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LOCAL/STATE
The Michigan Daily - Friday, January 18, 2002 - 5
Smooth jazz
Ford's losses surpass $5 billion
DEARBORN (AP) - After tucking away $4.1
billion in restructuring costs into last year's books,
Ford Motor Co.'s chief financial officer says the
automaker expects to break even in 2002 as a result
of a major cost-cutting plan.
"In 2002 we will realize $2 billion in pretax profit
improvement from the revitalization plan," Ford
CFO Martin Inglis said during a conference call yes-
terday with financial analysts and reporters.
After an expected loss in the first quarter of this
year, Inglis said he expected the automaker would
either break even or return to profitability by year's
end.
Ford posted a $5.07 billion loss in the fourth quar-
ter of 2001, or $2.81 a share, mostly due to the $4.1
billion in costs related to its restructuring plan and an
additional $102 million in accounting charges, the
automaker reported yesterday.
Excluding those costs, the automaker would have
lost $860 million or 48 cents a share, beating Wall
Street expectations. A consensus of analysts polled
by Thomson/First Call estimated Ford would lose 50
cents a share excluding special costs.
"It was the expected disaster. Ford is hemorrhag-
ing red ink all over the place," said David Healy, an
"It was the expected disaster. Ford is hemorrhaging
red ink all over the place."
- David Healy
Analyst with Burnham Securities Inc.
analyst with Burnham Securities Inc.
The loss means there will be no profit-sharing
checks for hourly workers. On Wednesday, hourly
workers at General Motors Corp. were told they
would not receive profit sharing checks this year
because even though the automaker reported a profit
for 2001, it did not meet financial goals.
Inglis called 2001 a challenging year for the
automaker, citing "unexpected" economic factors
and the Firestone tire replacement program.
During the October-December period in 2000,
Ford earned $1.08 billion, or 57 cents a share,
including special items, but not including earnings
from its parts subsidiary, Visteon Corp., which it
spun-off.
For all of 2001 Ford lost $5.45 billion or $3.02 per
share including the special charges, compared with
earnings of $3.47 billion, or $2.30 a share in 2000.
This was Ford's first losing year since 1992 when the
world's second-largest automaker lost $7.4 billion.
Excluding the charges, in 2001 Ford lost $782
million or 44 cents a share.
Revenues for 2001 were $162.4 billion, down 5
percent from $170.1 billion a year ago.
Inglis said while Ford gained .3 percent market
share in the United States during the fourth quarter,
the automaker's market share dropped almost 1 per-
cent to 22.8 percent for the year.
The automaker's worldwide automotive operations
lost $803 million in the fourth quarter compared to a
$762 million profit in the same period in 2000.
In North America, Ford's automotive operations
lost $916 million in the fourth quarter of 2001 com-
pared to a profit of $740 million in 2000.
ALYSSA WOOD/Daily
The "Evil Jazz Quartet" performs last night at Leonardo's Cafe on North
Campus, where they perform every Thursday.
Kmart searches for respect
with management shakeup
Analysts say Troy-based company
still appears headed toward declaring
the biggest retail bankruptcy in history
DETROIT (AP) - Charles Conaway, who was brought in
to restructure the ailing Kmart Corp. in May 2000, was
replaced as chairman yesterday but remains CEO in a man-
agement shakeup some analysts say is an attempt to restore
credibility to the retailer. Kmart named James B. Adamson,
one of the Troy-based company's board of directors, the new
chairman. Kmart president and chief operating officer Mark
S. Schwartz, who joined the company in September 2000, has
left the company, Kmart said.
The new role for Adamson, who has experience with bank-
rupt companies, comes amid speculation that the nation's No.
3 retailer could declare bankruptcy within days.
"Conaway has lost respect outside the company, and what
the board, is trying to do is earn back that respect by bringing
Jim," said John Plummer, president of Plummer Associates,
an executive recruiting firm based in Rowaton, Conn. "Jim
has bankruptcy experience, and he is also the kind of guy who
can get Kmart through public relations troubles."
Adamson, who joined Advantica in 1995 as president and
CEO, helped spearhead the company out of bankruptcy,
industry observers said. He also played a significant role in
getting back respect for Denny's, which was faced with a
number of racial discriminatory claims a few years ago.
Kurt Barnard, president of Barnard's Retail Trend Report,
based in Montclair, N.J., sees hiring Adamson as a sign that
the retailer probably will file for bankruptcy.
"Conaway will now be able to devote his entire time to run-
ning the company, without getting involved in bankruptcy-
issues"'Barnard said.
The company's stock price saw a bit of a jump after the
announcement. The stock closed at $1.79, up 19 cents from
Wednesday's closing price of $1.60. It was the most heavily
traded stock on the New York Stock Exchange, with nearly 82
million shares changing hands.
Kmart's troubles picked up speed earlier this month after
officials announced that 2001 results would break even at best
because of disappointing holiday sales, and suggested they
might seek additional.financing.
The retailer's board of directors held a regularly scheduled
meeting on Monday and Tuesday. Until yesterday's announce-
ment, Kmart had refused to comment on its financial state.
Details about the company's finances and future remained
sketchy after the announcement. Jack Ferry, a Kmart
spokesman, declined comment on the company's finances and
the specific reason for Schwartz's departure.
In its statement, Kmart said it continues to evaluate its
finances and business plans for the 2002 and 2003 fiscal years.
The company said it also is continuing discussjons with its
lenders regarding existing and possible supplemental financ-
ing facilities.
"We appreciate the loyalty Kmart has received from our
customers and the continuing support shown by many of our
vendors and other business partners;' Conaway said.
On Jan. 2, Prudential Securities Inc. said it would not be
surprised if Kmart filed for Chapter 11 bankruptcy "if trends
do not improve" in the next six months. The financial organi-
zation downgraded the discount retailer's stock from "hold" to
"sell."
For the most part, industry experts have been able only to
speculate about a Chapter 11 filing, which bankruptcy experts
say would mark the biggest retail bankruptcy in history.
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