Recovering

27 July 2007



Ford Surprises with $258 Million Quarterly Earnings

Ford Motor Company appears to have started its turn-around. The Company just filed its second quarter figures, and it had global revenues of $40.1 billion, net income of $750 million (31 cents a share), and earnings from continuing operations of $258 million (or 13 cents per share), excluding special items. The gray cloud surrounding the silver lining, though, is the continued losses in North America, but they are also getting smaller. Ford’s recovery, thus far, appears to be driven by the falling value of the US dollar along with its cost-cutting efforts.

The analysts were shocked by this – they were way off. Thomson Financial’s earnings tracker service First Call polled 15 analysts whose consensus view was that Ford would lose around 35 cents a share, excluding special items. Last year’s second quarter had a loss of 6 cents a share, so the analysts were actually expecting Ford to get a whole lot worse. It’s one thing to expect a loss, but it’s quite another to expect deterioration that doesn’t happen. Getting the direction wrong is much more serious than getting the magnitude of improvement or deterioration wrong. First Call’s respondents expected flat sales of $37.5 billion, and from that $2.6 billion error, the rest followed.

The words “excluding special items” figure heavily in this quarter’s analysis. They refer mainly to the sale of the Aston Martin brand. That brought in $206 million, and overall, special items brought the earnings up $443 million. There will be more special items to exclude in the coming months. Ford is in talks with interested parties for the sale of its British brands Jaguar and Land Rover, and it is conducting a “strategic review” of Volvo. That could well lead to the sale of the Swedish operation.

The star of the quarter was Ford’s Premier Automotive Group. It posted a pre-tax profit of $140 million for the quarter. Last year’s second quarter, it lost a pre-tax $162 million, an improvement of $302 million. The Group includes Jaguar, Land Rover and Volvo, though, so Ford may well wind up parting with its strongest performer. The wisdom of such a move remains elusive.

North American operations improved with a pre-tax loss of $279 million against a pre-tax loss of $789 million a year ago. The 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; its European financial services arm reported a pretax profit of $105 million, down from $425 million in the same quarter last year. The US dollar’s decline is reflected in each of these figures, while the rising interest rates in Europe turn up in its financial services weakness. Ford’s doing better, but it isn’t out of the woods yet.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.


Home

Google
WWW Kensington Review







Amazon Honor System Click Here to Pay Learn More