Ford Motor Company (NYSE:F), an American auto icon, overall profits fell 57% in the second quarter earnings because the challenges overseas are mounting.
The second quarter results of Ford Motor Company (F) brought some good news and bad news for the company. The good is that just like last quarter, the Ford Motor Company’s sales and profits in its most important market, the U.S.A. continued to be strong enough for the company to weather just about any challenge.
The bad news is that Ford Motor Company (NYSE:F)’s overall profits were down 57% in the 2 quarter. When Ford was facing collapse six years ago, the CEO Alan Mulally laid out the “One Ford” plan that would end up saving the company.
Mulally’s vision for a better future was deceptively simple: Ford Motor Company (F) would invest aggressively in great new products, work hard to keep its costs as low as possible and also sell a smaller, and more polished lineup of cars and trucks in markets all around the world.
That strategy of Mulally has worked out great, especially in the U.S. Vehicles like the ford model of compact Focus, the Explorer, and Ford’s much-lauded line of pickups have proven hugely successful here. So much that Ford added shifts in the factories that make each of those vehicles during the second quarter. The Ford’s models of Explorer and Focus assembly lines are now running around the clock.
Ford is also a top seller in Russia, where a Ford factory in St. Petersburg makes the Focus for the local market, and it’s a hit in Europe, where the Ford fights with rival Volkswagen (VLKAY) for the top of the compact-car sales charts but still not as successful as it should be.
All of the automakers worldwide have suffered, and Ford is no exception. Ford Motor Company also lost $404 million in Europe during the 2nd quarter, that is a big dive from a profit of $176 million a year ago. A deep global recession also affected the automaker and other problems drove auto sales down about 10% in the first half of 2012, to their lowest levels in a decade.
In order to break even, an auto factory has to be run at at least 80% of its maximum capacity and currently Ford’s are running at only about 63%, according to estimates put together by analysts at Morgan Stanley.
Mulally said to reporters on Wednesday morning that the most important aspect of the “One Ford” plan is Ford’s determination to match production to demand as Company won’t hesitate to close factories if it won’t make Europe profitable again. The Ford’s factories already in the U.K. and Belgium are at risk under the global recession and low demand.