Ford suffers record loss

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By Bill Koenig BLOOMBERG NEWS

Ford Motor Co., the world's third-biggest automaker, posted a record quarterly loss of $8.7 billion and accelerated a conversion to fuel-efficient vehicles to wean itself from money-losing trucks.

Ford shares fell the most in eight years after the company reported a second-quarter deficit of $3.88 a share compared to a profit of $750 million, or 31 cents, a year earlier. The figure included $8 billion in pretax write-downs for plant closings and the declining value of truck leases at Ford Motor Credit Co.

The automaker said it will double production of hybrid vehicles, sell more European autos such as the Fiesta in the Chief Executive Officer Alan Mulally's turnaround plan.

“They believe this is a permanent shift in buyer sentiment that they have to adjust to no matter how hard it will be,” said Greenwich, Conn. “This is going to be expensive.”

The loss marks the sixth in eight quarters under Mr. Mulally, 62, recruited from F-Series pickups forced the CEO in May to abandon his target of returning to profit in 2009.

Ford's product thrust will face heightened competition from General Motors Corp. in June said it will shutter four truck factories and build more small cars.

Ford makes “a lot more money selling large pickup trucks, and they're not going to make as much selling small cars,” Mr. Keller said.

Neither Ford nor GM has posted an annual profit since 2005. Their struggles prompted professor Edward Altman to project this week that each has about a 46 percent chance of default within five years.

“Both are in very serious shape and the markets reflect that,” Mr. Altman said in a July 22 interview with Bloomberg Television. He cited his Z-score mathematical formula that measures bankruptcy risk. The model shows Ford and GM are “on the verge of bankruptcy,” said Mr. Altman, who teaches finance at New York University's Stern School of Business.

Excluding costs Ford considers one-time expenses, the loss was $1.38 billion, or 62 cents a share. On that basis, Ford was expected to report a deficit of 28 cents, the average estimate of 12 analysts surveyed by Bloomberg.

Ford dropped 92 cents, or 15 percent, to $5.11 on the New York Stock Exchange, for the biggest daily decline since Aug. 3, 2000.