One-time charges, including the cost of abandoning the Mercury brand, hit Ford's bottom line.
Ford Motor Co. reported a slight drop in earnings for the second quarter as special, one-time charges – including the abandonment of the Mercury brand — hit the company’s earnings sheet.
Nevertheless, Ford still posted net income of $2.4 billion, or 59 cents per share, an 8% year-over-year decline of $201 million, or 2 cents per share, from second quarter 2010. But the maker also posted a healthy 13% increase in revenues.
Without the one-time write-offs, Ford would have earned $2.9 billion, or 65 cents a share – slightly ahead of the consensus analyst forecast of 60 cents.
It was notably the ninth consecutive quarterly profit by Ford, the only domestic automaker to avoid filing for bankruptcy protection during the auto industry’s deep downturn in 2009. Chrysler, which also reported its second-quarter numbers today, said it went $370 million into the red as the result of one-time charges connected to the payoff of its government bailout loans. (Click Here for more on Chrysler.)
“We delivered very good second quarter results while growing the business globally and serving more customers in every region,” said Alan Mulally, Ford president and CEO. “Despite an uncertain business environment, we further strengthened our balance sheet and continued to invest for the future.”
Looking forward, Ford’s executive vice president and Chief Financial Officer Lewis Booth said the latest earnings show the maker “on track for solid results in 2011” despite its decision to lower its sales forecast for the overall European and U.S. markets this year.
Mulally noted the second quarter was marked by growth of the company’s automotive business, Ford gaining market share despite the ongoing problems in the U.S. and Europe. Ford also remained the top brand in Canada, while increasing sales volume by over 40% in Turkey and by over 30% in Russia. It also increased its share in China and Southeast Asia.
Ford’s second-quarter pre-tax operating profit was $2.9 billion, or 65 cents per share, a decrease of $64 million, or 3 cents per share, from second quarter 2010. Total automotive results improved, offset by an anticipated reduction in financial services results.
For the first half of 2011, Ford earned a pre-tax operating profit of $5.7 billion, with net income of $4.9 billion and reported automotive operating-related cash flow of $4.5 billion.
Ford’s second quarter net income was hurt by unfavorable special items of $272 million, $177 million more than a year ago. The special items included the shutdown of the Mercury brand and other dealer-related actions in North America, and pension settlements in Belgium, the company said.
The second-quarter automotive pre-tax operating profit was $2.3 billion, an increase of $209 million from second quarter 2010. However, Ford Credit pre-tax operating profit was $604 million, a decrease of $284
million from second quarter 2010.
North American operations posted a second-quarter pre-tax operating profit of $1.9 billion. South America, Europe and Asia Pacific Africa also were profitable.
Ford’s second-quarter revenue was $35.5 billion, an increase of $4.2 billion from second quarter 2010. Ford generated positive automotive operating-related cash flow of $2.3 billion in the second quarter.
Ford continued its focus on strengthening its balance sheet, with a net reduction in automotive debt of $2.6 billion in the second quarter. That was offset partially by an increase in low-cost loans to support advanced technology. But the maker nonetheless ended the quarter with $14 billion in loans, down by half from the load it took on in order to survive the recent industry downturn.
Ford has been hoping that the steady pay-off of its debt will eventually convince credit agencies such as Moody’s to boost its debt rating to investment grade, which would further lower borrowing costs. Company officials have said they hope to see that happen within a year.
Ford ended the second quarter with $22 billion of cash reserves, an increase of $700 million compared to March 31, 2011. Automotive gross cash exceeded debt by $8 billion, leading to a first-half improvement of $6.6 billion compared with the end of 2010.