Ford's Grip Gets Weaker

The automaker beats but continues to lose market share.
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Updated from 7:42 a.m. EDT

Ford

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reported a 19% slide in second-quarter earnings due in part to shrinking U.S. market share, and the company said its automotive operations won't be profitable this year.

The No. 2 automaker earned $946 million, or 47 cents a share, in the quarter, compared with earnings of $1.2 billion, or 56 cents a share, last year. Worldwide auto sales rose 5.4% from last year to $38.69 billion. Analysts had been forecasting earnings of 33 cents a share on sales of $36.96 billion.

Despite the upside to expectations on Wall Street, traders were discouraged by the performance of Ford's automotive unit. Shares were recently down 9 cents, or 0.8%, to $10.84.

Ford's North American automotive operations had a pretax loss of $907 million in the quarter compared with pretax income of $454 million a year ago. Sales fell $568 million from a year ago to $19.9 billion. Helping to offset the red ink was $1.2 billion of pretax income from Ford Motor Credit, a unit that earned $1.43 billion a year ago.

The company recorded one-time charges related to a bailout of its former parts subsidiary

Visteon

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and job reductions totaling 18 cents a share. But the charges were fully offset by interest earned on tax benefits related to old tax returns.

"Despite profitability in most regions, our global automotive results were disappointing, reflecting the fiercely competitive environment in which we continue to operate, particularly in North America," Ford said in a release.

In light of that environment, Ford's chief financial officer Don Leclair told analysts on a conference call the company would not give quarterly earnings guidance going forward. However, Ford did affirm its full-year earnings target of $1 to $1.25 a share; those earnings will come primarily from its credit arm.

In dealing with excess capacity issues in the industry and the company's burdensome cost structure, Leclair said "nothing is off the table." He said the company plans to expand and accelerate its restructuring efforts in order to stay competitive.

"We are responding to this tougher operating environment through actions aimed at improving our cost structure, optimizing our global footprint, strengthening our balance sheet and making essential investments for the future," Ford said. "We'll continue to share our plans as the year progresses.

In the U.S., Ford's share of the auto market declined 1.4%, mostly due to a decline in its share of the truck market. Leclair said

General Motors'

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employee discount promotion hurt its business. This month, Ford has started an employee discount program of its own to rival GM's, and Leclair said the early returns look promising.

Ford's global automotive operations lost $245 million before taxes in the quarter, compared with income of $97 million a year ago. Ford Europe and Ford Asia/Pacific were profitable in the quarter.