Ford cuts 5,000 jobs and warns on profits

Ford, the world's second-biggest car maker, shocked the markets yesterday by announcing up to 5,000 job losses and warning of a steep fall in profits this year.

Ford, the world's second-biggest car maker, shocked the markets yesterday by announcing up to 5,000 job losses and warning of a steep fall in profits this year.

The job losses, to be concentrated among white-collar staff in the US, will lead to one-off charges in the second half of the year of $700m (£485m). A further $200m charge is being taken to cover the write-down of investments in e-commerce and automotive ventures.

Ford, which is struggling to recover from the huge Firestone tyre recall, quality problems and a slowdown in the North American car market, said full-year earnings would be about 40 per cent lower than expected at around 70 cents a share before the one-off charges. This compares with analysts forecasts of $1 to $1.35 and a previous company forecast of between $1.25 to $1.35. Ford shares tumbled by 8 per cent to a 12-month low in early trading on Wall Street.

Jacques Nasser, Ford's chief executive, said the job cuts were "difficult but necessary". He added: "The North American market has become fiercely competitive. Although we have reduced total costs by nearly $7bn over the last four years, we need to continue to accelerate our efforts to improve efficiencies while protecting important new product plans."

Ford lost $752m in the second quarter, including one-off charges for the replacement of 13 million Firestone tyres, and worldwide sales fell 7 per cent. Ford's UK arm is about to announce losses of around £500m for the past year. The higher-than-expected figure includes charges for the closure of car-making facilities at Dagenham in Essex.

Meanwhile, Vauxhall, the UK arm of General Motors, confirmed yesterday that it made a £192m loss last year following a decline in both production and sales. In 1999, the company made a profit of £128m. Last year's heavy losses were mainly due to the costs of ending car production at Luton. UK production fell 10 per cent to just under 282,000 while sales declined by 3 per cent to 486,000 due to a fall in exports.

Earlier this week, GM announced that it was considering closing one major car plant in Europe and shedding thousands of jobs in an attempt to cut costs by $1.8bn and return its European operations to profit in 2003.

The restructuring is part of a wide-ranging review of the business code-named Project Olympia, which involves 18 separate teams looking at different aspects of GM's operations from design, marketing and product range to parts, engineering and dealer networks.