Ford reports $8.7-billion shortfall, its largest quarterly loss ever

Three months ago, Ford Motor Co. reported an unexpected $100-million first-quarter profit and quiet jubilation ensued on Wall Street.

Today, Ford brought down the hammer of reality, reporting its largest quarterly loss ever, an $8.7-billion shortfall that it blamed on soaring gasoline prices and the resulting crash in consumer demand for the large vehicles it predominantly sells.

The $3.88-per-share loss compares with a $750-million profit, or 31 cents per share, in the second quarter of 2007. The latest figures include a $5.3-billion write-down of Ford’s automotive business and a $2.1-billion write-down on its Ford Motor Credit arm, both of which have been punished by falling values of trucks and SUVs.

Revenue for the quarter fell to $38.6 billion from $44.2 billion a year earlier.

Excluding the one-time charges, Ford lost $1.38 billion on the quarter, or 62 cents a share, more than double the 27 cents per share loss that Wall Street analysts had expected. In early trading in New York, Ford shares declined 60 cents, or 10%, to $5.43.

Ford Chief Executive Alan Mulally said that the company would respond to the challenging marketplace by aggressively moving toward producing smaller, more fuel-efficient cars, in many cases in factories currently dedicated to trucks, and by reducing costs and cutting its workforce. Ford has sold 1.11 million cars through the first six months of the year, down 14% compared with last year.

“We continue to take decisive action in response to the rapidly changing business environment,” Mulally said. “The second half will continue to be challenging, but we have absolutely the right plan to respond to the changing business environment and begin to grow again for the long term.”

Ford’s new plan is to bring six of its European car models to the United States, converting three truck and SUV plants in the United States and Mexico to produce some of them. In addition, it plans to double its output of hybrids and four-cylinder engines.

Earlier, Ford had said it would be forced to delay the introduction of its redesign of the F-150 pickup, its top-selling vehicle, due to slumping sales for the vehicle, down 23% through June. It also said that it would move to reduce its salaried workforce by 15% and offer other buyouts to hourly workers.

In addition, Ford said it would miss its long-stated goal of full-year profitability by 2009. Now, with things looking even gloomier, there are more worries about Ford’s solvency than its black ink.

Ford’s stock has plummeted in recent weeks, from $8.48 per share on May 1, to $4.36 on July 2. Mulally was brought in from Boeing in late 2006 as an industry outsider expected to right the ship, yet six of the eight quarters that have passed since his arrival have been money-losers.

And last week, credit service Fitch, which has lately been kinder to Ford than rivals General Motors Corp. and Chrylser, said it would review Ford’s debt rating as serious concerns about the company’s long-term liquidity bubbled to the surface.

Ford today denied it had liquidity problems. GM last week announced dramatic cost-cutting moves, including suspension of its stock dividend, and large staff and marketing cost reductions, to maintain solvency. On Wednesday, Chrysler said it would cut 1,000 salaried jobs.

The problem for Ford, as is the case for GM and Chrysler, is relatively simple: It no longer make the kinds of vehicles that consumers want to buy. After years of reaping profits from huge-margin SUVs and pickups, Ford’s three brands – Lincoln, Mercury and Ford – have but one compact car among them, the Focus.

Yet with gasoline prices soaring over $4 a gallon nationwide, sales in the truck categories have declined by 18% so far this year, while Focus sales are up 27% and would likely be up even more if the company could produce them fast enough to meet demand.

In response, Ford earlier said it would bring its new Fiesta subcompact model to the United States by early 2010. Its new plan will bring a total of six models to the United States, including the popular European Focus model.

It will convert truck plants in Wayne, Mich.; Louisville, Ky.; and Cuautitlan, Mexico, to produce compact and subcompact cars.

“While we have no intention of giving up our longtime truck leadership, we are creating a new Ford in North America on a foundation of small, fuel-efficient cars,” said Mark Fields, president of Ford’s Americas division.

 ken.bensinger@latimes.com