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Author: TMFBreakerRob Big gold star, 5000 posts Old School Fool Home Fool Supernova Phoenix 1
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Subject: Ford 2Q: Getting Stronger Every Day Date: 7/23/2010 7:41 AM
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Another powerful performance. Here's the Ford PR, with certain sections bolded by me for emphasis (plus some comments inserted):

DEARBORN -- Ford Motor Company today reported second quarter 2010 net income of $2.6 billion, or 61 cents per share, a $338 million improvement from second quarter 2009, as each of its major business operations around the world recorded improved profits.

Excluding special items, Ford reported a pre-tax operating profit of $2.9 billion, or 68 cents per share, an improvement of $3.5 billion from a year ago and a $932 million improvement from the prior quarter, and the company’s best quarterly performance since the first quarter of 2004. Ford has posted an Automotive and total company pre-tax operating profit for four consecutive quarters.

Ford North America posted a second quarter pre-tax operating profit of $1.9 billion, a $2.8 billion improvement from second quarter 2009. <Rob: That's amazing!>

“We delivered a very strong second quarter and first half of 2010 and are ahead of where we thought we would be despite the still-challenging business conditions,” said Ford President and CEO Alan Mulally. “We remain on track to deliver solid profits and positive Automotive operating-related cash flow for 2010, and we expect even better financial results in 2011.

“Our progress is being led by the strength of our new products and our leaner, global structure,” Mulally added. “Customers are responding to our strongest ever product lineup – a full family of vehicles with world-class quality, fuel efficiency, safety, smart design and value.”

Ford’s second quarter revenue was $31.3 billion, up $4.5 billion from the same period a year ago. Excluding Volvo revenue from 2009, Ford’s revenue in the second quarter was up $7.4 billion compared to 2009, or over 30 percent.

Automotive operating-related cash flow was positive $2.6 billion during the second quarter, primarily reflecting pre-tax operating profits and favorable changes in working capital.

Ford finished the second quarter with $21.9 billion in Automotive gross cash, a decrease of $3.4 billion since the first quarter, as a result of substantial debt reduction actions. Including available credit lines, total Automotive liquidity was $25.4 billion at the end of the quarter.

The company ended the second quarter with Automotive debt of $27.3 billion, down $7 billion in the quarter. The reduction included a $3.8 billion payment by Ford to the UAW Retiree Medical Benefits Trust, and a $3 billion repayment of Ford’s revolving credit facility. The debt reduction will save Ford more than $470 million in annualized interest savings.

Special items were an unfavorable pre-tax amount of $95 million in the second quarter. Ford recorded $229 million of personnel and dealer-related charges related primarily to the plan to discontinue production of the Mercury brand, which was offset partially by $94 million of favorable held-for-sale adjustments for Volvo and a $40 million gain related to the full pre-payment of Ford’s VEBA Note A debt obligation at a discount.

The first half cost associated with Mercury discontinuation and total U.S. dealer reductions is expected to be somewhat less than half of the total expected special item charges for these actions during the 2010 to 2011 period.

If Volvo had continued to be reported as an ongoing operation, Ford would have reported a second quarter pre-tax operating profit of $53 million for Volvo, representing a $290 million improvement compared to the second quarter of 2009.

“Our fundamental business is strong and we continue to gain momentum around the world,” said Lewis Booth, Ford executive vice president and chief financial officer. “Profits improved across our global business operations in the second quarter and we made continued progress in paying down our debt and strengthening our balance sheet.”

Second Quarter 2010 Highlights
Repaid $7 billion of Automotive debt, including $3.8 billion to the UAW Retiree Medical Benefits Trust and $3 billion of the company’s revolving credit facility
Ranked No.1 in UBS Investment Research quarterly survey of OEM-supplier relations in the U.S.
<Rob: Old news, but good news>
Announced $450 million investment to build a flexible vehicle manufacturing plant in Thailand
Announced $250 million investment in Ford Pacheco Plant in Argentina
Announced $135 million investment to design, engineer and produce key components in Michigan for Ford’s next-generation hybrid-electric vehicles that go into production in 2012
Announced plan to discontinue production of the Mercury brand in the fourth quarter to increase focus on the Ford and Lincoln brands in North America
Ford brand ranked highest among all non-luxury brands in the 2010 J.D. Power & Associates Initial Quality Study
Received seven Top Safety Picks in the Insurance Institute for Highway Safety’s awards for the 2010 model year, tying the highest mark for the industry
<Rob: Woohoo!>
Announced plans to expand and enhance Lincoln lineup with seven all-new or significantly refreshed vehicles in the next four years – including the brand’s first-ever C-segment vehicle
Revealed freshened Mondeo in Europe with restyled exterior, upgraded interior and new EcoBoost gasoline and TDCi diesel powertrains
Announced plan to begin delivering the Transit Connect Electric in Europe in late summer 2011
Launched and sold out of the limited edition Focus RS 500 high performance model in Europe
Began production in Thailand of the new Fiesta for Southeast Asian markets
Reported a 21 percent sales increase and gained a half-point of market share in the U.S. on strong retail market performance of Ford’s products, including the F-Series, Taurus, and Transit Connect
Posted a 27 percent sales increase in Asia Pacific Africa, including a 20 percent increase in China
Tripled quarterly sales in India, setting a new record, as the new Ford Figo received 25,000 orders in its first 100 days on the market <Rob: Ford is still a minor player, but its good progress>
Ford solidified its position as Canada’s top-selling brand, expanding market share to 17.5 percent, up 2.1 percentage points from a year ago


Automotive Sector

For the second quarter of 2010, Ford’s worldwide Automotive sector reported a pre-tax operating profit of $2.1 billion, compared with a loss of $1.1 billion a year ago. The improvement primarily reflected favorable volume and mix, net pricing and exchange.

Total vehicle wholesales in the second quarter were 1.4 million, compared with 1.2 million units a year ago. Worldwide Automotive revenue in the second quarter was $28.8 billion, up from $23.6 billion a year ago. Wholesales, revenues and operating results for 2010 exclude Volvo, while 2009 results include Volvo.

North America: For the second quarter, Ford North America reported a pre-tax operating profit of $1.9 billion, compared with a loss of $899 million a year ago and a profit of $1.2 billion in the first quarter of 2010. The year-over-year improvement was explained primarily by favorable volume and mix, net pricing and exchange. Second quarter revenue was $16.9 billion, up from $10.7 billion a year ago. <Rob: Super Duty was a big contributor>

South America: For the second quarter, Ford South America reported a pre-tax operating profit of $285 million, compared with a profit of $86 million a year ago and a profit of $203 million in the first quarter. The year-over-year increase reflects primarily favorable net pricing, favorable exchange, and higher volume, offset partially by higher commodity and structural costs. Second quarter revenue was
$2.6 billion, up from $1.8 billion a year ago.

Europe: For the second quarter, Ford Europe reported a pre-tax operating profit of $322 million, compared with a profit of $57 million a year ago and a profit of $107 million in the first quarter. The year-over-year increase was explained primarily by lower costs, driven in part by lower spending related to distressed suppliers and a warranty reserve adjustment not expected to reoccur, offset partially by unfavorable net pricing. Second quarter revenue was $7.5 billion, up from $7 billion a year ago. <Rob: Ford has decided to preserve profits and not pursue a market share war fueled by incentives in Europe>

Asia Pacific Africa: For the second quarter, Ford Asia Pacific Africa reported a pre-tax operating profit of $113 million, compared with a loss of $27 million a year ago and a pre-tax operating profit of $23 million in the first quarter. The year-over-year improvement is more than explained by higher volume, reflecting primarily higher industry, lower costs, and favorable exchange. Second quarter revenue was $1.8 billion, up from $1.2 billion a year ago. <Rob: Watch this category over the next couple years!>

Other Automotive: Other Automotive consists primarily of interest and financing-related costs and resulted in a second quarter pre-tax loss of $551 million, explained by net interest expense of $459 million and $92 million of unfavorable fair market value adjustments, associated primarily with Ford’s investment in Mazda.

Financial Services Sector

For the second quarter, the Financial Services sector reported a pre-tax operating profit of $875 million, compared with a profit of $595 million a year ago. <Rob: GM's recent purchase of an auto credit company is a start, but it'll take years to make a contribution like Ford Credit. Too bad.... ;) >

Ford Motor Credit Company: For the second quarter, Ford Credit reported a pre-tax operating profit of $888 million compared with a profit of $646 million a year ago and a profit of $828 million in the first quarter. The year-over-year increase reflected primarily a lower provision for credit losses and lower residual losses due to higher auction values, offset partially by the non-recurrence of prior year net gains related to unhedged currency exposures and lower volume.

Outlook
Ford said it continues to make progress on all four pillars of its plan:

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

Ford expects third quarter 2010 production to be up 126,000 units compared with year-ago levels, reflecting continued strong demand for Ford products, maintenance of competitive stock levels, and the non-recurrence of prior-year stock reductions. Third quarter production will be down 174,000 units compared to second quarter 2010 production, reflecting planned vacation shutdowns during the third quarter that generally are used to prepare for new models.

Fourth quarter production also will be affected by planned holiday shutdowns and new product changeovers for vehicles such as Focus and Explorer. Overall, Ford’s third and fourth quarter production schedule is lower than the first half but consistent with the company’s strategy to match supply with demand.

Ford expects full-year 2010 U.S. industry volume will be in the range of 11.5 million to 12 million units. In the 19 markets Ford tracks in Europe, full-year industry volume is expected to be in the 14.5 million to 15 million unit range, reflecting a stronger-than-expected first half offset by a weaker second half.

Ford now expects full-year 2010 U.S. total market share and its share of the U.S. retail market to be improved compared with 2009. Europe market share for the full year is now expected to be about equal to the first half of 2010, but lower than 2009, reflecting the company’s decision to limit increases in incentives in the region.

Ford is on track to improve full-year quality for all regions, compared with a year ago. <Rob: Keeping up the momentum>

Ford has achieved significant structural cost reductions over the past four years. In 2010, Ford expects full-year Automotive structural costs to be about $1 billion higher to support growth and key product introductions. Ford’s cost structure, however, continues to improve as a percentage of revenue. Ford also expects full-year commodity costs to increase by about $1 billion.

Capital expenditures were $1.9 billion in the first half. Ford expects full-year capital spending to be about $4.5 billion to support its product plan, as the company continues to realize efficiencies from its global product development processes.

Ford Credit now expects full-year 2010 profits to be higher than its 2009 profits. The second half of 2010, will be lower than the first half because Ford Credit expects smaller improvements in the provision for credit losses and depreciation expense for leased vehicles compared with the improvements during the first half.

Ford expects to have solid financial results in the second half, continuing to exceed the expectations it had earlier this year.

As in most years, Ford’s first half results will be stronger than second half, reflecting normal seasonality – including lower second half volumes related to planned shutdowns and product launches. This year, Ford also expects higher investment and costs in the second half to support growth and key product introductions, as well as higher commodity costs and smaller reductions in reserves at Ford Credit.

Overall, Ford is on track to deliver solid profits and positive Automotive operating-related cash flow for 2010, providing a solid foundation for continuing growth.

2011 Outlook
For 2011, based on present planning assumptions, Ford expects continued improvement in total company profitability and Automotive operating-related cash flow, including improvements in its Automotive operations. These improvements are driven primarily by the growing strength of Ford’s global products, continued cost structure improvements and the gradually strengthening global economy.

Ford Credit will continue to be solidly profitable for 2011 but at a lower level than 2010, reflecting primarily a lower occurrence of this year’s favorable factors.

By the end of 2011, Ford expects to move from a net Automotive debt position to a net cash position. <Rob: This is a big deal>

Overall, Ford said its performance gives it great confidence going forward. It has aggressively restructured its business to be profitable in the current environment and, going forward, it will continue to:

Expand its business, particularly in the growth regions of the world, such as China and India
Improve its overall cost structure and achieve competitive costs while strengthening further its operational excellence
Take actions to strengthen its balance sheet and become investment grade

“Our business performance this year and the growing success of our products give us great confidence going forward,” Mulally said. “Our plan is to continue to enhance our operational excellence and improve our competitiveness to continue to deliver profitable growth for everyone associated with Ford.”
****************

Overall, I think this is a very nice performance. I was hoping for at least $2 billion. Who can say what the market will do with this...LOL? Maybe the stock will dip today...(who knows!)....but I'm pleased because I think this will eventually translate into a solidly higher share price...even later this year perhaps.

Rob
RB Home Fool
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Author: allmusl70 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14306 of 18153
Subject: Re: Ford 2Q: Getting Stronger Every Day Date: 7/23/2010 4:59 PM
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Rob, the numbers are incredible! At the end of the second quarter, Ford had $21B in cash/securities on hand. Their debt has dropped from $34B at the end of 2009 to $27B. These numbers are absolutely encouraging. If Ford manages to pay down another $6B by years end, this will make them a net credit company instead of a net debit, which will be looked upon very favorably by the markets IMO. Do you know if the numbers can be broken down to coastal markets such as CA? I know that Peter has brought this point up a couple of times, but I believe it is a valuable one. If indeed the coastal markets show a major shift from Japanese manumfacturers to Ford, this speaks volumes.

Well done Ford Fools!!!!

Al

p.s. Still didn't win that Powerball, so the sweetest Mustang built is still out of my grasp! LOL!

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Author: Donna405 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14307 of 18153
Subject: Re: Ford 2Q: Getting Stronger Every Day Date: 7/23/2010 9:15 PM
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Remembrance: I purchased Ford on the way down at $6.90 per share, and many of my investing friends laughed at me. For some reason, my gut would not, with Ford's currrent leadership, the ship would not go down. I've always wanted to own Ford stock (never owned a Ford, but my grandfather had a Model T back in the days as his first car). For my next car in the next few years (currently own a 1994 Volvo 940, and we all know that with the proper maintenance, they last forever.), I am looking into Ford.

I am so glad I purchased this stock, and hopefully, will hold it for a number of years. (Only wished I had purchased more when it was less than $2 a share.)

Now, in the next couple of years, I would like to see Ford reinstate its dividend, since I am now retired, and most of my stocks are dividend paying equities.

Donna

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Author: TMFBreakerRob Big gold star, 5000 posts Old School Fool Home Fool Supernova Phoenix 1
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Subject: Re: Ford 2Q: Getting Stronger Every Day Date: 7/23/2010 11:39 PM
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I can't access that kind of information anymore, unfortunately. Its another case of increased compartmentalization of information to improve security. Not a bad thing. I wouldn't have been able to go into details anyway.

If I remember correctly, there is a site "somewhere" where CA registration information is publicly available.

Rob
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Author: JustMee01 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14310 of 18153
Subject: Re: Ford 2Q: Getting Stronger Every Day Date: 7/24/2010 11:38 AM
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" there is a site "somewhere" where CA registration information is publicly available"

Yes, there is. The last time I looked, I wasn't wowed by the numbers, but there was significant improvement for Ford.

The site is:

http://cncda.org/

The 2Q numbers are actually available:

http://www.cncda.org/secure/GetFile.aspx?ID=1946

They also archive old reports for comparison.

Peter

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Author: allmusl70 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14311 of 18153
Subject: Re: Ford 2Q: Getting Stronger Every Day Date: 7/24/2010 3:39 PM
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Thanks, Peter, for the site reference. You're correct, the numbers aren't very "wowing" and to me they indicate we really have an uphill battle in that region. But, as Rob has pointed out in past posts, it appears that the overseas markets have much to offer...and Ford is pursuing those with all they've got. We're already behind the curve in China with GM being the best seller over there. If we can make a dent in that market alone, it should equate out to some nice profits.

And speaking of GM, any guesses how far in debt they will be oh, say, two years after their IPO? With them purchasing a financial arm to tap back into those profits, that should help them considerably. But that purchase price is $3.5B and they need another $7B(?) to cover their retiree and health care costs by years end. That is significant cash outlay. I haven't ran a detailed analysis of GM's predicted cash outlays as a lot of this information just isn't available yet, but my best guess right now would be that they could be in the neighborhood of $10B to $15B in debt just depending upon how much they raise through their IPO. And then, will we see the UAW and the gov't sell significant holdings shortly thereafter? If so, we could see price stagnation or even dropping somewhat much like Citi is experiencing everytime another sale block is mentioned.

Just some of my ramblings....

Al

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Author: JustMee01 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14312 of 18153
Subject: Re: Ford 2Q: Getting Stronger Every Day Date: 7/24/2010 5:06 PM
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Hey Al,

I've been on vacation, so I haven't been following my holdings. Just got back. Seems like ATP is treading water, although frankly, that's a good thing given the circumstances. Ford, on the other hand is looking more and more like a totally new company. The reorganization has paid handsome dividends. The thing that I like the most prehaps, is the strong FC performance. With fewer vehicles coming off lease, it sounded to me that a couple of quarters ago, that they were slightly pessimisitic regarding FC performance from a YoverY perspective. The good performance speaks volumes on Ford's resale strength. I really can't get over the recent statement that the Focus is retaining value better than the Corolla. Bear in mind that's the CURRENT Focus, not even the well-reviewed new model. While it's only a matter of perception, from a marketing perspective, people deciding that your product is superior is even more important than fielding an improved product. It's pretty impressive how quickly public opinion has turned in their favor.

You and Rob are right of course that Asia will be the growth driver in the future for the industry. But, my preoccupation with Cali in the nearterm is really a coal-mine-canary kind of thing. The product is quite unpopular in Cali, as are all US autos, relatively speaking. If they can win the hearts and minds of people predisposed AGAINST their product, it speaks to how well they're improving their product and how well they're marketing that product. I've been watching Fusion sales, which have, overall, taken the NA market by storm. In Cali, the improvement is there, but it has been marginal. So, an intensensely popular NA product has seen only modest success in Cali, speaking to the work that needs to be done in one of NA's biggest markets...

That all occurs on the backdrop that the Camry is getting KILLED in Cali. Overall, Camry sales have weakened in NA, but in Cali, the Camry has actually fallen deep. They've plunged 50% off their peak. However, the major benefit has been to Honda. Most of those lost sales have been to Accord. The Altima and Fusion have both risen, but the preference toward Asian nameplates is still much stronger in Cali, and even a very strong NA product (Fusion) has made disproportinate inroads there. While NA is Ford's most profitable market, it's not even that that's got me fixated on Cali. It's more the fact that I view Cali as a very tough market for Ford to conquer, and thus a very good barometer for Ford's success in strengthening its brand. Winning over the guy that wouldn't consider your product would be an excellent sign.

JMO of course.

Congrats to all holders on a fine quarter. I think it's just the beginning.

Peter

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Author: allmusl70 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14313 of 18153
Subject: Re: Ford 2Q: Getting Stronger Every Day Date: 7/24/2010 6:49 PM
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Peter,

I share the same view on Ford, where it is going and just how conservative their projections have been. As you know, I diversed my Ford holdings almost a year ago...still holding a strong position but nothing to what I once had. Took some of the profits and ventured into other investments (ATPG being one of them). BTW, I sold a majority of ATPG when we got a bounce to almost 13. Back to Ford. I believe that Ford is poised to really jump over the near future...but not overnight. We've been kind of stuck in this land between 10 and 14 for a few months now. How does one play that? Well, I have to give Rob credit for sparking my thoughts on how to do this (although that wasn't his intention at the time).

Back in mid April, Rob voiced a thought on possibly buying short term calls on Ford...May's to be precise. I did a little research and found that at the time Ford's May $12 calls fit the bill to guidance that I had learned from TMF Options service. I pulled the trigger and bought in. It immediately...literally a few days...skyrocketed as Ford went pass 13 and then 14. I sold half of my holdings to recoup my initial investment and pocket a few dollars profit. Well, we all know what happened the latter part of April and I didn't save all of the profits I could have realized as the options slowly dwindled. I sold them to get some more profit, but not as much as I could have had. Nice lesson for me though. I need to be more dilegent in locking in profits. Stop being so greedy to get ALL of the profit. I did that to a degree in that as soon as I could pull my initial investment off the table and still have a nice amount in play, I took it. But the remainder is where I need to be better at dealing with.

Well, in the last couple of weeks with Ford trading so low, the options play came full circle once again. I studied and studied. My wife would probably tell you that I was becoming obsessed! I bought Ford Sept 12 calls at a ridiculous price of .56! I was banking on Ford impressing again on their numbers which by all research, they should have at least equalled analysts expectations. BUT what I've done differently this time is to purchase more contracts than I previously did. When they reach the double point (1.12), I would sell half as I did before and recoup my initial investment. That happened yesterday and I still have nearly two months until expiration. My plan is to sell the remaining half position in two more lots. The trigger will be 50% higher or 50% lower than the current price of 1.17. The next trigger will be set again at 50% of the then sell price. This way, I limit my downside to still take in a profit. I know that I am limiting my potential upside as well, but will have locked in a nice profit over less than 3 months.

The original play in April was based on sound reasoning and the financials as they presented themselves. As it turned out, the game was the one to be in but the way I played it really left a bit to be desired in the end. This time I am hoping to execute the play better to have a more sound victory. If Ford continues to climb and thus the calls climb, I should recover the unrealized gains that I gave up with my sold ATPG holdings. The latter was not the reason for the play, but I realized yesterday that is how the numbers will work out. If Ford falls, I'll still pocket a nice profit because I've already taken my initial investment off the table.

Feel free to comment, throw rocks or add more thoughts!

Al

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Author: TMFBreakerRob Big gold star, 5000 posts Old School Fool Home Fool Supernova Phoenix 1
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Subject: Re: Ford 2Q: Getting Stronger Every Day Date: 7/24/2010 9:51 PM
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Thanks, Peter!

Maybe the Fusion isn't fancy enough to suit Cali customers. Hopefully, we'll see some progress with Fiesta and the upcoming Focus....and then eventually the next generation Fusion, which I personally think is even more appealing than the current one.

It took years to lose Cali, if it takes years to win it back, so be it.

Rob
RB Home Fool

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