Ford's earnings increase 6.7%, to $2.38 billion Cost-cutting, truck sales aid 2nd-quarter numbers

Auto industry

July 16, 1998|By BLOOMBERG NEWS

DEARBORN, Mich. -- Ford Motor Co.'s second-quarter earnings rose 6.7 percent, as cost-cutting and high-profit sport-utility vehicles and trucks helped it earn more from automobiles than in any previous quarter.

The world's second-largest automaker yesterday reported net income of $2.38 billion, or $1.91 a diluted share, up from profit from continuing operations of $2.23 billion, or $1.82 per share, in the second quarter of 1997. Analysts had expected earnings of $1.81 a share.

Though Ford used discounts to move some vehicles, it slashed costs and made up to $10,000 pretax on each of its popular Expedition sport-utility vehicles and new commercial pickups. After-tax profit on automobiles surged to 6.6 percent of sales as a result, the most in nearly a decade.

"In this environment of lousy pricing, you need both cost-cutting and new products to have higher earnings," said Nicholas Lobaccaro, a Merrill Lynch analyst. "Ford is doing a lot of things right."

Ford shares fell $1 to close at $59.25 yesterday.

Though the earnings topped expectations, Ford didn't post the spectacular results some investors had expected, Lobaccaro said. Ford shares have risen 88 percent this year.

The company's nonautomobile earnings, principally from its Ford Credit finance unit and car-rental company Hertz, also rose.

Ford's revenue rose 3.9 percent in the quarter to $37.3 billion from $35.9 billion, although its worldwide vehicle shipments declined 4 percent to 1.79 million.

Ford's profit from its automobile business climbed 18 percent to a quarterly record $2.05 billion. Profit in North America rose 15 percent to $1.65 billion.

The automaker got a big boost from its redesigned F-series Super Duty commercial pickups, each of which generates $10,000 in pretax profit.

Its redesigned Lincoln Town Cars and Continentals also did well, and its big sport-utility vehicles continued to sell briskly.

Vigorous cost-cutting continues to help Ford. It trimmed automotive costs by $900 million in the second quarter and by $1.3 billion in the first half, exceeding the $1 billion cost- cutting target it had set for the entire year.

Ford's U.S. market share fell to 19.1 percent in the quarter from 20.3 percent a year ago, in part reflecting the company's scrapping of several unprofitable cars, including the Thunderbird and Mercury Cougar.

Ford ended the quarter with a record $14 billion in cash and marketable securities, up from $13.1 billion at the end of the first quarter.

Profit in Europe doubled to $310 million, though Ford's market share fell 1.3 percentage points to 10.4 percent as Japanese and Korean automakers increased exports to the continent.

In South America, Ford earned $14 million, down 44 percent from $25 million in the year-earlier quarter.

Ford's Visteon Automotive Systems parts unit earned $241 million in the quarter, up 15 percent from $210 million in the 1997 period.

Outside the auto business, Ford Credit earned $300 million, up 7 percent.

Ford's share of Hertz's earnings was $60 million. The company owns 81 percent of Hertz, which earned $75 million overall in the quarter, up from $60 million.

Pub Date: 7/16/98

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