Despite Q3 Loss, Ford Sees Reason To Be Optimistic

Ford Motor Company has more salubrious news than did General Motors--which this week reported a $39 billion third-quarter loss, versus a $147 million loss a year ago.

Ford's loss was $19 per share, or $380 million, for the quarter versus $5.2 billion last year.

The company saw an improvement in revenue--$41.1 billion versus $37.1 billion a year ago. The company says the improvements were due to better pricing, currency balance and a stronger product mix.

Ford reported global sales of 1.48 million vehicles in the third quarter--up from 1.46 million a year ago. Worldwide automotive revenue for the third quarter was $36.3 billion, from $32.5 billion in the same period last year.

The company says it is on track to post a profit in 2009, and meet its North American cost-reduction target of $5 billion by 2008.

Alan Mulally, CEO of the company, said in a release that he was encouraged by the results. "Our third-quarter and year-to-date performance indicate that our plan is working. Our full-year pre-tax outlook excluding special items is to be substantially better than 2006. We remain committed to improving our business and delivering our plan."



The company says that among other things, it will focus on bolstering profits for its Volvo brand.

Ford acquired Volvo in 1998 for $6.45 billion, when the Dearborn, Mich. automaker, enjoying the spoils of its SUV and truck sales, was the world's most profitable automaker. Ford says Volvo will be a global, premium-car brand. Ford also sees Volvo as a stand-alone operation--rather like Mazda, of which Ford owns about one third-- with product-development and parts tied to Ford's divisional brands.

Volvo is part of the company's Premier Automotive Group (PAG), which Ford began dismantling this year when it sold Aston Martin. PAG, with headquarters in Irvine, Calif., was created in 1999 by former Ford CEO Jacques Nasser as an umbrella entity for the luxury brands he acquired late in the decade. In addition to Volvo, PAG also comprised Jaguar, Land Rover, and former Ford unit Aston Martin (sold to private ownership in March).

The company says it is trying to sell its Jaguar and Land Rover brands, and that it anticipates an agreement early next year. Volvo reported losses last quarter which the company says were offset by profits at the combined Jaguar and Land Rover operation.

George Magliano, director of automotive research for the Americas for Lexington, Mass.-based consultancy Global Insight, says Volvo's sweet spot in the U.S. market is as a niche brand in the near-luxury market.

"Turning Volvo into a true global luxury brand like BMW--that's going to be tough. It's a brand equity issue right now," he says. "Volvo is not perceived in the same frame of mind as BMW and Mercedes. The price point is lower, and they don't have the vehicle lineup."

He also warns that linking Volvo product development to Ford's is risky. "That is one of the many reasons Jaguar is in the straits they are today," he says, referring to vehicles like the X-Type, which was an effort to build Jaguar share in 2002 with an entry-level vehicle. "You can work all you want on Ford, but if you start getting Ford design cues into Volvo it's not going to work."

The other issue for Volvo will be that its brand equity has for so long been associated with safety. But, notes Magliano, "most everyone else has that now."

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