Profits take a U-turn as Ford negotiates tire recall

DETROIT -- Hit by half a billion dollars in costs related to the massive Firestone tire recall, Ford Motor Co. said Wednesday that third-quarter profit skidded 16 percent, for its first quarterly earnings decline in more than four years.

Profit from continuing operations fell to $994 million, or 50 cents a share, in line with analysts' forecasts. The results were down from $1.19 billion, or 54 cents, a year earlier.

The decline was attributed to the automaker's continuing woes in Europe and the cost of replacing recalled tires, most of which equipped Ford sport-utility vehicles and pickup trucks.

"It's fair to say if we exclude the costs associated with the Firestone recall, which were in the region of $500 million, the third-quarter earnings would have been a record," Chief Financial Officer Henry Wallace said in a conference call.

Sales rose 7.5 percent to $40.1 billion from $37.3 billion.

Ford has been embroiled in the recall of the 6.5 million Firestone tires since it was announced Aug. 9. With Firestone unable to keep up with the demand for new tires, Ford scrambled to find replacements from competitors, and even purchased molds so that more replacement tires could be produced.

"Getting our customers onto good tires has been, and continues to be, more important than short-term profits," Ford Chief Executive Jac Nasser said in a statement.

John Casesa, chief automotive analyst at Merrill Lynch in New York, agrees that Ford is essentially in solid shape.

"The company remains highly liquid with gross cash at $18.6 billion -- implying excellent support for its high dividend payout and for new product investment," Casesa wrote.