Ford Reports Unanticipated 2Q Loss; Drop in SUV and Truck Sales Partly to Blame
21 July 2006
|Ford’s 2Q06 automotive sector results. Although North American results improved compared to 2Q2005, it remains a very large problem.|
Ford Motor Company reported a net loss of $123 million for the second quarter of 2006—results worse than expected. This compares with net income $946 million in the second quarter of 2005. Ford’s second-quarter loss from continuing operations, excluding special items, was $48 million, compared with a profit of 936 million in the same period a year ago.
Ford’s second-quarter total sales and revenue was $42 billion, down $2.5 billion from a year ago.
The truck and SUV markets that sustained our profitability for so long are getting smaller and more competitive..the market shift continues to impact our revenue. The speed and magnitude of the market shift is putting added pressures on our costs...and the competitive landscape is continually shifting, as evidenced by the GM-Renault-Nissan discussion.
The external factors [market shift, commodity and fuel costs] I’ve outlined aren’t going to get any easier, so we need to go father and faster [in the restructuring].—Bill Ford, CEO
On a pre-tax basis, worldwide Automotive sector losses in the second quarter were $808 million. This compares with a pre-tax loss of $245 million during the same period a year ago.
Worldwide automotive sales for the second quarter declined 2.6% to $37.7 billion from $38.7 billion in the same period last year. Worldwide vehicle unit sales in the quarter rose 0.8% to 1,732,000, up from 1,718,000 a year ago.
In the second quarter, Ford’s North America automotive operations reported a pre-tax loss of $797 million, compared with a pre-tax loss of $907 million a year ago. The improvement is more than explained by cost reductions in most areas of the business, partially offset by a mix shift from trucks to passenger cars, higher incentives and adverse foreign currency exchange. Sales were $19.2 billion, down 3.5% from $19.9 billion for the same period a year ago.
Ford is cutting its projected third-quarter production in North America to 670,000 units, down 58,000 units on a year-over-year basis, and 40,000 units less than what was previously announced. This drop mainly reflects reductions in truck production.
During the earnings conference call, Ford said the company will accelerate and revamp the “Way Forward” restructuring plan announced early this year.
If they had a better crystal ball, I’d go out and buy one. We don’t want to get into were we right or were we wrong. The issue is, how do we react? We baked in flexibility, and now we are going to use it.—Mark Fields, President Ford Americas
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