DETROIT, July 16 — The Ford Motor Company's earnings fell nearly 27 percent in the second quarter, and the company said today that it expected profits to be flat for the second half of the year. þþThe declining profits reflected sluggish vehicle sales in the critical North American market, where Ford's market share is also declining, and prices that continue to fall if one factors in the rising costs of incentives like rebates and interest-free financing. þþÿIt is a tough world in terms of industry volume; it's a tough world in terms of overcapacity and the consequential effect on pricing, rebates and incentives,ÿ the company's vice chairman, Allan D. Gilmour, said. þþÿThere's not much strength at all in the U.S. economy,ÿ he said, adding that ÿwe're not planning on any substantial upturn either this year or as we look into the early part of next year.ÿþþFord reported net income of $417 million in the second quarter, or 22 cents a share, down from $570 million, or 29 cents, in 2002.þþThe report came today as Big Three contract talks with the United Automobile Workers union opened at the headquarters of the Chrysler Group, a division of the German company DaimlerChrysler. þþChrysler recently warned that next week it will report a $1.2 billion quarterly loss. At a news briefing, one reporter elicited a smile from Chrysler's top negotiator, John Franciosi, when he asked if Chrysler's losses would help its negotiating position. ÿIt's a tough plus,ÿ Mr. Franciosi said. ÿYou certainly don't want to ever have a quarter like we're going to announce next week.ÿþþMuch of the Big Three's problems relate to foreign competitors like Toyota Motor and Honda Motor taking market share; the union's membership has also dwindled, in part, because it has failed to organize a single domestic assembly plant solely owned by a foreign automaker.þþA top union negotiator said today that getting Chrysler's help in organizing American plants operated by its corporate cousin, Mercedes, would be an issue in the talks. þþTalks open at General Motors on Thursday and Ford on Friday. þþAt Ford, results beat analysts' estimates, but executives said the company was essentially forecasting earnings of 3 cents a share for the rest of the year, having earned 67 cents already and holding to a goal of earning 70 cents for the full year. þþMr. Gilmour said a loss of 15 cents a share was expected in the third quarter, as the company scales back production. þþShares of Ford fell 65 cents, or 5.6 percent, to $10.99.þþÿWe believe that deterioration in industry fundamentals will continue to more than offset Ford's operating performance,ÿ wrote John Casesa, an auto analyst at Merrill Lynch, in a note released shortly after earnings were announced. þþStephen Girsky, an analyst at Morgan Stanley, said ÿyou've got an automotive business that barely made money. All of it was made by the finance company,ÿ referring to Ford Motor Credit. þþHe added that investors had hoped the company would have increased earnings expectations for the full year, having nearly met its full-year outlook already. þþRevenue at Ford fell to $40.7 billion in the second quarter from $42.2 billion in the period a year earlier. Worldwide vehicle sales fell by 137,000 units, to 1.7 million cars and trucks. þþThe company's European operations were a particular trouble spot as industry sales declined along with prices. Ford sales also became more concentrated in less-profitable vehicles. Ford Europe reported a pretax loss of $525 million in the second quarter, compared with an $18 million loss a year earlier. þþThe company showed improvement in cost-cutting and in the performance of the Premier Automotive Group, the luxury division that oversees Volvo, Jaguar, Land Rover and Aston Martin. The company has described both areas as important in turning itself around after losing $6.4 billion in 2001 and 2002.þþPremier Automotive had pretax earnings of $166 million in the second quarter in contrast to a $122 million loss a year earlier. The company said its cost-cutting efforts were ahead of plans, having trimmed $1.9 billion in overall costs compared with a $500 million goal for the year. þþ
Source: NY Times
