Here is some background for Brian White's liveblogging of Ford's (NYSE: F) second quarter earning results:
Ford surprised the market by announcing black ink for the second quarter of 2007, with net income of $750 million, or $0.31 EPS on $44 billion revenue, which was a 6% increase over 2006 2nd quarter.
Unfortunately the increase in revenue was primarily due to currency exchange, mix and net pricing improvements -- sales volume actually was lower than 2006. The profit was due in part to cost reductions of $600 million, including the elimination of 6,400 jobs.
Backing out special items, mostly the sale of Aston Martin and deferred gains on certain hedges at Jaguar and Land Rover, and profits finished at $258 million, or $0.13 EPS. The paltry earnings won't do much to excite a market convinced that the company has taken only the first few initial steps in their climb back to economic viability.
As expected, the financial services sector tanked, where pre-tax earnings dropped from $425 million to $105 million. The company also confirmed what is widely known, that it is looking for a buyer for Jaguar and Land Rover, and is 'conducting a strategic review' about what to do with Volvo.
Vehicle sales dropped from 1.8 million in 2006 to 1.77 million in the second quarter of 2007, the decline due to sales in North America. Ford North America lost $279 million pre-tax (over a half-billion dollar improvement over 2006), while the South America, Europe, Asia Pacific, Africa, Premier Automotive Group and Mazda sectors all reported modest profits.
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Reader Comments (Page 1 of 1)
7-27-2007 @ 12:02PM
Jobu37 said...
So your detailed look into the 2nd Qtr earnings tell you that this "surprise" isn't all that amazing? You claim that part of the reason they posted a profit is because of an improvement in net pricing. You imply this is a bad thing. Do you even know what net pricing is? It means they were able to sell their cars for more $. Higher margins, in short. This took place in an enviroment int which Chrysler has been giving vehicles away for well over a year now and Toyota has even resorted to $5-6000 rebates on their new Tundra. Both of these put extreme pressure on the F150 but yet they were still able to improve the pricing on all other models to make up for the drop in margins on the F150. Improvement in net pricing contributed $900 million to this quarter's results IIRC. A major contributor to the drop in sales is the fact that they reduced "rental fleet sales" well over 50,000 units in the quarter. That's 50,000 units sold for no or next to no profit. Ford is starting to be run like a real business now where they are taking steps to improve pricing power at the expense of market share. Even in this environment they still eked out retail market share gains in June. Fusion, Edge, Escape, and the new Taurus are all well received product at the retail level. Instead of pushing more units via heavy discounting, ala Chrysler, they are letting the market buy closer to the transaction price that Ford wants them to sell at. Your negative viewpoints are actually what makes these financials so impressive. I've seen a couple of articles make the same negative stance on the net-pricing aspect of these results so seeing you take their commentary and run with it led me to having to correct you. This is more directed at the misinformed media than you.