Oct. 20 (Bloomberg) -- Ford Motor Co., the world's third- largest automaker, posted a $284 million quarterly loss, its first in almost two years, amid declining sales of sport-utility vehicles. The company plans ``significant'' plant closings to reduce North American production.

The third-quarter net loss was 15 cents a share, compared with net income of $266 million, or 15 cents, a year earlier, Ford said in a statement today. Ford's North American auto business had a $1.2 billion pretax loss, its fourth in the past five quarters. Chief Executive Officer William Clay Ford Jr. said he will announce the plant closings in January.

``It's probably going to get uglier before it gets better,'' said analyst Mike Ward of Soleil Securities in New York. Declining sales of sport-utility vehicles ``has to be a big chunk'' of the North American automotive loss, he said.

Sales of large SUVs, the heart of Ford's profits, have fallen sharply at Ford and at rival General Motors Corp. this year because of rising gasoline prices and shifting consumer tastes. Bill Ford, 48, is eliminating salaried jobs, shuffling management and closing plants to stem the losses. The reorganization is his second since taking over as CEO four years ago.

Ford's loss deepens the troubles for U.S.-based automakers and their primary parts suppliers as Japanese rivals such as Toyota Motor Corp. continue to gain U.S. sales and market share.

Detroit's Woes

GM, the largest automaker in the world, reported a $1.6 billion third-quarter loss three days ago. Delphi Corp., the biggest U.S. maker of auto parts, filed for Chapter 11 bankruptcy protection on Oct. 8. Dana Corp., the biggest maker of light- truck axles, today said it will sell three units and cut 5 percent of its salaried jobs.

The last time Detroit-based GM and Dearborn, Michigan-based Ford had losses in the same quarter was the third quarter of 2002.

Ford Motor's worldwide auto operations had a $1.3 billion pretax loss. Ford also had costs to bail out Visteon Corp., its largest supplier, and to cut salaried jobs in North America. The average analyst estimate excluding some costs was for a 10-cent loss, and Ford said the loss on the same basis was 10 cents. Revenue rose 4.4 percent to $40.9 billion.

Due in December

Bill Ford said on a conference call today that he will ask for recommendations on the North American plant closings by December. The company's top two North American executives, Mark Fields and Anne Stevens, are reviewing the company's plants to see how they match up to future production plans, Bill Ford said.

Fields took over as North American chief on Oct. 1 and Stevens was appointed as his deputy, effective Nov. 1. ``I thought it was only fair to give Mark and Anne time'' to devise a plan, Bill Ford said.

``They have continued to chip away at their overall manufacturing,'' said Joseph Phillippi, an analyst with AutoTrends Consulting based in New Jersey. General Motors and Ford ``are adjusting to new realities, and the new reality is that you have to downsize your organization to where they can be profitable.''

2002 Plan

Bill Ford announced his first reorganization plan in January 2002. At that time, he said he would pare 35,000 jobs, included those announced the previous year.

Included were plant closings set for Edison, New Jersey, Oakville, Ontario, and Lorain, Ohio. The New Jersey and Ontario plants have been closed, and the Ohio plant is scheduled to shut down this year. Ford also moved to sell non-auto assets, including the U.K.-based Kwik-Fit auto-repair chain.

Ford eliminated 33,811 jobs, or 9.4 percent of its worldwide workforce, from 2002 through 2004, according to U.S. regulatory filings.

Ford estimates it will cut a total of 10,000 jobs this year. It had 324,864 employees worldwide at the end of 2004 and about 125,000 in North America.

In addition, the company is in the process of selling its Hertz rental-car unit to a group of investors including Clayton Dubilier & Rice Ic., Carlyle Group and a Merrill Lynch & Co. buyout unit. The buyers will pay Ford $5.6 billion and assume $9.4 billion in debt, the largest leveraged buyout since 1989. Today, Ford sold its Beanstalk trademark-licensing unit to Omnicom Group Inc. and a group of Beanstalk managers.

Ford reached a new three-year labor contract last month with the Canadian Auto Workers union. Under that agreement, Ford will close a Windsor, Ontario, casting plant as part of 1,100 total job cuts, or 8.8 percent of 12,460 CAW members at Ford.

The `Low End'

Ford today said full-year 2005 earnings will be on the ``low end'' of its previous forecast of profits of $1 to $1.25 a share, excluding what it calls one-time items. On that basis, Ford had profits of $1.02 a share through nine months. Ford had net income of $1.9 billion, or 95 cents a share, through September.

Ford during the quarter managed to snap a streak of 28 consecutive months of declining U.S. market share. The company followed the lead of GM in offering employee prices to all buyers, after GM introduced the incentive in June and increased U.S. sales 47 percent that month. Ford adopted the discounts in July, boosting sales 29 percent that month. Ford's U.S. sales of cars and trucks rose 5.2 percent for the quarter.

Quarterly sales fell 32 percent each for the midsize Explorer SUV and Expedition and Navigator large SUVs. Ford's pretax profit for each large or midsize SUV is $5,000 to $6,000, Burnham Securities Inc. analyst David Healy estimates.

SUVs, Cars and Fuel

Sport-utility vehicles are less fuel efficient than cars. Ford estimates its 2005 light trucks, which include SUVs, pickups and minivans, can go an average of 21.5 miles per gallon of gasoline, while its cars average 28.2 mpg.

U.S. unleaded gasoline retail prices reached their peak on Sept. 5 and averaged $2.72 yesterday, according to AAA's Web site.

Ford shares fell 5 cents to $8.42 at 4:15 p.m. in New York Stock Exchange composite trading. The stock declined 3.7 percent during the third quarter and has fallen 42 percent this year.

Ford Motor Credit Co.'s 7 percent note due in 2013 fell 1.1 cents to 94.725 cents on the dollar, the yield rising to 7.9 percent from 7.7 percent yesterday, according to Trace, the bond price reporting service of the NASD. A basis point is 0.01 of a percentage point.

Too Much Capacity

Ford's North American auto business also needs to use its factories more efficiently, company President Jim Padilla told reporters last month. The automaker's plants in the region are operating at 86 percent of capacity, based on two eight-hour shifts, according to Harbour Consulting in Troy, Michigan. Ford must raise that to ``over 90 percent on average,'' Padilla said.

Bill Ford today said the company has an estimate of how much factory capacity it needs to cut. He declined to specify.

The chief executive also declined to say whether plant closings would occur during Ford's current contract with the UAW, which expires in September 2007. The contract prohibits plant closings unless the union has agreed to a shutdown.

``We do our negotiations in private,'' he said.

The company has 19 North American assembly plants. Factories with excess capacity include Wixom, Michigan, where production of the Thunderbird car ended earlier this year and the LS sedan is set to halt in 2006; St. Louis, which makes Explorers on only one shift; and St. Paul, Minnesota, Ford's oldest U.S. factory, which builds Ranger small pickups. U.S. sales of the Ranger fell 22 percent through September.

`Disappointing'

``Ford realizes they have to do more cost cutting,'' said Wil Stith, who helps manage $2 billion in debt at Baltimore-based MTB Investment Advisors, including Ford debt. ``North America is disappointing, but it was expected. Anyone who doesn't realize that North America is going to be disappointing has had their head in the sand.''

Bill Ford earlier this year responded to North American losses by planning to cut about 2,750 salaried jobs. The reductions have included firing some employees, in such areas as public affairs, marketing, manufacturing and product-development engineering. Ford finished the firings on Sept. 29.

Ford had $158 million in pretax costs for the job cuts in the third quarter. The company also had $180 million in pretax costs related to its Visteon bailout. Ford took back 23 plants and offices from the auto-parts supplier on Oct. 1. Ford intends to sell most of the factories transferred from Visteon. Ford agreed to take back the facilities in May, saying it needed to secure a steady supply of parts from money-losing Visteon, its largest supplier.

UAW Negotiations

The automaker also is negotiating with the United Auto Workers to reduce Ford's U.S. health-care tab. GM on Oct. 17 announced an agreement with the Detroit-based union that the company said will save it $1 billion a year. GM estimates it will spend $5.6 billion this year on U.S. health care.

Ford estimates its 2005 U.S. health-care bill at $3.5 billion. Bill Ford declined to say how much the company may save from a GM-style health-care agreement with the union. ``We have an idea what this could mean to us,'' he said.

Ford Motor Credit Co., the automaker's consumer-credit unit, reported its second-quarter net income fell to $577 million from $734 million on higher borrowing costs. Ford Credit is ``part and parcel of Ford'' and there are no plans to sell it, Leclair said in an interview today. GM said Oct. 17 it is looking to sell a controlling interest in General Motors Acceptance Corp., that company's consumer-finance unit.

Standard & Poor's, which rates Ford debt at BB+, the highest non-investment grade, said Oct. 3 that it was reviewing the automaker and might further reduce the rating.

S&P plans to finish the review after Ford announces fourth- quarter and year-end financial results in January. S&P said any reduction probably will be only one level, to BB. S&P said today's third-quarter report ``heightens concerns'' about Ford's ``ability to effect a timely turnaround in its critical North American operations.''

To contact the reporter of this story: Bill Koenig in Dearborn, Michigan, at wkoenig@bloomberg.net

Last Updated: October 20, 2005 16:52 EDT