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post #1 of 3 (permalink) Old 07-20-04, 05:34 AM Thread Starter
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USA:Finance arm gives Ford a boost

Finance arm gives Ford a boost


DETROIT -- Ford Motor Co. on Tuesday said its second-quarter profit more than doubled, topping estimates, as strength in its finance arm offset weak auto sales.

The No. 2 U.S. automaker reported net income rose to $1.2 billion, from $417 million, a year earlier.

Ford's market share in the United States fell by 1.2 percentage points in the second quarter and its U.S. sales declined by 5 percent.

Ford's total revenue rose to $42.8 billion from $40.7 billion.

Excluding special items, which included charges from restructuring in Ford's European operations and Ballard Power Systems, Ford earned 61 cents per share.

Wall Street analysts on average were expecting second-quarter earnings of 49 cents a share.

Ford, which has been backing away from low-margin fleet and daily-rental sales, said its automotive unit had a pretax loss of $57 million, compared with a pretax profit of $3 million a year ago.

Its financing arm, Ford Credit, reported net income of $897 million, up from $401 million a year ago.

Ford also raised it full-year forecast by 15 cents to $1.80 to $1.90 a share. The automaker also said it expected to earn in the range of breakeven to 5 cents per share in the third quarter.

My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.

My next Ford.....
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post #2 of 3 (permalink) Old 07-21-04, 07:00 AM Thread Starter
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Re: USA:Finance arm gives Ford a boost

Ford makes $1.2 billion, but trouble looms

Analysts cautious as company's finance arm buoys struggling auto business in 2nd quarter

By Eric Mayne / The Detroit News

DEARBORN — Ford Motor Co.’s second-quarter profits nearly tripled to $1.2 billion on strong financing operations, but the company is struggling to make money selling cars and trucks.

Ford raised profit projections and now expects to make $5.3 billion pretax this year. But the good news for Chairman and CEO Bill Ford Jr.’s ongoing turnaround effort was tinged with signs of trouble.

Ford’s worldwide automotive operations lost money in the second quarter and its European-based Premier Automotive Group — including Jaguar, Volvo, Land Rover and Aston Martin — posted an alarming $362 million loss despite sales that rose 8 percent to $6.9 billion. Ford warned Tuesday that its luxury auto division likely will finish the year in the red and that another restructuring at Jaguar is needed.

Investors pushed Ford shares down 38 cents — or 2.5 percent — to $14.60 a share Tuesday in unusually heavy trading volume.

“While the quarterly profit is good, you’d like to make more of it from selling cars than from financing cars,” said Dan Poole, vice president of equity research at Cleveland-based National City Corp., which manages $23 billion in assets, including Ford shares.

In North America, automotive earnings rose $10 million to $455 million in the second quarter. But sales fell slightly to $20.5 billion from $20.7 billion.

Higher vehicle prices and demand for more expensive models were offset by declining overall sales.

Ford is cutting fleet sales to rental car companies and other customers to focus on more profitable retail sales. But increasing incentives, high vehicle inventories and costly plant changeovers could slow momentum in the U.S. market in coming months.

The second quarter results underscore the challenges Ford faces as it attempts to rebound from $6.4 billion in losses in 2001 and 2002 in a competitive worldwide market. Ford launched a turnaround in January 2002 and promised investors it would earn $7 billion in pretax profits by mid-decade.

Ford is counting on the introduction of several new vehicles by year’s end, such as the Ford Five Hundred large sedan and Hybrid Escape sport utility vehicle, to lift sales and market share.

The automaker increased its full-year earnings guidance for the third time Tuesday, hiking its projection 15 cents per share. Based on the new earnings estimate of $1.80 to $1.90 per share, Ford stands to earn $5.3 billion in pretax earnings this year — with the bulk coming from credit and financing.

In the April-June period, Ford Motor Credit reported record net income of $897 million, up $496 million from a year ago.

Ford’s second-quarter earnings also were buoyed by a turnaround at Ford of Europe, which sells blue oval-badged cars in Germany, England and elsewhere. Ford of Europe reported a pretax profit of $211 million, excluding special items, versus a loss of $525 million in the year-ago quarter.

The good news at Ford of Europe, though, was overshadowed by the losses of the Premier Automotive Group, the collection of European luxury brands. Ford does not break out the financial performances of its brands, but Chief Financial Officer Don Leclair said the luxury division suffered because of unfavorable currency exchange rates and costly retooling efforts at plants that build Land Rover and Volvo products. The Premier Automotive Group is launching two redesigned vehicles — the Land Rover LR3 and Volvo S40 and V50 compact cars.

But Jaguar is still struggling and hobbled with high operating costs that Ford plans to address.

“We’re not talking about major, significant, Earth-shattering changes here,” Leclair said. “We’re just talking about re-evaluating the business structure. It’s a high priority.”

Leclair said the Premier Automotive Group, together with Lincoln U.S. luxury division, will still contribute one third of Ford’s total earnings by mid-decade, said Leclair, even though “the market for luxury vehicles in the United States in particular has gotten tougher.”

Still, the loss recorded by the luxury division prompted some analysts to question Ford’s strategy of assembling Europe-based luxury brands.

“The Premier Group might have been a good idea at the start,” said George Magliano, Global Insight’s director of auto industry research for the Americas. “It hasn’t done very well.”

The Premier Automotive Group posted losses for two years until the second quarter of 2003. It earned $164 million in 2003, an upswing of $904 million from 2002. But its quarterly performance remains inconsistent.

Ford’s second-quarter earnings did little to offset disappointment among analysts over the Premier Automotive Group’s performance, which was “much lower than expected,” said Deutsche Bank analyst Rod Lache.

“On balance, we don’t see anything significantly positive or negative in the quarter, and don’t expect the stock to react meaningfully,” Lache said in research notes.

In the second quarter, Ford’s automotive operations lost $57 million, including charges of $120 million to increase a stake in fuel cell supplier Ballard Power Systems and $20 million to complete restructuring moves in Europe.

While investors and analysts remain lukewarm, Ford executives remain upbeat.

“We’re improving our business,” Leclair said. “The financial services side is improving faster than the auto side. But we are going to make $1 billion in the auto business for this year.”

My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.

My next Ford.....
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post #3 of 3 (permalink) Old 07-21-04, 07:13 AM Thread Starter
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Re: USA:Finance arm gives Ford a boost

Big gains, more trims at Ford

Automaker's 2004 goal: Cut extra $800 million


Ford Motor Co. nearly tripled its profit in the second quarter of the year after record earnings in its financing arm offset money-losing automotive operations, especially in the division that manages the company's four European luxury brands.

The company was optimistic enough to increase its projections for full-year profits, but it warned that deeper cost cuts may be needed to get there.

The Dearborn automaker reported net income of $1.17 billion, or 57 cents a share, on Tuesday, up substantially from a profit of $417 million, or 22 cents a share, in the same quarter a year ago.

The results, which exceeded Wall Street's estimate by about 11 cents a share, signal that the automaker's turnaround is on track, said Don Leclair, Ford's chief financial officer.

"We are on an improvement trend," he said.

However, Ford shares closed down 38 cents, or 2.54 percent, at $14.60 on the New York Stock Exchange on Tuesday.

Leclair said Ford has moved closer to meeting its goal of $7 billion in annual profit, before taxes, by 2006. Ford increased its profit estimate for 2004 by 15 cents to a range of $1.80-$1.90 a share, excluding any special income or expenses. That would equate to a pretax profit for the year of about $5.3 billion.

To meet that goal, Leclair said that Ford wants to cut an additional $800 million in costs this year. That's on top of the $600 million it cut in the first quarter. Leclair could not specify where those savings would come from but said that any job reductions would likely come through attrition.

Global losses
Despite the solid overall performance, Ford's worldwide automotive sector reported a loss of $57 million in the April-June period.

Overall automotive revenues in the second quarter rose to $36.7 billion from $34.1 billion a year ago, and most of the vehicle-making divisions reported a profit.

However, the Premier Automotive Group, which is known as PAG and manages the Aston Martin, Volvo, Land Rover and Jaguar brands, posted a pretax loss of $362 million in the second quarter that offset gains in North America and other business units.

That is down from PAG's pretax profit of $166 million a year ago -- a decline of $528 million.

Most of Ford's profit in the quarter was made in Ford Credit, which reported record net income of $897 million, up from $401 million a year ago.

Revenues in the financing arm declined to $6.08 billion, from $6.44 billion a year ago.

But the financing arm benefited from improvements in a few key areas that are likely to be unsustainable: reduced losses for loans, which may be partly the result of the improving economy; better returns on repossessed vehicles sold at auction, which are commanding higher prices, and low interest rates.

Overall expenses for Ford Credit declined to $702 million in the second quarter from $1.17 billion a year ago -- a major savings.

Ford's performance led some industry observers to continue questioning the strength of the company's core automotive operations. Rival General Motors Corp. has faced similar doubts about its car and truck business.

Automotive analyst Gary Lapidus of Goldman Sachs said that while Ford's overall performance was good, the mix of results between the automotive and financial-services divisions "was disappointing, unless financing is the new core business."

Lapidus said the profit contribution from the financing arm was 23 cents per share ahead of Goldman Sachs' forecast, while automotive profit contribution was 12 cents below forecast.

John Casesa, an automotive analyst for Merrill Lynch, said he also was troubled by the mix of profits at Ford but took a more positive view of the automaker's overall performance.

"More broadly, the recovery at Ford has really come through as management promised," Casesa wrote.

Profits rebound
After a combined loss of $6.43 billion in 2001 and 2002, Ford posted net income of $495 million last year. The company went on to post a profit of $1.95 billion in the first quarter of this year.

With the April-June results, that brings Ford's profit for the first half of the year to $3.12 billion, or $1.51 a share -- more than double the $1.31 billion, or 67 cents a share, it earned through June 2002.

Leclair defended Ford against criticism over how it made its second-quarter profits.

He noted that automotive profits have steadily improved since 2001 and that Ford is committed to making a pretax profit on automotive operations of $1 billion this year, on top of an estimated pretax profit of $4.3 billion from its financial-services business.

What's more, excluding $140 million in special expenses, global automotive profits were $83 million in the second quarter -- an $80-million improvement over last year.

Most of Ford's worldwide automotive operations, he also noted, reported good results for the second quarter.

Ford's North American pretax profit was $455 million, excluding special items, up $10 million from a year ago. The automaker said it was benefiting from a strategy to pull back from the fleet market, where vehicles are sold at a discount to government, rental and other companies. Overall, revenue was $20.5 billion, down from $20.7 billion a year ago.

Ford Europe's pretax profit was $211 million, excluding special items, compared with a pretax loss of $525 million a year ago. A large part of that gain was caused by the Ford Focus C-Max, which helped boost automotive revenue to $6.7 billion, up from $5.2 billion a year ago.

The major weakness of Ford's automotive empire is PAG, which Leclair said was hurt by major launches in the Land Rover and Volvo divisions.

Other reasons cited for difficulty in the division: a strong euro, higher operating costs, model changes at Land Rover and Volvo and lower net pricing. Disappointing sales of Jaguar vehicles in the United States, and escalating costs, also were noted.

The unit suffered even though revenues from PAG vehicles improved in the quarter to $6.9 billion, from $6.4 billion a year ago.

Although Leclair refused to elaborate on what changes might be necessary at PAG, he characterized them as "more subtle . . . they're going to take a little longer to work through."

Some of the additional cost-cutting Ford hopes to accomplish this year will undoubtedly be concentrated at PAG, Leclair said. Leclair noted that Ford's automotive operations will likely see a big improvement in the second half of the year, mostly in the fourth quarter, when Ford launches a variety of products, including the Ford Five Hundred, Freestyle and Escape Hybrid, the Land Rover Discovery/LR3 and the new Ford Focus in Europe.

My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.

My next Ford.....
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