Ford Motor Co. profits dropped 27 percent during the second quarter, but the company executives said they were pleased with the results, which still beat expectations and included profits from the Premier Automotive Group for the first time since 2001.
Ford reported a net income of $417 million, or 22 cents a share, for the second quarter of 2003, compared to the net income of $570 million, or 29 cents a share, in the second quarter of 2002. The 22 cents per share was about 3 cents per share better than 19 cents per share predicted by analysts, following the company’s slow-moving revitalization plan.
Allan Gilmour, Ford vice chairman, said the automaker now expects to lose about 15 cents per share in the third quarter as the company cuts production by 15 percent. Nonetheless, Ford will still hit its target of a 70-cent per-share profit for the full year in 2003, Gilmour said.
Dissecting the numbers
A combination of slower sales and declining prices trimmed Ford’s revenues to $40.2 billion from $42.2 billion in the second quarter of 2002 and world vehicle sales dropped 7 percent.
Worldwide automotive revenue declined by $1 billion from $35.2 billion during the second quarter of 2002 to $34.2 billion in the second quarter of 2003, even though the company was able to get more revenue per vehicle.
Don LeClair, Ford’s new chief financial officer, said the company was particularly disappointed by the results from its European operations, where losses grew to $411 million in the second quarter.
“We know the second quarter results are unacceptable,” said LeClair.
One bright spot was the Premier Automotive Group, which includes Jaguar, Volvo, Land Rover and Aston Martin. PAG posted a profit of $196 million. It was the first profit by PAG since the fourth quarter of 2001, LeClair said.
Ford Motor Credit reported net income increased 22 percent to $401 million from $330 million in the second quarter a year earlier.
Cost cuts ahead of targets
Gilmour stressed the cost cutting that’s critical to the company’s revitalization plan, which is continuing to outrun its original targets.
“We continue to surpass our cost performance targets, and we continue to strengthen the balance sheet,” Gilmour said.
Ford trimmed more than $1.9 billion in costs from its automotive business during the first half of 2003 — more than triple the company’s full-year target.
For the full year, the savings are expected to total more than $2.5 billion and more are expected in the months ahead as Ford closes the plants first designated for a shutdown in the original revitalization plant, LeClair said.
In addition, LeClair said Ford expects to get a lift from the rollout of the 2004 F-150 and the 2004 Freestar minivan. The introduction of the new vehicles should allow Ford to trim incentives, he said.