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Ford Stock Slips as Chief Says Company in Trouble in N. America

by editor2
September 4th, 2006

Sept. 4 (Bloomberg) — Ford Motor Co. shares edged lower in Europe today after Chief Executive Officer Bill Ford said the company was “in trouble” in North America.

The stock dropped 6 cents from the close on Sept. 1 in New York to $8.21. Ford stock in the U.S. has fallen 12 percent over the past 12 months.

Ford, based in Dearborn, Michigan, will announce its third restructuring in five years this month. The second-biggest U.S. automaker announced in January it would cut 30,000 jobs and close 14 plants in North America by 2012. The CEO in an internal memo and again in an interview with Newsweek magazine yesterday said the company is working to accelerate that program.

“A turnaround is taking a very long time to materialize,” said Yvan de la Fressange, who manages $181 million in the Gutzwiller One fund, including 250,000 Ford shares, in Basel, Switzerland. “ The actions they’re taking now are the right ones and will probably work in the long term, but it’s going to be a hard road.”

Credit-default swaps based on Ford Motor Credit’s debt fell to $332,700 today from $333,700 on Sept. 1 and $418,600 a month ago. An increase signals perceptions of credit quality are deteriorating, a decrease indicates improvement.

Credit-default swaps are financial instruments based on corporate bonds and loans that are used to speculate on an increase or decrease in indebtedness. Investors who buy the contracts get $10 million should Ford default within five years.

The company didn’t expect the speed and severity of the rise in oil prices, Ford said in the Newsweek interview posted on the magazine’s Web site yesterday.

Oil Prices

“The rise in oil prices really shot Ford in the foot because it’s caused demand for SUVs and trucks to plummet,” de la Fressange said.

Ford has said this month’s announcement is an acceleration of the January plan. The company has broadened restructuring beyond North America. Last week, Ford put its profitable U.K.-based Aston Martin luxury-car unit on the sales block. The automaker is debating the fate of its Jaguar and Land Rover luxury-vehicle subsidiaries. Land Rover became profitable in 2005 while Jaguar is losing money.

Bill Ford, great-grandson of company founder Henry Ford, became CEO in October 2001 and unveiled his first job-cutting plan in January 2002. Ford reported a $3.49 billion profit for 2004. Net income fell slid to $2 billion last year, as profits from car and truck loans made up for automotive losses. North America is the company’s largest auto unit, where sales of profitable mid- and large-sized sport-utility vehicles fell.

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