Ford Cuts 2012 Outlook As Quarterly Profit Tumbles 58%

Ford Motor Co. netted $1 billion in the second quarter of this year compared with $2.4 billion in the same period of 2011. The company lost money in all regions except North America.

Revenue slid 6% to $3.3 billion, and vehicle sales shrank 5% to 1.45 million units. Pretax operating income fell 36% to $1.8 billion, including a 39% drop to $1.4 billion at Ford's automotive unit. Overseas losses increased to $465 million, less than the $570 million the company projected in late June.

Ford, which had predicted that full-year pretax operating profit would match last year's $8.8 billion, now expects to fall short of that goal. The company has slashed 2012 capital spending to $5 billion from the $5.5-billion-$6 billion originally planned.

A big reason for Ford's lower outlook is the European loss exceeding $1 billion it now predicts. The company still projects "significantly higher" North American pretax earnings and margin. But Ford now expects its market share to shrink in the U.S. and Europe instead of maintaining last year's levels.

In Europe, pretax operating losses widened to $404 million in the April-June period from $149 million in the first quarter and a $176 million profit in the second quarter of 2011. Revenue contracted 21% to $7.1 billion, and vehicle sales fell 15% to 359,000 units. Ford's European sales decline exceeds the overall market because the company is avoiding the deep discounts offered by rivals a policy it pledged to continue.

Pretax operating income in North America rose 5% to a near-record $2 billion in the second quarter as higher net pricing offset higher structural costs and unfavorable volume and mix. The unit's operating margin widened to 10.2% from 9.8% a year earlier. Revenue increased by $200 million to $19.7 billion despite a 2% decline in vehicle sales to 719,000 units.

Ford's Asia-Pacific and Africa unit swung to a $66 million loss in the latest quarter from a $1 million profit a year earlier. Revenue in the region advanced 10% to $2.3 billion on an 11% gain in sales to 250,000 vehicles.

In South America, the company narrowed its loss to $5 million from $267 million in the same period of 2011. Revenue fell 21% to $2.3 billion, and volume sank 12% to 119,000 vehicles.

Ford Motor Credit Co.'s operating earnings dropped 26% to $447 million. Ford cites lower financing margins and lower income from selling leased vehicles because of fewer lease terminations.

Companywide, automotive cash exceeded debt by $9.5 billion on June 30, up from $9.3 billion on March 31. The carmaker contributed $800 million in payments to its worldwide pension funds in the quarter, including a voluntary $500 million contribution to its U.S. plan, as part of its strategy to reduce those liabilities.