Advertisement
  1. Archive

FOR ONE QUARTER, FORD HITS A PROFIT

A full year of gains, though, will have to wait until 2009.

Ford surprised Wall Street on Thursday by posting its first quarterly profit in two years. Then it spoiled the party by warning investors that it still expects big losses in the next two quarters and no return to full-year profitability until 2009.

Ford squeezed most of the gains out through cost-cutting, mainly with a roughly 30 percent decline in jobs, and good sales overseas.

Now Ford needs its North American division to start turning a profit. That could be difficult with the company's U.S. rivals and Japanese automakers breathing down its neck.

Still, investors applauded Ford's $750-million second-quarter profit - also helped by higher net pricing on its vehicles. Ford posted a 1.5 percent gain to finish at $8.09 as the most active issue on the New York Stock Exchange.

But even president and chief executive Alan Mulally said investors should not think that Ford has turned the corner to consistent profitability.

"These accomplishments are something to be proud of, but we are not ready to declare victory," he said, predicting losses in the second half of the year due to traditionally lower sales volume.

The company also said the sale of its Jaguar and Land Rover subsidiaries was probable, and that its U.S. market share was starting to stabilize, even rising from the first quarter to second quarter.

The second-quarter profit surprised 15 Wall Street analysts surveyed by Thomson Financial who expected the company to lose 35 cents per share excluding special items.

The company attributed the gains to significant year-over-year improvement in its automotive operations, restructuring and positive special items that totaled $443-million. That includes a $206-million gain related to the sale of its Aston Martin unit.

Even its struggling North American division showed progress, although it still lost $279-million before taxes.

Ford has shed 27,000 hourly and about 10,000 salaried jobs since September 2006 through early retirement and buyout offers as it tries to shrink itself to match lower demand for its cars and trucks.

Ford's automotive sector made $378-million for the quarter, vs. a pretax loss of $716-million during the second quarter of last year. The loss in its core North American operations narrowed by $510-million from the $789-million lost in the second quarter of last year.

The company reported cost reductions of $600-million for the quarter, or $1.1-billion for the full year, primarily due to health care cost concessions negotiated with the United Auto Workers, the reduced work force and lower warranty repair costs.

Argus Research Corp. senior automotive analyst Kevin Tynan said that Ford still won't be profitable for a while.

"The $279-million loss in North America is still a problem," Tynan said.

FAST FACTS

Out of reverse

Ford Motor Co. posted its first quarterly profit in two years, although it expects losses for the remainder of the year.

2nd Qtr Yr Ago Revenue $44.2B $41.9B Net Income $750M -$317-M Per Share 31 cents -17 cents

YOU MIGHT ALSO LIKE

Advertisement
Advertisement