Reply #27: Ford Foiled by $4 Gasoline After First-Quarter Profit `Mirage'

[ozymandius]

July 23 (Bloomberg) -- Ford Motor Co.'s turnaround plan has been derailed by $4-a-gallon gasoline, dashing investor hopes raised after Chief Executive Officer Alan Mulally produced a surprise first-quarter profit.

Tomorrow he's expected to report a second-quarter loss of 25 cents a share, the average of 12 analyst estimates compiled by Bloomberg, on plunging sales of pickup trucks and sport- utility vehicles. The forecasts exclude what the world's third- biggest automaker calls one-time costs. A year earlier, Ford had a profit on that basis of $258 million, or 13 cents.

``Confidence in our plan is really increasing,'' Mulally said in an interview on April 24, after Ford reported first- quarter earnings of $100 million, or 5 cents a share. A month later, as record fuel prices hurt sales and an 82 percent increase in steel costs drove up expenses, he backed off his goal of returning to an annual profit next year.

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A loss would be the sixth in eight quarters since Dearborn, Michigan-based Ford recruited Mulally, 62, from Boeing Co. in September 2006. The automaker has lost $15.3 billion in the past two years and hasn't posted an annual profit since 2005.

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The cost to protect Ford debt from default rose to 1,462 basis points on July 22 from 1,214 on April 1, according to CMA Datavision in New York. An increase in the price indicates a decline in the perception of a company's credit quality.

http://www.bloomberg.com/apps/news?pid=20601103&sid=a600I6x814TA&refer=us