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updated: 7/26/2011 7:17 AM

Ford says 2Q profit falls as costs rise

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  • A Ford logo on a wheel at a car dealership in Omaha, Neb.

      A Ford logo on a wheel at a car dealership in Omaha, Neb.
    Associated Press

Associated Press

DEARBORN, Mich.-- Ford Motor Co. says its second-quarter profit dropped slightly as higher sales were offset by the cost of developing new products and expanding sales in Asia.

The company earned $2.4 billion, or 59 cents per share, down 8 percent from a profit of $2.6 billion, or 61 cents per share, in the second quarter of 2010.

It was Ford's ninth straight quarterly profit. Ford President and CEO Alan Mulally said the company is focused on improving its balance sheet and investing in new products despite the bumpy economy. Ford is now projecting that annual U.S. sales will be in the lower end of its 13 million to 13.5 million forecast, and it lowered its full-year sales forecast for Europe.

For the second quarter, worldwide sales rose, but the company spent more on materials like steel and copper and on product development. In Asia, where Ford recently announced an ambitious growth plan, Ford reported a pretax profit of just $1 million, down $112 million from the same quarter a year earlier, as it invests in new plants and products.

Revenue rose 13 percent to $35.5 billion. Analysts polled by FactSet had forecast revenue of $32.15 billion.

Without one-time items, including $110 million for employee reductions, Ford would have earned $2.9 billion, or 65 cents per share. That beat analysts' forecast of 60 cents per share.

Ford warned last month that its second-quarter profit could slip, citing investments in future products. In addition to a slew of new cars in Asia, the company is in the midst of an expensive overhaul of its flagging Lincoln luxury brand. It also plans to introduce the hybrid-only C-Max minivan in the U.S. early next year.

Ford paid off $2.6 billion in debt during the quarter, bringing its load down to $14 billion. Ford hopes that its steady reduction of debt will convince ratings agencies to return the company to investment-grade status. That would make it cheaper to borrow money.

U.S. auto sales stumbled in the second quarter, losing the momentum they had before the March 11 earthquake in Japan. Some buyers turned to Ford and other brands when Japanese cars were in short supply. But others seem determined to wait until fall, when Japanese supplies will be replenished and prices are expected to fall.

The supply shortages helped Ford keep prices high in the second quarter. Auto pricing site said Ford's incentive spending fell 18 percent to $2,492 per vehicle during the quarter.

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