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Ford’s $1.4 Billion Loss in First Quarter Better Than Expected

For the first three months of 2009, the second-largest U.S.
automaker said it spent $3.7 billion more than it took in, far less than the
$7.2 billion it spent in last quarter of 2008.

The company said it is on track to break even by 2011. In
early trading Friday, Ford’s stock surged 17.4 percent to $5.27 a share.

Last year, Ford turned a $70 million profit, or 3 cents per
share, compared to the loss announced Friday, which amounted to 60 cents per

Analysts told Thomson Reuters they expected a $1.23 per
share loss on revenue of $22 billion. Instead, Ford’s quarterly revenue was
$24.8 billion, down nearly 37 percent from $39.2 billion in the same quarter of
last year, as U.S. sales declined 43 percent in the quarter.

Chief Financial Officer Lewis Booth said Ford is confident
that it will slow the drain on its cash even further this year, and he said the
company will make it through 2009 without needing government aid. He would not
speculate, however, about 2010, the Associated Press reported.

“This is a very, very difficult environment,” he
said. “We’re comfortable we’ll get through this year.”

Booth called the first-quarter performance “solid”
compared with the previous quarter, which capped off Ford’s $14.6 billion loss
for 2008, the worst annual loss in the company’s 106-year history.

Ford said it had $21.3 billion in cash as of March 31, after
going through $3.7 billion of its reserves last quarter – better than the $7.2
billion it used in the fourth quarter.

“For several years, Ford has made it a habit to report
surprisingly good first quarter results, only to disappoint later,’ the Detroit
Free Press reported.”Last year, when Ford was widely expected to report a
first quarter loss, it surprised Wall Street with a profitable quarter. Then,
gas prices spiked, the country slipped into a recession and Ford finished the
year with a $14.6-billion loss – the worst in its history.”

The company has enough cash to last through at least 2010,
Golman Sachs analyst Patrick Archambault said, according to the New York Times.
He upgraded his rating on the company’s stock to “buy,” helping
shares to their highest level in six months.

“Unlike GM, we do not foresee bankruptcy at Ford,”
Archambault wrote to his clients. “With GM and Chrysler likely to file for
bankruptcy in coming weeks, in our view, we think the stage is set for a sea
change in the structure of the U.S. auto industry.”

The Times has reported that the U.S. Treasury Department has
directed Chrysler to prepare a Chapter 11 bankruptcy filing as soon as next

Because GM and Chrysler accepted $17.4 billion in federal
aid, they are racing toward deadlines to make deep cuts or file for bankruptcy.
But Ford was the first U.S. automaker to modify its contract with the United
Auto Workers union and strike a deal to make up to 50 percent of payments to a
union-run health care trust in stock instead of cash. The company also
completed tender offers to reduce its debt by more than one-third. The company
said the moves would result in annual savings of $1 billion.

Many Ford dealers say they see more customers trading in General
Motors or Chrysler vehicles. “Ford may actually benefit from market share
losses as it picks up ‘Buy American’ consumers who may shun the other two
companies (either on political grounds of not supporting bailouts or on
concerns of purchasing from a bankrupt company),” Barclay’s Capital
analyst Brian A. Johnson wrote to his clients, according to the Times.

A day after GM said it would temporarily shutter 13 North
American plants for up to 10 weeks this summer to slash production, Ford said
it has increased its second-quarter production forecast. The increase is due to
seasonal adjustments and because of first-quarter production cuts to reduce
dealer inventory. North American production is expected to rise 25 percent to
435,000 vehicles.

Special items improved Ford’s earnings by $362 million.
Ford’s $1.1 billion gain on its debt exchange was offset by a $664 million
impairment charge due to a reduction in the book value of its Swedish Volvo
unit. Ford classified Volvo as “held for sale,” meaning that it’s
likely the unit will be sold in the next 12 months.

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