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Ford 2nd-Qtr Profit Falls 19% on U.S. Sales Decline (Update2)

Ford 2nd-Qtr Profit Falls 19% on U.S. Sales Decline

July 19 (Bloomberg) -- Ford Motor Co., the No. 2 U.S. automaker, said second-quarter profit fell 19 percent as its North American auto operations lost money on falling sales of cars and trucks.

Net income dropped to $946 million, or 47 cents a share, from $1.17 billion, or 57 cents a share, a year ago, Dearborn, Michigan-based Ford said in a statement today. The company's North American operations, its largest, had a pretax loss of $1.21 billion. Revenue rose 3.9 percent to $44.5 billion.

Ford Chief Executive William Clay Ford Jr. oversaw a 4 percent decline in second-quarter U.S. unit sales as General Motors Corp. lured customers with incentives and Asian automakers such as Toyota Motor Corp. and Nissan Motor Co. gained market share. GM offered consumers the same discount that employees get, helping boost its June U.S. sales 47 percent.

``Continued weakness in their product line combined with GM's employee price campaign hurt them,'' Brian Bruce, who helps manage $18 billion in equity, including Ford shares, for PanAgora Asset Management in Boston, said in an e-mail before earnings were released.

Profit and sales at Ford are declining even as automakers industrywide are selling more cars and trucks in the U.S. this year. Ford's second-quarter share of the U.S. market fell to 18.2 percent from 19.7 percent a year earlier.

Beating Estimates

Excluding some costs and gains, Ford was expected to earn 33 cents a share, the average estimate of analysts surveyed by Thomson Financial. On that basis, profit was $936 million, or 47 cents.

One-time items included $313 million, or 15 cents a share, in expenses for Ford's pending bailout of Visteon, a former unit and the automaker's largest supplier. Ford agreed in May to take back 24 plants from Van Buren, Michigan-based Visteon. The automaker also had tax adjustments that added to profit.

Ford's forecasts have underestimated actual results by an average of 63 percent the past six quarters. The second-quarter results mark the 14th-straight quarter that Ford has exceeded the average analyst estimate.

Ford has 17,400 employees stationed at Visteon plants, a cost Visteon said it couldn't afford. Those employees are paid about double what hourly workers at rival suppliers receive. Ford pays the workers and Visteon reimburses the cost of wages and benefits.

About 5,000 of the workers will be offered buyouts. Ford plans to revamp the plants and sell most of them. Ford workers who remain at factories sold by the automaker will continue to receive their current wages and benefits. Buyers will reimburse Ford for part of the compensation, with Ford absorbing the rest.

Ford Credit

Ford Motor Credit Co., which makes loans to car and truck buyers, had net income of $740 million, down from $897 million a year ago. Ford Credit produced most of Ford's profits in 2004.

The automaker on April 8 abandoned a 2006 profit target of $7 billion, excluding some costs. To meet that goal, Ford's auto operations would produce more earnings than Ford Credit.

The company's automotive operations had a pretax loss of $245 million, excluding costs Ford considers one-time items, compared with a profit of $97 million a year ago.

A North American pretax loss of $907 excluding one-time items compares with a $454 million pretax profit in 2004's second quarter. Sales were $19.9 billion, down $568 million from the same period in 2004.

SUV Sales Down

Sales of profitable mid- and large-sized sport-utility vehicles, such as Explorer and Expedition, declined as the average price of regular unleaded gasoline hit a record $2.28 a gallon on April 11, according to AAA's gasoline-price Web site.

The slide in SUV sales offset gains on passenger cars. Ford's car sales in the U.S. rose 1.2 percent during the first half of 2005 while sales of light trucks slid 7.5 percent.

Standard & Poor's cut its rating on Ford debt to BB+, or junk status, on May 5, which may boost the company's borrowing costs. Moody's Investors Service and Fitch Ratings also in May cut their ratings on Ford debt.

The automaker responded to flagging profits and sales by cutting about 1,000 U.S. salaried jobs during the quarter. The company said June 21 it plans to pare its North American auto operations by another 5 percent, or 1,700 jobs.

To contact the reporter of this story:
Bill Koenig in Dearborn, Michigan [e-mail]


LINK: http://www.bloomberg.com/apps/news?pid=10000103&sid=agQF_Sox.UOY&refer=us