Is Ford finally shifting out of reverse?
The nation's No. 2 automaker yesterday reported a $750 million net profit for the second quarter, although North American operations remained in the red.
It was Ford's first quarterly profit in almost two years and defied Wall Street's expectations of another steep loss.
Cost cutting, increased sales of higher-profit vehicles and strong results in overseas markets contributed to the surprise profit, although Ford also reported improvement in its core North American operations.
"It was a blowout quarter," said David Healy, an analyst with Burnham Investment Research. "It's an indication that the cost-cutting program is making progress more rapidly than expected."
The results broke a string of seven straight quarterly losses and followed a first quarter that saw the company post a much smaller loss than analysts were forecasting.
Executives warned that it was too early to claim success.
"When you look at our second-quarter performance, there's no doubt that we're making progress, but we still have a long way to go," said Chief Executive Officer Alan R. Mulally, the former Boeing Co. executive hired by Ford last fall to accelerate its turnaround effort.
Mulally said the second half of the year would be "difficult." Although Ford said overall 2007 results would be better than previously forecast, he said he was sticking to his prediction that the company wouldn't return to full-year profitability until 2009.
Headwinds include the nation's weak housing market, which is hurting pickup truck sales, and higher commodity costs.
Construction workers are a prime audience for Ford's F-150 pickups, and high gas prices continue to restrain sales of pickups and large SUVs - once the mainstays of Ford's bottom line.
The company is also facing a general slowing of the U.S. auto market, Healey noted. Sales this year are running at an annualized pace of about 16.7 million vehicles, about a half-million below the "normal" rate.
Although Ford's overseas operations posted a collective 80 percent, or $600 million, improvement during the second quarter, Ford North America - the United States, Canada and Mexico - remains a tough spot.
Ford's Way Forward turnaround plan centers on returning that crucial unit to profitability by 2009 by closing 16 plants, eliminating 44,000 jobs and revamping the company's lineup for Ford, Mercury and Lincoln vehicles.
Ford said its U.S. market share rose to 15.6 percent in the period, up from 15.1 percent in the first quarter but down from 16.7 percent for the second quarter last year. Ford's market share had been falling as it curtailed low-profit sales to rental and corporate fleets.
Mulally said sales of the Ford Edge, a car-based sport utility vehicle introduced last fall, had been particularly strong. He also said he was encouraged by sales of Ford's Focus, Fusion, Taurus and Escape models.
Mulally said Ford was talking to parties interested in buying its Jaguar and Land Rover brands as it continues to dismantle its Premier Auto Group. Aston Martin was sold earlier this year.
The fate of the group's remaining nameplate, Swedish car maker Volvo, is under review and will be decided by the end of this year, Mulally said.
The company said it cut $600 million in costs during the quarter.
In all, Ford has reduced worldwide costs by $1.1 billion so far this year. That brings Ford's total cost reductions to $2.3 billion since the start of the Way Forward, which aims to reduce $5 billion in operating costs overall.
Its second-quarter net profit of 31 cents a share compares with a net loss of 17 cents, or $317 million, in the second quarter of 2006.
Excluding one-time items, Ford earned $258 million, or 13 cents a share. On that basis, Wall Street was expecting the automaker to report a loss of 35 cents a share, according to Thomson Financial.
Revenue rose 5.5 percent to $44.2 billion.
Martin Zimmerman writes for the Los Angeles Times. The Detroit Free Press contributed to this article.