This summary is based on the second quarter fiscal 2008 earnings call conducted by Ford Motor Company (F) on July 24, 2008.
Management:
Director, Investor Relations: Lillian Etzkorn
President and Chief Executive Officer: Alan Mulally
Executive Vice President and Chief Financial Officer: Don Leclair
Executive Vice President and President, The Americas: Mark Fields
Key Investors Issues
- EPS were a loss of $3.88 per share compared to a profit of 31 cents per share last year.
- The company lost $8.7 billion compared to a profit of $750 million a year ago.
- Revenue, excluding special items, fell to $38.6 billion from $44.2 billion a year earlier.
Second Quarter Highlights
Vehicle whole sales last quarter were about 1.6 million units, down 212,000 from the same period in 2007.
This reduction includes 78,000 Jaguars and Land Rovers and Aston Martin units.
- Ongoing company revenue was $38.6 billion, excluding Jaguar and Land Rover from the 2007 data, revenue was down with lower volume adverse product mix and lower net pricing, partly off set by favorable exchange.
- Pre tax results from continuing operation were a loss of $1 billion, $1.5 billion lower than a year ago. This reduction included about one billion in automotive at about $500,000,000 in financial services.
- Net loss was $8.7 billion including about $8 billion of pre-tax special charges primarily related to a non-cash excessive impairment charges. This impairment primarily reflects the impact of both the automotive and credit companies up with the shift in demand in the US market away from large tracks and SUVs.
- The company ended the quarter with $26.6 billion of cash down $10.8 billion from a year ago. This reduction in part reflects implementation of the initial part of retiree health care agreement with UAW as well as planned payment of subvention payments upfront to Ford Credit.
Ford North America incurred an operating loss of $1.3 billion.
- The company saw a strong performance from operations outside of North America with Ford of Europe at a pre-tax profit of $582 million in Ford South America making $388 million. In other regions Ford A specific Africa and Mazda were both profitable and improved compared with 2007.
- Volvo incurred a loss as expected. These results were improved from the first quarter of this year.
- Ford Credit incurred a $294 million pre-tax operating loss. The company reduced cost by one billion with over $600 million of that coming from North America, which keeps on track up five billion cost reduction goal for this year.
- The company launched three all new vehicles. The all-new Ford Kuga was recently unveiled by Ford Europe. The stylish compact cross wall vehicle has the best fuel economy as any all wheel drive vehicle in its segment. In North America, the company has launched two entirely new products. 2009 Ford Flex a crossover vehicle with fuel economy that is equal to a better than any of its seven passenger competitors and a 2009 Lincoln MKS luxury sedan with a distinctive new signature left for Lincoln.
The MKS and the Flex will be the first vehicle to receive Ford’s new EcoBoost engine technology.
EcoBoost will deliver up to 30% better fuel economy. The company completed the sale of Jaguar and Land Rover the top time motors on June 2nd and reduced hourly personnel in North America by about 4000 primarily through enterprise wide buy outs.
The company began 15% reduction of salary personnel cost.
There were $426 million of pre-tax charges excluding the impairments.
- The company recorded a charge of $274,000,000 associated with personnel separation programs in North America largely related to the hourly programs in the U.S. In addition, there was a gain of $100 million for OPEB related to the North American hourly separation programs and the company recognizes the charge of $303 million primarily associated with the sale of ACH glass operation. The $75 million for Jaguar Land Rover reflects an operating profit through the closing date of June 2nd partly offset by a loss on sale.
- Aston impairments represent a non-cash pre-tax charge of $7.6 billion. These charges have no impact on credit lines and access to credit lines or overall liquidity. The pronounced shift in consumer preferences away from full size pickup trucks and traditional SUVs toward more smaller, more fuel efficient vehicles has caused the company to review the fair value of long lived assets in North Americas. The company has determined that the future discounted cash flows generated by those assets were lower than their carrying value. As a result, the company recorded a pretext non-cash charge of $5.3 billion.
- The consumer shifts coupled with reduced overall demand for vehicles in North America has caused a reduction in second auction values for full size pickups and traditional SUVs in particular. Ford Credit reviewed its U.S. and Canadian operating lease portfolio and determined that a lease and residual values would be lower than previously expected. That resulted in impairment. That impairment is recognition that for certain vehicle lines the carrying value of Ford Credit''s net investment in leases at the end of the second quarter was higher than the expected discounted future cash flows related to those assets. As a result Ford Credit recorded a pretext charge of $2.1 billion. Results included a charge of $214 million that represents the impact on Ford of a good well impairment related to Mazda''s company-owned dealerships in Japan.
The auto sector shows a change results compared with a year ago, a deterioration of $1.1 billion.
- Compared with 2007 volume in mix was $1.3 billion unfavorable. Primarily due to unfavorable volume in mix in North America and lower volume at Volvo and that was partly offset by improvements in Europe.
- Net pricing was $200 million unfavorable, more than explained by declines in North America and Volvo partly offset by improvements in South America and Europe.
- Costs were one billion favorable. Exchange was $200 million unfavorable more than explained by the impact of the weakening of the British Pound compared with the Euro and the U.S. dollar compared with European currencies.
- Net interest and related fair market value adjustments were $200 million unfavorable. The non-recurrence of 2007 profits for Jaguar and Land Rover and Aston Martin affected the year-over-year comparison by about $200 million.
