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Ford to revamp lineup after $8.7 billion Q2 loss
From Automotive News:
Ford to revamp lineup after $8.7 billion Q2 loss
Mercury slated for product infusion; Ranger pickup gets reprieve; Stock falls 15% on news
and Philip Nussel
July 24, 2008 - 7:08 am ET
UPDATED: 7/24/08 4:31 p.m. EDT
DETROIT -- Ford Motor Co. said today its operations lost $1.38 billion in the second quarter as high gasoline prices drove consumers from its big trucks. The automaker earned $258 million during the same quarter of 2007.
Ford also said it took an $8 billion charge primarily for reducing the value of various troubled assets, bringing the total net loss for the quarter to $8.67 billion. Ford stock fell 15.3 percent on the news to finish the day at $5.11 a share.
In response to the downturn, Ford said it will add six small European vehicles to its North American lineup and convert three large truck and SUV plants to small cars beginning in December.
Ford said it will revitalize the Mercury lineup by the end of 2010. With no new products on the long-term horizon, the survival of the Mercury brand had been in doubt.
Ford also confirmed it would continue production of the Ranger small pickup at the Twin Cities assembly plant in Minnesota through 2011.
The automaker's revised turnaround plan calls for doubling its capacity to produce four-cylinder engines in North America by 2011. Ford said its hybrid vehicle lineup, and production, will double in 2009.
Worst quarter in Ford history
In the financial report, Ford said the special charges for troubled assets included a $5.30 billion charge for Ford North America.
The North American unit posted a $1.3 billion pretax loss in the quarter compared with a $270 million loss during the same period a year ago.
Ford said it posted a pretax profit of $582 million in Europe during the quarter, up from $262 million. It also turned profits in Asia and South America. The Volvo unit lost $120 million compared with a loss of $91 million a year ago.
Ford CFO Don Leclair confirmed that the $8.67 billion in red ink was the worst quarterly loss in the history of the company.
Ford executives aren't saying when they expect the automaker to return to profitability.
"It's just so volatile right now," CEO Alan Mulally said. "We thought the best thing is to focus on what we're doing right now on the product side."
Ford ended the second quarter with $26.6 billion cash, down $10.8 billion from a year ago. With available credit lines, the company says it has $38.2 billion in total financing.
Despite the cash burn, Ford executives say they are comfortable the company has significant liquidity to see its plan through.
"Having said that, we're always looking to try and improve our balance sheet," Leclair told Automotive News. "But we had a lot of stress testing and planning for a significant downturn, which clearly we're in now."
That plan counts on the industry recovering in 2010.
Mulally told Automotive News: "It kind of comes back to the economy coming back in 2010. Clearly if it doesn't, we'll keep reviewing our financing needs."
Ford said it posted second-quarter revenue, excluding special items, of $38.6 billion compared with $44.2 billion during the same quarter last year. When removing the recently sold Jaguar, Land Rover and Aston Martin units from 2007 results, Ford said its revenue would have been "down slightly."
Mercury gets new small car
Mulally said the progress Ford has made to create one global product development strategy offers flexibility to respond to changing market conditions in the United States.
"We are in a stronger position than ever to leverage Ford's global assets and continue to address the pressures facing us in North America," he said in a conference call with journalists today.
Ford announced that Mercury will get a new small car in 2010 and that a new European small vehicle will arrive in North America in 2010.
The automaker also reconfirmed that it will:
• Add the European Transit Connect small van to the North American lineup in mid-2009.
• Add a new Lincoln seven-passenger crossover. It will arrive in 2009.
• Add the European Ford Fiesta in sedan and five-door hatchback versions in early 2010.
• Switch to a new European Ford Focus in sedan and five-door hatchback versions in 2010.
• Build a unibody version of the next-generation Ford Explorer. It will arrive in 2010 and improve fuel economy by as much as 25 percent.
Ford said it will convert its Michigan Truck plant in Wayne, Mich., to small-car production in 2010. Ford didn't identify the vehicles but said they would be derived from its global C-car or Focus-sized platform. Ford already assembles the Focus at a neighboring factory in Wayne.
Production of the Ford Expedition and Lincoln Navigator large SUVs now built at the Wayne truck plant will move to the Kentucky Truck plant in Louisville, Ky., early next year.
Ford announced that another assembly plant in Louisville will switch from building the Explorer SUV to producing more C-sized small cars beginning in 2011.
The third truck plant to be converted to small cars is in Cuautitlan, Mexico. Ford previously announced that move. The plant, which now makes F-series pickups, will build the Fiesta small car in early 2010.
And the Ranger compact pickup will remain in the lineup for at least two more years than previously planned. The Minnesota assembly plant that makes the Ranger will continue production through 2011. It previously had been scheduled to close in 2009.
Along with the realignments, Ford is offering another round of targeted buyouts to hourly workers at its U.S. plants and facilities. Ford said it is on track to reduce salaried personnel costs 15 percent in North America by Aug. 1.
Mark Fields, Ford's president of the Americas, said: "We don't expect the U.S. economy to begin to recover until early 2010."