Job cuts, slimmer losses in North America and good sales overseas helped Ford Motor Co. post surprise second-quarter earnings Thursday of $750 million, its first profitable quarter in two years.
The company also confirmed it is exploring the sale of its Jaguar and Land Rover subsidiaries and said its U.S. market share rose during the quarter.
Despite that, Ford’s president and chief executive Alan Mulally said investors should not think the automaker has turned the corner to consistent profitability.
“These accomplishments are something to be proud of, but we are not ready to declare victory,” Mulally said, predicting substantial losses in the third and fourth quarters.
Ford’s second-quarter profit of 31 cents per share compares with a net loss of $317 million, or 17 cents per share, in the same quarter of last year.
The company attributed the gains to significant year-over-year improvement in all of its automotive operations, and to cost cuts due to restructuring and positive special items that totaled $443 million. That includes a $206 million gain related to sale of its Aston Martin unit. Even its struggling North American division showed progress.
Ford has shed 27,000 hourly and about 10,000 salaried jobs since September 2006 through early retirement and buyout offers as it tries to shrink itself to match lower demand for its cars and trucks.
The positive earnings, though, surprised 15 analysts polled by Thomson Financial who expected the company to lose 35 cents per share excluding special items.
Ford said it is exploring the potential sale of Jaguar and Land Rover based on discussions with parties that have expressed interest in the British units. And the company said it is conducting a strategic review of Volvo “that likely will conclude prior to year end.”
Despite the quarterly earnings, the company said it still doesn’t expect to post an annual profit until 2009, although it is burning cash at a slower rate than the slightly less than $17 billion through 2009 that the company had predicted.
Even without the positive special items, the company still made money in the quarter, posting a profit of $258 million, or 13 cents per share. That compares with a loss of $118 million, or 6 cents per share, in the year-ago quarter.
“Despite the improved results in the second quarter, we have a long way to go,” Mulally said during a conference call with reporters and analysts, adding that he expects the second half of the year to be difficult.
Mulally also said the sale of Jaguar and Land Rover is probable, although no decisions have been made, and that the company is undergoing a strategic review of its Volvo unit.
Dearborn-based Ford reported revenue of $44.2 billion for the quarter, a 5.5 percent gain over the $41.6 billion reported in the year-ago period.
Ford said its automotive sector made $378 million for the quarter, compared with a pretax loss of $716 million during the second quarter of last year.
Although its core North American operations showed improvement, they still posted a pretax loss of $279 million. That compares with a pretax loss of $789 million a year ago.
The company reported cost reductions of $600 million for the quarter, or $1.1 billion for the full year, primarily due to health-care cost concessions negotiated with the United Auto Workers, 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. The share had been dropping. It was 16.7 percent in the second quarter of 2006.
Ford’s Premier Automotive Group, which includes Jaguar, Land Rover and Volvo, reported a pretax profit of $140 million for the quarter, an improvement over the pretax loss of $162 million for the same period in 2006. The company said all brands showed improvement. The profit comes at a time when all three are under consideration for sale as Ford tries to raise cash needed to fund its restructuring plan.
Argus Research Corp. senior automotive analyst Kevin Tynan said analysts were off in their earlier assessments because they were looking at a wide band of estimates for Ford, but added that the automaker still hasn’t turned the corner to profitability.
“The $279 million loss in North America is still a problem,” Tynan said.
Operating profit from Premier Automotive Group is a good sign “but essentially all of those brands are on the block and up for sale,” Tynan said. “Going forward, you will be eliminating that profit.”
Other signs of lingering trouble is Ford Motor Credit’s profit still being down significantly from last year’s second quarter and already massive restructuring of Ford in North America, he added.
“Ford has driven a lot of the costs out of the system already and it’s still not profitable,” Tynan said. “It really does get more difficult from here. The easy costs are already out. Now, if you need more cost-reduction, especially in North America, where do you get them?”
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, Ford made $262 million, and its financial services arm turned a pretax profit of $105 million, down from $425 million in the same quarter last year.