Ford Posts Profit After Restructuring, Shares Jump
Ford posted an operating loss for the quarter that was better than analysts expected, excluding a net gain of $2.8 billion from one-time items that included the debt reduction actions, despite reeling global markets that helped push U.S. rivals General Motors and Chrysler into bankruptcy.
The automaker said it expects the U.S. economy to begin to recover in the second half of this year.
"Despite the really tough economic environment our plan is working and the underlying business is improving," Chief Financial Officer Lewis Booth told reporters.
"We continue to make really good progress on cost reductions," Booth said. "You can now see the results of the operations focused on cash."
An overall and North American profit in 2011 would be the first such mark for the U.S. automaker since 2004.
Ford posted a net profit of 69 cents per share for the second quarter, versus a net loss of $2.7 billion, or $3.89 per share, a year earlier.
The loss from continuing operations and excluding one-time items was $638 million, or 21 cents per share. Analysts on average had expected a loss of 50 cents per share on that basis, according to Reuters Estimates.
Revenue fell to $27.2 billion in the quarter, from $38.2 billion a year earlier. Analysts had expected $23.39 billion.
Ford said it burned through $1 billion in cash in the second quarter, an easing from the first quarter's $3.7 billion outflow. The company had expected the rate to decline as the year progressed.
The automaker said it expects cash flow to improve the rest of the year and will continue to pursue actions to better its balance sheet.
AHEAD OF SCHEDULE?
"This is outstanding," said Erich Merkle, president of auto consulting firm Autoconomy.com. "The cash burn is really being wiped off quickly. They are well ahead of schedule. I think Ford returning to profitability will be sooner than most expect."
Ford cut its automotive debt by about $10 billion by completing a series of transactions in early April, and raised $1.6 billion through a public stock offering in May, using proceeds to support funding for a U.S. union retiree healthcare trust.
Ford executives have said the company has sufficient liquidity to complete a turnaround plan, leaving investors focused on cash preservation and debt reduction.
The automotive business ended June with $21.0 billion in cash, compared with $21.3 billion at the end of March. Its debt burden stood at $26.1 billion at the end of June, down from $32.1 billion at the end of March.
The company borrowed $23 billion in 2006, secured by most of its remaining assets, including the Blue Oval logo, to support a multilayered restructuring and now carries a far heavier debt burden than post-bankruptcy GM and Chrysler.
Ford posted losses totaling $30 billion from 2006 through 2008 -- including a company record of $14.7 billion last year -- and reported a $1.43 billion loss in the first quarter.
The Dearborn, Michigan-based automaker has been navigating a U.S. downturn now in its fourth year with industry sales reaching their worst levels in three decades. It has not taken emergency U.S. government loans.
The automaker is restructuring its manufacturing operations to operate profitably in a smaller U.S. auto market and to meet an expected increase in consumer preferences for cars over larger SUVs and pickup trucks that drove profits a decade ago.
Ford said that 1,000 United Auto Workers-represented hourly employees accepted buyouts or early retirements in its latest offer, leaving it with about 47,000 hourly workers, a level it is comfortable with.
The automaker has sold several businesses to raise cash and focus its operations including its Aston Martin, Jaguar and Land Rover brands from its former premier auto group. Ford is also entertaining offers for its Volvo brand.
Booth said Ford was talking to a number of interested parties for Volvo, the Swedish luxury car brand that is the last member left from its premier auto group.
Ford shares rose 9.2 percent in premarket trading to $6.97 from Wednesday's close of $6.38 on the New York Stock Exchange.