Ford Motor Co., financially broadsided by the continuing Firestone tire crisis and heavy losses in its automotive business, said Wednesday that it lost $551 million in the second quarter.
Ford's loss, or 30 cents per share, was nevertheless ahead of the Wall Street consensus estimate of 34 cents per share in the red, according to a survey by First Call/Thomson Financial.
Ford had already said that its recall of Firestone tires on its vehicles would cost $2.1 billion after taxes, wiping out any profit for the quarter. Without the recall cost, Ford would have earned about $1.5 billion, the same as its operating profit in the second quarter of last year.
"Our decision in May to replace 13 million potentially unsafe Firestone tires was an unprecedented action," said Chief Executive Jacques Nasser. "Although we're disappointed it resulted in a second-quarter loss, it was the right thing to do for the safety and trust of our customers."
Ford counted the recall cost as a business expense in its operating earnings and not as a one-time charge, in line with Bridgestone/Firestone's own recall of 6.5 million tires last August. The tires in the first recall were implicated in hundreds of tread-separation accidents that left at least 203 people dead and more than 700 injured.
Ford also took a one-time charge of $114 million for restructuring at Japanese auto manufacturer Mazda, in which Ford owns a controlling stake, and $87 million for a new accounting standard on hedging and derivatives, bringing the total loss for the quarter to $752 million, or 41 cents a share.
The Mazda charge was Ford's share of a restructuring plan to turn around the Hiroshima-based auto maker, which is expected to post a loss of more than $1 billion for fiscal 2000. It was similar to a $133-million second-quarter charge that General Motors Corp. announced Tuesday for a restructuring at Isuzu Motors, the Japanese affiliate it controls.
Amid the slowing U.S. vehicle market, Ford has lost more market share this year than either GM or DaimlerChrysler's Chrysler Group. But while Ford expects the U.S. auto market to weaken somewhat in the second half of this year, it still sees 2001 ending up being the third-best sales year ever, Chief Financial Officer Henry Wallace said in a conference call.
Ford lost $1.03 billion from its global automotive operations in the second quarter, contrasted with a profit of $2.07 billion a year ago. In North America it lost $1.14 billion, as volume dropped 12.7% and automotive revenue declined 12.3%.
The losses and the Firestone costs helped push Ford's net cash to $6.8 billion, down 62% from a year ago. But the company was still able to generate $2.2 billion in cash from its business in the quarter.
"That was one of the surprises," said analyst Scott Merlis of Dresdner Kleinwort Wasserstein. "The balance sheet remains in excellent condition, and there's a general sense that incentives are going to stabilize."
Ford shares fell 38 cents to $25.34 in Wednesday's New York Stock Exchange trading.
Despite the sales and earnings downturn, Ford announced Wednesday that it will invest more than $350 million to reopen a closed engine plant in Ohio, creating about 650 jobs.
Reuters was used in compiling this report.