DEARBORN, Mich. – Of all the times for Ford Motor Co. to make money, it had to pick the second quarter.
Just as the company goes hat-in-hand to the United Auto Workers seeking concessions, it shocks Wall Street and turns a tidy $750 million profit, its first in two years.
It may be a little harder now for the nation’s No. 2 automaker to plead poverty to its roughly 51,000 UAW workers, but Chief Executive Alan Mulally cautioned Thursday that Ford has not turned the corner to sustained profitability.
“These accomplishments are something to be proud of, but we are not ready to declare victory,” he said, predicting substantial losses in the second half due to traditionally lower sales volume. He repeated the company’s assertion that it won’t make a full-year profit until 2009.
He also said the union, which formally opened contract talks with Ford on Monday, knows the company’s financial situation well.
“Everybody really does understand the situation we are in,” Mulally said in a conference call with reporters and analysts. “We still lost $279 million in North American operations, and we have a lot of work to do to get back to profitability.”
Analysts and even Wall Street investors greeted the black ink favorably. Ford’s stock price rose on a day when most others nosedived.
The company said its profit was fueled by cost cutting, higher net pricing on its vehicles, slimmer losses in North America and better sales overseas.
It also said sale of its Jaguar and Land Rover subsidiaries was probable, it was doing a “strategic review” of its Volvo unit, and its U.S. market share was starting to stabilize, even rising from the first quarter to second quarter.
Ford’s profit of 31 cents per share compares with a net loss of $317 million, or 17 cents per share, in the same quarter of last year.
Even its struggling North American division showed progress, cutting its losses from $789 million in the second quarter of last year.
The company attributed the gains to significant year-over-year improvement in all of its automotive operations, cost cuts due to restructuring and positive special items that totaled $443 million. That includes a $206 million gain related to the sale of its Aston Martin unit.
Yet even without the positive special items, the company still made money in the quarter, posting a profit of $258 million, or 13 cents per share.
Ford has shed 27,000 hourly jobs since September of 2006 and is in the process of reducing its salaried work force by about 10,000 as it tries to shrink to match lower demand for its cars and trucks.
But the timing of the positive quarter might be bad because of the contract talks, in which Ford hopes to cut hourly labor costs by around $25 to better compete with Asian rivals.
David Healy, an analyst with Burnham Securities, said the North American losses are still good ammunition to get concessions.
“I think they can still plead poverty to the union,” he said, pointing out that the North American loss came even though overall U.S. auto sales were reasonable for the quarter and reflective of what they are likely to be the rest of the year.
Earlier in the week, union President Ron Gettelfinger said he wouldn’t concede that Ford’s financial situation is worse than its Detroit-area counterparts and said the company had a lot of cash.
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