The crisis surrounding Ford escalated on Wednesday when the carmaker said its second-quarter loss would be more than double what it reported a fortnight ago and warned its luxury-car unit would not be profitable this year.
The surprise announcement, made after the market close, came as the Detroit-based group said it had hired Kenneth Leet, a former Goldman Sachs investment banker, to advise chief executive Bill Ford on strategic moves. Analysts said Ford could end up selling non-core assets, including its Jaguar luxury brand and its financing business, in an attempt to bolster restructuring efforts and halt the slump in sales and market share.
The need to turn around a business dogged by high healthcare costs, poorly received models and a focus on gas-guzzling large vehicles, was heightened by the revelation of a bigger-than-reported quarterly loss. Ford, which this week lost its place as the US second largest carmaker to Japan’s Toyota, said higher pension costs related to its redundancy programme would push its net second-quarter loss up from the $123m announced on July 20 to $254m.
The total cost of providing pensions to the 12,000 workers that will leave the company this year would increase from the previous estimate of $1bn to $1.2bn. Ford did not give a reason for the rise in the pension costs, saying only that it now had a “better estimate” than a fortnight ago. To meet the higher-than-expected pension liability, Ford’s $6.2bn pension fund would shift $3bn in long-term investments to shorter-date bonds.
Ford added to the talk over a sale of its luxury brands – Jaguar, Volvo, Aston Martin and Land Rover – by warning that the unit would not be profitable this year due to weaker-than-expected sales over the past few months. Ford’s luxury-car business, which has largely missed out on recent strong demand for high-end and sports vehicles, is expected to be a priority for Mr Leet’s strategic review.
“Ford has been under a lot of pressure and one of the problems has been that the acquisition of premier luxury-car brands hasn’t paid off,” said George Magliano, America’s director of automotive research at economics consultancy Global Insight.
In an internal memo to staff, seen by the Financial Times, Mr Ford indicated the review by Mr Leet – who was hired by a Ford board with two Goldman Sachs alumni, Robert Rubin and John Thornton – would be wide-ranging. “It is prudent in a time of rapid change in our industry for us to carefully examine all of our options,” he wrote.
According to figures released this week, Ford’s share of the US market fell from more than 20 per cent a year ago to 16.1 per cent in July, after a 34.3 per cent drop in sales.