Ford reports second-quarter profit of $2.6 billion

Ford Motor Co. reported a second-quarter profit of $2.6 billion as U.S. vehicle sales rose 20 percent and the automaker continued to gain market share.

Ford reports second-quarter profit of $2.6 billion
Ford earned $2.1 billion on its core automotive operations during the latest period, compared with a year-earlier loss of $1.1 billion on that basis.

Revenue rose by $4.5 billion, or 17 percent, to $31.3 billion.

The results surpassed an earlier projection by Ford CFO Lewis Booth, who said in April that the company's first-quarter profit of $2.1 billion would be the year's strongest.

All of Ford's global automotive operations were profitable and showed improvement during the latest period. During the first six months of the year, Ford earned $4.7 billion - its biggest first-half profit since 1998. The automaker has also been profitable for five consecutive quarters now.

In North America, Ford's automotive business earned a pre-tax operating profit of $1.9 billion, compared to a loss of $899 million a year ago. Ford cited higher sales and favorable pricing for the $2.8 billion swing in North American results.

During the second quarter, Ford's automotive revenues in North America advanced by $6.2 billion, or 58 percent, to $16.9 billion.

Transaction prices higher

Ford 's U.S. light vehicles sales rose by nearly 90,000 units - or 20 percent - to 539,644 during the second quarter.

The automaker is limiting discounts and attracting higher prices for new vehicles such as the Ford Taurus, Mustang and F-150 Super Duty pickup.

New models generated a $1 billion improvement in net pricing during the period compared to a year ago, with discount spending down $500 million along with $500 million in net price increases.

Ford Credit reported second quarter pre-tax operating profits of $888 million, a $242 million improvement from the second quarter of 2009 and a $60 million improvement from the first quarter of 2010.

“We delivered a very strong second quarter and first half of 2010 and are ahead of where we thought we would be despite the still-challenging business conditions,” Ford CEO Alan Mulally said in a statement.

The results easily topped Wall Street's expectations, and helped drive Ford shares 3 percent higher to $12.43 in early New York Stock Exchange trading today.

Ford said today the second half won't be as profitable as the first half, citing higher costs to launch new products, a rise in commodity prices and smaller reductions in reserves at Ford Credit. Booth said prices for steel, copper and aluminum will increase by $1 billion this year.

Operating costs will rise over the next few quarters as Ford prepares to build the redesigned Explorer and Focus, the continued launch of the Fiesta sub-compact and new engines for the F-150 pickup.

Because of weakening economic growth, the automaker narrowed its forecast for U.S. vehicle sales this year to 11.5 million to 12 million units. It had previously assumed industry light vehicle demand would reach 11.5 million to 12.5 million units.

U.S. light vehicle demand dropped to 10.4 million units last year -- the lowest level since1982.

High unemployment, the prolonged housing slump, and lackluster consumer spending are undermining U.S. economic growth.

"We believe we have a sustainable and slow recovery," Booth said today, adding Ford does not anticipate a double-dip recession.

Cash reserves fall

Ford ended the quarter with automotive gross cash of $21.9 billion, down from $25.3 billion at the end of the first quarter. The company attributed the decline to debt-reduction efforts and product-launch costs.

Ford said its automotive debt fell to $27.3 billion from $34.3 billion at the end of the first quarter.

“One of the high points of the quarter was we paid down $7 billion in debt,” Booth said, adding it is “very urgent” that Ford continues to pare debt.

By the end of 2011, Ford expects to move from an automotive net debt position to a net cash position. At the end of the second quarter, Ford's automotive debt exceeded cash levels by $5.4 billion.

Ford told analysts today it expects its credit rating - currently below investment grade - to rebound as it whittles down debt.

“We remain on track to deliver solid profits and positive automotive operating-related cash flow for 2010, and we expect even better financial results in 2011,” Mulally said.

Ford's U.S. market share stood at 17.5 percent through June, up almost 1.5 points from the year-earlier figure and up a tenth of a point for the quarter. Ford expects its full-year 2010 U.S. total market share and its share of the

U.S. retail market to be improved compared with 2009.

In Europe, Ford posted a pre-tax operating profit of $322 million, compared with a profit of $57 million a year ago and a profit of $107 million in the first quarter. The automaker said today it expected its European market share for all of 2010 to be about equal to the first half of 2010, but lower than 2009, reflecting the company's decision to limit increases in incentives in the region.

Ford says it expects its finance arm, Ford Motor Credit, to be less profitable in the second-half compared to the first half, but it will report a full-year profit for 2010. Ford Credit's second-quarter net profits reached $556 million, up from $413 million in the year-ago quarter.

Ford Credit expects smaller improvements in the provision for credit losses and depreciation expense for leased vehicles compared with the improvements during the first half.

Author: Al
Source: Autolatest & Autonews

Ford, reports, second-quarter, profit, billion