Ford Reports $2.3 Billion Net Profit, $424-Million Operating Loss
By Michelle Krebs July 23, 2009Ford Motor Co. reported a net profit of $2.3 billion in the second quarter, thanks to a one-time
special gain. However, the automaker continues to lose money in its operations.
Ford said Thursday its net profit was the result of a $2.8-billion net gain due to debt-reduction actions the automaker took. Its pre-tax operating loss came to $424 million in the second quarter, excluding those special items. Its after-tax loss totaled $638 million.
Still, Ford's second-quarter results show the automaker is improving its financial position and narrowing losses. Further, Ford's results beat analysts' forecasts, although the company's automotive operations still "burned" slightly more than $1 billion for the quarter.
Revenues Down But Ford Credit Gains
Ford's $2.3 billion net profit compares with a net loss of $8.7 billion in the year-ago quarter. Indicating softness in sales worldwide, Ford's revenue totaled $27.2 billion in the quarter, down $11 billion from a year ago. And Ford closed the quarter with $21 billion in cash on hand and higher market share.
"While the business environment remained extremely challenging around the world, we made significant progres on our transformation plan, Ford President and CEO Alan Mullaly said in a statement. "Our underlying business is growing progressively stronger as we introduces great new products that customers want and value, while continuing to aggressively restructure our business and strengthen our balance sheet."
Indeed, Ford's automotive operations lost $1 billion in the quarter, but that was much improved from the $2.9 billion lost in the year-ago quarter. Its losses in North America increased while Ford made money in South America, Europe and Asia Pacific-Africa.
Ford's operational loss was offset by a hefty gain of $595 million in the financial services side of the business, although executives said Ford Motor Credit does not expect the second half of the year to continue the strength of the first half. In the second quarter, Ford Credit lost revenue due to lower sales volumes but more than made up with increased residuals from leases.
Losses for Volvo, which remains up for sale, increased to $231 million from $120 million a year ago.
Mulally said Ford continues to project it will not again generate profits from automotive operations until 2011.
Sticking With Upbeat Projections
Mulally said the company definitely believes it will retain the momentum it seemingly gained as Detroit rivals General Motors Co. and Chrysler Group LLC coursed through Chapter 11 bankruptcies during the second quarter.
Moreover, Ford is sticking with one of the industry's more-optimistic forecasts for full-year industry sales. The company projects the U.S. Seasonally Adjusted Annual Rate to finish between 10.5 million and 11 million units for the year, while many industry analysts are having difficulty forecasting a SAAR that exceeds 10 million.
Ford also is bullish about a recovery in Europe, thanks to gains that have been larger than anticipated. The company had projected European auto sales to total 12.5 million to 13.5 million units, but now indicates sales may exceed 15 million units.
Mulally dampened any excessively rosy inferences from the company's rather upbeat stance, however. He said an economic recovery "is likely to be more modest than many of us had hoped."
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When I was in JH in the detroit suburbs, about the time Chrysler asked the Government for a loan (Also I think around the time Reagan was shot), the hadline of the Detroit Free Press or the Detroit News was "GM and Chrysler lose $1 Billion, Ford loses $500 million". That single headline had tainted my view of the Detroit three more than any other as for the longest time since nothing changed. The only bigger impact on my opinion was the terrible cars I had during the mid 80's until the mid 90's when I started buying Mazda and Honda.
So after reading this headline I have to say, Ford is at least doing as well as they did in 80-82, and in todays dollars that ain't so bad in this market I guess. You go Ford, and good for you to make those painful decisions early on when and changing your business while all the analysts said you were lagging GM in your turnaround. For your efforts if I buy a new car I will test drive a Fusion.
Congratulations to Ford for emerging as the best run domestic automaker, even though people thought they were idiotic for turning down government assistance.
The new Fusion and Taurus are good cars, far more exciting than their counterparts from Japan.
GM still appears to be stumbling around, trying to figure out what to do. Ford is doing what it planned to, which is return to profitability.
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