Ford narrows operating loss, slows rate of cash burn
July 23, 2009 - 7:10 am ET
DETROIT -- Ford Motor Co. narrowed its pretax operating loss to $424
million in the second quarter while posting a net profit of $2.3
billion because of a gain related to recent recent debt-reduction
Ford made good on its pledge to cut its cash burn rate. The automaker
burned through $1 billion in automotive operating cash, compared with
$3.7 billion in the first quarter and $7.2 billion in the final
quarter of 2008.
The $2.3 billion net profit compares with a net loss of $8.7 billion a
Total revenue plunged nearly 29 percent to $27.2 billion as auto sales
continued to languish at the 27-year lows that helped push U.S. rivals
General Motors and Chrysler into bankruptcy.
The results move Ford towards its goal of restoring profits in 2011.
It hasn't had made money on an annual basis since 2005.
"While the business environment remained extremely challenging around
the world, we made significant progress on our transformation plan,"
CEO Alan Mulally said in a statement. "Our underlying business is
growing progressively stronger as we introduce great new products that
customers want and value, while continuing to aggressively restructure
our business and strengthen our balance sheet."
Ford finished the second quarter with total cash reserves of $21.0
billion, down from $21.3 billion at the end of March. Analysts
estimate Ford needs $9 billion to $10 billion in cash to fund
Ford's operating loss of $424 million before taxes and special items
compared with a $1.03 billion operating loss a year earlier.
Results in the company's key North America market improved to a
pre-tax loss of $851 million, compared with $1.3 billion a year
Ford, which posted losses totaling $30 billion from 2006 through 2008,
including a company record of $14.7 billion last year, has said it
expects to return to profitability in 2011.
When the first quarter ended, Ford CFO Lewis Booth said the company
expected its cash burn for that period to be the highest of the year.
"We can expect to see continued improvements in cash during the year,"
Booth said. "We expect to see sequential improvement."
Booth said at the time that Ford was "certainly confident of getting
through this year" with sufficient cash.
Ford's first-half 2009 market share grew to 16.1 percent from 15.8
percent through June of 2008. It now stands at No. 2 in 2009 U.S.
sales after ceding the spot to Toyota Motor Corp. in 2007. Toyota's
first-half share was 16.0 percent and GM's 19.7 percent. Overall, U.S.
light-vehicle sales fell 35.1 percent in the first half of 2009.