business

General Motors today reported a 2005 calendar-year loss of $3.4 billion, or $5.99 per share, compared with net income of $3.6 billion, or $6.37 per share, in 2004. Including special items, GM reported a loss of $8.6 billion, or $15.13 per share for 2005, compared to net income of $2.8 billion, or $4.92 per share in the year-ago period.  Revenue was $192.6 billion in 2005, compared to $193.5 billion in 2004. GM’s automotive operations reported an adjusted loss of $5.3 billion in 2005, compared to adjusted earnings of $1.2 billion in 2004. The decline was principally driven by large losses in North America, partially offset by improved results in Europe and in the Latin America, Africa and Middle East region. In the fourth quarter of 2005 GM’s automotive operations reported an adjusted loss of $1.5 billion compared to adjusted earnings of $268 million in the year-ago period. GM reported a loss of $1.2 billion, or $2.09 per diluted share in the fourth quarter of 2005, excluding special items.  These results compare to adjusted earnings of $726 million, or $1.28 per share in the year ago period. Including special items, GM reported a loss of $4.8 billion, or $8.45 per diluted share in the fourth quarter of 2005 alone, compared to a loss of $99 million, or $0.18 per share in the fourth quarter of 2004.

“2005 was one of the most difficult years in GM’s history, driven by poor performance in North America,” GM Chairman and Chief Executive Officer Rick Wagoner said.

“In order to improve financial results in 2006 and 2007, we are moving quickly to implement several important actions that will address these weaknesses in North America.”

GM sold 9.2 million vehicles worldwide in 2005, the second-largest volume in GM’s history, on the strength of increased sales in three of GM’s four business regions and all-time sales records in our Asia Pacific and Latin America, Africa and Middle East regions.  Vehicle sales in the Asia Pacific region were up 20 percent, the Latin America, Africa and Middle East region increased 19 percent, and Europe posted a 1.3 percent gain in one of the most competitive markets in the world.  Unit sales were down 3.1 percent in North America in 2005.  As a result, GM’s share of the global automotive market was 14.2 percent in 2005, down from 14.4 percent in 2004.

GM expects to reduce its North American structural costs by $6 billion on a running-rate basis by the end of 2006, with more than $4 billion of the reduction coming in calendar year 2006, and to reduce its net material costs by $1 billion.  Key elements of the structural cost reduction plan include the health-care agreement with the United Auto Workers union, which accounts for about $3 billion of the annual expense savings (excluding the impact of payments to the defined contribution Voluntary Employees’ Beneficiary Association Trust); the capacity utilization initiatives and other manufacturing initiatives, which total about $1.5 billion; and additional productivity and cost efficiencies in other areas of the business especially engineering, advertising, and salaried employment levels and benefits.   “The historic agreement we signed with the UAW in October, and the capacity reduction  announcements we made in November that give rise to the North American restructuring charge, are important and significant steps on the road to recovery,” said Wagoner.  “But it’s clear that we need to do more, and so we are focused on that with our recently announced objective to reduce global structural costs to 25 percent of automotive revenue by 2010, from the current level of approximately 34 percent.

Ford details "Way Forward" plan: Mercury to stay, new hybrids, and more...

Ford today announced its comprehensive “Way Forward” plan, which aims to restore profitability to its automotive business in North America no later than 2008. “The automotive market in North America is rapidly becoming as crowded and fragmented as other global markets,” said Bill Ford, chairman and CEO. Ford is recommitting itself to Mercury and has developed more focused positioning for the brand. Ford hopes its three American brands can each develop a distinct niche with unique customers. The company also said that hybrid versions of the Ford Five Hundred, Mercury Montego, Ford Edge and Lincoln MKX will debut in the 2008-2010 timeframe. The new hybrids will join the Ford Escape and Mercury Mariner hybrids, which are on sale today, as well as the Ford Fusion and Mercury Milan hybrids, which will debut in 2008. Ford also said that it will introduce new “white space” products to reach customers in new segments, and accelerate plans to bring even more crossover vehicles and new small cars to market. “We know how to play offense and play to win,” Ford VP Mark Fields said. “Our plan will deliver more products – from small cars to our largest trucks – that are unmistakably Fords.”

“One of the most important findings from this research is that Americans really do want to buy American brands, as long as they are competitive with the imports,” said Mark Fields. “We know this, because it’s already working in some segments today, such as the success of the new Ford Fusion in the import-dominated midsize car market.

 “Of all the leading automakers, we believe Ford is America ’s Car Company because of where we’ve been. In terms of economic and social influence, there is no other company that’s had a greater impact on the lives of people in the U.S. and in the 20th century than Ford.”

 Mercury

 “The attraction of Mercury is modern, expressive design – one that is differentiated from Ford vehicles. Our Mercury target customer is not looking for product functionality that is substantially different from Ford vehicles. But they do have different attitudes and values, and they want a product that visually communicates that distinctiveness.”

“Going forward, we will be more aggressive in appealing to these customers with clear, modern differentiation in the design of Mercurys, a unique purchase experience and marketing that is targeted, personalized and interactive,” Fields said.

Lincoln

 Ford’s vision for the Lincoln brand is to make Lincoln the “reward for consumers who are living the American dream.” The company sees Lincoln becoming the largest volume contributor to the Lincoln Mercury business.

“Lincoln customers don’t need to shout about success. They are self-made people with enough confidence to be elegant and understated,” Fields said. “That understanding of the Lincoln customers will drive our brand and product decisions going forward. ”

 “ Lincoln is about American luxury. There are many customers in this country living the American dream and who would prefer to drive America ’s luxury car. That is where we are headed ,” he added.

Straightforward Pricing

 Ford is accelerating the clear-and-simple pricing strategy that began with the introduction of the Ford Fusion and Ford Mustang. Ford plans to reduce the MSRP of its products and dramatically reduce and cap rebates as it introduces new products.

“ We started introducing clear pricing two years ago. The success of Mustang and Fusion proves that it works,” Fields said. “ We will bring sticker prices more in line with actual transaction prices and cap ‘cash on the hood’ rebates as we introduce new cars and trucks into the marketplace. It will protect our margins and consumers, too, through higher resale values.”

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