Ford profit off 57 pct. amid European crisis

Ford Motor Co., the second-largest U.S. automaker, lowered its outlook for full-year profit while reporting that second-quarter net income fell 57 percent as losses in Europe ballooned and overshadowed earnings in North America.

A growing economic crisis in Europe is denting the turnaround that chief executive officer Alan Mulally has engineered at Ford.

European pretax operating losses widened to $404 million, from a loss of $149 million in the first quarter and profit of $176 million a year earlier. Ford said Wednesday that it now expected full-year European losses to exceed $1 billion and that it no longer forecast total pretax operating profit to equal last year's $8.8 billion.

"It's brutal, man, just brutal," said Gary Bradshaw, a fund manager at Dallas-based Hodges Capital Management, which owns about 250,000 Ford shares. "They've done a remarkable job here in the U.S., paying down debt and getting an investment-grade rating, but the European stuff is just killing them."

Ford reported its 13th consecutive profitable quarter, with net income of $1.04 billion, or 26 cents a share, compared with $2.4 billion, or 59 cents, a year earlier. Excluding onetime items, the profit was 30 cents a share, beating the 29-cent average estimate of 17 analysts surveyed by Bloomberg.

Ford shares closed down 9 cents, or nearly 1 percent, at $8.97.

The economy in Europe, which accounts for a quarter of Ford's revenue, is worse than Ford anticipated at the start of the year and will stay challenging for at least five more years, chief financial officer Bob Shanks said.

"We think this is a situation we'll have to deal with for the foreseeable future," Shanks said. "We're not counting on a strong recovery of the business as one of the things that will save us."

Ford is cutting ad spending and sponsorships in Europe "because people aren't buying," Shanks said. The automaker also is reducing production by shortening work days in factories, reducing assembly-line line speeds, and shedding temporary employees, Shanks said.

"We have excess capacity in Europe, and that's one of the many challenges we're facing," Shanks told reporters Wednesday at Ford's Dearborn, Mich., headquarters. "As we think about all the different things we have to do to put Europe on track, making sure production meets demand is one of the things."