By on July 23, 2009

Huzzahs will greet Ford’s execs this morning, as The Blue Oval Boyz didn’t lose as much as they could have, and didn’t burn as much of their cash pile as they could have. More specifically, the DOE loan-taking American automaker reported a $424 million pre-tax operating loss on net income of $2.3 billion. (“Special items” created a net gain of $2.8 billion, including a $3.4 billion gain via debt-reduction.) The automaker ended the second quarter with “Automotive gross cash” of $21 billion. That means Ford’s “operating-related cash outflow” (i.e., cash burn) was $1 billion. Before the results, Ford CFO Lewis Booth claimed Ford was “certainly confident of getting through this year” with sufficient cash. True dat. Meanwhile, business sucks: Ford’s second quarter revenues clocked-in at $27.2 billion, down $11 billion from the same period a year ago. [Ford financials here.]

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32 Comments on “Ford Posts $424 Million Q2 Loss, Burns a Billion Bucks...”


  • avatar
    dwford

    The slow climb out of ditch continues. Will they sell some more stock to cut debt further now? Just think, in a year’s time they will have a bunch of new product: Fiesta, Focus, Explorer, and new engine tech for many other models.

  • avatar
    highrpm

    Sweet! And my tax dollars aren’t even paying their salaries!

  • avatar
    Dimwit

    Not bad. Not great, but, given the state of the US economy, it could be a lot worse too.
    Yeah, the Chicken Littles will be running around, calling for the undertaker but overall, it’s getting better.

  • avatar
    rnc

    Thier operations only lost 424m and the company burned through 1b of cash (which is basically the difference in cash used purchasing debt from F and FMC and equity issued) in the last quarter with 11b less revenue than the previous year. That’s amazing in this environment. The gain from debt isn’t just from debt purchased its also from debt refinanced.

  • avatar
    Jeff in Canada

    This is why I love this site; the truth.

    Every news outlet is touting the 2.8B ‘profit’ but TTAC looks at the real numbers, and presents them in a frank, straight-forward fashion.

    Full disclosure; I’m a Ford guy, so I really like the good news they’ve been getting, but also appreciate the reality check that TTAC offers.

    It’s a slow process for them to return to greatness, and the news may not be great yet, but at least its in the right direction. The snowball is rolling down the hill…

  • avatar
    rochskier

    Great!

    Now if only Ford could develop and market a product that would catch my interest…

  • avatar
    TEXN3

    Lemme guess rochskier: a turbo-diesel RWD wagon with a 6-speed? As much as everyone on every car forum says they’d buy one…it’d be the biggest sales dud, and a costly one.

    I’m with Jeff in Canada…maybe it’s the same name, but while I’m a Ford guy it’s good to see the realistic news. I wonder where Ford would be in a slightly better economic state. Maybe they’d still have their blinders on.

  • avatar
    toxicroach

    Thing is that if certain zombies weren’t sucking up sales, Ford probably would have bagged a genuine profit.

  • avatar
    psarhjinian

    Thing is that if certain zombies weren’t sucking up sales, Ford probably would have bagged a genuine profit.

    If certain zombies hadn’t been bailed out, we probably would still be on the downward slope of the recession because lots and lots of people would have been thrown out of work really quickly.

    I’m all for letting GM and Chrysler fail, but the time for it would have been either 2006 or 2011.

  • avatar

    toxicroach

    Thing is that if certain zombies weren’t sucking up sales, Ford probably would have bagged a genuine profit.

    Agreed. Even if you spot the feds the idea that keeping GM on drip-feed was necessary to avoid an economic meltdown—sorry a WORSE economic meltdown—keeping Chrysler in biz was a major mistake.

    If Ford could have picked-up even a quarter of that biz, it would have helped them keep on keepin’ on.

    All eyes on July and August sales now . . .

  • avatar
    mattstairs

    RF + 1

    There was no “systemic risk” in allowing Chrysler to fail. Painful, yes, but it wouldn’t have wrecked all the suppliers.

    Someone would’ve picked up the (few) good pieces at auction and paid cash instead of technology for them as well.

  • avatar
    ihatetrees

    If certain zombies hadn’t been bailed out, we probably would still be on the downward slope of the recession because lots and lots of people would have been thrown out of work really quickly.

    It’s not 1969 – GM & Chrysler aren’t that critical to the economy. And had they gone tango-uniform, Ford (and the transplants) would have added employees.

    There is way to much automotive capacity in North America.

  • avatar
    P71_CrownVic

    This is why I love this site; the truth.

    Every news outlet is touting the 2.8B ‘profit’ but TTAC looks at the real numbers, and presents them in a frank, straight-forward fashion.

    Couldn’t have said it better.

    Now if only Ford could develop and market a product that would catch my interest…

    They already do…they just refuse to sell it here.

  • avatar
    kowsnofskia

    Thank god one automotive news outlet out there actually has the balls to point out the truth.

    Of course, the markets are using Ford’s nonexistent “profit” to help fuel an asinine stock rally based on nothing but I guess that’s just to be expected now.

  • avatar
    adonasetb

    Cracking on Ford for losing money? How big were the profits at Toyota or Honda?

  • avatar
    jpcavanaugh

    Two things that are already slowly happening will help Ford – 1) General improvement in the economy that will perk up industry sales and 2) Continued pickup of market share from GM and Chrysler customers (and perhaps some others). If these two trends continue, Ford can start to pick up some ground.

    I still can’t see how the larger problem is solved for the entire industry in the US unless SOMEBODY shuts down.

    This reminds me of the old joke about the two guys running away from bear. First guy says “We can’t outrun this bear.” Second guy replies “I don’t have to outrun the bear, I just have to outrun you.” Ford seems to be outrunning GM and Chrysler for now.

  • avatar
    MrDot

    It’s not so much cracking on Ford, as it’s realizing that even though the downward slide isn’t as steep, Ford is still bleeding money. I really want them to make it, but it looks like we’re in the beginning of a Japan-style decade long economic doldrum. Somebody has to go out of business, and the government has put its chips on GM.

  • avatar
    quasimondo

    It’s not 1969 – GM & Chrysler aren’t that critical to the economy. And had they gone tango-uniform, Ford (and the transplants) would have added employees.

    that’s a bold assumption and blatantly incorrect. With everybody slowing down production, who is going to hire workers they don’t need?

  • avatar
    rochskier

    @ TEXN3:

    Good guess!

    I own a Magnum R/T AWD.

    I find the Flex completely inane.

  • avatar
    RobertSD

    I don’t think the market is reacting to the $2.3B profit figure. They are reacting to the fact that Ford’s operating loss ($424M or ~$0.13/share) was smaller than expected. That suggests that Ford has been undervalued by the market.

    The cash burn change is also good news. I’m seeing burn of $1.6B, but maybe I’m looking at it the wrong way. Regardless, that’s half the cash burn as last quarter. And the DOE loans haven’t been added in there yet from what I could see (on the debt or cash side).

    The best news was that NA could reduce its operating loss half a billion dollars despite sales being down close to 30%. Part of it was strength in revenue (their rev/sale is up pretty strongly), but a lot of it had to be cost reductions.

    So, what are the risks: Asia’s and Europe’s price/vehicle didn’t fair as well. Of course, that’s due to the Fiesta blowing things away and coming in at a price point that is not average for Ford. But still if you have a relatively high fixed cost base, a car like the Fiesta can only contribute bits and pieces to the bottom line.

    Supplier health was called out specifically and Booth noted that he expected Ford’s Q3 and Q4 performance to be hindered “slightly” by supplier problems. Not sure how big “slightly” is, but I would take it to mean $150-250M/quarter. This would also affect cash burn.

    Notables: debt. Everyone is focused on it now, but I’m pretty sure another debt swap is baked into Ford’s stock price at this point. I’m looking for about $6-8B in swaps between now and next year. That would bring Ford on level with GM before govt loans are counted. Whereas Ford was able to get away with issuing $3B of stock for $10B, I expect they may have to issue $3B for less debt next time around. The good news, however, is that Ford’s market cap is nearly ~3-4x what it was during the last debt-equity exchange. So, shareholders won’t be diluted as much.

    Not all peaches, but a good earnings report overall… but we knew it would be.

  • avatar
    FloorIt

    AP reporters did state Ford essentially did lose $424M. Also it said that Ford is still renegotiating union contracts to be more inline with GM & Chry UAW concessions.

    http://finance.yahoo.com/news/Debt-reduction-pushes-Ford-to-apf-176681451.html?x=0&.v=26

  • avatar
    MichaelJ

    Normally, especially over the last couple years, “Special Items” for Ford and GM have had a negative impact on the final reported numbers. When that’s the case, TTAC reports the big negative number, including the special items, and may or may not indicate in the fine print what the real “operating number” is.

    Now…we have special items that are positive for Ford. So the special items are largely ignored, and the headline is about the operating loss.

    The consistency is that the number that presents the worst spin is the one that’s used.

    Just sayin.

  • avatar
    TEXN3

    See, that’ll work for you rochskier, I was recently given your Magnum’s older brother: E430 4matic. And still have Ford’s only compact wagon: Mazda3 GT.

    I don’t mind the Flex, but if it’s a Ford…then I’d rather get a Taurus X for the family hauler and replace both the Benz and the Volvo 760 (not worth anything more than the fluids it leaks). T-X is not bad for our budding family, AWD works well in the Rockies, and the wife drives in a boring manner, so it’d work. Plus an Eddie Bauer edition is $10k less than a Flex SEL AWD!

  • avatar
    rnc

    MichaelJ

    +1

  • avatar
    wsn

    psarhjinian :
    July 23rd, 2009 at 10:11 am

    If certain zombies hadn’t been bailed out, we probably would still be on the downward slope of the recession because lots and lots of people would have been thrown out of work really quickly.

    ——————————————-

    If certain zombies hadn’t been bailed out, we probably have already been fully recovered.

    Spending money creates jobs; collecting tax eliminate jobs.

    It costs more than $1M to save each zombie job. With each job saved, maybe 3 jobs are lost when that tax burden rests on the shoulders of small business owners who have to fire people due to thinner margins and higher costs (due to dilution of currency).

  • avatar
    wsn

    quasimondo :
    July 23rd, 2009 at 1:09 pm

    It’s not 1969 – GM & Chrysler aren’t that critical to the economy. And had they gone tango-uniform, Ford (and the transplants) would have added employees.

    that’s a bold assumption and blatantly incorrect. With everybody slowing down production, who is going to hire workers they don’t need?

    ———————————————

    What’s wrong with it?

    GM + Chrysler account for less than 30% of US auto sales.

    It’s very normal that an industry lose 30% of unneeded fat. Actually, many industries are seeing more than 30% decline as of now.

    It’s also normal and OK that laid off workers in an obsolete industry have to find work in a new industry. If it hadn’t been this way, you and me would be hunting and farming now, instead of typing to a computer.

  • avatar
    BDB

    The stock market seems to like the news.

  • avatar
    BDB

    The recession is just beginning not ending.

    Might see a short term bump if we’re very lucky.
    Long term the economies goose is cooked and only a massive correction will fix that.

    Glenn Beck, is that you?

  • avatar
    panzerfaust

    Ford to GM and Chriat; ‘yeah, we’re screwed, but we’re not as screwed as you guys are!
    Party at Edsel’s house!

  • avatar
    quasimondo

    It’s also normal and OK that laid off workers in an obsolete industry have to find work in a new industry. If it hadn’t been this way, you and me would be hunting and farming now, instead of typing to a computer.

    This time around there is no new industry ready to pop up and employ workers no longer in the auto industry. The longtime decline of manufacturing in the U.S. has seen to that. It is one of the symptoms of a jobless recovery (an oxymoron if I’ve ever heard one).

  • avatar
    golden2husky

    If certain zombies hadn’t been bailed out, we probably have already been fully recovered.…

    You can’t really believe that….do you? That sounds about as likely as trickle down economics being true. I was not in favor of any of the bailouts either, but there will be no recovery for quite some time. Way too many people have spent years of future earnings…those people are not going to be spending discretionary dollars for a long time.

    Ford will rebound as long as their products continue to improve the way they have been and they get accolades from the toaster testers at Consumers. Funny how influential that magazine is… Ford really need to market better though.

    EDIT:
    It is one of the symptoms of a jobless recovery (an oxymoron if I’ve ever heard one).

    Well, that’s what we had in the past…fat cats fatter, more average people out of work.

  • avatar

    hi , You can’t really believe that….do you? That sounds about as likely as trickle down economics being true. I was not in favor of any of the bailouts either, but there will be no recovery for quite some time. Way too many people have spent years of future earnings…those people are not going to be spending discretionary dollars for a long time.


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