"Ford On Pace For Turnaround"

[Falc'man]

Ford On Pace For Turnaround
Joann Muller, 07.22.09, 06:00 PM EDT
Lower losses anticipated in second-quarter report, but huge debt load remains a concern.

DETROIT -- Ford Motor has done a good job of keeping its eyes on the road during a difficult stretch, as its domestic rivals veered off into bankruptcy.

In the second quarter, Ford ( F - news - people ) picked up two points of market share, even as it cut the average sales incentive on its vehicles by about $1,100. It has managed to keep inventories low, too, so while General Motors ( GMGMQ.PK - news - people ) and Chrysler were forced to shut down their factories for long stretches in early summer, Ford recently said it's raising production for the first time in two years.

So when the carmaker reports its second-quarter operating results on Thursday, analysts are expecting some fairly good news.

Of course, everything is relative. The consensus among analysts is for a loss of 53 cents per share, according to Reuters Estimates, compared with a loss of 62 cents a year earlier.

Some analysts are more bullish. Credit Suisse analyst Christopher Ceraso is looking for a second-quarter loss of 28 cents a share, and wrote in a note to clients that Ford could post a modest profit in 2010, a year ahead of company guidance. Michael Ward of Soleil Securities says Ford's North American auto operations could post a pretax profit of $1 billion next year, based on the benefit of cost reductions, improved industry sales, new products and market share gains. Ford's chief executive, Alan Mulally, is still calling for a return to profitability in 2011.

Ford's pace of new product introductions is strong and could drive further market share gains at the expense of GM and Chrysler, according to Bank of America/Merrill Lynch, which published its annual "Car Wars" study this week. Among the models Ford will be rolling out are a new Taurus flagship and two new fuel-efficient small cars designed in Europe, the Fiesta and a revamped Focus.

There are, however, some long-term challenges that could threaten Ford's ongoing recovery. The automaker, which has been burning cash at the rate of more than $1 billion per month, borrowed $23 billion in 2006 to finance its restructuring and is now saddled with $25.8 billion in debt. That is substantially more than GM and Chrysler, which shed much of their debt in bankruptcy.

Ford, which was the only U.S. automaker not to seek taxpayer loans for survival, has been working to improve its balance sheet in recent months. It cut its automotive debt by about $10 billion by completing a series of transactions in early April. It also raised $1.6 billion through a public stock offering in May that it used to fund a union retiree health-care trust.

http://www.forbes.com/2009/07/22/for...rtner=yahootix