Ford Blames 2Q Loss on Dependence of SUVs

Pioneer Ford is shown in Goodyear, Ariz. on Wednesday, July 19, 2006. Ford Motor Co. lost $123 million in the second quarter due mainly to the costs of shedding personnel as the nation's second-biggest automaker signaled it plans additional steps in its restructuring effort. Revenue fell 6 percent from a year ago, when the company earned a nearly $1 billion profit. (AP Photo/Khampha Bouaphanh) (Khampha Bouaphanh - AP)

In North America, Ford had a pretax loss of $797 million, compared with last year's $907 million loss in the second quarter. Ford said its successes in cutting costs were offset by the market shift toward cars. It also blamed higher sales incentives and adverse foreign currency exchange rates.

"We're moving fast to meet growing customer demand for cars and crossovers," Bill Ford said. "But the speed and the magnitude of the market shift is putting added pressure on our costs."

Ford executives acknowledged they had not foreseen the size of the obstacles they faced when they first announced their turnaround plan. But they provided no clues how they would compensate for that, other than to say the changes would come faster and might go further than previously planned.

"The key question is how Ford's solution has changed in response to a more difficult environment," Morgan Stanley analyst Jonathan Steinmetz said in a research note Thursday. "This is not yet clear."

Bank of America analyst Ron Tadross said he expected both Ford and General Motors Corp., which is in the midst of its own restructuring, to continue to lose market share.

"Throwing cash at cost reductions ... does not produce sustainable improvements unless the share loss stops," he said in a note to investors.

Tadross said both companies are "ripe for a management change."

Ford stopped providing earnings guidance earlier this year, but its production forecast appeared to reflect scaled-back expectations for the third quarter. The company said it expected production to drop 8 percent from the third quarter of 2005 to 670,000 _ 40,000 fewer vehicles than previously announced.

One-time items amounted to a net reduction in second-quarter earnings of 4 cents per share. That included charges relating to plant closures and job cuts; a gain on the transfer of pension liabilities by Mazda Motor Corp., of which Ford owns about a third, to the Japanese government; and a favorable adjustment to a first-quarter charge for layoffs and termination packages.

For the first half of the year, Ford lost $1.3 billion, or 70 cents a share, in contrast to a profit of $2.16 billion, or $1.05 a share, a year ago. Six-month revenue fell to $83 billion from $89.7 billion a year ago.

Asked about a proposal for GM to join the alliance of Nissan Motor Co. and Renault SA, Bill Ford said the company was following developments and "game-planning" but that he couldn't offer any analysis. As to the question of whether Ford could benefit from a partnership, Bill Ford said the company was keeping its focus on turning around its business.

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