Ford posts loss; plans cuts, possible asset sales

DETROIT (Reuters) - Ford Motor Co posted a worse-than-expected quarterly loss on Friday, burning $7.7 billion of cash in its automotive business amid slowing global demand that threatens the future of the U.S. auto industry.

Ford, whose automotive unit ended the quarter with $18.9 billion in cash including marketable securities, set new deeper salaried cost cuts and said it would explore asset sales.

The automaker said it hoped to improve automotive cash by $14 billion to $17 billion through 2010 through the various cost cuts under the expectation that the global downturn will be "deeper, broader and longer than was previously assumed."

The company's automotive cash burn in the third quarter included production cuts, operating losses and upfront payments to Ford Credit to support consumer loan incentives. Overall liquidity, including available credit, totaled $29.6 billion.

Ford Chief Financial Officer Lewis Booth said he was comfortable with the automaker's liquidity and did not expect to tap into revolving credit lines.

The automaker expects its cash burn rate to be slower in the fourth quarter than in the third quarter.

Ford Chief Executive Alan Mulally and the leaders of General Motors Corp, Chrysler and the United Auto Workers met with U.S. lawmakers on Thursday to support a federal bailout of the struggling industry.

Ford, along with other automakers in Europe, was also participating in a bid to seek 40 billion euros of loans to support the industry. The request is similar to the U.S. $25 billion loan program to support improved fuel economy.

The automaker said its third-quarter net loss narrowed to $129 million, or 6 cents per share, from $380 million, or 19 cents per share, a year earlier.

The results include a gain of more than $2 billion from the approval of the voluntary employee beneficiary association aligned with the United Auto Workers.

Excluding these and other one-time items, the loss from continuing operations was $2.98 billion, or $1.31 per share, compared with analysts' expectations for 94 cents per share, according to Reuters Estimates.

Total revenue fell to $32.1 billion in the quarter, from $41.1 billion a year earlier.

Ford Motor Credit net income fell to $95 million for the quarter, from $334 million a year earlier, and the captive finance arm did not contribute a dividend to Ford.

By sharp contrast, GMAC LLC, the finance arm for GM that is 51 percent-owned by Cerberus Capital Management, posted a $2.52 billion third-quarter loss on Wednesday.

COST-CUTTING DETAILS

Analysts have increasingly focused on whether Ford and rival GM have the cash needed to ride out an auto sector downturn that spread from the United States, where sales hit a quarter-century low in October.

Ford, which has accelerated plans to shift North American production toward more fuel-efficient cars, said it would reduce salaried expenses by another 10 percent, following on a program that cut such costs by 15 percent earlier in 2008.

It has about 22,600 salaried workers in North America and the cuts are expected to be involuntary, with some attrition, and completed by the end of January.

Ford also said it was eliminating merit pay increases for North American salaried employees in 2009 and performance bonuses for global salaried employees, including the annual incentive compensation plan, for the 2008 year.

The automaker is also planning to explore divestitures of other assets, such as office buildings as well as facilities it reacquired from former unit Visteon Corp in 2005.

The Volvo car unit is not for sale, and Ford will continue to focus on improving its results, a company spokesman said.

Volvo is the last remaining brand from Ford's former premier auto group that had included the divested Aston Martin, Jaguar and Land Rover. Volvo's pretax loss widened to $458 million in the quarter, from $167 million a year earlier.

Ford also plans more equity for debt swaps and other incremental sources of financing to support its balance sheet.

Ford said it planned to cut capital spending by up to $1 billion, to a range of $5 billion to $5.5 billion. It also expects to cut engineering, manufacturing, information technology and advertising costs.

The company said about 2,600 workers represented by the United Auto Workers accepted buyouts in its most recent round, a stronger-than-expected response, a spokesman said. The company does not have plans for additional hourly buyouts.

Ford also said it would cut fourth-quarter production in North America by another 40,000 vehicles to 430,000 units, including a mix of cars and trucks. It cut its Ford Europe production plan by 90,000 vehicles to 400,000.

Ford has been forced to reduce production to meet declining consumer demand in North America and to address a shift toward smaller, more fuel-efficient cars and away from the gas-guzzling large trucks and SUVs that once had been the backbone of its profits.

Shares of Ford were up 1 cent or 0.5 percent at $1.99 on the New York Stock Exchange late on Friday morning. Through Thursday, the stock had fallen more than 70 percent in 2008, including hitting a 26-year low in October.

(Reporting by David Bailey and Poornima Gupta; Editing by Lisa Von Ahn and Matthew Lewis)