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Old 07-17-2003, 05:57   #1 (permalink)
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United States:Ford expects slim profits in 2nd half

Automaker's lucrative midyear likely to be followed by earnings of 3 cents per share

By Mark Truby / The Detroit News

DEARBORN -- The good news for Ford: In the first six months of the year, the automaker has earned a respectable $1.3 billion, or 67 cents a share.

The bad news: The company expects to make just 3 cents a share for the rest of the year.

The paper-thin earnings forecast illustrates just how difficult it is to make money in the U.S. auto market today.

Incentive spending is at record levels, car and truck sales are down industrywide and competition from foreign car brands is more intense than ever.

"Red Poling, when he was (Ford's) CEO, said it's a tough old world out there," Ford Vice Chairman Allan Gilmour said Wednesday. "And that's about what it is in the auto industry these days."

Ford reported Wednesday that it earned net income of $417 million in the second quarter, slightly better than expectations, but down 27 percent over the same period last year.

To achieve the numbers, Ford managers have been swinging the budgetary ax throughout the sprawling global organization. The automaker cut $1.3 billion in costs from April through June, and $1.9 billion for the year, nearly four times the original goal of $500 million.

Ford now plans to cut $2.5 billion for the entire year.

"We have been absolutely rigorous on cutting all costs that don't affect the flow of new products," said Ford chief financial officer Don Leclair. "That's going to continue and accelerate."

The pace of cost cutting on the product development front will slow in the second half due to the launch of several important models, including the redesigned Ford F-150 pickup truck, and the Ford Freestar and Mercury Monterey minivans.

Ford, which lost $6.4 billion in 2001 and 2002, said it expects a loss of 15 cents a share in the current quarter ending Sept. 30, and a profit of 18 cents in the fourth quarter.

Overall, Ford's second-quarter revenues declined to $40.7 billion from $42.2 billion a year earlier as several Ford units stumbled.

The most alarming fall was Ford's European operations, which posted a loss of $525 million in the quarter, up sharply from a loss of $18 million a year earlier

Ford's financing operations accounted for the majority of the earnings. Its worldwide automotive business made just $3 million.

One positive sign: Ford's Premier Automotive Group -- European luxury brands Volvo, Land Rover, Jaguar and Aston Martin -- reported pretax earnings of $166 million, after a loss of $122 million a year earlier.

"Among Ford's auto segments, North America was in line, Europe was a disaster, losing twice our expectation, but (Ford's luxury business) rebounded with the success of the Volvo XC90 and launch of the Jaguar XJ," Merril Lynch analyst John Casesa wrote in a report.

A smooth, on-time launch of the hugely popular F-150, which hit showrooms late next month, is the most crucial hurdle for Ford in the second half of the year. The rollout is on target, Ford executives said.

While some economist are forecasting that the U.S. economy will rebound, Ford isn't as optimistic.

"We are not planning on any substantial turnaround either this year or as we look into the early part of next year," Gilmour said.
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