sales climbed 17 percent in August thanks to the program.
Ford's revenue fell $800 million for the quarter, to $30.9 billion, due mainly to its financial services arm, Ford Motor Credit, making fewer loans.
But the division still posted a pretax profit of $677 million, and revenue from auto operations rose slightly to $27.9 billion.
Ford also has benefited from consumer goodwill after it declined government bailout money and didn't go into bankruptcy over the summer as GM and Chrysler did. Ford grabbed sales from its rivals, posting the largest increase in market share of any automaker in September. Ford expects an overall gain in U.S. market share in 2009, a feat it hasn't accomplished since 1995.
(This version CORRECTS 5th graf that Ford's North American car and truck division posted the first pretax profit since the first quarter of 2005 sted company's first pretax profit since first quarter of 2005)
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GM Says 7,500 UAW Members to Take Buyouts, Boosting Savings Bid

March 26 (Bloomberg) -- General Motors Corp. said 7,500 United Auto Workers members have signed up for buyouts the company needs as part of cuts to keep $13.4 billion in U.S. aid and more than doubling a Barclays Capital estimate.

The retirements and buyouts open slots for the biggest U.S. automaker to hire replacement workers for half the current union rate. Under the federal loans GM says it needs to survive, labor costs must match those of Japanese automakers in the U.S.

GM and Chrysler LLC are encouraging workers to accept buyouts, retire or quit after concessions this year eliminated benefits related to job security and unemployment pay. They’re seeking as much as much as $21.6 billion in new U.S. financing to stay in business.

President Barack Obama’s auto task force will announce more aid for GM and Chrysler within a week, possibly in a few days, Senator Carl Levin said yesterday.

“It’s clear that there will be more support and it will be with some conditionalities, which will be made clear within a week,” Levin, a Michigan Democrat, told reporters in Washington.

Steven Rattner, the U.S. Treasury’s chief auto adviser, said March 20 the task force would give a “sense of direction” before the end of the month. March 31 is the automakers’ deadline to show they can restructure and remain viable.

‘Clear Direction’

“It’s something that will be positive,” Levin said of the task force’s planned announcement. “The administration wants to be helpful. It is clear to me that there will be conditions and that there will be clear direction as to where they’re headed.”

GM’s union buyout covers about 62,000 employees willing to retire or quit and consists of a $25,000 voucher to buy a new auto and receive $20,000 in cash. The company’s goal is to get half of about 22,000 eligible workers to leave and GM budgeted for about 6,000 to take the current offer, a person familiar with the plans said.

Workers who accepted the buyout by the March 24 deadline have seven days to reconsider. The UAW declined comment on the offers before today’s release.

Barclays analyst Brian Johnson in Chicago projected in a March 12 report that GM would persuade about 3,100 workers to leave. GM, Ford Motor Co. and Chrysler cut more than 124,800 hourly workers with buyouts or attrition in three years.

Ford’s Buyouts

Union workers at Ford, which isn’t seeking government loans, ratified changes March 9 after reaching an accord on a plan to replace as much as half of future payments to a UAW-run retiree health-care fund with stock instead of cash. GM and Chrysler are still negotiating retiree-fund changes.

The Ford UAW concessions eliminate the so-called jobs bank that paid workers most of their wages to report to a work location when there were no duties to perform. Pay that supplements unemployment has been reduced. Laid-off employees who refuse to take a new job, even hundreds of miles away, lose their benefits.

Ford’s buyout program, which pays as much as $75,000 in cash and vouchers, begins April 1 and ends May 22. The program may be accepted by 5 percent, or about 2,100, of Ford’s current 42,000 UAW members, Johnson wrote.

Chrysler may shed about 3,000 workers in a buyout, people familiar with that program said this week. The deadline for acceptances, originally set for tomorrow, has been extended indefinitely because new contract language with the UAW isn’t complete, company spokesman Max Gates said today.

Chrysler’s Package

Cerberus Capital Management LP’s Chrysler is offering cash and a vehicle voucher with a combined value of as much as $75,000 to its 28,600 UAW workers. The Auburn Hills, Michigan- based automaker granted buyouts of as much as $100,000 last year, when 13,200 union workers left.

GM started the first of its announced plans for 10,000 salaried-worker cuts March 24, eliminating 160 mechanical engineering jobs in Michigan, spokesman Tom Wilkinson said. The automaker has a May 1 deadline to complete the reductions, which include 3,400 U.S. employees.

The company got 34,400 union members to leave in 2006 with packages of as much as $140,000, and used pension funds to help pay as much as $62,500 for 18,000 UAW members to depart in 2008.

GM UAW Labor Savings Said Double Ford’s $500 Million Agreement

March 11 (Bloomberg) -- General Motors Corp., trying to keep U.S. aid it needs to survive, expects more than double the $500 million savings Ford Motor Co. said it gets with labor changes approved this week, people familiar with the details said.

United Auto Workers union leaders reached a tentative agreement on contract changes for GM on Feb. 17 covering 62,000 workers and are still negotiating on a retiree health-care fund. GM’s savings are bigger than Ford’s in part because of additional work rule changes, the people said, who asked not to be identified because the GM details haven’t been released.

GM needs labor and debt holder concessions of more than $28.5 billion as part of an agreement with the U.S. Treasury to keep $13.4 billion in loans. GM is also trying to convince President Barack Obama’s auto task force to free up as much as $16.6 billion more to keep the largest U.S. automaker out of bankruptcy.

Ford, which is not seeking U.S. aid, said today that a new labor agreement and modifications to a Voluntary Employee Beneficiary Association union retiree health-care fund will save $500 million annualized, with about 75 percent of that realized this year. The estimate of GM savings includes only the contract concessions and doesn’t include any changes to the VEBA, the people said.

“GM has already said we have achieved substantial savings in our labor agreement but we are not giving details,” GM spokeswoman Renee Rashid-Merem said. UAW spokesman Roger Kerson didn’t immediately return a phone call seeking comment.

Similar Agreements

The UAW-GM agreement makes similar economic concessions to the one ratified by union members at Ford, UAW Vice President Cal Rapson wrote in a March 9 letter to local presidents and chairmen. The union won’t set a vote to ratify the agreement, or give details, until after the VEBA agreement is set, Rapson said in the letter.

The new Ford agreement will trim labor and benefit costs to $55 an hour from $60, Hinrichs said. Ford’s labor costs may fall to $50 an hour by 2011, if the car market improves, spokesman Mark Truby said.

Toyota’s comparable U.S. labor costs are about $48 or $49 an hour, Hinrichs said, adding that Ford will reach parity with the U.S. plants of European and Asian carmakers by 2011 as savings from concessions are fully realized.

GM said in its Feb. 17 report to the U.S. Treasury that it aims to reach labor-cost parity this year.

Changes to the GM contract “in the area of economics, pattern the UAW Ford agreement,” Rapson said in the letter. Other parts, he said, are “drastically different.”

For example, there are no mandatory physical examinations and “other parts of the agreement are different to better fit GM culture.”

Concessions Needed

GM must persuade the UAW to swap $20.4 billion in future obligations to the VEBA for half that in cash and the rest in equity as part of U.S. Treasury requirements. GM has said it needs at least $2 billion in fresh aid by the end of this month or it will be bankrupt.

The UAW walked out of GM talks on Feb. 13 in a dispute over the VEBA demands and later returned to approve only other concessions. GM UAW members must still ratify the agreement for it to be implemented.

GM needs labor concessions in part to win an agreement from bondholders to exchange about $27.5 billion in existing debt for $9.2 billion and new GM equity. The bondholders are still negotiating that demand.

GM’s bondholders meet with Obama’s auto committee March 5. The bondholders’ representatives are concerned GM’s viability plan may not keep it out of bankruptcy, a person familiar with the matter said last week.

The Ford contract changes won the support of 59 percent of production workers and 58 percent of skilled-trades employees, the union said March 9 in a statement. About 42,000 members were eligible to vote on the contract. The terms include elimination of annual bonuses and cost-of-living pay increases, as well as reductions in layoff benefits and in the company’s cash contribution to the VEBA.

Ford tells Congress it may be able to go it alone

WASHINGTON (AP) -- Ford Motor Co. is asking Congress for a $9 billion "stand-by line of credit" to stabilize its business, but says it doesn't expect to tap it. Unless one of Detroit's other Big Three auto companies goes bust, Ford expects to have enough money to make it through next year without government help, it said in a plan that projected the firm will break even or turn a pretax profit in 2011.

Detroit's automakers, making a second bid for $25 billion in funding, are presenting Congress with plans Tuesday to restructure their ailing companies and provide assurances that the funding will help them survive and thrive.

General Motors Corp., Ford and Chrysler LLC said they would refinance their companies' debt, cut executive pay, seek concessions from workers and find other ways of reviving their staggering companies.

The Big Three executives also are offering a series of mostly symbolic moves to burnish their images, badly tattered after they arrived in Washington D.C. last month on three separate private jets to plead for a federal lifeline for their struggling companies. All three companies offered separate plans for hearings that will be held Thursday and Friday.

That approach the auto executives took last month led Democratic congressional leaders to declare they didn't come prepared to justify their pleas and they told them to go back home and ready a new plan.

This week, the automakers are going out of their way to show deference to lawmakers and a willingness to flog themselves for past mistakes. "I think we learned a lot from that experience," Ford CEO Alan Mulally told The Associated Press in an interview.

Mulally said he'd work for $1 per year if his firm had to take any government loan money. The company's plan also says it will cancel all management employees' 2009 bonuses, scrap merit increases for its North American salaried employees next year, and sell its five corporate aircraft.

And for this week's appearances here, all three company chiefs will skip the lavish travel arrangements. Mulally is coming by car from Detroit for this week's second round of congressional hearings on government help for the Big Three. GM Chief Rick Wagoner will drive a Chevrolet Malibu hybrid sedan for the 520-mile trek from Detroit to Capitol Hill, spokesman Tony Cervone said Tuesday. And Chrysler LLC CEO Robert Nardelli won't travel by corporate jet, but a spokeswoman declined to elaborate on his travel plans, citing security reasons.

The unions were preparing to make sacrifices as well. United Auto Workers leaders summoned local union leaders from across the country to an emergency meeting Wednesday in Detroit to discuss concessions the union could make to help auto companies get government loans.

U.S. automakers are struggling to stay afloat heading into 2009 under the weight of an economic meltdown, the worst auto sales in decades and a tight credit market. General Motors, Ford and Chrysler went through nearly $18 billion in cash reserves during the last quarter, and GM and Chrysler have said they could collapse in weeks.

Meanwhile, the auto companies released new sales numbers that underlined the punishing business environment facing the Big Three. Ford said its November U.S. light vehicle sales tumbled 31 percent amid a continued slump in consumer spending and tight credit markets. Sales at Toyota, Japan's No. 1 automaker, fell 34 percent despite its extension of zero-percent financing on a dozen vehicles.

Ford's blueprint said it would invest $14 billion over the next seven years to boost its vehicles' fuel-efficiency, and improve the overall efficiency of its fleet by an average of 14 percent next year. And Ford is calling for a new partnership among automakers, parts suppliers and the government to develop new battery technologies domestically, so the U.S. doesn't have to rely on foreign batteries - as it now does on foreign oil - to power its cars.

GM will outline efforts to negotiate swapping some of the company's debt for equity stakes in the automaker, either shares or warrants for them, said two people briefed on the company's plan.

With eight separate brands, GM will also discuss efforts to shed brands but it would prefer to sell them instead of shutting down Pontiac, Saturn or Saab, said one of the people briefed on the plan. Killing off brands, like GM did with Oldsmobile in 2004, would require cash the company doesn't have, the person said. The people briefed on GM's preparations didn't want to be identified because the plan hadn't been completed.

Chrysler is expected to outline changes that would include a swap of debt in the company for equity stakes and reductions in some vehicle models, according to a person who was briefed on the plan. The person spoke on condition of anonymity because the discussions were private.

GM, according to its quarterly report filed with the Securities and Exchange Commission, owes creditors $45 billion and it must pay more than $7.5 billion early in 2010 to a UAW-administered trust fund that will take over retiree health care payments.

Ford owes more than $26 billion, with $6.3 billion due to its UAW trust fund at the end of 2009. Chrysler, a private company, does not have to open its books, but its CEO, Nardelli, has said it would be difficult for the company to make it without federal aid. All three likely are negotiating with the UAW for delays in payments to the trusts.

The companies are resisting calls for bankruptcy, arguing that no one would buy a car from an automaker that may not survive the life of the vehicle.