This morning, we announced strong second quarter financial results that reflect progress on our One Ford plan and demonstrate our success in working together to deliver an exciting, viable and profitably growing Ford for all of our stakeholders.
We made even more progress this quarter in delivering cars, utilities and trucks that people want and value around the world, as well as investing for global growth and continuing to strengthen our balance sheet by paying down debt – all despite uncertain economic conditions. Congratulations to everyone for continuing to focus on our plan and taking the decisive action that will increase our competitiveness and allow for long-term growth.
Our fundamental plan to deliver One Ford is working, and it remains unchanged:
• Aggressively restructure to operate profitably at the current demand and changing model mix
• Accelerate the development of new products that customers want and value
• Finance the plan and improve the balance sheet
• Work together effectively as one team, leveraging Ford’s global assets
It is important for all of us to read the below news release and understand the progress we are making against our plan and our outlook for the future.
One Team. One Plan. One Goal. One Ford.
Congratulations and thank you!
DEARBORN – Ford Motor Company today reported second quarter 2011 net income of $2.4 billion, or 59 cents per share, a decrease of $201 million, or 2 cents per share, from second quarter 2010. The period was marked by continued Automotive growth, solid profitability and strong cash flow, and a continued focus on strengthening the balance sheet and investing for the future.
“We delivered very good second quarter results while growing the business globally and serving more customers in every region,” said Alan Mulally, Ford president and CEO. “Despite an uncertain business environment, we further strengthened our balance sheet and continued to invest for the future.”
Second quarter pre-tax operating profit was $2.9 billion, or 65 cents per share, a decrease of $64 million, or 3 cents per share, from second quarter 2010. Total Automotive results improved, offset by an anticipated reduction in Financial Services results.
For the first half of 2011, Ford earned a pre-tax operating profit of $5.7 billion, net income of $4.9 billion and reported Automotive operating-related cash flow of $4.5 billion. Ford continued to grow volume and revenue during the period.
Ford’s second quarter net income was affected by unfavorable special items of $272 million, $177 million more than a year ago. The special items include personnel reduction actions, Mercury and other dealer-related actions in North America, and pension settlements in Belgium.
Second quarter Automotive pre-tax operating profit was $2.3 billion, an increase of $209 million from second quarter 2010. Second quarter Ford Credit pre-tax operating profit was $604 million, a decrease of $284 million from second quarter 2010.
North America posted a second quarter pre-tax operating profit of $1.9 billion. South America, Europe and Asia Pacific Africa also were profitable.
Ford’s second quarter revenue was $35.5 billion, an increase of $4.2 billion from second quarter 2010. Ford generated positive Automotive operating-related cash flow of $2.3 billion in the second quarter.
Ford continued its focus on strengthening its balance sheet, with a net reduction in Automotive debt of $2.6 billion in the second quarter. The net reduction includes $2.3 billion of payments on its term loans and full repayment of the outstanding balance of $800 million on its revolving credit line. These actions were offset partially by an increase in low-cost loans to support advanced technology.
Ford ended the second quarter with $22 billion of Automotive gross cash, an increase of $700 million compared to March 31, 2011. Automotive gross cash exceeded debt by $8 billion, leading to a first-half improvement of $6.6 billion compared with the end of 2010.
Ford’s Automotive liquidity totaled $32.2 billion, an increase of $4.3 billion in the first half.
“We are on track for solid results in 2011, including delivering on our guidance for improved full-year
SECOND QUARTER 2011 HIGHLIGHTS
pre-tax operating profit and Automotive operating-related cash flow compared with last year,” said Lewis Booth, Ford executive vice president and chief financial officer. “Going forward, we will continue building on this solid foundation for future investment and growth.”
• Increased market share in the U.S. and Europe
• Remained No. 1 in Canada, including best June result in 22 years
• Increased sales volume by over 40 percent in Turkey and by over 30 percent in Russia
• Increased market share in China and ASEAN
• Focus, F-150 and MKX won IIHS Top Safety Pick; Focus won Euro NCAP’s five-star rating
• Lincoln named the top brand in the 2011 AutoPacific Vehicle Satisfaction Awards
• Previewed 2013 Taurus at New York Auto Show
• Announced plans to build 1.0-liter three-cylinder EcoBoost engine and all-new eight-speed transmission
• Announced $350 million investment with joint-venture partners to build Ford’s first transmission plant in China with initial capacity of 400,000 six-speed transmissions
• Announced plan to add 340 new dealerships in China by 2015
• Made commitment to build next-generation small SUV in China
• Announced $72 million investment to increase production capacity at the Chennai Engine Plant in India
• Began production of Duratorq TDCi engine in South Africa
• Announced plan to export Ranger to 148 markets from South Africa
• Revealed new production plans in Europe that will enable the launch of at least 20 all-new or significantly freshened vehicles in next three years
• Signed agreement for a 50-50 joint venture in Russia with Sollers to provide more products and expanded services for the market
• Announced plan to triple production capacity of electrified vehicles in the U.S. to more than 100,000 by 2013
Total Automotive pre-tax operating profit in the second quarter was $2.3 billion, an increase of $209 million from second quarter 2010. The improvement was driven by higher net pricing at each of the Automotive operations, favorable volume and mix in North America, and lower net interest expense. Net interest expense improved due primarily to debt repayments made since the beginning of second quarter 2010.
Total vehicle wholesales in the second quarter were 1.5 million units, up 101,000 units from second quarter 2010, as every business segment reported higher wholesales. Total Automotive revenue in the second quarter was $33.5 billion, up $4.7 billion from second quarter 2010.
North America: In the second quarter, North America reported a pre-tax operating profit of $1.9 billion, an increase of $10 million from a year ago. This reflects significant improvement in net pricing, driven by the strength of its products, and favorable volume and mix. These were offset by higher costs, including increases for new products, commodities, and structural costs. Wholesales in the second quarter were 736,000 units, up 77,000 units from a year ago. Revenue was $19.5 billion, up $2.6 billion from second quarter 2010.
South America: In the second quarter, South America reported a pre-tax operating profit of $267 million, a decrease of $18 million from a year ago. This represents South America’s 30th consecutive quarterly pre-tax operating profit. Net pricing was higher but was more than offset by higher commodities cost and increased structural costs due to local inflation. Wholesales in the second quarter were 135,000 units, up from a year ago. Revenue was $2.9 billion, up $300 million from second quarter 2010.
Europe: In the second quarter, Europe reported a pre-tax operating profit of $176 million, a decrease of $146 million from a year ago. The decrease was more than explained by higher commodities and structural costs. Adverse change in dealer stocks also was a contributing factor, reflecting actions to replenish dealer stocks in second quarter 2010 following the end of scrappage programs, compared to dealer stock declines in second quarter 2011. Wholesales in the second quarter were 422,000 units, about the same as a year ago. Revenue was $9 billion, up $1.5 billion from second quarter 2010.
Asia Pacific Africa: In the second quarter, Asia Pacific Africa reported a pre-tax operating profit of
$1 million, a decrease of $112 million from a year ago. The lower profit primarily reflects higher costs, which include investments Ford is making to grow across the markets in the region, as well as unfavorable product-line and market mix. Wholesales in the second quarter were 226,000 units, up 17,000 units from a year ago. Revenue, which excludes sales at unconsolidated China joint ventures, was $2.1 billion, up $300 million from second quarter 2010.
Other Automotive: In the second quarter, Ford reported a loss in Other Automotive of $76 million, an improvement of $475 million from a year ago. The improvement primarily reflects lower net interest expense from significant debt reduction actions. For the first half, Ford’s net interest expense was about $700 million lower than the same period last year.
FINANCIAL SERVICES SECTOR
For the second quarter, the Financial Services sector reported a pre-tax operating profit of $602 million, a decrease of $273 million compared with second quarter 2010.
Ford Motor Credit Company: Second quarter Ford Credit pre-tax operating profit was $604 million, a decrease of $284 million from second quarter 2010. In line with our expectations, the results reflect primarily lower credit loss reserve reductions and the non-recurrence of lower lease depreciation expense of the same magnitude as 2010.
Ford remains focused on delivering its One Ford plan, which is unchanged:
• Aggressively restructuring to operate profitably at the current demand and changing model mix
• Accelerating the development of new products that customers want and value
• Financing the plan and improving the balance sheet
• Working together effectively as one team, leveraging Ford’s global assets
In the first half of 2011, the seasonally adjusted annual rate of sales was 12.8 million in the U.S. and 15.4 million units for the 19 markets Ford tracks in Europe.
Ford is maintaining its U.S. full year industry volume outlook in the range of 13 million to 13.5 million units. For the 19 markets Ford tracks in Europe, after a strong first half, Ford sees some sign of weakness related to the debt crisis and fiscal austerity programs. Ford now forecasts the industry in Europe to be in a range of 14.8 million to 15.3 million units, compared with 14.5 million to 15.5 million units previously.
As reported with first quarter results, quality remains mixed due to some near-term issues in North America, which Ford is addressing. Ford said it is pleased with progress made to date on those issues.
The company also said it is on track to achieve quality improvements in its international operations.
The company expects its full year U.S. total market share, its U.S. retail share of the retail market and European market share to be equal to or improved from 2010. In the first half, Ford’s U.S. total market share was 16.7 percent, its U.S. retail share of the retail market was 13.9 percent and European market share was 8.4 percent.
Ford said its second quarter and first half performance were very good, and the company remains on track to deliver continued improvement for full year pre-tax operating profit and Automotive operating-related cash flow compared with 2010. In 2010, the company reported a full-year pre-tax operating profit of $8.3 billion and Automotive operating-related cash flow of $4.4 billion.
Ford said it continues to expect second half results will be lower than first half. In the Automotive sector, this reflects increasing commodities and structural costs, as well as seasonal factors that tend to favor the first half. At Ford Credit, lower profit in the second half primarily reflects the same factors affecting first half results.
Ford continues to expect commodities and structural costs to each increase by about $2 billion compared with 2010. The increase in structural costs is consistent with supporting higher volumes in the short term, as well as the company’s plan to grow the business, strengthen its brand and improve its products through the business planning period. Ford said it expects its structural costs as a percent of net revenue to improve compared with 2010.
Based on first half performance and expectations for the full year, Ford continues to expect Automotive operating margin to be equal to or improved compared with 6.1 percent in 2010, despite higher commodities cost. In the first half, Automotive operating margin, at 7.3 percent, was down half a point compared with the same period a year ago.
Ford expects 2011 capital expenditures in the range of $5 billion to $5.5 billion. Capital spending in the first half was $2 billion.
Ford expects total company third quarter production to be about 1.4 million units, up 92,000 units from a year ago, reflecting continued strong customer demand for its products.
“We are making consistent progress on our commitment to deliver profitable growth for all,” said Mulally. “Going forward, we remain focused on aggressively managing short term challenges and opportunities and strengthening the foundation to deliver our mid-decade plan and serve a growing group of Ford customers around the world.”
Ford’s planning assumptions and key metrics, and production volumes, are shown below: