Ford Motor Co. lost $5.8 billion US in the fourth quarter amid slumping sales and huge restructuring costs, pushing the fabled automaker's deficit for the year to $12.7 billion US, the largest in its 103-year history.

The annual loss reported Thursday surpassed its previous record for a year of $7.39 billion US set in 1992. The 2006 loss amounted to a loss of $6.79 US per share versus a profit of $1.44 billion US, or 77 cents a share, in 2005.

Ford president and CEO Alan Mulally: 'We fully recognize our business reality and are dealing with it.'
(CCN MATTHEWS/Ford Canada Ltd.)

The Dearborn, Mich., company expects more losses this year. It expects to burn up $10 billion US in cash on automotive operations through 2009 and spend another $7 billion US to invest in new products.

The fourth-quarter loss was the worst final-quarter loss in Ford's history and its second-worst quarterly performance. Ford lost $6.7 billion US in the first quarter of 1992, mainly as a result of accounting rule changes on health-care liabilities.

"We began aggressive actions in 2006 to restructure our automotive business so we can operate profitably at lower volumes with a product mix that better reflects consumer demand for smaller, more fuel-efficient vehicles," Alan Mulally, president and chief executive officer, said in a statement. "We fully recognize our business reality and are dealing with it. We have a plan and are on track to deliver."

Excluding special items, Ford lost $1.50 US per share in all of 2006, worse than Wall Street predicted. Fourteen analysts polled by Thomson Financial expected a loss of $1.35 US per share for the year, excluding special items.

Growing foreign competition

Ford, faced with increasing competition from overseas rivals such as Toyota Motor Corp., is banking on a restructuring plan to pull it through this rough stretch. Mulally, hired from aerospace giant Boeing Co., is leading the drastic efforts to turn the company around.

Ford mortgaged its assets to borrow up to $23.4 billion US to pay for the restructuring and to cover losses expected until 2009. About 38,000 hourly workers have signed up for buyout or early retirement offers from the company, and Ford plans to cut its white-collar work force by 14,000 with buyouts and early retirements.

Ford, which relied on truck and sport utility vehicle sales for much of its profits, was hurt last year as gas prices of $3 US per gallon sent consumers fleeing to smaller, more fuel-efficient vehicles. Ford has seen its market share deteriorate in recent years. At the same time, Toyota has seen its U.S. sales rise, beating Ford for the No. 2 sales spot in July and November.

New products

The company has rolled out or will introduce several new or updated products during 2007, including the Edge crossover, new F-series Super Duty pickups, a redesigned Focus small car and an updated Five Hundred larger sedan.

But many analysts are skeptical that the products are strong enough to turn the company around.

Mulally said earlier this month that Ford's restructuring plan remained "absolutely the right thing to do."

Ford said that special items associated with restructuring costs totaled $9.9 billion US for the year as the company continues efforts to shrink itself to match reduced demand for its cars and trucks.

Sales for the fourth-quarter fell to $40.3 billion US from $46.3 billion US a year ago, while annual sales dropped to $160.1 billion US in 2006 from $176.9 billion US in 2005.