Ford suffers record $12.7bn loss

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Ford lost $12.7bn (£6.5bn) in 2006 - the most dismal result in the car maker's 103-year history - and warned that the performance of the business would get sharply worse before it gets better.

The gloomy prognosis outlined yesterday comes before a showdown with unions over new pay and conditions, with Ford asking for significant concessions from workers at the same time as it plans to give bonuses to middle managers. Alan Mulally, the former Boeing executive brought in to try to save the company last year, said he hoped to be able to agree new contracts without provoking a strike. "Either one of us, the union or the management, could destroy the Ford company," he warned.

The car maker lost $5.8bn in the last three months of 2006, as it wrote redundancy cheques to some of the 38,000 employees who volunteered to leave.

The redundancies, which will cut the North American workforce by one third, are expected to be complete by September; a further 7,000 people have left this month. The North American business will not make a profit until 2009. Widening losses at Jaguar and Land Rover contributed to yesterday's dismal results. The Premier Automotive Group (PAG), which includes the British brands, was in the red to the tune of $327m in 2006, compared to $89m the year before. PAG is selling its Aston Martin brand.

Mr Mulally said he was considering giving bonuses to managers to stop them being poached by rivals. Rumours of the plan have angered workers, who are being asked to accept cuts to pension and healthcare benefits.