Ford Motor Co, the world's third-biggest automaker, posted a record quarterly loss of $8.7 billion and accelerated a conversion to fuel-efficient vehicles to wean itself from money-losing trucks.
The second-quarter deficit of $3.88 a share compared with a profit of $750 million, or 31 cents, a year earlier. The figure included $8 billion in pretax writedowns for plant closings and the declining value of truck leases at Ford Motor Credit Co. The shares fell as much as 11 per cent.
Ford said it will double production of hybrid vehicles, sell more European autos such as the Fiesta in the US and convert three North American truck factories to make a redesigned Focus and other small cars. The revamping is a response to record gasoline prices that have ravaged sales of large pickups and sport-utility vehicles and derailed Chief Executive Officer Alan Mulally's turnaround plan.
"They believe this is a permanent shift in buyer sentiment that they have to adjust to no matter how hard it will be," said Maryann Keller, an independent auto analyst and consultant based in Greenwich, Connecticut. "This is going to be expensive. The losses are going to be bigger during this transition."
The loss marks the sixth in eight quarters under Mulally, 62, recruited from Boeing Co. to revive the Dearborn, Michigan- based automaker. Gasoline approaching $4 a gallon and plunging sales of F-Series pickups forced the CEO in May to abandon his target of returning to profit in 2009.
Analysts' estimates: Excluding costs Ford considers one-time expenses, the loss was $1.38 billion, or 62 cents a share. On that basis, Ford was expected to report a deficit of 28 cents, the average estimate of 12 analysts surveyed by Bloomberg.
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Ford dropped 62 cents, or 10.3 per cent, to $5.41 at 12:12 pm in New York Stock Exchange composite trading after falling to $5.37 earlier. Ford's 7.45 per cent bond due July 31 rose 0.75 cent to 57.75 cents on the dollar. The yield fell to 13.4 per cent.
Ford said it had $26.6 billion in automotive cash at the end of the quarter, down $10.8 billion from a year earlier. The company is "confident" it has enough liquidity, Chief Financial Officer Don LeClair told reporters.
Mulally declined to set a new target date for the automaker to return to profitability.
"It's just the uncertainty,"he said, referring to the US economy. "It's so volatile right now. We figured the best thing was to focus on what we could do on the product side."
The company also hasn't made an estimate for how much cash it will burn as it restructures. Ford borrowed $23.4 billion in late 2006 to revamp operations.
Writedowns: Ford had pretax writedowns of $5.3 billion for its North American auto operations and $2.1 billion for vehicle leases at Ford Credit. LeClair said 85 per cent of the Ford Credit writedown was tied to falling values for pickup trucks and SUVs.
Ford Credit had a record loss of $1.4 billion, compared with a year-earlier profit of $62 million.
"Every number was close, but every number was on the wrong side, on the negative side," said Dan Poole, vice-president of equity research at Cleveland-based National City Corp. "The $8 billion charge was quite a bit of a surprise."