10-QPeriod: Q2 FY2009

FORD MOTOR CO Quarterly Report for Q2 Ended Jun 30, 2009

Filed August 5, 2009For Securities:FF-PCF-PDF-PB

Summary

Ford Motor Company reported a significant turnaround in its second quarter of 2009, with a net income attributable to Ford Motor Company of $2.26 billion, or $0.69 per diluted share, a substantial improvement from a net loss of $8.7 billion, or ($3.89) per diluted share, in the same period of 2008. This dramatic swing was largely driven by a massive $3.4 billion gain on debt reduction actions and a $1.2 billion gain from the conversion of convertible notes, significantly offsetting operational challenges. The Automotive sector, while still facing revenue declines of 35% year-over-year due to lower volumes and the non-recurrence of Jaguar Land Rover sales, showed a significant improvement in pre-tax income due to the absence of major impairment charges from the prior year and substantial gains from debt management. The Financial Services sector also demonstrated a strong recovery, primarily due to the non-recurrence of a large operating lease impairment charge and improved auction values for leased vehicles. Despite the positive net income in the quarter, Ford's liquidity remained a key focus. The Automotive sector's gross cash stood at $21.0 billion, but the company had drawn down $10.1 billion on its revolving credit facility. Ford Credit's funding strategy continued to rely on government-sponsored programs and securitizations amidst volatile credit markets. While the company achieved significant debt reduction through various transactions, its overall debt levels remained substantial, and credit ratings continued to be a concern.

Financial Statements
Beta
Revenue$26.81B
Cost of Revenue$23.35B
Gross Profit$3.46B
SG&A Expenses$3.11B
Operating Expenses$28.55B
Operating Income$829.00M
Interest Expense$1.68B
Net Income$2.26B
EPS (Basic)$0.75
EPS (Diluted)$0.69
Shares Outstanding (Basic)3.00B
Shares Outstanding (Diluted)3.35B

Key Highlights

  • 1Ford reported a net income of $2.26 billion in Q2 2009, a substantial improvement from a net loss of $8.7 billion in Q2 2008.
  • 2Automotive sector revenue decreased by 35% year-over-year to $24.0 billion, impacted by lower wholesale volumes.
  • 3Significant gains from debt reduction actions ($3.4 billion) and convertible note conversions ($1.2 billion) heavily influenced the reported net income.
  • 4The Automotive sector's pre-tax income improved significantly due to the absence of large impairment charges from the prior year.
  • 5Ford Credit's pre-tax income saw a substantial improvement, driven by the non-recurrence of operating lease impairments and better auction values for vehicles.
  • 6Automotive sector gross cash was $21.0 billion at the end of Q2 2009, but the company had drawn $10.1 billion on its revolving credit facility.
  • 7Ford Credit faced ongoing challenges in credit markets, relying on government-sponsored programs and securitization for funding.

Frequently Asked Questions

The primary driver of Ford's improved net income in the second quarter of 2009 was the significant gains realized from debt reduction actions, totaling $3.4 billion, and a $1.2 billion gain from the conversion of convertible notes. These financial gains significantly outweighed operational challenges and the negative impact of lower sales volumes.

The Automotive sector experienced a significant year-over-year revenue decline of 35% to $24.0 billion, driven by a 27% drop in wholesale volumes across all regions. However, the pre-tax income for the sector showed a marked improvement compared to the prior year's loss, mainly due to the non-recurrence of substantial fixed asset impairment charges ($5.3 billion in Q2 2008) and the aforementioned gains from debt reduction efforts. Structural costs also saw a reduction.

Ford's Automotive sector had $21.0 billion in gross cash at the end of Q2 2009. However, the company had drawn $10.1 billion under its revolving credit facility. The company actively reduced its debt during the quarter through various transactions, but overall debt levels remained high, and credit ratings continued to be a concern, impacting funding costs.

Ford Credit demonstrated a strong performance improvement, with pre-tax income increasing significantly. This was primarily driven by the absence of a large operating lease impairment charge from the prior year and improved auction values for returned leased vehicles. Lower provisions for credit losses and operating costs also contributed positively, although lower volumes due to industry conditions and divestitures partially offset these improvements.