Ford Motor Co., hurt by rising commodity prices and higher product development costs, reported a decline in second-quarter net profits today to $2.4 billion. Hit the jump to read the rest of the story.
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North American pre-tax operating profits rose slightly, while earnings in other regions and Ford’s financial operations fell. Revenues increased as the automaker boosted cash and further trimmed its debt burden.
“We delivered very good second-quarter results while growing the business globally and serving more customers in every region,” Ford CEO Alan Mulally said in a statement. “Despite an uncertain business environment, we further strengthened our balance sheet and continued to invest for the future.”
Quarterly net income of $2.4 billion came on revenues of $35.5 billion. A year earlier, Ford posted net profits of $2.6 billion on revenue of $35.07 billion, including revenues from Volvo. Excluding Volvo, which Ford sold in the third quarter of 2010, Ford’s revenue in the second quarter of 2010 was $31.3 billion.
More cash, less debt
“We’re off to a really good first half,” Lewis Booth, Ford’s CFO, said in a media briefing. “We’re now at $14 billion net debt and $22 billion net cash which is a substantial improvement from the first quarter.”
Ford’s cash total rose $700 million from March 31. Its debt fell $2.6 billion to $14 billion.
Ford said second-quarter profits declined in its South America, Europe and Asia Pacific Africa operations. Ford Motor Credit Co. posted a pretax operating profit of $604 million, down $284 million from a year earlier.
Booth stopped short of predicting when Ford would earn an investment grade credit rating. He noted that the rating agencies have made it clear they want the automaker to meet several requirements, including resolving contract talks with the UAW this summer. But Booth said if Ford continues to report profits and reduce debt, “We expect to get to investment grade sooner rather than later.”
Not easy
Booth added, “It wasn’t an easy quarter.” He said demand weakened in North America after the March earthquake in Japan interrupted production for many automakers. Even though Ford’s production was minimally impacted, a shortage of cars kept some shoppers out of the market in both North America and Europe.
Ford is maintaining its U.S. full-year industry volume outlook in the range of 13 million to 13.5 million units, Booth said.
“We expect it to be closer to 13 million,” he said. Several analysts have lowered their outlooks to below 13 million, citing sluggish economic growth and earthquake-related inventory shortages.
Booth added there will be some improvements in the second half as Japanese production ramps up.
“We expected a relatively quiet year this year and that’s what we’re going to see,” he said.
All oil-driven commodity prices — including steel, aluminum and plastic — remain under upward pressure, Booth said. He reiterated Ford’s guidance that its commodity costs would be $2 billion higher this year than last year.
