A record performance at its burgeoning credit arms leads Ford Motor Co. to a second-quarter net income of $1.2 billion, or $0.57 per share, comparing favorably against its $417 million, or $0.22-per-share performance in like-2003.

The after-tax earnings come on $43 billion in revenue, bettering second-quarter revenue in 2003 by $2.2 billion.

Ford is going to restructure its Jaguar business.

As was the case in the first quarter of 2004, Ford’s performance over the period outperforms expectations. The auto maker’s second-quarter guidance, revised in June, forecast $0.45 to $0.50 per-share. (See related story: Ford Increases Q2 Outlook)

Over the first half of the year, Ford has posted a $3.1 billion ($1.51 per share) net profit and the company is on pace to better its $3.5 billion-$3.8 billion full-year performance target, adding fuel to its 2006 target of $7 billion in full-year net income – half of which is slated to come from automotive operations.

Ford Motor Credit Co. represents much of the muscle behind the results, which was business as usual at Ford for three years until profits from automotive operations outpaced the financial arm in the first quarter. (See related story: Ford Beats Q1 Expectations, Ups Outlook)

Ford Credit contributed a record net income of $897 million (representing 77% of net profit), an increase of $496 million over like-2003’s $401 million. It showed particular strength in its credit-loss performance as spending fell well short of Ford’s provision. Lease residuals also improved vs. previous levels, with rental-fleet market share dropping 3.6 points vs. like-2003.

“Results were very strong for the quarter, with significant improvements in credit losses,” Ford Credit Chairman and CEO Mike Bannister says in a release, noting that a bullish U.S. economy and low interest rates propped up the operation.

However, the auto maker reports problems with its Premier Automotive Group stable of brands, particularly at Jaguar Cars, where sales numbers and retail mix are falling behind expectations; incentives are higher than desired; and the weak U.S. dollar is killing the brand’s bottom line, Chief Financial Officer Don Leclair says.

“We have hit a bump in the road, (but) we’re going to get over that,” he says, promising an announcement soon on restructuring actions at Jaguar. “We’re going to have to reevaluate, particularly, the Jaguar business structure.”

Although Leclair doesn’t provide a timetable for a restructuring announcement, he says the level of action will be relatively “subtle” compared with recent actions taken at Ford of Europe, and will be designed to take place over the long haul as opposed to Ford of Europe’s results, which began to show after nine months.

Profits of $83 million from worldwide automotive operations are comparatively sparse when compared with the financial arm, but are favorable compared with like-2003’s break-even performance. The automotive business was especially hurt by a $362 million loss at PAG.

PAG’s loss comes even as its sales outpace like-2003 by 2%, leading to a $500 million spike in revenue to $6.9 billion vs. $6.4 billion in 2003. Strong Volvo sales are carrying PAG, as Jaguar struggles and Land Rover pumps major investment into its Solihull, U.K., plant for this summer’s redesigned Discovery/LR3 launch, Leclair says.

He says PAG’s weak performance will cause it to miss its profit target and it will be lucky to break even this year.

On a more positive note, Ford of Europe enjoyed market-share gains and a 10% increase in sales over like-2003, thanks to strong Focus C-Max sales, which contributed to earnings of $211 million on $6.7 billion in sales. The unit may break even in 2004, whereas Ford had been predicting a slight loss. (See related story: Booth: Ford Europe Comeback on Track)

North American automotive operations, checked by drooping market share and a pullback from fleet sales, remains profitable, making $455 million on $20.5 billion in revenue and bettering like-2003’s profit by $10 million, even as revenue was flat.

While Ford Credit profitability significantly outpaces automotive operations through the first half, Leclair points to the $80 million improvement in the quarter vs. 2003, and the strong outlook for the remainder of the year as proof the automotive business is on track.

“This year we’re going to make a billion dollars (in automotive, and) we are on an improvement trend.”

Ford Second Quarter
Financial Results
2004 2003 %
Sales $42,802 $40,582 5.2
Net Income $1,165 $417 64.3
E/S* $0.57 $0.22 61.4
Unit Sales** 1,748 1,718 2.8

Note: Dollar sales and net income stated in millions; unit sales in thousands. * E/S is earnings per share. ** Unit sales are worldwide wholesale deliveries.