DEARBORN, Mich. (AP) – Of all the times for Ford Motor Co. to make money, it had to pick the second quarter.
Just as the company goes hat-in-hand to the United Auto Workers seeking concessions, it shocks Wall Street and turns a tidy $750 million profit, its first in two years.
It may be a little harder now for the nation’s No. 2 automaker to plead poverty to its roughly 51,000 UAW workers, but Chief Executive Alan Mulally cautioned Thursday that Ford has not turned the corner to sustained profitability.
“These accomplishments are something to be proud of, but we are not ready to declare victory,” he said, predicting substantial losses in the second half due to traditionally lower sales volume. He repeated the company’s assertion that it won’t make a full-year profit until 2009.
He also said the union, which formally opened contract talks with Ford on Monday, knows the company’s financial situation well.
“Everybody really does understand the situation we are in,” Mulally said in a conference call with reporters and analysts. “We still lost $279 million in North American operations, and we have a lot of work to do to get back to profitability.”
The company said its profit was fueled by cost cutting, higher net pricing on its vehicles, slimmer losses in North America and better sales overseas.
Ford’s profit of 31 cents per share compares to a net loss of $317 million, or 17 cents per share, in the same quarter of last year.
Even its struggling North American division showed progress, cutting its losses from $789 million in the second quarter of last year.
The company attributed the gains to significant year-over-year improvement in all of its automotive operations, cost cuts due to restructuring and positive special items that totaled $443 million. That includes a $206 million gain related to the sale of its Aston Martin unit.
But the timing of the positive quarter might be bad because of the contract talks, in which Ford hopes to cut hourly labor costs by around $25 to better compete with Asian rivals.
Earlier in the week, union President Ron Gettelfinger said he wouldn’t concede that Ford’s financial situation is worse than its Detroit-area counterparts and said the company had a lot of cash.
Argus Research Corp. senior automotive analyst Kevin Tynan questioned how Ford will turn a profit in North America because it isn’t making money even with massive cost cuts.
“The easy costs are already out. Now, if you need more cost reduction, especially in North America, where do you get them?” he asked.
But Chief Financial Officer Don Leclair said in an interview with The Associated Press that Ford’s latest restructuring plan is only nine-and-a-half months old.
Some white collar workers who accepted buyout and early retirement offers have yet to leave, meaning more cost cuts will take place in the third quarter. Plus, Ford has yet to reap all the benefits of behaving like a global company in which cars and trucks worldwide are built with common parts, he said.
“There’s a lot there. We’re part way into it. We have a lot more to do,” he said.
Leclair also said the profitable quarter helped Ford to reduce its estimated cash burn through 2009 from $17 billion to $15 billion to $16 billion.
Mulally said the probability of selling Jaguar and Land Rover is greater than 50 percent, and Leclair said that just because the company is studying Volvo doesn’t mean that it will be sold.
Dearborn-based Ford reported revenue of $44.2 billion for the quarter, a 5.5 percent gain over the $41.9 billion reported in the year-ago period.
Ford said its automotive sector made $378 million for the quarter, compared to a pretax loss of $716 million during the second quarter of last year.
The company reported cost reductions of $600 million for the quarter, or $1.1 billion for the full year, primarily due to health care concessions negotiated with the UAW, the reduced work force and lower warranty repair costs.
It also reported that its U.S. market share rose to 15.6 percent for the quarter from 15.1 percent in the first quarter.
Ford’s Premier Automotive Group, which includes Jaguar, Land Rover and Volvo, reported a pretax profit of $140 million for the quarter. The automaker’s Asia Pacific and Africa unit made a pretax profit of $26 million, and Ford made $255 million pretax in South America. In Europe, it made $262 million, and Ford Motor Credit made $62 million, $242 million less than in the same quarter last year. Ford also received $81 million from its investment in Mazda.
Ford shares closed up 12 cents, or 1.51 percent, to $8.09 on Thursday.
Associated Press Writer Corey Williams in Detroit contributed to this report.
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