Ford reported today that it has registered a $8.7 billion net loss in the second quarter of 2008, including pre-tax special charges of $8 billion. This mean that for each share Ford lost $3.88.
The pre-tax special charges of $8 billion include impairments of $5.3 billion for Ford North America long-lived assets and $2.1 billion for Ford Motor Credit Company's operating lease portfolio.
However, Ford recorded a strong profitability from Ford Europe and Ford South America.
Ford also announced that it has accelerated its product and production transformation plan with the addition of several new fuel-efficient small vehicles in North America and a realignment of its North American manufacturing.
Ford Press Release:
Ford Motor Company [NYSE: F] today reported a second quarter net loss of $8.7 billion, or $3.88 per share, including pre-tax special items totaling $8 billion. This compares with a net profit of $750 million, or 31 cents per share, in the second quarter of 2007.
Ford also today announced a significant acceleration of its transformation plan with the addition
of several new fuel-efficient small vehicles in North America and a realignment of its North American manufacturing (see related release http://media.ford.com/article_display.cfm?article_id=28660).
“We continue to take decisive action in response to the rapidly changing business environment and remain absolutely committed to the four elements of our business transformation plan,” said Ford President and CEO Alan Mulally. “Our European and South American operations are robust and profitable. We have momentum in Asia. And we are uniquely positioned to leverage our global
assets and the global strength of the Ford brand to quickly bring more small, fuel-efficient vehicles to North America.”
The 2008 operating data discussed below exclude Jaguar Land Rover, which was sold on June 2, 2008. Jaguar Land Rover and Aston Martin data are, however, included in the 2007 data, except where otherwise noted. See tables following “Safe Harbor/Risk Factors” for the amounts attributable to Jaguar Land Rover and any necessary reconciliations to U.S. GAAP.
Ford’s second quarter pre-tax operating loss from continuing operations, excluding special items, was
$1 billion, down from a year-ago profit of $483 million. On an after-tax basis, Ford's second quarter operating loss from continuing operations, excluding special items, was $1.4 billion, or 62 cents per share, compared with a net profit of $258 million, or 13 cents per share, a year ago.
Ford’s second quarter revenue, excluding special items, was $38.6 billion, down from $44.2 billion a year ago. Adjusted to exclude Jaguar Land Rover and Aston Martin from 2007 results, revenue would have been down slightly, with lower volume, adverse product mix and lower net pricing,
partly offset by favorable exchange.
Special items reduced pre-tax results by $8 billion in the second quarter, or $3.26 a share, primarily reflecting charges associated with asset impairments of $5.3 billion for Ford North America and $2.1 billion for Ford Credit. Because of deteriorating economic conditions, demand has declined substantially, particularly in North America. At the same time, fuel and commodity prices have increased substantially. As a result, there has been a significant shift away from large pickup trucks and traditional SUVs in North America. This prompted a review of our long-lived North American assets and Ford Credit operating lease portfolio, which led to the pre-tax non-cash impairment charges.
Automotive gross cash, which includes cash and cash equivalents, net marketable securities, and loaned securities, was $26.6 billion at June 30, 2008, a decrease of $2.1 billion from the end of the first quarter.
The decrease primarily reflects working capital increases, upfront subvention payments to Ford Credit, and Automotive operating losses, offset partly by the proceeds of the Jaguar Land Rover sale.
The following discussion of second quarter highlights and results are on a pre-tax basis and exclude special items. See tables following “Safe Harbor/Risk Factors” for the nature and amount of these special items and any necessary reconciliations to U.S. GAAP.
SECOND QUARTER HIGHLIGHTS
Posted profits of $582 million in Ford Europe and $388 million in Ford South America.
Launched the new Ford Kuga in Europe, a compact crossover vehicle with the best fuel economy of any AWD vehicle in the segment.
Completed the sale of Jaguar Land Rover to Tata Motors.
Improved initial quality of Ford brand vehicles in the U.S. at a rate faster than the industry average, according to J.D. Power and Associates. Ford was the only full-line automaker to show continuous quality improvement since 2004.
Lincoln and Mercury finished fifth and sixth, respectively, in the latest J.D. Power survey of customer satisfaction with dealership service.
Achieved $1 billion in cost savings, including over $600 million in Ford North America (at constant volume, mix and exchange; excluding special items). The company remains on track to achieve $5 billion in annual cost reductions in North America by the end of 2008 compared with 2005.
Launched the 2009 Ford Flex, our all-new seven passenger crossover vehicle with fuel economy that is equal-to-or-better-than its crossover competitors, and Lincoln MKS, our new luxury sedan in North America.
Confirmed the next-generation European Ford Fiesta and Ford Focus will begin North American production in 2010 as Ford North America adds more small cars, crossovers and fuel-efficient powertrains.
For the second quarter of 2008, Ford’s worldwide Automotive sector reported a pre-tax loss of $670 million, compared with a pre-tax profit of $378 million during the same period a year ago.
The deterioration was more than explained by lower volume and less favorable mix, particularly in the North American full-size pickup and traditional SUV segments, unfavorable net interest expense, lower net pricing, and changes in currency exchange, partly offset by favorable cost changes.
Worldwide Automotive revenue for the second quarter of 2008 was $34.1 billion, down from $40.1 billion a year ago. Total company vehicle wholesales in the second quarter were 1,561,000, compared with 1,773,000 units a year ago. The decrease reflected lower wholesales, primarily in North America, and the exclusion of Jaguar Land Rover and Aston Martin volume in 2008.
North America: For the second quarter, Ford North America Automotive operations reported a pre-tax loss of $1.3 billion, compared with a loss of $270 million a year ago. The deterioration reflected unfavorable volume and mix, especially in the full-size pickup truck and traditional SUV segments, and unfavorable net pricing. The impact of these factors was partly offset by cost reductions. Second quarter revenue was $14.2 billion, down from $19 billion a year ago.
South America: For the second quarter, Ford South America posted a pre-tax profit of $388 million, up from $255 million a year ago. The increase reflected higher net pricing and improved volume and mix, partially offset by unfavorable exchange. Second quarter revenue increased to $2.4 billion, up from $1.8 billion a year ago.
Europe: For the second quarter, Ford Europe pre-tax profits were $582 million, up from $262 million a year ago. The improvement was primarily explained by favorable volume and mix, and cost reductions, partially offset by unfavorable exchange. Second quarter revenue was $11.5 billion, up from $9.2 billion a year ago.
Volvo: For the second quarter, Volvo reported a pre-tax loss of $120 million, compared with a loss of $91 million a year ago. This reflected an improvement from first quarter results. The decline primarily reflected unfavorable volume and mix, unfavorable net pricing, and unfavorable exchange, partially offset by cost reductions. Second quarter revenue was $4.3 billion, compared with $4.4 billion a year ago.
Asia Pacific Africa: For the second quarter, Ford Asia Pacific Africa reported a pre-tax profit of $50 million, compared with a pre-tax profit of $26 million a year ago. The improvement primarily reflected favorable net pricing and cost performance. Second quarter revenue was $1.7 billion, about the same as a year ago.
Mazda: Ford earned $103 million from its investment in Mazda in the second quarter, compared with $72 million a year ago.
Other Automotive: Other Automotive, which consists primarily of interest and financing-related costs, reported a second quarter pre-tax loss of $336 million. This included net interest expense of $339 million.
For the second quarter, the Financial Services sector posted a pre-tax loss of $334 million, compared with a pre-tax profit of $105 million a year ago.
Ford Motor Credit Company: Ford Credit reported a pre-tax loss of $294 million in the second quarter, compared with a profit of $112 million a year ago. The decrease in earnings primarily reflected higher depreciation expense for leased vehicles and higher provision for credit losses, reflecting weakness in the North American vehicle auction market.
2008 OUTLOOK
“The second half will continue to be challenging, but we have absolutely the right plan to respond to the changing business environment and begin to grow again for the long term,” Mulally said. “We have great products entering the marketplace in the second half, including the Ford Flex, Lincoln MKS and Ford F-150 in North America, the Ford Kuga in Europe, and the Ford Fiesta in Europe and China. We continue to make progress on every element of our plan, and we are accelerating the transformation of Ford into a lean global company that delivers profitable growth for all.”
