No. 2 carmaker posts sharp drop in 2Q earnings, but beats target; sees larger-than-expected 3Q loss.
Ford earned $417 million, or 22 cents a share, compared with $610 million, or 31 cents a share, earned a year earlier, excluding special items. Analysts surveyed by earnings tracker First Call had a consensus earnings-per-share forecast of 19 cents.
The company basically broke even on its core automotive operations, seeing pre-tax profits fall to $3 million from $403 million a year ago. North American pre-tax auto profits fell to $445 million from $921 million, while losses in European auto operations bulged to $525 million from $18 million a year earlier. But the company saw losses narrow in its auto operations in other world regions.
Profits also narrowed at its Hertz car rental unit, as pre-tax profits fell to $57 million in the period from $72 million a year earlier. The one area that saw strong improvement in earnings was Ford Credit, where net income rose to $401 million from $330 million a year earlier, due to higher income related to securitizations and a lower provision for credit losses.
The company said it now expects a third-quarter loss of 15 cents a share, excluding special items, although it still hopes to earn 70 cents a share for the year. The company said the new guidance is due to planned production volume reductions in the third quarter. The company expects to build 810,000 vehicles in North America, down 141,000 vehicles, or 15 percent, from a year earlier. European production is being cut 22,000 vehicles, or 6 percent, while its luxury Premier Auto Group production will be off 4,000, or 3 percent.
Slides prepared for the company's presentation to analysts said it expects cost savings efforts this year to reach $2.5 billion in savings. It also said it expects to see high incentive levels continue along with Ford Credit returning to trend levels.
First Call's current forecast calls for a 12-cent-a-share loss in the third quarter and full-year earnings of 67 cents. The company earned 12 cents a share in the third quarter of 2002 and 47 cents a share for all of 2002.
Revenue fell to $40.7 billion from $42.3 billion a year earlier due to continue declines in net pricing (price less the cost of marketing and incentives) along with lower sales volumes. Total worldwide vehicle sales fell to 1.7 million in the quarter, off 137,000 vehicles from a year earlier, as U.S. market share fell to 20.6 percent from 21.2 percent in the first quarter and 21.3 percent in the year-earlier period.
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