Ford reports record $8.7B loss, plans boost in small-car output

7/25/2008

DETROIT - Ford Motor Co. reported a record quarterly loss yesterday of $8.7 billion and announced plans to overhaul two North American plants to build small cars.

Because of buyers' shift away from low-gas-mileage pickup trucks and sport utility vehicles, Ford it plans to begin selling six European small cars in the United States.

The loss, equal to $3.88 a share, was mostly the result of $8 billion in write-downs because of falling demand for and resale values of pickups and SUVs in the United States.

Ford took charges of $5.3 billion charge related to lower asset values in North America and $2.1 billion on the lease portfolio at its financing arm, Ford Motor Credit Co.

Excluding the write-downs and other charges, the company lost $1 billion from continuing operations, down from a profit of $483 million a year ago. It lost $1.3 billion in North America.

In the year-ago quarter, Ford had a profit of $750 million, or 31 cents a share. In April, the company surprised Wall Street with a $100 million first-quarter profit, but the market for its most profitable vehicles has deteriorated swiftly since then.

Revenue fell to $38.6 billion in the second quarter from $44.2 billion a year ago, in part because the company has sold European brands Jaguar, Land Rover, and Aston Martin.

Ford executives said they expect the U.S. market to remain sluggish through next year. Don Leclair, chief financial officer, said Ford has $26.6 billion in cash on hand, down $10.8 billion from a year ago but enough to sustain its restructuring.

Ford said it will cut production for the rest of the year by an additional 105,000 vehicles, for a total reduction of 26 percent compared with the second half of 2007.

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.

A factory in Wayne, Mich., that now assembles Lincoln Navigator and Ford Expedition large SUVs and one in Louisville that builds Explorer midsize SUVs will be retooled to build small cars on the European Focus frame starting in 2010 in Wayne and 2011 in Louisville.

Navigator and Expedition assembly will shift to another plant in Louisville.

Additionally, a St. Paul, Minn., factory that builds the Ranger small pickup will stay open to 2011, a two-year delay in Ford's plan to close it.

The company has already announced plans to build the Fiesta subcompact at a former truck factory in Mexico.

The Transit Connect will be imported from Turkey.

Ford also plans to double its capacity to build fuel-efficient, four-cylinder engines in North America by 2011.

Gasoline-electric hybrid models will double to four models in 2009 from two now, Ford said. Hybrid production will double to 50,000 units annually, spokesman Mark Truby said.