Ford Aims To Save Itself By Bringing Small European Cars To U.S.

DEARBORN, Mich. — Ford Motor Co. posted the worst quarterly performance in its history Thursday, losing $8.67 billion in the second quarter.

The company also said it will retool two more North American truck and sport utility vehicle plants to build small, fuel-efficient vehicles, and it announced plans to bring six new small vehicles to North America from Europe by the end of 2012.

The net loss includes $8.03 billion worth of write-offs because the sharp decline in U.S. truck and SUV sales has reduced the value of Ford's North American truck plants and Ford Motor Credit Co.'s lease portfolio. Even excluding those items, Ford lost 62 cents per share, worse than Wall Street expected. Twelve analysts surveyed by Thomson Financial, on average, expected a 27 cent loss per share.

Including the write-downs, Ford lost $3.88 per share in the April-June quarter, compared with net profit of $750 million, or 31 cents per share, in the same quarter a year ago.

The second-quarter loss surpassed Ford's previous record quarterly loss, $6.7 billion in the first quarter of 1992.

Second-quarter revenue was $38.6 billion, down $5.6 billion from the year-ago period. Analysts expected $34.6 billion.

Ford has been successful selling cars in Europe, and the company is banking on the new European models to boost sales and revenue as it deals with a market shift from trucks to cars brought on by high gasoline prices.

The company said it has sufficient liquidity to weather the latest downturn in the U.S. auto market without additional borrowing. Ford borrowed $23.4 billion in 2006 to fund its North American turnaround.

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"We are pleased that we went to the capital markets at the right time," Ford President and CEO Alan Mulally said in a conference call with investors and media. "We have the scale, the expertise and the financing to execute our plan."

Wall Street wasn't impressed, at least initially. Ford shares dropped 58 cents, or 9.6 percent, to $5.45 in morning trading.

The company said it will retool the Michigan Truck plant in suburban Detroit, shifting its products from large SUVs to make global vehicles off the European Focus platform by 2010.

The SUVs made at Michigan Truck _ the Lincoln Navigator and Ford Expedition _ will be shifted to the Kentucky Truck plant in Louisville, which makes Ford Super Duty pickups.

The company also will retool the Louisville Assembly Plant, which now builds the Ford Explorer midsize SUV, to produce vehicles on the European Focus frame, starting in 2011.

The company had previously announced it would retool its pickup truck factory in Cuautitlan, Mexico, to build the Fiesta subcompact for North America starting in 2010.

Ford also said its Twin Cities Assembly Plant in St. Paul, Minn., will continue producing the Ranger small pickup through 2011. The plant was scheduled to close next year, but Ranger sales are down just 4 percent in the first half of this year, versus 18 percent for the U.S. light truck market as a whole.

The company also plans to revamp the body shops in nearly all its North American assembly plants so that they will be more flexible and able to respond more quickly to changes in market demands. Chief Financial Officer Don Leclair said it costs about $250 million per plant to make those changes.

Leclair said Ford's capital expenditures will reach $6 billion annually between now and 2010 because of the cost of revamping plants and introducing new products and engines. Ford plans to upgrade or replace all of its engines by 2010.

"What you're seeing is kind of a bubble that we're going to go through ... but early on we're going to see cost savings because of the economies of scale that we're getting as we develop more and more vehicles off of fewer platforms," he said.

Cost cuts also will come from employee layoffs. Ford said 4,000 U.S. hourly workers took buyouts in the second quarter, and the company will continue offering buyouts at targeted U.S. plants. Ford also has announced plans to cut its salaried costs by Aug. 1 through voluntary and involuntary layoffs.

The company said its write-offs included $5.3 billion in North American auto operations and $2.1 billion for Ford Credit because of the drop in the value of the plants and equipment that make trucks and SUVs, and the lower price Ford Credit can fetch for them at auction when leases expire. Leclair said 85 percent of the Ford Credit write-down was triggered by the drop in truck and SUV values.

Ford reported a pretax loss of $1.3 billion in North America because of the deteriorating U.S. market and the shift away from trucks. U.S. sales overall were down 10 percent in the first half of the year, with Ford's sales down 14 percent.

The company, though, continued to be profitable overseas, posting a $582 million profit in Europe and $388 million in South America. The company also made $50 million at its Asia-Pacific-Africa division.

"The second half will continue to be challenging, but we have absolutely the right plan to respond to the changing business environment and begin to grow again for the long term," Mulally said in a statement.

Ford said it does not expect a U.S. economic recovery to start until early 2010.

The company identified only three of the European small vehicles it will bring to North America: the Transit Connect small van, the European Focus and the subcompact Fiesta. Most will be built in North America, and Leclair said some might be exported. Ford already has announced that the Transit Connect will be imported from Turkey.

Ford said the other three vehicles would be identified later, including one that is unique within its segment.

Other possible vehicles are the Kuga small crossover, the C-Max small van and the Mondeo midsize car.

Ford also announced that the next-generation Ford Explorer midsize SUV will come out in 2010 and be built on car underpinnings, making it more fuel efficient than the current truck-based model. And it announced it will build a seven-passenger car-based crossover vehicle for Lincoln in mid-2009.

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On the Net:

http://www.ford.com

Comments

[Ariadne]

It's hard to feel bad for these people. They learned back in the '70's that smaller more fuel efficient cars was the wave of the future and then they (and we) forgot.

[vippy]

It is not the car companies' fault that they had these huge gas guzzlers for congress makes the rules on the miles per gallon consumption. Remember several years ago the government
said you can write off the vehicle if you buy one over 5,000 lbs. Nothing wrong with the European
Small Cars if they would just leave their mpgs in tact. But I am afraid that will not be happening
since congress wants us to use more, they are making money off oil and to prove it, why did
they pass the Commodities Future's Modernization Act and create the Enron Loophole?
With their investigation into the speculators now they put the reigns on the future's market, however, not quite, they left themselves enough where they continue to make money. One has
to wonder who they serve? Certainly not the people who put them in power. Congress says one thing and does another and by now it should be clear for everyone to see. Good example is the
opposing of raising the min. wage but yet they voted themselves a huge automatic pay increase
of $ 15,000. Best to vote them all out and start anew.

[lysistrata]

It is the car companies and the oil companies and construction companies and developers in cahoot with politicians fault. The companies lobbied and paid to have the people they wanted elected. Together they did all they could to eliminate public transportation like rail transport and helped build the suburban sprawl and telling us that is what we really want. As long as it is big and cheap it is the American way of life, just like Cheney said we are entitled to it. Remember when he said to protect the environment is just a virtue, not made for Americans, to that effect anyway.

[steamboat]

Ariadne, yes you are correct...­......But Americans also do it to themselves. Go to a mall someday and start counting the cars in the lot. And see how many are SUV's, big cars, Toyota's, Nissans, VW's, etc., etc., etc.......­...And we all preach we're for the workin' man, but thats the UAW worker who gets laid-off when folks buy those foreign cars. Yes, the foreign cars are starting to get made here. But the plants are usually in the south/SW where they don't have the union-power. Am I right?....­So again, we do it to ourselves.­..........­..........­..........­..........­....I have a Ford, but I live in Chicago right near a Ford plant. Had I lived somewhere else, I am not 100% sure what I'd have. I have to admit, so I am NOT above anybody else on this issue.

[thegreatgiginthesky]

The reason people buy foreign made cars is because of the poor quality of american vehicles. I've owned a ford and I will never again buy a product of theirs again. Why should I pay my hard earned money to buy inferior c-rap just because it is American? Make a better product to compete with the foreign companies, then we'll talk about supporting the UAW.

[thegreatgiginthesky]

Make a few more Ford Flex's, I'm sure that was what Ford was missing.

[Nitehawk]

What???? They're not bringing the Ka here???

[EinChicago]

Probably a good thing. My mum has a 2008 Ka right now which she used to repalce her 2002 Ka after it was pretty much totalled by a strong sneeze from a passing motorist.

[Nitehawk]

I don't know, I'd like a cheap Sports Ka to drive around in.