DETROIT -(Dow Jones)- Ford Motor Co. (NYSE:F) (F) gained some breathing room for its turnaround effort in the second quarter, but the auto maker faces what could turn out to be hefty losses in its core North America unit in the second half of the year.
On Thursday Ford reported a $750 million second-quarter net profit, pulling its year-to-date earnings to a respectable $468 million, or 22 cents a share, nearly $1 a share better than analysts expected. The company had been projecting an operating loss of nearly $3 billion for the full year, but is now saying the loss won't be so deep thanks to the first-half performance and expectations for better results of automotive operations, interest expense and its financial- services arm.
Chief Financial Officer Don Leclair told Dow Jones Newswires the company is on track to post "better" results than the $2.8 billion operating loss posted in 2006, emphasizing the company is more interested in the short term in posting better year-over-year results than eye-popping profits. In the third quarter, the company is set to lose money and Leclair said the important issue for Ford is to once again do better than the same period in 2006.
"If you keep getting better every quarter, eventually you're going to be profitable," he said. For now, increased costs for regulatory compliance, commodities and capital spending will pressure second-half earnings.
With that in mind, Ford executives are keeping an eye on the tenuous nature of the company's turnaround amid uncertainty about the economy and Ford's ability to extract cost cuts from its main union.
"The challenges ahead remain formidable, and we expect the second half to be difficult," Chief Executive Alan Mulally said during a conference call. The company likely stands to run through at least $5 billion in cash over the remainder of the year, and falling SUV and truck sales - still representing the heart of Ford's product portfolio - show few signs of recovery, leaving production schedules and revenue forecasts vulnerable.
Leclair said the company is not afraid to cut production if the automotive market should register an unexpectedly worse downturn due to pressures in the broader economy. "We'll react," Leclair said.
Regardless of the cautionary tone, investors applauded Ford's results in the second quarter, which marked the first time in two years the auto maker turned a profit. Shares were up 1.5% to $8.09 for the regular trading session, even as concerns over credit markets and surging crude-oil prices inspired a major selloff on Wall Street Thursday.
