World Business

Problems at its credit branch and a writedown of assets, plus a poor administration and high elastic fluid prices, led to a second-quarter loss of $8.7 billion

through David Kiley

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Ford Motor (F) reported a second-quarter overthrow of $8.7 billion, its worst single place in recital.

Much of the privation was due to a writedown in the relative length of assets, and losses on falling values of SUVs coming against leases back to the automaker’s Ford Motor Credit arm. But, like a kid who wrecks the family car and tries to distract his parents from the bad news by offering to paint the house, Ford unveiled a plan to make over its lineup with more feeble, fuel-efficient vehicles in the next two-and-a-half years—faster than Wall Street had expected.

Ford’s invent to achieve a without deductions profit in 2009 after losing $15.3 billion the past two years had even now been thrown off track by dint of. the worse-than-expected housing meltdown and high gas prices. But the huge second-quarter loss was a setback Chief Executive Alan Mulally did not anticipate until a few months ago when SUVs like the Ford Explorer (BusinessWeek.com, 9/1/06), Ford Expedition (BusinessWeek.com, 2/19/07), and Lincoln Navigator (BusinessWeek.com, 4/2/07) started losing thousands of dollars in value in a matter of weeks at auctions whither off-lease vehicles are sold. Skyrocketing gas prices have cratered call by regard to for such vehicles.

Ford shares were commercial down 9.5%, at 5.46, in midday trading put on the New York Stock Exchange. Ford has been a sprightly stock over the ended two months, trading between 4.30 and 8 a share. The company has been whipsawed betwixt a surprise first-quarter profit, subsequent changed forecasts in profitability and cash burn, and an investment in the automaker by financier Kirk Kerkorian, who paid 8 per share for the sake of a stake in Ford.

The second-quarter loss was $3.88 per share, compared with net profit of $750 million, or 31¢ a share, in the same quarter last year. The destruction includes $8.03 billion worth of write-offs as of a decline in value of North American assets and Ford Motor Credit’s lease portfolio. Even excluding those special items, Ford profligate 62¢ a have a portion of, worse than Wall Street expected. Twelve analysts surveyed by means of Thomson Financial, on average, expected only a 27¢ loss. Ford’s second-quarter revenue was $38.6 billion, down $5.6 billion from the year-ago period. Analysts expected $34.6 billion.

Mulally is moving faster to restructure Ford’s global product portfolio encircling more fuel-efficient cars, less amount sure dependence on trucks and SUVs, and less manufacturing complexity. Since his arrival at Ford from Boeing (BA) in late 2006, Mulally has been driving his team to make business cases for bringing more of Ford’s smaller European vehicles to the U.S., a move on which Ford product strategists have pushed back. Mulally especially has questioned from the beginning of his tenure why Ford was making different similar-size vehicles for North America and Europe. "We can’t survive with this level of complexity" is a mantra Mulally has repeatedly drilled into Ford managers, according to staffers.