DETROIT (Reuters) –
Ford Motor Co posted a $2.3 billion quarterly net profit, mainly due to gains from a $10 billion debt reduction plan, and said it was on track to at least break even in 2011, sending its shares up as much as 9.7 percent.
Ford's operating loss narrowed from a year ago and was better than analysts had expected, despite poor global markets that helped push General Motors and Chrysler into bankruptcy.
Ford has not taken U.S. government emergency loans.
Referring to the overall market, Chief Executive Alan Mulally said on a conference call, "We believe it is going to start to come back, led by the GDP in the United States in the third quarter and pick up a little momentum in the fourth quarter and next year, but clearly this is still a very fragile economy."
An overall and North American profit in 2011 would be the first for Ford since 2004.
In the second quarter, Ford posted a net profit of 69 cents per share compared with a net loss of $2.7 billion, or $3.89 per share, a year ago.
Excluding a net gain of $2.8 billion mainly from debt reduction, Ford's operating loss narrowed to $638 million, or a loss of 21 cents per share, from a loss of $1.4 billion, or a loss of 63 cents per share, a year ago.
Analysts, on average, had expected a loss of 50 cents per share on that basis, according to Reuters Estimates.
Revenue fell to $27.2 billion in the quarter, from $38.2 billion a year earlier. Analysts had expected $23.39 billion.
Ford said its auto business burned through $1 billion cash in the second quarter compared with $3.7 billion in the first quarter. It said it expects cash flow to improve over the remainder of 2009.
"The cash burn is really being wiped off quickly," said Erich Merkle, president of auto consulting firm
Ford cut its automotive debt by about $10 billion by using cash and stock to buy back debt in transactions completed in April, lowering annual interest expense by more than $500 million. It raised $1.6 billion through a stock offering in May, which it used mainly for a U.S. union retiree healthcare trust.
EYES ON CASH, DEBT
Ford executives have said the company has enough liquidity to complete a turnaround plan, leaving investors focused on cash preservation and debt reduction.
The automotive business ended June with $21.0 billion in cash and $26.1 billion in debt, compared with $21.3 billion in cash at the end of March and $32.1 billion in debt.
Ford borrowed $23 billion in 2006, secured by most of its remaining assets including its Blue Oval logo, to support its restructuring and now carries a heavier debt load than post-bankruptcy GM and Chrysler.
Bank of America Merrill Lynch analyst John Murphy wrote in a note on Thursday that borrowing in 2006 and debt recapitalization in 2009 had "positioned Ford's balance sheet relatively well."
"Mulally has recognized what was right at Ford and leveraged it, putting Ford in a strong position relative to its competition," Murphy wrote.
Ford had total losses of $30 billion from 2006 through 2008, including a company record of $14.7 billion last year, and reported a $1.43 billion loss in 2009's first quarter.
Based in Dearborn, Michigan, Ford has been navigating a U.S. downturn now in its fourth year, with industry sales at their worst levels in three decades.
Ford's U.S. sales fell about 33 percent in the first half of 2009, the best among the six top-selling automakers.
Ford expects U.S. auto industry sales of 10.5 million to 11 million vehicles in 2009, including medium and heavy duty trucks. Ford's planning assumptions for 2010 call for U.S. industry sales of 12.5 million vehicles next year.
The company is restructuring to be profitable in a smaller U.S. auto market and to meet expected increased preference for cars over SUVs and pickup trucks.
About 1,000 hourly employees accepted buyouts or early retirement in Ford's latest offer, leaving the company with about 47,000 hourly workers. Ford had said it is comfortable with that number.
The company is in talks with the United Auto Workers Union on other issues to give it labor cost parity with competitors.
Ford has sold several its Aston Martin, Jaguar and Land Rover brands to raise cash and focus operations. It is also entertaining offers for its Swedish brand Volvo, which would leave it with its Ford, Lincoln and Mercury brands.
Ford Credit, the company's financing arm, reported net income of $413 million in the quarter compared with a net loss of $1.4 billion a year ago.
Ford shares were up 49 cents or 7.68 percent at $6.87 on Thursday on the New York Stock Exchange. (Reporting by David Bailey and Soyoung Kim; Editing by Gerald E. McCormick, Maureen Bavdek and Matthew Lewis)
NEW YORK (Reuters) –
Advisers to large bondholders of CIT Group Inc (CIT.N) are pushing to allow the company to restructure its debt with a prepackaged bankruptcy option should later debt exchanges fail to attract enough creditors, a source close to the negotiations said on Thursday.
The prepackaged option would explicitly open the door for CIT to file for bankruptcy protection if not enough bondholders tendered their notes, said the source, who declined to be named as discussions were private.
The lender to 1 million small and middle-size companies clinched $3 billion in emergency financing from large bondholders this week to restructure its debt and avoid bankruptcy, after the collapse of rescue talks with the U.S. government.
CIT said estimated funding needs for the year ending June 30, 2010, include $7 billion of unsecured debt. The firm has about $40 billion of long-term debt, according to independent research firm CreditSights.
In a first step, CIT is offering 82.5 cents on the dollar for $1 billion floating-rate senior notes due August 17, but the company said it could be forced to file for bankruptcy if it did not get the support of a large number of bondholders.
"There are enough incentives for bondholders with notes coming due in August to tender because I would think they would prefer to keep it (CIT) out of bankruptcy," said Michael Taiano, an analyst at Sandler O'Neill.
Problems at CIT stem in part from Chief Executive Jeffrey Peek's decision earlier in the decade to expand into subprime mortgages and student loans.
Concerns about the company's financial health increased even after CIT in December received $2.33 billion from the government's Troubled Asset Relief Program. The New York-based lender estimated it has lost more than $1.5 billion in the second quarter, hurt by bad loans and writedowns.
The company has been denied access to a U.S. Federal Deposit Insurance Corp program to sell government-backed debt, and the U.S. government declined further assistance, forcing the company to turn to private investors for critical cash.
"Probably major bondholders ... are trying to get a consensus and put a positive stance (on the company's outlook) -- making sure we all get this debt exchange done and then we can go on to next phase," said William Larkin, portfolio manager with Cabot Money Management in Salem, Massachusetts.
But he said some investors were panicking. "In the credit crisis we saw this, that the short end blew up. Individuals hope they will get paid off before there is any trouble, but CIT is an example of what may not happen -- that you may get in trouble."
CIT's debt weakened. The company's floating-rate notes due in August slipped to 79.38 cents on the dollar in early afternoon trade from 80.25 cents on the dollar early on Thursday morning, according to MarketAxess data, trading below the company's offer price.
CIT's shares fell 16 percent to 73 cents in afternoon trading on the New York Stock Exchange.
A bankruptcy would make CIT, with $75.7 billion of reported assets, the largest U.S. financial company to file since Lehman Brothers Holdings Inc (
(Reporting by Juan Lagorio, additional reporting by John Parry; Editing by Phil Berlowitz and Gerald E. McCormick)
WASHINGTON – Rates for 30-year mortgages have edged up after falling for three-consecutive weeks.
The average rate for a 30-year fixed mortgage this week was 5.2 percent, up from 5.14 percent a week earlier, mortgage company Freddie Mac said Thursday.
Rates on 30-year mortgages fell to a record low of 4.78 percent earlier this year, but then rose to nearly 5.6 percent last month after yields on long-term government debt, which are closely tied to mortgage rates, climbed.
Though the troubled U.S. housing market is beginning to stabilize, higher rates could threaten or slow down any recovery, since prospective buyers would be able to borrow less money and might decide to hold off on their purchases.
Sales of previously occupied homes rose for the third month in a row in June, the National Association of Realtors reported Thursday. That hasn't happened since early 2004, during the boom.
"The worst may be behind us," said Frank Nothaft, Freddie Mac's chief economist, in a statement.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
The average rate on a 15-year fixed-rate mortgage rose to 4.68 percent, up from 4.63 percent last week, according to Freddie Mac.
Rates on five-year, adjustable-rate mortgages averaged 4.74 percent, down from 4.83 percent a week earlier. Rates on one-year, adjustable-rate mortgages edged up to 4.77 percent from 4.76 percent.
The rates do not include add-on fees known as points. The nationwide fee for averaged 0.7 point for all loans in Freddie Mac's survey except for one-year adjustable rate mortgages, which averaged a fee of 0.6 percent.