Automaker to Introduce Smaller European Cars to U.S.
By Jordan Weissmann
Washington Post Staff Writer
Friday, July 25, 2008
Ford yesterday reported an $8.7 billion second-quarter loss, the worst quarterly performance in the company's history, and announced a series of changes aimed at ramping up production of small cars as drivers bristle at the rising cost of gasoline.
The company said it plans to double its hybrid-car production by 2010 and introduce six of its European models in the United States by 2012. The European versions of the Focus and the Fiesta would arrive by 2010. Ford also wants to double the production of fuel-efficient four-cylinder engines for North America.
Ford's plan to bring European models to U.S. showrooms is the most aggressive yet by an American automaker, said Jesse Toprak, auto analyst with Edmunds.com.
"The U.S. market is destined to look like the European market in just a matter of a few years," he said. "The domestic automakers are trying to do whatever they can to create a better product mix."
The company attributed $8 billion of its losses to the reduced value of its assets, such as the sport-utility-vehicle and pickup-truck lines, for which consumer demand has declined sharply. Ford's U.S. sales were down 14 percent from the second quarter of last year, with light trucks taking an 18 percent hit.
The loss amounted to $3.88 per share, or 62 cents per share excluding the shrinking asset value. Analysts had forecast a loss of 27 cents a share, according to a survey from SmartMoney.com. The worse-than-expected results sent Ford shares down 15 percent, to close at $5.11. Last year, Ford had a second-quarter profit of $750 million, or 31 cents per share.
David Whiston, auto analyst with Morningstar, said the results were bad, adding: "It shows that if you want to invest in Ford, you have to be patient. It shows they have to totally restructure the North American business."
Ford chief executive Alan R. Mulally said he could not predict when the company would be profitable again. While Ford expects the U.S. economy to begin its recovery by early 2010, Mulally said it wasn't clear whether the company would be profitable by then.
Ford said it will offer more buyouts to hourly workers and lay off some white-collar employees. The company hopes to cut salary costs 15 percent by August.
Among its moves to boost small-car sales, Ford will convert three of its American truck and SUV plants to car production starting in December, it said.
The company also is in the process of globalizing its car platforms so that basic design features such as the suspension and metal underbody can be used for similar cars in different regions. The changes should reduce engineering and development costs.
"The fundamental requirements for vehicle design are really coalescing around the world," Mulally said.
Ford continued to profit overseas, netting $582 million in Europe and $388 million in South America during the quarter. The company also made $50 million at its Asia-Pacific-Africa division.
Whiston and other analysts said Ford was making the right long-term moves to turn itself around in the United States.
"What impresses me so much about Ford is the speed at which they have just blown through the toughest culture in the industry and turned it into what is looking like a fairly nimble culture," said John Wolkonowicz, an analyst with Global Insight.
Ford's losses are the latest bad news in a turbulent summer for the auto industry. With high gas prices driving customers away from pickup trucks and SUVs, Detroit's Big Three, Toyota and others have had unexpectedly steep sales declines.
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