Ford Motor Co. executives have warned for weeks that their second-quarter earnings report would be an epic disappointment for a company that emerged from 2019 weaker than expected financially, despite a healthy year for the industry.
Then the company surprised everyone.
Ford announced a $1.1 billion profit Thursday, counting a one-time investment gain from its partnership with Volkswagen in Argo AI, the autonomous driving technology company, of approximately $3.5 billion.
The automaker was facing hideous back-to-back quarterly earnings this year, worsened by the global pandemic. Ford felt pain even before the novel coronavirus shuttered factories in the spring. Three months ago, the company reported its first quarterly earnings net loss since April 2009 during the Great Recession.
Shortly after reporting that $2 billion loss, Ford warned things would get even worse.
Not counting the one-time gain from Argo, Ford reported that second-quarter earnings before interest and taxes – adjusted EBIT – was a loss of $1.9 billion, about $3 billion better than had been projected. That’s down from $1.7 billion in the second quarter of 2019. This year’s second-quarter net income of $1.1 billion was up
from $100 million in the same quarter last year.
While self-inflicted mistakes last year hurt the company as it headed into this pandemic, CEO Jim Hackett and Chief Operating Officer Jim Farley have assured industry analysts thpany will do better.
On Thursday, the company said it delivered on that promise.
“I could not be prouder of the Ford team’s optimism and effectiveness as we manage through this pandemic,” Hackett said in a statement. “We delivered a strong Q2 while keeping each other safe, caring for customers and neighbors and assuring tomorrow.”
Last year, a botched launch of its popular Explorer dramatically slowed delivery of SUVs during a period when consumers were eager to buy, which could have created a financial buffer.
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All automakers are dealing with a fragile economy, job losses, record unemployment and uncertainty created by national and international health scares.
Crosstown rival General Motors also exceeded expectations when it reported Wednesday a net loss of $800 million, down 132% from the second quarter a year ago. Fiat Chrysler Automobiles reports earnings Friday.
It is Ford, however, that plans to build and deliver to dealerships later this year on a trio of high-profile projects: a 2021 F-150, the small Bronco Sport and the all-electric Mustang Mach-E SUV. The Bronco SUV is scheduled for 2021.
Cash is essential during these product launches.
Ford ends the quarter with $39.3 billion in cash on hand and $39.8 billion in liquidity.
A year ago, Ford had $23.2 billion in cash on hand and $37.3 billion in liquidity.
“I’m optimistic,” Tim Stone, chief financial officer, said during an investor call. “We’re well positioned for what lies ahead.”
He added, “Our journey will be a long one. Ford is positioned to win this race.”
Ford executives cautioned thpany would incur significant financial challenges in the second half of the year.
Hackett said, “We’re keenly focused on cost and cash discipline.”
Hackett, since taking the reins at Ford in 2017, has acknowledged publicly during sales and earnings reports that things haven’t been going as hoped. He and Bill Ford Jr., executive chairman of the company, have tried to keep employees calm.
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Yet Ford “so obviously prepared” in the past for a downturn while “this time, it just didn’t seem like anyone was prepared for it,” said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions based in Chester Springs, Pennsylvania.
“This is not about the pandemic. We’ve been saying troubles were coming for more than a year,” he said.
Market analyst Jon Gabrielsen said Ford’s finan…