Ford continues to invest at the expense of profits. North America still dominates and that's a problem.
Ford Motor Company [NYSE: F] today reported second quarter 2011 net income of $2.4 billion, or 59 cents per share, a decrease of $201 million, or 2 cents per share, compared to the second quarter 2010. Total vehicle sales in the second quarter were 1.5 million units, up 101,000 units from second quarter 2010, as every business segment reported higher sales. Second quarter Automotive pre-tax operating profit was $2.3 billion, an increase of $209 million from second quarter 2010.
It was the eighth straight quarterly profit for the Number Two Detroit automaker. Ford nonetheless continues to struggle with profitability outside of North America especially in Europe and Asia. Ford is also facing sharp increases in commodity prices as well as large launch costs for new smaller, more fuel efficient vehicles in the U.S and Canada.
Ford’s second quarter pre-tax operating profit was $2.9 billion, or 65 cents per share, a decrease of $64 million, or 3 cents per share, from second quarter 2010, which was in itself a weak quarter. Total Ford Automotive results improved, offset by a reduction in Financial Services. Second quarter Ford Credit pre-tax operating profit was $604 million, a decrease of $284 million from second quarter 2010.
Ford’s second quarter net income was affected by so called “unfavorable special items” of $272 million – $177 million more than a year ago. The special items include personnel reduction actions as Ford continues to retrench. The closing of Mercury and other dealer-related actions in North America, as well as pension settlements in Belgium also negatively affected the results.
“Despite an uncertain business environment, we further strengthened our balance sheet and continued to invest for the future,” said Alan Mulally, Ford president and CEO.
For the first half of 2011, Ford earned a pre-tax operating profit of $5.7 billion, net income of $4.9 billion and reported Automotive operating-related cash flow of $4.5 billion.
Ford is maintaining – optimistically – its U.S. full year industry volume outlook in the range of 13 million to 13.5 million units as the economy languishes. For the 19 markets Ford tracks in Europe, after a good first half, Ford now admits to signs of weakness related to the debt crisis and fiscal austerity programs. Ford forecasts the industry in Europe to be in a range of 14.8 million to 15.3 million units, compared with 14.5 million to 15.5 million units previously.
Ford Motor debt at $14 billion remains high. Automotive gross cash exceeded debt by $8 billion, leading to a first-half improvement of $6.6 billion compared with the end of 2010. The rating agencies still think that Ford paper is junk, and will not likely change that view until after the UAW contract negotiations are completed this September, if then. Ford is the inevitable strike target for the UAW this year since government loan guaranties that bailed out bankrupt General Motors and Chrysler came with a “no-strike” stipulation for the pending contracts.
