GM Loses $3.2 billion while Ford Is In The Red by Only $132 Million in Second Quarter
Better World Club Looks Pretty Good. Didn't Come Close to Losing $132 Million Last Quarter--Thwarting BWC President's Dream
As Exxon Makes $10 Billion Last Quarter, Explain Again Why Auto Companies are Enabling the Oil Companies...
From Wall Street Journal Reports
General Motors and Ford Motor Co. announced huge losses in the 2nd Quarter. Ford Chief Executive William Clay Ford Jr. said that the company's $123 million loss is evidence of an increasingly tough marketplace in North America. Still, Mr. Ford expressed encouragement asserting that his restructuring plan is gaining "traction". Still, he said the auto maker must go "farther and faster" in its efforts. He said the cultural change taking place within the company's internal ranks "has been remarkable" and he sought to reassure investors by saying the same team that led turnarounds in various overseas markets are now in place in North America.
The company said Thursday it will outline further restructuring actions within the next 60 days.
Ford lost $797 million in North American operations in the second quarter, taking its losses in the region above $1 billion so far this year. While Ford bleeds at home, the auto maker is on track to make money in its international operations despite a few financial hiccups in the second quarter in some regions.
Ford has long relied on pickup truck and SUV sales to keep the company afloat, but high gasoline prices and a greater availability of alternative options in product portfolios has crimped demand for Ford's bread-and-butter products. Mr. Ford said the auto maker plans to reduce its North American production capacity by 15%, or 700,000 vehicles, by the end of 2006.
Meanwhile, GM Chairman Chief Executive Rick Wagoner Jr. was even more upbeat while announcing a $3.2 billion quarter loss: "Our turnaround has not just gained traction, it's accelerating into high gear." Revenue did jump 12% and the auto maker raised its cost savings target.
The results included a total of $4.33 billion in special charges, including a $3.7 billion after-tax charge related to buyouts and early retirements, which allowed GM to reduce its hourly work force by 34,400. One-time items also included a loss related to the pending sale of a 51% stake in finance arm GMAC, a gain on the disposition of Isuzu stock and other restructuring charges.
Excluding items, the company posted an adjusted profit of $1.2 billion, well above analysts' expectations. GMAC was a significant contributor to the upside surprise with adjusted earnings of about $898 million..
The Number 1 U.S. auto company posted a $10.6 billion loss last year amid sliding North American market share and a decline in popularity of more profitable but less fuel-efficient models. To stop its slide, the company embarked on an aggressive cost-cutting campaign late last year. The restructuring efforts got a major boost last month when nearly 35,000 hourly workers agreed to take financial incentives to leave, allowing GM to meet its job-cut target ahead of schedule and, at the time, increase its cost savings target.
Like Ford, the company still isn't profiting from making cars for its home market, but there are glimmers of hope. In North America, excluding special items, GM lost $85 million in the latest quarter, a $1.1 billion improvement over 2005's second quarter.
Mr. Wagoner said the company's newer products, including full-size SUVs, the Chevrolet Impala and HHR, and the Pontiac G6, were doing well. Ford and GM continue to lose market share, especially now that high gasoline prices have crimped sales of their bread-and-butter products, traditional SUVs and pickups.
Better World Club President Mitch Rofsky spoke enviously of the presidents of the two auto giants. "It's always been my personal dream to lose $10 billion in a year--and keep my job," he said. Discomfiting his own shareholders, Mr. Rofsky was considerably more sober than Mssrs. Ford and Wagoner, pledging: I'll work as hard as I can, but I may not have time to get there."