UPDATED: 7/20/06 3:00 P.M.DETROIT -- Ford Motor Co., which has been working to slash costs and stem market-share losses, on Thursday posted an unexpected second-quarter loss as sales of large SUVs slumped on higher U.S. gasoline prices and it took charges for employee buyouts.
Ford said it had a net loss of $123 million, compared with a profit of $946 million a year ago. Revenue fell to $41.97 billion in the second quarter, down from $44.55 billion a year earlier as U.S. vehicle sales for Ford fell 7 percent in the quarter.
The No. 2 U.S. automaker cut its third-quarter production target in North America, and CEO Bill Ford said the company will accelerate its turnaround efforts.
Bill Ford said on Thursday that he expects to see signs of turnaround in the automaker's North American vehicle operations in 2007.
"It's important for us to see as we go into '07 us starting to make some progress," Bill Ford said in an interview.
He also said the company was blindsided by the rapid shift in consumer tastes away from large and mid-size sport utility vehicles, and a spike in commodity prices during the second quarter.
Ford's restructuring program already includes closing 14 plants and cutting up to 30,000 factory jobs in North America. The second-quarter net results included one-time costs of $486 million before taxes related to buyouts in North America.
In a conference call following the results, Bill Ford said the company is on track to reduce capacity by 15 percent this year and is committed to achieving profitability in its key North American operations by 2008.
"We remain committed to this goal, we have seen improvement," Bill Ford said on a conference call with analysts. "I am encouraged by what has been going on behind the scenes. But the external factors I have outlined are not going to get any easier, which means we need to go farther and faster."
Said Goldman Sachs analyst Robert Barry: "North America remained the primary culprit contributing to the weakness. Pressures from volume, pricing and (product) mix remain severe, and we do not see much improvement anytime soon."
The results are seen underscoring the pressure on Ford's turnaround. The company, which lost $1.2 billion in the first quarter, cautioned last week that business conditions have become tougher over the past six months.
To hasten its turnaround and conserve cash, Ford last week halved its dividend and fees paid to board members.
Some analysts had cautioned that Ford's current turnaround efforts, which hinge on job cuts and plant closings, were too slow-moving to have any real effect on financial results until at least 2007.
SLUMP AT FORD CREDIT
Ford has been hit hard by high gasoline prices that have caused consumers to shift from SUVs and large trucks to smaller cars -- an area of relative weakness for Ford.
The decline in sales prompted Ford to cut its third-quarter production target in North America, mostly on the truck side, by 5.6 percent to 670,000 vehicles.
Ford said earnings at its finance arm, which makes loans to its customers, fell 40 percent to $441 million, partly reflecting its own higher borrowing costs.
With Ford's North American auto business struggling, the company has relied on compensating profits from the financing arm. In 2005, profits at Ford Credit exceeded losses in its auto unit and helped the automaker remain profitable.
Ford said the pretax loss in the second quarter for its core automotive operations widened to $808 million, excluding special charges, compared with a loss of $245 million a year earlier
In North America, Ford's largest unit, it had a loss of $797 million, before taxes and excluding special items, compared with a loss of $907 million a year earlier.
Investor confidence in Ford has waned since the automaker rolled out its turnaround plan in January. Ford shares have slid about 17 percent this year, while shares of General Motors have gained 47 percent.
Ford, which has indicated that it could be open to an alliance of the kind that GM is now considering with Renault and Nissan, is valued just over $12 billion, about a fourth of the market capitalization of DaimlerChrysler.
Ford's already battered shares were down 9 cents at $6.25 in midday trade on the New York Stock Exchange. Ford shares remain near a multiyear low of $6.18 hit on June 29, a day after Standard & Poor's cut Ford's credit rating deeper into junk status.