Let me preface this column by saying that I am not against American automakers. On the contrary, most of my relatives drive Ford
In fiscal 2005, Ford expects to earn pre-tax profit of about $5.35 billion, translating into roughly $1.85 per share. Last year, the company earned $850 million from its automotive business (did you know they had any others? They do) and $5 billion from its financial services division. Ford's looking for an extra $900 million from automotive next year but expects $1.4 billion less from financial services as higher interest rates squeeze the margins on cut-rate financing deals. Put it all together, and the company's expecting to earn about $500 million less in 2005 than it did in 2004.
Now you might think that aiming to reduce profits by half a billion dollars is not a particularly ambitious goal. But consider how Ford might fall short of even that mark. First off, the company expects to earn just $0.30 of the year's hoped-for $1.85 in profits in Q1 2005. However, Q1 will be the only quarter in which Ford's new Escape gas-electric hybrid owns the market for hybrid SUVs. By Q2, the Escape will no longer be the only game in town as Ford nemesis Toyota
Of course, Ford isn't depending on hybrids to power its profits (although considering Toyota's success with the technology, perhaps it should). Ford's always been an internal combustion engine-lover (ICE), emphasizing in particular ICE SUVs and pickups. Ford needs, and intends, to gain market share in this and other crucial markets -- hence, it's predicted doubling of automotive profits next year. But it's going to be rough going. By 2005, Nissan
Get the rest of the word on Ford in:
- Ford Manages a Gain
- Ford Fumbles First Hybrid SUV
- Automakers Telling the Same Tale
- Ford's First Step
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Fool contributor Rich Smith has no position in any company mentioned in this article.