Ford surprised the motor industry on Thursday afternoon by announcing a net profit of $US0.31 per share, or $750m, for the second quarter of 2007. Analysts and industry observers had expected the struggling Detroit-based automaker to post its eighth consecutive quarterly loss.
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According to Reuters Estimates, the average Wall Street forecast was a loss of 37 cents per share. The Q2 2007 result compared with a net loss of 17 cents per share, or $317m, a year ago.
Second-quarter revenue rose slightly to $44.2bn from $41.9bn in 2006, reflecting currency exchange, model mix and net pricing improvements, partially offset by lower volume, Ford said.
Q2 profit from continuing operations, excluding special items, was 13 cents a share, or $258m, compared with a loss of 6 cents a share, or $118m, last year.
Special items – primarily the sale of Aston Martin and the recognition of previously deferred gains on certain hedges at Jaguar and Land Rover – increased pre-tax results by $443m in the second quarter.
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By GlobalDataFord used its results announcement to finally confirm on the record it is “currently exploring in greater detail the potential sale of the combined Jaguar and Land Rover business and is in discussions with selected parties who have expressed interest.”
The automaker added it is also conducting “a strategic review of Volvo that likely will conclude prior to year-end”.
“We continue to focus on the four priorities of our plan – restructuring the business to operate profitably, accelerating the development of new products that our customers want and value, funding our plan and improving our balance sheet, and working even more effectively together as one global Ford team, leveraging our assets,” said Ford president and chief executive officer Alan Mulally.
“Our team is very encouraged by the significant progress we are making. We recognise the challenges that lie ahead and remain fully committed to delivering our plan.”
Ford Europe sales rose about 5% in H1 2007 and Land Rover sales, up 8%, set a record. Ford China sales were up 22%.
Ford, currently in the process of axing 16 plants and 45,000 jobs as part of its restructuring programme, said it achieved $1.1bn of cost savings in the first half, including $600m in the second quarter, and reduced North America personnel by 6,400.
It also completed the sales of Automobile Protection Corporation and UK-based sportscar maker Aston Martin.
Automotive Sector
Worldwide automotive sector Q2 pretax profits were $378m versus a pre-tax loss of $716m a year ago due to favorable pricing and cost reductions, partially offset by unfavourable exchange rates.
Q2 vehicle wholesales fell to 1,773,000 from 1,806,000. Revenue was $40.1bn, up from $37.8bn, reflecting exchange rates, mix and net pricing improvements offset partially by the lower volume.
Ford North America reported a reduced Q2 pre-tax loss of $279m, compared with -$789m a year ago, due to better pricing and cost reductions, offset by lower volume. Revenue was down to $18.8bn from $19.1bn.
Ford South America posted pre-tax profit of $255m, up from $99m on revenue, up to $1.8bn from $1.3bn.
Ford Europe’s profit also was up, to $262m from $185m, due to higher pricing and volumes, offset by higher manufacturing costs, mostly to meet increased volumes. Q2 revenue was $9.2bn versus $7.5bn.
Premier Automotive Group (PAG) posted a pre-tax profit of $140m versus a pre-tax loss of $162m last year. All PAG brands improved, Ford said. Revenue was $8.4bn versus $7.8bn.
Ford Asia Pacific and Africa boosted pre-tax profit to $26m, from $4m, due to cost reduction, including restructuring savings, and improved results in China, offset by lower volume and adverse mix, particularly in Australia and Taiwan, and unfavorable exchange rates. Revenue slipped to $1.7bn from $1.8bn in 2006.
Ford earned $81m from its investment in Mazda and associated operations, compared with $32m a year ago.
Other Automotive posted a pre-tax loss of $107m, compared with -$85m a year ago, due to higher interest expenses associated with financing actions in Q4 2006 but partially offset by increased interest income.
Financial Services sector pre-tax profit plunged to $105m versus $425m in 2006.
Ford Motor Credit Company net income of $62m was down $242m due to higher borrowing costs, lower credit loss reserve reductions, higher depreciation expense for leased vehicles and higher net losses related to market valuation adjustments from derivatives. Lower expenses, primarily improved operating costs, partially offset the result.
