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Rising gas prices have claimed another victim.
In a blow to Ford Motor's (F, news, msgs) turnaround plan, the U.S. automaker this morning said it will not be profitable in 2009, blaming lower demand for its high-profit -- but low fuel-economy -- SUVs and trucks.
"Unless there is a fairly rapid turnaround in U.S. business conditions, which we are not anticipating, it now looks like it will take longer than expected to achieve our North American Automotive profitability goal," said Chief Executive Alan Mulally in a prepared statement.
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Shares of Ford fell 8.2% on the news to close at $7.16.
Mulally had set a goal for profitability by 2009.
Ford lowered its outlook for full-year car and truck sales to between 15 million and 15.4 million, down from a previous forecast of 15.3 million to 15.6 million.
The automaker also said it is cutting North American production, citing "lower industry volume . . . dramatic model mix shifts away from large trucks and SUVs, and higher commodity costs."
Instead, the company will increase production of smaller vehicles, including the Ford Focus, Fusion and Escape, as well as the Mercury Milan and Mariner. The company said it expects to produce 690,000 vehicles in North America in the second quarter, a 15% decline from the same quarter in 2007. In the third quarter, Ford plans to produce 510,000 to 540,000 vehicles, down 15% to 20% from last year's third quarter.
Profitable by 2010?
"The news is a disappointment, especially if you consider the optimism after their first-quarter results," which were surprisingly upbeat, Argus Research analyst Kevin Tynan said. "But it's not all that surprising."Both Ford and General Motors (GM, news, msgs) have been through large restructurings, and they've done a "tremendous" job at getting costs out of the system, which resulted in the better-than-expected first-quarter numbers, Tynan said. But "that can't sustain the weak demand for their big-profit vehicles," he said.
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It won't get easier either, Tynan cautioned. "Because of oil prices and gasoline prices, the domestic companies need massive investment in research and development to become competitive in hybrids and smaller vehicles in general."
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Tynan added that he didn't think it was possible for Ford to be profitable by 2010.
First-quarter earnings surprise
Ford's first-quarter results, announced in late April, gave hope to investors that Mulally's restructuring plan was working.Ford earned $100 million, or a nickel per share, up from a net loss of $282 million, or 15 cents per share, in the same period a year ago. Analysts had expected a loss of 15 cents per share.
Profit from continuing operations came in at $525 million, or 20 cents per share.
The results showed "there are signs of progress that Ford just may, in fact, be fixable," Lehman Bros. analyst Brian Johnson told Bloomberg on April 24.
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