DETROIT, United States (AFP) - The Ford Motor Company surprised analysts Friday by offering a brighter outlook for the third quarter and 2004 earnings, even as it announced it was swinging the axe at its luxury Jaguar division.
The US auto giant said it will rake in better-than-expected results in the quarter and for the full year, after excluding special charges to reorganize its Jaguar operations in Britain.
Ford is now counting on third-quarter earnings in a range of 10 to 15 cents per share, and full-year earnings in a range of 1.90 to two dollars per share -- an increase of 10 cents apiece.
Ford chief financial officer Don LeClair cited strong earnings from the company`s credit arm, (Ford Credit) and continued savings at its core automotive operation for the change in earnings guidance.
The move delivered an immediate boost to Ford shares, which traded up two percent or 27 cents to 14.22 dollars per share around 2:00 pm (1900 GMT), but some analysts were not so buoyed by the news.
Merrill Lynch`s John Casesa said the downsizing at Jaguar, which calls for the closure of one plant and the elimination of 1,150 jobs, jeopardised one element of the automaker`s turnaround plan.
Friday`s announcement "makes Ford`s goal of deriving a third of its earnings from PAG by mid-decade dubious, even though the company is sticking to its target," he said in a note issued Friday.
Ford had been banking on strong revenues from its four luxury brands, (Jaguar, Aston Martin, Land Rover and Volvo) -- otherwise known as the Premier Automotive Group (PAG) -- to help it meet its target of seven billion dollars in profit by 2006.
In fact, PAG posted a posted a pretax loss of 362 million dollars in the second quarter, down from a pretax profit of 166 million in the same quarter a year ago.
The company will take a 450 million-dollar charge to cover the restructuring -- 375 million dollars of it this year, the remainder in 2005, but is hopeful, that excluding charges, the division will approach break-even in the fourth quarter.
Prudential`s Michael Bruynesteyn, however, predicted that it would "take many years for Ford to bring Jaguar up to par with the world`s leading luxury brands."
"Our view is that the brand has been pumped up too quickly, and consumers haven`t bought in," he wrote.
Jaguar`s US sales are off 11.5 percent in the year-to-date, while its competitors have been flat or up, Bruynesteyn said.
He reiterated Prudential`s "underweight" rating, saying that an aging vehicle line-up would accelerate the decline in Ford`s US market share through 2004 and 2005, further weakening its operating peformance.
According to Prudential`s projections, Ford`s pre-tax profit will likely remain flat in 2005 from 2004 at about 6.1 billion dollars.