DETROIT -- Ford Motor Co., hurt by rising commodity prices and higher product development costs, reported a decline in second-quarter net profits today to $2.4 billion.

North American pre-tax operating profits rose slightly, while earnings in other regions and Ford's financial operations fell. Revenues increased as the automaker boosted cash and further trimmed its debt burden.

"We delivered very good second-quarter results while growing the business globally and serving more customers in every region," Ford CEO Alan Mulally said in a statement. "Despite an uncertain business environment, we further strengthened our balance sheet and continued to invest for the future."

Quarterly net income of $2.4 billion came on revenues of $35.5 billion. A year earlier, Ford posted net profits of $2.6 billion on revenue of $35.07 billion, including revenues from Volvo. Excluding Volvo, which Ford sold in the third quarter of 2010, Ford's revenue in the second quarter of 2010 was $31.3 billion.

More cash, less debt

"We're off to a really good first half," Lewis Booth, Ford's CFO, said in a media briefing. "We're now at $14 billion net debt and $22 billion net cash which is a substantial improvement from the first quarter."

Ford's cash total rose $700 million from March 31. Its debt fell $2.6 billion to $14 billion.

Ford said second-quarter profits declined in its South America, Europe and Asia Pacific Africa operations. Ford Motor Credit Co. posted a pretax operating profit of $604 million, down $284 million from a year earlier.

Booth stopped short of predicting when Ford would earn an investment grade credit rating. He noted that the rating agencies have made it clear they want the automaker to meet several requirements, including resolving contract talks with the UAW this summer. But Booth said if Ford continues to report profits and reduce debt, "We expect to get to investment grade sooner rather than later."

Not easy

Booth added, "It wasn't an easy quarter." He said demand weakened in North America after the March earthquake in Japan interrupted production for many automakers. Even though Ford's production was minimally impacted, a shortage of cars kept some shoppers out of the market in both North America and Europe.

Ford is maintaining its U.S. full-year industry volume outlook in the range of 13 million to 13.5 million units, Booth said.

"We expect it to be closer to 13 million," he said. Several analysts have lowered their outlooks to below 13 million, citing sluggish economic growth and earthquake-related inventory shortages.

Booth added there will be some improvements in the second half as Japanese production ramps up.

"We expected a relatively quiet year this year and that's what we're going to see," he said.

All oil-driven commodity prices -- including steel, aluminum and plastic -- remain under upward pressure, Booth said. He reiterated Ford's guidance that its commodity costs would be $2 billion higher this year than last year.

First equals best

Ford posted first-quarter net profits of $2.55 billion on revenues of $33.11 billion and said in April it would be the best quarter this year because it planned to hike spending in following periods.

Ford has budgeted $5 billion to $5.5 billion in capital outlays this year, with the bulk of it taking place after the first quarter.

In the second quarter, Ford North America reported a pre-tax operating profit of $1.9 billion, an increase of $10 million from a year ago. Ford attributes that rise to improved net pricing, higher volumes and a more favorable mix of vehicles, meaning more sales of higher-margin cars and trucks.

Those positives were offset by higher commodity and structural costs, as well as increased spending on new products.

Special losses

Ford's second-quarter net also was dragged down by special losses of $272 million, $177 million more than a year earlier. The special losses covered personnel-reduction actions, the closing of its Mercury brand and other dealer-related actions in North America, and pension settlements in Belgium.

Ford sold 736,000 vehicles to dealers in the quarter, up 77,000 from a year earlier. North American revenue was $19.5 billion, up $2.6 billion from a year earlier.

U.S. vehicle sales slowed across the industry during the second quarter compared to the first quarter because of inventory shortages and slower economic growth.

Ford's U.S. sales rose 9 percent during the period to 574,228 units.

"The key debate around Ford continues to be the sustainability of -- or potential for improvement in -- North America pretax profits," Barclays analyst Brian Johnson said in a report Monday.

Johnson and other analysts say Ford remains vulnerable to industry pricing trends, sales volumes, higher commodity costs, and increased structural costs.

 

Still looking rosy

 

The future is getting scary in the autoworld. Everyone is having major supplier issues and it's getting worse. If they can't supply the vehicles the profits will drop. Hopefully we can get these issues fixed soon.

 

Pretty far cry from any handouts/bailouts. Like Snakebite says, it might be a drop in profits, but it's still a couple of BILLION dollars in profit. lol I can never figure out how they expect them to keep rising every single time? I'm surprised they can produce so many vehicles and expect people to just keep buying them - most people don't get a new car every year.

 

Very well put, mind you we try but it's more like every other year tehehe

 

The problem is that we let everything in life, like our jobs fall into the fast lane. I see it where i work we we constantly run out of supplies, which never seem to get fixed. The good ol push, push, even if you don't have what you need, still need that majic number at the end of the day!!!

 

The trouble is that the plants are setup to produce a certain amount of vehicles daily and if they don't have the right supplies they build whatever they can. For example they are having issues on all SUV lines supplying 4x4 components. In a market like ours (northern Alberta) 4x2 doesn't sell but we get stuffed with them because that is all they can supply.

 

even down here you rarely see a 4x2. In Windsor I think 4x2 would suffice 99.99% of the time

 

Yes but us little guys tend to get screwed over.