Ford Swings to Surprise Profit

By Reuters -  |  Posted 2008-04-24

DETROIT (Reuters) - Ford Motor Co (F.N: Quote, Profile, Research) posted an unexpected quarterly profit on Thursday, led by strong results in Europe and South America and a narrowing loss in North America, sending its shares up nearly 8 percent.

The automaker also cut its second quarter North American production plan and said it would offer more targeted buyouts to union workers at specific plants after getting about 4,200 workers to accept recent offers to leave the company.

Ford expects the rest of 2008 to be challenging, cutting its full-year North American outlook for industry sales, but said it remains committed to returning North America and its whole auto business to profitability in 2009.

"Particularly impressive was the continued strength in Europe," Calyon Securities analyst Mark Warnsman said in a research note. "The outstanding result in Europe would have meant little, however, if North America had not pulled itself back to close to breakeven."

Ford reported net income of $100 million, or 5 cents per share, compared with a net loss of $282 million, or 15 cents per share, a year earlier. Revenue fell 8 percent to $39.4 billion excluding the Jaguar Land Rover unit it is selling to Tata Motors Ltd (TAMO.BO: Quote, Profile, Research).

Ford expects to complete the Jaguar Land Rover sale by the end of the second quarter.

Ford reported a profit from continuing operations of $525 million, or 20 cents per share, excluding special items, while analysts on average expected Ford to report a loss of 14 cents per share on that basis, according to Reuters Estimates.

Like other U.S. automakers, Ford has been struggling with market share losses and a dramatic shift in consumer demand away from large sport utility vehicles to cars and smaller crossover SUVs built on passenger car platforms.

Ford was surpassed by Japanese rival Toyota Motor Corp (7203.T: Quote, Profile, Research) as No. 2 in auto sales in the United States last year. The slowing U.S. economy and rising gasoline prices have pressured U.S. auto sales in 2008 overall.

With truck-heavy vehicle lineups, GM, Ford and Chrysler LLC CBS.UL are feeling the pinch, while Toyota and Honda Motor Co Ltd (7267.T: Quote, Profile, Research) expand market share.


Ford, which posted losses of $2.7 billion in 2007 and $12.6 billion in 2006, has been cutting production capacity to match declining market share and meet the shift in demand for smaller more fuel-efficient vehicles.

The automaker said cost-cuts totaled $1.2 billion in North America, which that helped narrow the pretax operating loss in the region to $45 million, from $613 million a year earlier.

Ford offered buyouts to its 54,000 United Auto Workers-represented employees and will offer only targeted buyouts by plant and vehicle from this point. It did not give a target for the earlier plan or the new targeted buyouts.

"It's really an issue of cutting their way close to profitability in North America," Argus Research analyst Kevin Tynan said. "That, as time goes by, gets harder and harder to do."

Tim Ghriskey, chief investment officer with Solaris Asset Management in New York, said the cost-cutting will create a more profitable company that in time will lead to better sales. He does not own Ford shares, but follows it closely.

Ford cut its North American production outlook for the second quarter by 20,000 vehicles to 710,000, or about 101,000 lower than a year earlier. It has also said that it remains ready to cut production more if demand falls further.

The automaker will cut truck production in North America by 40,000 and increase car production, it said.

Ford also cut its full year forecast for U.S. auto industry sales that includes medium and heavy trucks to a range of 15.3 million to 15.6 million, from 16 million, a move executives tipped during a monthly sales conference call in early April.

Given that sales ran at about a 15.6 million seasonally adjusted annual rate in the first quarter, Ford is not banking on a significant sales rebound the rest of 2008.

The outlook is about in line with more recent expectations from analysts and other automakers.

GM said Wednesday that second-quarter U.S. auto industry sales may be weaker than the first quarter as fuel prices rise, but it still expects a recovery in the second half of 2008.

Ford also said its Ford Motor Credit Co reported net income of $24 million in the first quarter, down from $193 million a year earlier, mainly reflecting a higher provision for credit losses, depreciation on leased vehicles and higher net losses related to market valuation adjustments from derivatives.

Ford shares were up 63 cents, or 8.38 percent at $8.15 on the New York Stock Exchange. Through Wednesday's close on the NYSE, the stock was up 47 percent since a March 17 trough.

(Additional reporting by Ben Klayman; Editing by Gerald E. McCormick and Derek Caney)