America's second largest automaker Ford Motor Co. posted a second-quarter loss of $8.7 billion as it reduced the value of truck plants and loans to buyers of pickups and sport-utility vehicles by $8 billion.
The net loss of $3.88 a share compared with a profit of $750 million, or 31 cents, a year earlier, Ford said in a statement today. The loss excluding the asset write-downs was worse than analysts had estimated, and the shares fell about 8 per cent in early New York trading.
"Because of deteriorating economic conditions, demand has declined dramatically, especially in North America," said Ford CEO Alan Mulally, who also blamed rising gas prices for the decline.
Excluding costs Ford considers one-time expenses, the loss was $1.38 billion, or 62 cents a share. This was much larger than Wall Street expectations of around 30 cents losses per share. The latest results are a far cry from the first-quarter numbers when Ford had confounded analysts with a $100 million profit. (See: Ford confounds analysts, posts $100 million profit in first quarter)
The company also announced massive restructuring of its product lineup and workforce. CEO Mulally said the company is working toward reducing its salaried workforce by 15 per cent. The company aims to save $5 billion annually, and has managed to reduce costs by $1 billion so far.
He also said the company is now shifting its focus "to bring to the North American market smaller, more fuel-efficient vehicles that people increasingly want."
The company said it will make big changes to the vehicles it sells domestically - bringing six small cars made in Europe to the North American market. Ford said its plant in Cuautitlan, Mexico, in 2010 will produce the new Fiesta small car to be sold worldwide. Ford disclosed that plan in May. (See: Ford shifts base from the US to Mexico for new ''world car'')
SUV factories in Wayne, Michigan, and Louisville, Kentucky, will be converted to small cars. The Michigan plant will make the switch in 2010 and Louisville in 2011.
Production of Expedition and Navigator large SUVs, now made at Wayne, will be shifted to another Louisville plant that now makes only Super Duty F-Series pickups. Also, a St. Paul, Minnesota, plant that builds the Ranger small pickup was given a two-year reprieve to 2011 to meet renewed consumer demand for the vehicle.
In addition, Ford said it would build a car-based Explorer to replace the current truck-based model in 2010 and new seven- passenger Lincoln ''crossover'' vehicle in mid-2009. Ford showed prototypes of those models in January at the Detroit auto show. (See: 2008 Ford Explorer SUV is value for money and Ford make 2009 Lincoln MKS ships to dealership)
North American production capacity for 4-cylinder engines will double to more than 1 million units by 2011. A redesigned Mustang sports car and Taurus sedan will arrive in 2009.
Mulally said that, last quarter, Ford had rolled out two new vehicles - the Ford Flex, a "crossover" car-based SUV, and the aforementioned Lincoln MKS luxury sedan. Mulally said these are the first vehicles with "eco boost" technology, providing better fuel economy. (See: Ford Flex marketing campaign to kick off in style)
As production winds down, Ford has been slashing production of SUVs and large trucks to meet the reduced demand, and delayed the launch of its new F-150. But some truck and SUV lines will continue, at least for now. (See: Ford cuts truck production by 25 per cent as fuel prices pull down sales)
Ford said it had $26.6 billion in automotive cash at the end of the quarter, down $10.8 billion from a year earlier. The company is ``confident'' it has enough liquidity, Chief Financial Officer Don LeClair told reporters.
Ford hasn't set a new goal for returning to profit, spokesman Mark Truby said. The company also hasn't made an estimate for how much cash it will burn as it restructures. Ford borrowed $23.4 billion in late 2006 to revamp operations.
Ford had pretax write-downs of $5.3 billion for its North American auto operations and $2.1 billion for vehicle leases at Ford Credit. The write-downs stemmed primarily from falling demand for large pickups and sport-utility vehicles, and LeClair said 85 percent of the Ford Credit write-down was tied to falling values for pickup trucks and SUVs.
Ford Credit had a loss of $1.4 billion, compared with a year-earlier profit of $62 million.