Finance Blog number 1

Ford reported its best annual earnings since 1998 on Friday, making 2011 the second most profitable year in the company’s 109-year history.

But much of the profit was attributed to a non-cash gain, as it put a large tax credit from past losses on its balance sheet that will shield it from taxes in the future. Excluding that credit, the automaker posted full-year and quarterly earnings that fell short of last year’s profit as well as analysts’ forecasts.

Shares of Ford (, Fortune 500) tumbled as much as 7.4% in early trading on the earnings miss before recouping about half the lost ground after assurances on an investors’ call about earnings guidance moving forward. Shares were down 3.1% in midday trading.

The company’s 2011 net income of $20.2 billion, up from $6.6 billion in 2010, was the best since 1998, when it received a large one-time gain from the sale of The Associates financial unit. About $12.4 billion of the latest profit came from the accounting gain.

Excluding special items, Ford reported operating income of $6.1 billion, or $1.51 a share, down from the $7.6 billion, or $1.91 a share, it earned on that basis in 2010.

Fourth-quarter operating earnings of $787 million, or 20 cents a share, were down from $1.2 billion, or 30 cents, a year earlier. Analysts surveyed by Thomson Reuters had forecast earnings of 25 cents a share.

Pretax earnings for the quarter and full year improved in Ford’s home North American market due to increases in both the pricing and the volume of vehicles sold. The company’s profit margin in the region also improved.

The strong North American results mean that the 41,600 members of the United Auto Workers union will be getting larger profit-sharing payments for 2011.

Full-year payments to the factory workers will average $6,200, up from $5,000 in 2010. But the workers already received more than half of that money in December due to the new labor deal reached in the fall.

The company announced earlier this month that its white-collar workers would get both bonus payments and merit raises for 2011, the first time in four years they’ve received both.

Cool cars from Detroit auto show

Profit fell in Ford’s South American unit and the quarterly loss increased in Europe. The Asia-Pacific region tipped from a fourth-quarter profit a year earlier to a loss this time due to the flooding, but the company had already warned of that loss.

Revenue for the year reached $136.3 billion, up from $120.9 billion in 2010, as it sold 5.7 million cars and trucks worldwide, up 7% from its 2010 total.

Ford Chief Financial Officer Lewis Booth said that the accounting gain was significant for the company because it was a sign that the company is back to making regular profits. It had stopped booking the tax credits back in 2006, despite ongoing losses at that time, because of doubts that Ford would once again be able to make the kind of profits that would allow it to use those credits.

CEO Alan Mulally said he considered the results to be strong, and that Ford missed its profits targets in the quarter due to external factors outside of North America, such as the economic slowdown in Europe and flooding in Thailand that shut factories and affected its supply chain.

He said the company expects Ford’s overall pre-tax operating profit in 2012 to be roughly the same as last year, as better auto profits will be offset by lower earnings from its finance arm.

And he said the company is still well on track to hit the mid-decade target it set last year of significantly better profits and global sales of about 8 million vehicles, an increase of about 40% from 2011 levels.

Van Conway, president of Michigan turnaround consultant Conway MacKenzie, said Ford’s results for the year were good, not great, and management really can’t be blamed for problems such as the downturn in Europe.

"The old line used to be when the economy got a cold, Detroit got pneumonia," he said. "They’re clearly position to weather a storm far better than they did before."

Adam Jonas, analyst with Morgan Stanley, said some of the earnings miss was due to higher engineering and other costs associated with development of new vehicles. He said the outlook remains good for the company.

"2012 may be shaping up to be a very good year for Ford," he wrote in a note Friday.

Ford is the first of the Big Three U.S. automakers to report results. General Motors (, Fortune 500) and Chrysler Group will report next month. But all are expected to post profits, the first time all will be in the black at the same time since 2004. All gained U.S. market share for the first time since 1988. 

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Greece and its private investors are close to a deal that will significantly reduce the country’s debt and pave the way for it to receive a much-needed euro130 billion bailout.

Negotiators for the investors announced the tentative agreement Saturday and said it could become final next week.

Under the agreement, the investors would take a hit of more than 60 percent on the euro206 billion of Greek debt they own.

Here’s how it would work: private investors would receive new bonds whose face value is half of the existing bonds. The new bonds would have a longer maturity and pay an average interest rate of slightly less than 4 percent (compared with an estimated 5 percent on the existing bonds).

Without the deal, which would reduce Greece’s debt load by at least euro120 billion, the private investors’ bonds would likely become worthless. Many of these investors also hold debt from other eurozone countries, which could also lose value in the event of a Greek default.

The agreement taking shape is a key step before Greece can get a second, euro130 billion bailout from its European Union partners and the International Monetary Fund, although there are other issues involved before Greece can get that aid. This would be Greece’s second bailout. The EU and the IMF signed off on a euro110 billion aid package for Greece in May 2010, most of which has already been disbursed.

Greece faces a euro14.5 billion bond repayment on March 20, which it cannot afford without additional help.

Private investors hold roughly two-thirds of Greece’s debt, which has reached an unsustainable level _ nearly 200 percent of the country’s economic output. By restructuring the debt held by private investors, Greece and its EU partners are hoping to bring that ratio closer to 120 percent by the end of this decade.

In return for the first bailout, Greece’s public creditors _ the International Monetary Fund, the European Union and the European Central Bank _ have unprecedented powers over Greek spending. However, austerity alone will not fix Greece’s problem. The country must also find ways boost its economic output, which at the moment is shrinking.

If no debt-exchange deal is reached with private creditors and Greece is forced to default, it would very likely spook Europe’s _ and possibly the world’s _ financial markets. It could even lead Greece to withdraw from the euro.

The banks, insurance companies and other private holders of Greek bonds are being represented by Charles Dallara, managing director of the Washington-based Institute of International Finance, and Jean Lemierre, senior adviser to the chairman of the French bank BNP Paribas.

The main creditor negotiators will leave Greece on Sunday and will remain in close consultation with Greek and other authorities.

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Leaders of the world

President Barack Obama, offering an election-year prescription to spur the economy, said the wealthiest Americans should pay more taxes in the name of fairness, to bring down the deficit and ensure those trying to make ends meet don

The U.S. bond market is neutralizing budget deficits as an election-year campaign weapon.

Interest payments will cost the government 3.1 percent of gross domestic product this year, according to Office of Management and Budget and International Monetary Fund data compiled by Bloomberg. That

The body of a woman wearing a life vest was recovered by Italian coast guard divers Saturday from a narrow underwater corridor of the capsized cruise ship Costa Concordia, raising the death toll to 12 in the week-old accident that has sent some light fuel spilling into the Mediterranean off Tuscany.

Coast Guard Cmdr. Cosimo Nicastro told The Associated Press that the victim was found during a particularly risky inspection of an evacuation staging point at the ship’s rear.

“The corridor was very narrow, and the divers’ lines risked snagging” on objects in the passageway, Nicastro said. To permit the coast guard divers to get into the area, Italian navy divers had preceded them, setting off charges to blast holes for easier entrance and exit, he said.

The woman’s nationality and identity were not immediately known.

Before the corpse was found, 21 people were listed as missing. One of the women on the list is a Peruvian crew member, the others are passengers.

Three bodies were found in the waters near the ship in the first hours after the accident’ since then the rest of the victims have all been found inside the Concordia, apparently unable to get off the ship during a chaotic evacuation via lifeboats and later by helicopters. Some survivors jumped off and swam to safety.

The Concordia hit a reef and ran aground on Jan. 14, while passengers dined, about two hours after the ship had set sail from the port of Civitavecchia on the Tyrrhenian Sea. Costa Crociere has said the captain had deviated without permission from the vessels in an apparent maneuver to sail close to Giglio, a Tuscan island, to impress passengers aboard.

Search and rescue efforts for survivors and bodies have meant that an operation to remove heavy fuel in the Concordia’s tanks hasn’t yet begun, although specialized equipment has been standing by for days.

On Saturday, light fuel, apparently from machinery aboard the capsized Costa Concordia, was detected near the ship.

But Nicastro said there was no indication that any of the nearly 500,000 gallons (2,200 metric tons) of heavy fuel oil has leaked from the ship’s double-bottomed tanks. He said the leaked substance appears to be diesel, which is used to fuel rescue boats and dinghies and as a lubricant for ship machinery.

There are 185 tons of diesel and lubricants on board the crippled vessel, which is lying on its side just outside Giglio’s port. Nicastro described the light fuel’s presence in the sea as “very light, very superficial” and appearing to be under control.

Although attention has been concentrated on the heavy fuel oil in the tanks, “we must not forget that on that ship there are oils, solvents, detergents, everything that a city of 4,000 people needs,” Franco Gabrielli, the head of Italy’s civil protection agency, told reporters in Giglio.

Gabrielli, who is leading rescue, search and anti-pollution efforts for the Concordia, was referring to the roughly 3,200 passengers and 1,000 crew who were aboard the cruise liner when it ran into the reef, and then, with sea water rushing into a 70-meter (230-foot) gash in its hull, listed and finally fell onto its side.

Considering all the substances aboard the Concordia, “contamination of the environment, ladies and gentlemen, already occurred” when the cruise liner capsized, Gabrielli told a news conference.

Vessels equipped with machinery to suck out the light fuel oil were in the area, officials told Italian TV.

Earlier on Saturday, crews removed oil-absorbing booms used to prevent environmental damage in case of a leak. Originally white, the booms were grayish.

Divers resumed their search of the wreckage Saturday after data indicated the cruise ship had stabilized in the sea off Tuscany. Italian news reports said that the divers were also trying to locate the captain’s safe, in case it might contain documentation useful to the criminal probe.

The Italian captain, Francesco Schettino, is under house arrest for investigation of alleged manslaughter, causing a shipwreck and abandoning the ship before all were evacuated. Schettino insists he helped coordinate the evacuation from Giglio’s docks after leaving the ship when the Concordia lurched to one side.

The search had been suspended Friday after the Concordia shifted, prompting fears the ship could roll off a rocky ledge of sea bed and plunge deeper into the sea. An abrupt shift could also cause a leak in the Concordia’s fuel tanks, polluting the pristine waters around Giglio, part of a seven-island Tuscan archipelago.

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U.K. retail sales rose in December as stores cut prices to lure consumers during the year-end holiday shopping season.

Sales including fuel rose 0.6 percent from November, when they fell a revised 0.5 percent, the Office for National Statistics said today in London. The December increase matched the median forecast of 21 economists in a Bloomberg News survey. From a year earlier, sales were up 2.6 percent.

The gain may not be maintained as U.K. unemployment rises, inflation outpaces wage increases and consumer confidence falls. With global growth cooling and the euro-area crisis damping export demand, concerns are growing that Britain is heading for another recession. A report today indicated Chinese manufacturing shrank for a third month in January.

Officials say a German woman who was listed among the missing from the cruise ship grounding off Italy has been located alive in Germany, bringing the number of people still unaccounted for to 21.

The Grosseto prefect’s office says Gertrud Goergens identified herself to police. Her name was removed from the official list of missing late Wednesday.

Italian authorities released the names of the missing Wednesday as the search for passengers and crew aboard the Costa Concordia was suspended because the ship shifted slightly from its perch on rocks off the Tuscan island of Giglio.

So far eleven bodies have been recovered; 21 people remain unaccounted for.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

ROME (AP) _ The first victim from the Costa Concordia diaster was identified Wednesday _ a 38-year-old violinist from Hungary who had been working as an entertainer on the stricken cruise ship.

Sandor Feher’s body was found inside the wreck, and identified by his mother who traveled to the Italian city of Grosetto, according to Hungary’s foreign ministry.

The $450 million Costa Concordia cruise ship was carrying more than 4,200 passengers and crew when it slammed into a reef Friday off the tiny Italian island of Giglio after the captain made an unauthorized maneuver. The death toll stands at 11, with 22 people still missing.

Italian rescue workers suspended operations Wednesday after the cruise ship shifted slightly on the rocks near the Tuscan coast, creating deep concerns about the safety of divers and firefighters searching for the missing.

Jozsef Balog, a pianist working with Feher on the ship, told the Blikk newspaper that Feher was wearing a lifejacket when he decided to return to his cabin to pack his violin. Feher was last seen on deck en route to the area where he was supposed to board a lifeboat.

According to Balog, Feher helped put lifejackets on several crying children before returning to his cabin.

Italian authorities earlier released the names of 24 passengers and 4 crew still missing, a list that includes six bodies which have been pulled from the ship since Monday. The missing included 13 Germans, six Italians, four French, two Americans and one person each from Hungary, India and Peru.

Instruments attached to the ship detected the movements early Wednesday even though firefighters who spent the night searching the area above water for the missing could not detect any movement.

“As a precautionary measure, we stopped the operations this morning, in order to verify the data we retrieved from our detectors, and understand if there actually was a movement, and if there has been one, how big this was,” said Coast Guard Cmdr. Filippo Marini.

By late afternoon, officials still did not have enough data to reassure them that the ship had stopped resettling. The latest victims were discovered after navy divers exploded holes in the hull of the ship to allow easier access.

Premier Mario Monti offered his first comment on the disaster Wednesday, telling a press conference in London that it “could and should” have been avoided.

Monti also thanked the residents of Giglio, which has a wintertime population of about 900, for opening their doors to the 4,200 refugees who struggled ashore with nothing and were given clothes, food and shelter.

And he acknowledged concerns about the 500,000 gallons of fuel still aboard the ship.

“Everybody can be assured that the Italian authorities are both taking care of the prevention and limitation of any environmental negative implications of this accident, as well as in the first place providing all the necessary help to those affected.”

Passengers were still making their way home, with consistent claims that crew members were ill-prepared to handle an emergency evacuation.

“The crew members had no specialized training _ the security man doubled as the cook and bartender, so obviously they did not know what to do,” passenger Claudia Fehlandt told Chile’s Channel 7 television after being embraced by relatives at Santiago’s airport.

“In fact, the lifeboats, even the ones that did get lowered, they did not know how to lower them and they cut the ropes with axes,” she said.

Much of the focus has been on the cruise ship captain’s actions.

In a dramatic phone conversation released Tuesday, a coast guard official was heard ordering Capt. Francesco Schettino, who had abandoned the ship with his first officers, back on board to oversee the evacuation. But Schettino resisted, saying it was too dark and the ship was tipping dangerously.

“You go on board! Is that clear? Do you hear me?” the Coast Guard officer shouted as the Schettino sat safe in a life raft and frantic passengers struggled to escape after the ship rammed into a reef off the Tuscan coast. “It is an order. Don’t make any more excuses. You have declared ‘Abandon ship.’ Now I am in charge.”

The officer confronted him with an expletive-laced order to get back on board, which has quickly entered the Italian lexicon. The four-word phrase has become a Twitter hashtag and Italian media have shown photos of T-shirts bearing the command.

Schettino, later in the same exchange, denied having abandoned the ship, replying that he had tripped and fell.

“I did not abandon a ship with 100 people on board, the ship suddenly listed and we were thrown into the water,” Schettino said, according to a transcript published Wednesday in the Corriere della Sera paper.

Jailed since the accident, Schettino appeared Tuesday before a judge in Grosseto, where he was questioned for three hours. The judge ordered him held under house arrest _ a decision that federal prosecutors are planning to challenge.

Schettino’s lawyer, Bruno Leporatti, told a news conference Wednesday in Grosetto that house arrest made sense given there was no evidence the captain intended to flee. He cited the fact that the captain coordinated the evacuation from the shore after leaving the ship.

“He never left the scene,” Leporatti said. “There has never been a danger of flight.”

Leporatti added the captain was upset by the accident, contrary to depictions in the Italian media that he did not appear to show regret.

“He is a deeply shaken man, not only for the loss of his ship, which for a captain is a grave thing, but above all for what happened and the loss of human life,” the lawyer said.

Criminal charges including manslaughter and abandoning ship are expected to be filed by prosecutors in coming days. Schettino faces a possible 12 years in prison if convicted of the abandoning ship charge alone.

_____

Barry reported from Milan.

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Strikes and demonstrations against Greek austerity measures hit the capital Athens on Tuesday, as international debt inspectors returned to decide whether the country’s reforms are strong enough for it to secure a vital bailout.

The officials from the European Union, European Central Bank and International Monetary Fund, which are lending money to Greece to keep it from bankruptcy, are expected to press the government for faster cost-cutting reforms.

Greece’s continued access to bailout loans depends not only on delivery on its austerity promises but also on negotiations with private creditors on a bond swap deal aiming to cut its debt by euro100 billion ($127 billion). It needs to get an agreement soon if it is to secure more rescue loans, with a bond repayment of euro14.5 billion due in late March.

Some 10,000 protesters took part in rallies in central Athens over potential pay cuts in the recession-battered private sector. Anti-austerity strikes in the capital disrupted public transport and other services. Journalist unions also launched a 48-hour strike.

Police said a plain-clothed officer from the anti-terrorism division was beaten and seriously injured by a group of some 30 protesters who took his handgun. The rally was otherwise peaceful.

Under government pressure, unions and employers are due to launch talks Wednesday to explore ways of slashing labor costs. Lower-level members of the debt of the debt inspection team started the talks in Athens on Tuesday, with the mission chiefs due Friday.

Meanwhile, Greece saw its borrowing rates ease marginally in a bill auction on Tuesday. Unable to issue long-term debt due to untenably high borrowing interest rates of 33 percent, the country maintains a market presence through regular treasury bill auctions.

The public debt agency said it raised euro1.625 billion ($2.06 billion) in a sale of 13-week treasury bills, an interest rate of 4.64 percent, compared with 4.68 percent in the last such auction in December.

Demand for the bills was 2.90 times the amount on offer, roughly the same as last month.

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European Central Bank Governing Council member Ewald Nowotny said Standard & Poor