Tag Archive | "Ford profits"

Ford Profit Driven Down By North America, Warranty Costs


Via Reuters

Ford Motor Co posted a lower-than-expected first-quarter profit on Friday as the No. 2 U.S. automaker saw $400 million in higher warranty costs in North America, sending shares down 3.4 percent.

The company also saw incentives in North America rise in the quarter due to heavy competition and an aging lineup of vehicles it will address with the launch of 16 new models in the region this year.

Fitch Ratings analyst Stephen Brown called 2014 a transition year for Ford and said earnings will improve in the second half.

“They’ve got a few challenges out there, but … the company has a lot of new products coming online this year. They haven’t seen the benefits (of the new vehicles) on dealer lots yet.”

Ford Chief Executive Alan Mulally, 68, told analysts on a conference call that there was no change to plans for him to remain at the company through the end of the year. Earlier this week, a source said that Ford will soon name Chief Operating Officer Mark Fields as Mulally’s successor.
While Ford adjusts its warranty reserves every quarter, Chief Financial Officer Bob Shanks said the total was larger in the first quarter because the company has seen more field service actions, such as safety recalls and addressing customer complaints, over the last two years. He said that was a trend in the industry as vehicles become more complex.

The company affirmed its forecast for pretax profit for 2014, a year in which it is launching a record 23 new vehicles globally. It also said it is amending and extending its revolving credit facility.

Shanks said the underlying business remains strong.

“The run rate is very healthy and we feel that we’re moving forward very nicely in terms of what we expect for the year and setting us up for stronger growth and stronger profitability in 2015 and beyond,” he told reporters at the company’s Detroit headquarters.

Net income fell 39 percent to $989 million, or 24 cents a share, from $1.61 billion, or 40 cents a share, in the year-earlier period.

The quarter included the $400 million in additional costs for warranty reserves in North America for vehicles from as early as the 2001 model year, and $100 million in costs related to higher freight and other items due to the harsh winter in North America. It also included previously disclosed costs of $400 million, mostly due to the currency devaluation in Venezuela. All three items totaled 17 cents a share.

Excluding one-time items for European restructuring, Ford earned 25 cents a share, 6 cents below analysts’ estimates in a poll by Thomson Reuters I/B/E/S, or about the same amount as the warranty reserves. Weather costs accounted for another two cents.

Revenue was up slightly at $35.9 billion, above the $34.06 billion analysts had expected.

EUROPEAN LOSS NARROWS

Ford, which still expects a pretax profit this year in the range of $7 billion to $8 billion, said its credit facility is expected to grow to about $12 billion, from $10.7 billion after its completion at the end of the month. It sees operations in South America weaker than it previously forecast for the year, while Asia Pacific’s profit will be higher than last year.

Shanks said various global launches, including its redesign for the highly profitable F-150 full-size pickup truck, remain on track.

Net pricing in the quarter was up only $175 million as incentives increased $471 million over last year. Most of those higher incentives were offered in North America, where net overall pricing actually declined $139 million.

The North American operating profit fell by more than a third to $1.5 billion. RBC Capital markets analyst Joseph Spak said that was below Wall Street’s expected consensus of $2.2 billion and the company’s profit margin in the region was weaker than expected.

The North American operating margin fell to 7.3 percent from 11.1 percent last year as Shanks said the warranty and weather-related costs took a bite of 2.5 percentage points. However, Ford affirmed its outlook for a full-year margin in the region of 8 to 9 percent.

Overseas, business was more positive as demand continued to increase in China, the world’s largest auto market, and the company’s losses in Europe narrowed and were lower than expected according to analysts.

Stifel analyst James Albertine said the outlook in Europe trumped the overall profit miss. “EU growth may come more quickly than anticipated,” he said in a research note.

In China, Ford said its market share hit a record 4.5 percent, up from 4.4 percent in the fourth quarter. The profit in Asia Pacific rose to $291 million from a year-ago loss of $28 million, and the company’s profit margin in the region was a far stronger than expected 11 percent.

The company’s loss in Europe, which has been a drag on Ford profit for several years, was $194 million, down from $425 million a year ago.

Shanks affirmed the company’s previous outlook that it will return to profitability in Europe in 2015, helped by its own cost-savings actions as well as a rising European auto market.

The loss in South America, however, deteriorated to $510 million from a loss of $218 million last year due to the currency devaluation in Venezuela and Argentina. Ford now breaks out Middle East and Africa as its own region and its profit there rose 15 percent to $54 million.

Ford shares were down 3.4 percent at $15.77 on the New York Stock Exchange on Friday morning.

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Ford’s Profit Falls on Weak Performance Overseas


DEARBORN — Ford Motor Co. suffered a 57 percent drop in earnings in the second quarter as a result of expanding losses outside North America, and warned of continuing trouble in Europe for several more years.

The auto maker earned $1.04 billion, or 26 cents a share, down from $2.4 billion, or 59 cents a share, a year ago, as strong profits in North America offset a $404 million loss in Europe, a smaller loss in Asia and a big drop in profit in South America. Lower sales overseas caused revenue to fall 6.2 percent to $33.3 billion, according to The Wall Street Journal.

The problems in Europe are “structural in nature,” rather than the result of a cyclical downturn in the industry, Bob Shanks, Ford’s chief financial officer, said. He added that the company now expects European losses for the year to exceed $1 billion, up from an earlier $600 million forecast.

“We think this is a situation that we will have to deal with for the foreseeable future,” he said.

Mr. Shanks said Ford will take actions to slash costs and production capacity in Europe, despite the political and labor opposition to closures that make it difficult to shrink operations there. He suggested a downsizing in Europe could over time have positive results similar to those Ford has seen in North America, where the company restructured and now is producing near-record profits.

European auto sales have declined in each of the last four years and are on track to post a fifth drop in 2012, amid the European Union’s debt woes. As a result, many auto makers are operating more plants and employing more workers than they can keep busy.

“We have overcapacity now in Europe,” said Ford CEO Alan Mulally. “It isn’t going to come back fast and we aren’t going to be saved by volume.” Asked if Ford would try to close a plant in Europe, Mr. Mulally said it would examine “all areas of the business.”

Separately on Wednesday, France’s PSA Peugeot Citroën and Germany’s Daimler AG were dragged down by Europe’s woes. Peugeot already has said it plans to close one European plant; so has General Motors Co.’s Opel unit. GM reports its results next week and losses from Europe will be significantly higher than a year ago, a person familiar with the matter said.

Ford’s overall income came entirely from North America, where pretax profits hit $2 billion, up 5 percent from a year earlier, mainly as a result of strengthening sales of highly profitable pickup trucks. Ford’s 10.2 percent profit margin in North America was up slightly from a year earlier and the company said margins would stay high throughout the year. On average, Ford made $2,727 in operating profit on each of the 737,000 cars and trucks it produced in North America in the second quarter, $90 more than the year-ago figure.

In Europe, Ford already has slowed its plant production, laid off temporary workers and cut the length of work days. A year ago, Ford made a profit of $176 million in Europe, but falling sales and rising incentive costs made the operations unprofitable.

Ford has five assembly plants in Western Europe and derives about 25 percent of its global sales from the region, Mr. Shanks said. The company’s efforts to build global vehicles that are virtually the same in every market could make it easier for Ford to shut a plant because it could export cars from North America or elsewhere to Europe.

The company said its South American operations posted a $5 million pretax profit, down from $267 million a year-earlier as stiff competition forced it to lower prices or use incentives to sell cars.

A freeze in free-trade agreements between Mexico and Brazil and Argentina is hurting the business, Mr. Shanks said. Ford said it expects the region to remain profitable for the year.

Ford’s Asia and Africa operations also lost $66 million on a pretax basis as higher revenue from car sales were offset by heavy capital spending for new plants and products. A year ago, Ford eked out a $1 million profit in the Asia region.

Ford Motor Credit’s pretax results declined to $447 million, down from $604 million a year earlier. The lending arm is getting less revenue and profit from vehicles returned on leases.

Ford’s effective rate of 37 percent in the quarter reduced net income by about $600 million compared with a year ago. Its effective rate was 8 percent a year ago. The higher rate is connected to the release of a tax-valuation allowance last year.

Ford’s annual pretax profit and automotive operating margins are now expected to be lower than a year ago after earlier forecasts predicting equal or better performances.

Ford lowered its full-year profit forecast as well as its forecast for capital spending. Ford’s pretax earnings excluding charges were $1.8 billion, or 30 cents a share, were better than the 28-cent a share profit forecast by analysts. Mr. Shanks said the lower forecasts come directly from the eroding results from Europe and South America.

Capital-spending estimates were lowered to $5 billion from a range of $5.5 billion to $6 billion. Mr. Shanks said the lower capital spending came from efficiency improvements, and not from cuts to any car-development programs.

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Ford Falls Short of Profit Estimates


Ford Motor Co. posted fourth-quarter profit that fell short of analysts’ estimates as overseas operations dragged down results while a one-time tax gain resulted in the company’s biggest annual profit since 1998.

Ford reported its 11th consecutive profitable quarter, with net income of $13.6 billion, or $3.40 a share, compared with $190 million, or 5 cents, a year earlier. Excluding one-time costs, the profit was 20 cents a share, trailing the 25-cent average estimate of 15 analysts surveyed by Bloomberg.

It was the third straight annual profit for Chief Executive Officer Alan Mulally, 66, who has improved quality and expanded the lineup with fuel-efficient models like the Fiesta subcompact. Net income was boosted by a non-cash gain of $12.4 billion from eliminating a valuation allowance against deferred tax benefits, Ford said.

“It was another good solid year, but the gains weren’t quite as dramatic as in previous years,” said Efraim Levy, an analyst for S&P Capital IQ, who has a “buy” rating on Ford. “It will get tougher going forward.”

Ford slid 4.5 percent to $12.21 at the close in New York. The shares are up 13 percent this year after falling 36 percent in 2011.

Ford removed the valuation allowance, created in 2006 as it began reporting operating losses, because it expects to be profitable in the future and to use the tax benefits, according to a U.S. regulatory filing last year. Ford lost $30.1 billion from 2006 to 2008, as truck and sport-utility vehicle sales collapsed and the economy fell into the worst recession since the Great Depression.

“They’re telling the world that they’ve attained a level of confidence in their ability to generate substantial amounts of income for the foreseeable future,” said Robert Willens, a corporate tax specialist and president of Robert Willens LLC of New York. “It’s quite a positive, forceful statement on their ability to prosper going forward.”

Profit excluding some items for 2011 was $8.8 billion, or $1.51 a share, up $463 million from the previous year.

In the fourth quarter, the Dearborn, Michigan-based automaker was hamstrung by a weakening European market and flooding in Thailand that wiped out profits in its Asian operations, Chief Financial Officer Lewis Booth said today.

The fourth-quarter earnings miss was caused by “the external environment, the slightly greater impact than we anticipated of commodity costs, currency and the Thai floods,” Booth told reporters in Dearborn.

Ford spent $2.3 billion on commodities such as steel in 2011, more than the $2.2 billion it told analysts in October it would spend, Booth said.

The European market is deteriorating and Ford is not sure when it will turn around, Booth said. Ford declined to provide a forecast on whether it can make money in Europe this year.

“We think this has the potential to be another tough year economically in Europe,” Booth said on the “The Hays Advantage” on Bloomberg Radio. “We’re not making any predictions about Europe this year.”

There is too much automotive factory capacity in the region, which is causing automakers to boost incentives, Booth said. Ford increased incentives in the fourth quarter, while still improving net prices, he said.

Ford said its pretax operating loss in Europe widened to $190 million from a loss of $51 million a year earlier. In Asia- Pacific and Africa, Ford reported a pretax operating loss of $83 million, down from a $23 million profit last year. For the full year, Ford lost $92 million in Asia-Pacific and Africa and it lost $27 million in Europe.

“We’re obviously a little disappointed to be at just slightly worse than break-even for Europe,” Booth said in an interview. “We think of Europe as a solid business operating in a very difficult business environment. That business environment will turn at some stage.”

Ford’s outlook for Europe seems “a big optimistic,” said Matthew Stover, an analyst at Guggenheim Securities LLC in Boston. “We think that you’re going to have to see production reduced” and a loss for the year of $1.5 billion in Europe, he said.

Ford is on pace to meet its mid-decade goal of increasing global sales by 50 percent, Booth said. The automaker lost 34,000 vehicles of production to the Thai floods, which was more than it was expecting, he said.

“We expect overall to see Asia-Pacific to be steadily profitable, but we expect to see some spiking in the quarters because it is a volatile region,” the finance chief said. “We expect Asia-Pacific to be modestly profitable this year.”

Ford is building seven factories in the Asia-Pacific region and introducing new models in China and India, such as the EcoSport small SUV it introduced in New Delhi this month. This year in China, Ford will begin selling the Kuga SUV, which is based on the Escape SUV sold in the U.S.

“In the forward years, you can expect to see the pace in Asia-Pacific and Africa being relatively modest for the early part,” Booth said. “Then accelerating for the later part of the period as the plants come onstream and the new products come on stream.”

Ford said its fourth-quarter automotive operating margin fell to 2.2 percent from 3 percent a year earlier.

In North America, where Ford generates most of its sales and profits, the second-largest U.S. automaker reported pretax operating income of $889 million, up from $670 million last year. Ford’s U.S. sales rose 11 percent last year and it gained market share for the third consecutive year for the first time since 1970.

“Ford is still a North American company,” said Brian Johnson, an analyst with Barclays Capital. “In 2012, we’re looking for the U.S. sales rate to recover, their market share to remain solid and their pricing to remain solid with products like the Escape and the Fusion refreshed” with new styling.

Fourth-quarter sales rose 6.5 percent to $34.6 billion as Ford boosted North American production by 14 percent during the period to 674,000 cars and trucks. The average estimate for total fourth-quarter revenue was $33.5 billion, according to the average of four estimates.

Ford reiterated it will produce 675,000 cars and trucks in North America during the first quarter, up 18,000 vehicles from last year. Ford said today it will cut production in South America, Europe and Asia Pacific Africa this quarter.

Globally, Ford said it plans to produce 1.4 million cars and trucks in the first quarter, down 51,000 vehicles from last year.

For the year, Ford’s revenue rose 13 percent to $136.3 billion, compared with an average forecast of $134.7 billion from five analysts surveyed.

U.S. consumers paid an average of $32,028 for the company’s models last year, up 25 percent from 2002 and the highest price Ford vehicles have ever commanded, according to online auto researcher Edmunds.com.

Automotive debt, which excludes Ford Motor Credit, was $13.1 billion at year’s end, an increase from $12.7 billion on Sept. 30, the company said.

The debt rose in the quarter primarily because it tapped loans from the U.S. Department of Energy that boosted its obligations by $300 million, the automaker said. The federal loans are being used to produce fuel-efficient cars.

Ford has more debt than rivals because it borrowed $23 billion in late 2006, after Mulally arrived from Boeing Co. and before credit markets froze. That enabled the automaker to avoid the bailouts and bankruptcies that befell the predecessors of General Motors Co. and Chrysler Group LLC in 2009.

The company will contribute $3.5 billion this year to its global pension plans, including $2 billion to the U.S. plan.

Ford said it will pay $2,450 to each of its 41,600 U.S. hourly workers for second-half 2011 profits.

“Ford’s doing everything right except getting their stock price up,” said Gary Bradshaw, a fund manager at Dallas-based Hodges Capital Management, which owns about 250,000 Ford shares. “They’ve got their costs down, good products, good engineering and good leadership. Ford can do surprisingly well this year.”

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Ford Profit Ups Expectations


Ford Motor Co.’s strong third-quarter earnings of $1.65 billion met some resistance Wednesday from an investment community wanting assurances the fourth quarter won’t disappoint.

That is what happened a year ago: High expectations for the automaker with a history of outperforming expectations led to fourth-quarter results lower than Wall Street anticipated. The subsequent fall from grace saw Ford stock fall in a correction of sorts — shares are down more than 30 percent in the last year, according to The Detroit News.

Ford stock closed at $11.87 Wednesday, down 4.5 percent for the day.

Chief Financial Officer Lewis Booth found himself fielding questions about the cost of launching new vehicles in the fourth quarter and any further hits from commodity prices.

Both were factors in last year’s disappointing fourth-quarter results, which saw earnings of only $190 million.

Booth and CEO Alan Mulally assured nervous investors that Ford will be profitable for the full year, even with challenges in Europe, which is embroiled in economic uncertainty.

“We delivered solid results for the third quarter despite an uncertain business environment,” said Mulally, noting the company is on track to exceed last year’s $8.3 billion pretax operating profit with $7.7 billion through the first nine months.

“Our product plans remain on track,” Mulally said.

No cutbacks are planned, but global engineering and efficiencies have reduced structural costs to $1.6 billion for the year — less than the $2 billion projected.

Capital expenditures also will be less costly at about $4.6 billion, compared with $5 billion to $5.5 billion forecast as part of the full-year plan.

Brian Johnson of Barclays Capital was reassured.

“Ford delivered a quarter that was stronger than on first glance,” he said in a report later in the day.

“And we are not taken aback by the absence of a dividend announcement, which we see more likely following the full year release,” Johnson said.

Booth said he recognized that investors wanted more specifics than the automaker wanted to provide, including when dividends will be restored. The last dividend was 5 cents, paid in September 2006.

“We want to return to paying a dividend as soon as we think our balance sheet can stand it,” Booth said.

Shareholders can expect modest amounts initially, but payouts will be more than token amounts, he said.

The balance sheet is shaping up for dividends to resume next year.

Ford announced third-quarter earnings of $1.65 billion or 41 cents per share, making it the 10th consecutive profitable quarter for the company, even though earnings decreased by $38 million from a year ago.

Widely watched pretax operating profit dipped $111 million to $1.9 billion or 46 cents per share which beat analysts’ expectations of 44 cents in earning per share. It was the ninth straight month of pretax profit.

Operating profit took a $350 million hit because prices fell on hedged commodities.

Standard & Poor’s said Ford would have had better results now if not for volatility in commodity pricing.

The company now expects U.S. sales to hit 13 million for the year. Booth said a few months ago he thought sales would be closer to 12.9 million.

But that has been revised after a good September and expectations that October sales, which will be reported Tuesday, will also be strong.

“Ford is still benefiting from good will for not taking a bailout. Ford is getting higher margins because people are choosing to buy their cars,” said Stephen Spivey, senior industry analyst with Frost & Sullivan in San Antonio.

Edmunds.com senior analyst Michelle Krebs said the near-record results for the quarter are partly attributable to higher average transaction prices, at $32,391 per vehicle sold in the U.S.

“Ford’s solid third-quarter financial performance relied on the winning formula of higher sales volume, lower incentives and healthier transaction prices,” said Krebs.

Booth said Ford is adding production in the fourth quarter. Two-thirds of production will be trucks and SUVs, which are the most profitable vehicles.

As a result, transaction prices are expected to remain strong.

Pretax operating profit from automotive operations was $1.3 billion for the quarter, which is $45 million more than a year ago. North American operations generated a pretax profit of almost $1.6 billion — flat compared with a year ago — but Ford lost money in Europe, Asia Pacific and Africa during the quarter.

Last week, two ratings agencies, Fitch Ratings and Standard & Poor’s, bumped Ford up to one notch below investment grade upon ratification of the new labor agreement that kept labor costs to less than 1 percent annually.

Booth said on Wednesday that the company is starting to see the benefits of the ratings upgrades on Ford’s spreadsheets.

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Ford Motor Reports 10th Profitable Quarter, and May Restart Dividend


DEARBORN — The Ford Motor Company on Wednesday said profit fell 2 percent in the third quarter, to $1.65 billion.

It was the 10th consecutive profitable quarter for Ford, which last week secured a new labor contract with the United Automobile Workers union and said it was close to restoring a dividend to shareholders.

Nearly all of the profit — $1.6 billion, the same as a year ago — came from North America, while losses in Europe increased 56 percent, to $306 million, reported The New York Times.

“We delivered solid results for the third quarter despite an uncertain business environment by continuing to serve our customers around the world with best-in-class vehicles,” Ford’s chief executive, Alan R. Mulally, said in a statement.

The overall profit is equal to 41 cents a share and brings the carmaker’s total earnings for 2011 to $6.6 billion, 4 percent more than the first nine months of 2010. Ford earned $1.69 billion, or 43 cents a share, in the third quarter of 2010. Revenue increased 14 percent to $33.1 billion.

The company earned a third-quarter pretax operating profit of $1.94 billion, or 46 cents a share, $111 million less than a year ago. That figure, which excludes special items related to job cuts, the end of the Mercury brand and dealer-related actions, is slightly above the consensus analyst forecast of 44 cents a share.

Operating profit was reduced by a $350 million noncash charge related to commodity hedges after prices declined significantly at the end of September, Ford said. It projected that structural and commodity costs for all of 2011 would be $3.8 billion higher than 2010, less than its initial forecast of $4 billion.

Ford said it reduced its automotive debt by $1.3 billion in the quarter to $12.7 billion. It reported positive automotive cash flow of $400 million, but automotive gross cash declined by $1.2 billion to $20.8 billion.

Its chief financial officer, Lewis W. K. Booth, said the company was on track to surpass its 2010 full-year operating profit of $8.3 billion, even though its automotive operating margins would be slightly lower. Its operations have earned $7.7 billion so far in 2011.

“The core of the business is very strong,” Mr. Booth told reporters at Ford’s headquarters. “We’re doing all this while we’re investing for the future.”

Ford workers on Oct. 19 ratified a new four-year deal with the United Automobile Workers that the company said would increase its labor costs by less than 1 percent annually. Most of the company’s 41,000 U.A.W. members will get bonuses of $6,000 and profit-sharing checks of about $3,750 this month.

The new contract prompted Standard & Poor’s and Fitch Ratings to upgrade Ford’s credit rating two notches, to BB-plus, which is one level below investment grade. Moody’s is considering a similar upgrade.

With the labor issue settled, analysts now say they expect Ford to resume paying a dividend to shareholders as soon as 2012. The company suspended its quarterly dividend in 2006.

Mr. Booth said Ford would restore its dividend “as soon as we think our balance sheet will stand it,” but he declined to give a specific timeframe.

Brian A. Johnson, an analyst with Barclays Capital, predicted in a note to clients this week that Ford would announce a dividend early next year and pay 36 cents for 2012, increasing to 55 cents in 2015.

“The key debate around Ford continues to be the sustainability of — or potential for improvement in — Ford North America pretax profits, especially in light of tailwinds from pricing and what may turn out to be lower than previously guided headwinds from commodities and structural costs,” Mr. Johnson wrote.

Shares of Ford fell 4.5 percent to close at $11.74 on Wednesday.

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Ford Second-Quarter Profit Beats Estimates


Ford Motor Co., poised to begin negotiations with the United Auto Workers, said second-quarter profit fell less than estimates as buyers paid more for models such as the Fiesta subcompact.

Net income fell to $2.4 billion from $2.6 billion a year earlier, Dearborn, Michigan-based Ford said today in a statement. Excluding some items, profit was 65 cents a share, beating the 61-cent average of 14 analysts’ estimates compiled by Bloomberg. Sales climbed 1.4 percent to $35.5 billion even after last year’s sale of Volvo Cars.

Ford is set to begin contract talks this week with the UAW to close a gap in labor costs with rivals. Chief Executive Officer Alan Mulally raised prices for Fiesta and Explorer sport-utility vehicles to offset some of the $4 billion in higher costs that Ford expects this year, including manufacturing spending.

“This wasn’t the easiest of quarters,” Lewis Booth, Ford’s Chief Financial Officer, told reporters today in Dearborn. In North America and Europe, “demand was a little bit weaker in both markets versus the first quarter” because of Europe’s debt crisis and supply constraints in North America.

Shares rose 25 cents, or 1.9 percent, to $13.42 before the start of regular trading.

Pretax profit in Ford’s European operations plunged 45 percent to $176 million. While the results compared unfavorably to a year earlier when the company was rebuilding inventories after government programs to scrap older vehicles, the figures were “well in-line with our planning,” Booth said.

Industrywide U.S. light-vehicle sales slowed to a seasonally adjusted annual rate of 12.1 million in the second quarter from 13.1 million in the prior three months, according to Autodata Corp. The March 11 earthquake and tsunami in Japan reduced supply of vehicles and parts.

Ford’s U.S. deliveries rose 9 percent to 1.07 million in the first half, trailing the industry’s 13 percent gain. The 9 percent figure includes year-ago sales of Volvo vehicles.

“We’re looking at it being a rough ride for the rest of this year not just for Ford, but for the industry as a whole,” Stephen Spivey, an analyst at Frost & Sullivan Inc. in San Antonio, said in a phone interview before results were released.

Ford raised prices three times and lowered discounts more than the industry average in their home market during the first half, according to Woodcliff Lake, New Jersey-based Autodata. Higher prices boosted global revenue by $1.1 billion, the company said.

Mulally, 65, is betting U.S. consumers will switch from larger vehicles to more fuel-efficient cars such as the Fiesta and pay more for amenities such as heated leather seats as gasoline prices rise. Regular unleaded gas has exceeded $3.50 a gallon in the U.S. since March, according to AAA.

The cost of developing new models and improving the Ford and Lincoln brand images will add $2 billion to the company’s structural costs this year. Ford also reiterated its forecast for commodity costs to rise by another $2 billion.

“There are various kinds of initial hits to the bottom line as you’re bringing out new product, but if it’s done right you make that up on the back end,” Stephen Brown, a Chicago- based analyst at Fitch Ratings, said in a phone interview before results were released.

In 2008, Ford’s sales plunged when gas prices peaked at $4.11 a gallon and damped demand for the automaker’s pickups and SUVs. Ford had $30.1 billion in losses from 2006 through 2008, before earning $9.28 billion in the last two years.

Ford shares have declined 22 percent this year through yesterday after a 68 percent gain in 2010.

Ford’s second-quarter sales of $35.5 billion topped nine analysts’ average estimate for $32.1 billion.

The automaker boosted North American production for the quarter by 8.7 percent percent to 710,000 cars and trucks, in line with its forecast on April 26. Pretax profit for the region rose less that 1 percent percent to $1.91 billion.

Ford forecast a 7.5 percent increase to third-quarter production to 630,000 units in North America, according to today’s statement. Worldwide output will rise 7.3 percent to 1.35 million.

Ford maintained its for full-year industrywide U.S. sales of 13 million to 13.5 million vehicles, including medium-and heavy-duty trucks.
“We probably feel closer to the bottom end of that, but we’re still expecting to see some recovery in the second half as availability of product from all manufacturers becomes better,” Booth said.

Profit in Ford’s credit operations will fall by about $1.1 billion this year because of changes in lease depreciation and credit-loss reserves, repeating a previous forecast, the company said. Ford reiterated its forecast that the unit will distribute about $3 billion to the parent company this year.

Ford Credit distributed $1 billion to the parent company in the second quarter, bringing first-half contributions to $1.9 billion.

Ford’s automotive operations had $22 billion in cash on June 30, up from $21.3 billion on March 31. The company, which reduced debt by $14.5 billion last year, cut automotive debt to $14 billion on June 30, from $16.6 billion on March 31.

Ford has more debt than rivals because it borrowed more than $23 billion in late 2006 before credit markets froze, allowing it to avoid the bailouts and bankruptcies that befell the predecessors of General Motors Co. and Chrysler Group LLC in 2009.

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