Pre-tax special charges of US$8bn, including impairments of $5.3bn for Ford North America assets, and $2.1bn for Ford Motor Credit Company's operating leases, plunged the automaker to an $8.7bn, or $3.88 a share, net loss for the second quarter of 2008 compared with net profit of $750m (31 cents a share) in Q2 2007.

Ford said the "significant shift away from large pickup trucks and traditional SUVs in North America" had prompted a review of "long-lived" assets and the lease portfolio, which led to the pre-tax non-cash impairment charges.

It posted a pre-tax operating loss of $1bn excluding special items but achieved cost reductions of $1bn, including over $600m in North America. down from a year-ago profit of $483 million.  The after-tax second quarter operating loss, excluding special items, was $1.4bn, or 62 cents per share, compared with a net profit of $258m, or 13 cents per share, a year ago.

It said it remains on track to reach $5bn in annual cost reductions in North America by the end of 2008, compared with 2005, and posted good profits in Europe and South America.

It also announced a small car offensive and more restructuring of its North American manufacturing operations.

Second quarter revenue, excluding special items, was $38.6bn, versus $44.2bn . Adjusted to exclude Jaguar Land Rover and Aston Martin - sold on 2 June - from 2007 results, revenue would have been down slightly, with lower volume, adverse product mix and lower net pricing, partly offset by favourable exchange, the automaker said.

Automotive

Globally, the blue oval's automotive sector reported a pre-tax loss of $670m, compared with pre-tax profit of $378m last year, due to the fall in North American large pickup and SUV sales,  interest expenses, lower pricing, and currency rates, though costs were reduced.

Revenue was down from $40.1bn to $34.1bn and vehicle wholesale volume fell to 1,561,000 from 1,773,000 units a year ago, reflecting lower North American sales and the departure of Jaguar Land Rover and Aston Martin.

North America

North America automotive operations lost $1.3bn pre-tax compared with a loss of $270m in Q2 2007. Second quarter revenue was down from $19bn to $14.2bn.

South America

But profits were made in South America - a pre-tax gain of $388m, up from $255m due to higher volume at higher prices though exchange rates had a negative impact. Q2 revenue increased to $2.4bn from        $1.8bn.

Europe

Ford Europe was also in the black with pre-tax profits up from $262m a year ago to $582m, largely for the same reasons as South America. Second quarter revenue rose to $11.5bn from $9.2bn.

But Volvo posted a pre-tax loss of $120m, compared with a loss of $91m in 2007. Second quarter revenue was $4.3bn, compared with $4.4bn.

Asia-Pacific

Ford Asia Pacific Africa posted pre-tax profit of $50m, compared with $26m and revenue was flat at $1.7bn.

Ford received $103m from its investment in Mazda in the second quarter, compared with $72m last year.

Financial Services

Unsurprisingly, given how the US subprime mortgage crisis has rippled out to other countries, Ford's financial services posted a pre-tax loss of $334m, compared with pre-tax profit of $105m in 2007.

Ford Credit lost $294m pre-tax compared with $112m profit. Higher depreciation costs for leased vehicles and higher provision for credit losses, reflecting weakness in the North American vehicle auction market, got most of the blame.

Outlook

"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 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."