DETROIT -- Ford Motor Co. narrowed its pretax operating loss to $424 million in the second quarter while posting a net profit of $2.3 billion because of a gain related to recent debt-reduction actions.
Ford made good on its pledge to cut its cash burn rate. The automaker burned through $1 billion in automotive operating cash, compared with $3.7 billion in the first quarter and $7.2 billion in the final quarter of 2008.
The $2.3 billion net profit compares with a net loss of $8.7 billion a year earlier.
Total revenue plunged nearly 29 percent to $27.2 billion as U.S. auto sales continued to languish at the 27-year lows that helped push rivals General Motors and Chrysler into bankruptcy.
Ford shares surged on the news. As of 12:52 p.m. ET, the stock rose to $7.07, a 52-week high. It closed the day at $6.98, up 9.4 percent.
The second-quarter results move Ford towards its goal of restoring profits in 2011. It hasn't made money on an annual basis since 2005.
"Clearly the business environment remains difficult, and demand for new vehicles remains weak around the world," CEO Alan Mulally said on a conference call. "Despite the challenges, Ford's underlying business is getting progressively stronger."
Ford Motor Credit posted a pretax profit of $646 million, compared with a pretax loss of $294 million a year ago.
Results in the company's key North America market improved to a pretax loss of $851 million, down from $1.3 billion a year earlier.
Ford also made money in some regions.
In Europe, Ford reported a profit before taxes of $138 million, down from $582 million a year earlier. Pretax profit also shrunk in South America, to $86 million from $388 million.
The Asia-Pacific and Africa operations had a pretax loss of $25 million after a profit of $50 million on the same basis in the second quarter of 2008.
Volvo, which Ford is trying to sell, had a pretax loss of $231 million, almost double the $120 million loss from a year ago.
Ford finished the second quarter with total cash reserves of $21.0 billion, down from $21.3 billion at the end of March. Analysts estimate Ford needs $9 billion to $10 billion in cash to fund operations.
Ford's operating loss of $424 million before taxes and special items compared with a $1.03 billion operating loss a year earlier.
Ford, which posted losses totaling $30 billion from 2006 through 2008, including a company record of $14.7 billion last year, has said it expects to return to profitability in 2011.
Booth on cash
CFO Lewis Booth said Ford used less cash in the quarter than it expected.
"Because the second quarter cash was so good, we're not sure we're going to get a sequential improvement in the third quarter," he said in an interview, altering a forecast for quarter-to-quarter advances he made three months ago.
He did say that cash burn will slow from the first half to the second half.
Booth said Ford will continue to look for opportunities to improve its balance sheet, but he wouldn't comment on whether more debt restructuring is imminent. Analysts are speculating that such actions are likely, given Ford's rising stock price and the cleaner balance sheets that rivals GM and Chrysler have after emerging from bankruptcy.
"The people down the road have been through a fairly difficult process of cleaning up their balance sheets, he said. We're going to do it in a different way. We're going to work on the base business."
GM's announcement in November that it was in danger of running out of cash triggered a seven-month drama that included a successful plea for U.S. bailout loans and a Chapter 11 filing.
Market share gain
Ford's first-half U.S. market share grew to 16.1 percent from 15.8 percent a year earlier, bolstering chances that a 13-year slide will end this year.
The company now stands at No. 2 in 2009 U.S. sales after ceding the spot to Toyota Motor Corp. in 2007. Toyota's first-half share was 16.0 percent and GM's 19.7 percent. Overall U.S. light-vehicle sales fell 35.1 percent through June.
Ford cut its automotive debt by about $10 billion by completing a series of transactions in early April and raised $1.6 billion through a public stock offering in May, using proceeds to support funding for a UAW retiree health care trust.
That debt restructuring led to Ford reporting its net profit for the quarter. Because Ford was able to settle the debt for less than its face value, the company wrote down the value of the debt, booking a $3.4 billion gain.That combined with restructuring costs and other special items for a total gain on special items of $2.8 billion.
Without the gain, Ford would have posted a sizable net loss for the quarter. Its operating loss after taxes was $638 million.
"The road ahead remains challenging," Mulally said. "While we expect the economy to improve in the second half of the year, the recovery is likely to be more modest than many of us had hoped."
Chrissie Thompson contributed to this report.