Ford's big loss: $8.7 billion in 3 months

By Elizabeth Strott

Soaring gasoline prices have caused a lot of pain to drivers -- and to Ford Motor (F, news, msgs), which got slammed in the second quarter.

This morning, the U.S. automaker reported a whopping loss of $8.7 billion, or $3.88 per share, as more consumers shifted away from sport-utility vehicles and trucks to smaller, more fuel-efficient cars. Excluding items, Ford lost $1 billion, or 62 cents per share, worse than analysts' expectations of a 28-cent per-share loss.

Shares of Ford fell 68 cents, or 11.3%, to $5.35 this afternoon.

The average price of gasoline has soared over the past year, hitting a record $4.114 for a gallon of regular on July 17. A year ago, gas averaged $2.945 a gallon, nearly 40% cheaper than it is today.

"This is going to be an extremely painful year," said Mirko Mikelic, a senior portfolio manager at Fifth Third Asset Management, to Bloomberg News. "The F-150 is really where they've made money for years, and that's gone."

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Ford reported a 28% drop in sales last month, with sales of its F-Series pickups plunging 41%. For the quarter, F-Series truck sales fell 31% to 126,575.

Ford reported a profit of $750 million, or 31 cents per share, last year.

The automaker wrote down assets of $5.3 billion for its auto business and $2.1 billion on leases at Ford Motor Credit.

"I think grim is being optimistic for the company," Wall Street Strategies analyst David Silver said to MarketWatch. "Right after the first-quarter earnings release, there was all this talk about Ford really turning the corner, but all of Detroit seems to still be dragging their feet with this restructuring."

Truck woes

The decline in sales of the F-150, once the all-time best-selling vehicle in the U.S., has hurt truck sales across the industry. J.D. Power and Associates lowered its forecast for truck sales earlier this week because of the "sluggish economy."

"The economic stress and uncertainty that consumers may face over the next six to 12 months will likely result in a continuous period of slow new-vehicle sales," executive director of automotive forecasting Jeff Schuster said in a press release. "It is also unlikely that a pronounced rebound will occur in 2009 and conditions could actually worsen before they improve." J.D. Power and Associates expects a 12% decline in light truck sales in 2008 to 14.2 million units.

Ford said today that it will delay the launch of the newly designed F-150 pickup. Ford also said it will convert three truck plants in the U.S. to make fuel-efficient cars and that it will double hybrid production by next year. "We continue to take decisive action in response to the rapidly changing business environment and remain absolutely committed to our business transformation plan," Ford chief Alan Mulally said. Overall U.S. auto sales have dropped eight months in a row. "The growth rate of smaller vehicle segments has not been enough to offset significant declines experienced in large-vehicle segments," J.D. Power and Associates said.

In June, auto sales fell 18.3%, the worst June for automakers in 17 years, according to Edmonds.com. Ford reported a 28% drop in sales last month, with sales of its F-series pickups plunging 41%.

"Our view is that gas prices aren't likely to go down, and more importantly, many consumers have moved on," Ford sales analyst George Pipas told The Associated Press on July 1, when it reported June figures. "We believe that the segment has merit for certain consumers but is not likely to rebound at any point."

Tough times ahead

In a statement, Mulally said: "The second half will continue to be challenging, but we have absolutely the right plan to respond to the changing business environment and begin to grow for the long term."

The quarterly loss is the sixth out of eight quarters since Mulally has been running the company.

Other automakers also struggling

General Motors (GM, news, msgs) reported an 18% decline in June sales, and Chrysler, majority-owned by private-equity firm Cerberus Capital Management, saw sales fall 36% last month.

GM earlier this month announced more restructuring plans in an effort to deal with the mess the industry is facing. The automaker said it will cut salaried jobs, suspend its dividend and sell assets to boost its cash position. The company also said it will speed up its factory closings.

• Read more: Can GM ever come back?

GM shares were down $1.20, or 8.2%, to $13.42 this afternoon.

Meanwhile, GM lost its coveted No. 1 spot in the global sales race to Japanese automaker Toyota Motor (TM, news, msgs) earlier this week.

Toyota reported a preliminary sales gain of 2% in the second quarter, while GM's sales fell by 5%.

"There's just not quite enough volume in these emerging markets to offset weakness in North America," Mike DiGiovanni, GM's executive director of global markets and industry analysis, said on a conference call with analysts Wednesday.