Way Backward?
The Way Forward is fraught with potholes.
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Morgan Stanley automotive analyst Jonathan Steinmetz slashed his profit estimate for Ford Motor on Friday a day after the automaker announced a second quarter loss of $125 million, or 7 cents a share.
Steinmetz reduced his full-year projection to a penny-a-share loss from a 54-cents-per share profit, based on lower expected production, a weaker product mix and the rising cost of raw materials. He cut his 2007 profit estimate to 45 cents a share from 80 cents.
"The problems at Ford are getting worse as evidenced by weak North American auto results, a third quarter production cut in high margin products, and significantly weaker year-over-year financial services results," Steinmetz said in a research note Friday.
During the earnings call, Ford management said it will take two months to tinker with its "Way Forward" turnaround plan, mainly by adding additional cost cutting measures. But Steinmetz thinks the company is challenged as much on the revenue side as it is on the profit side.
"A solid near term liquidity position is not sufficient?without a clear path to improved automotive profitability, it will be hard to maintain liquidity long term," he said.
Ford's sales were off 7% in June on a weak performance of its F-Series pickup trucks, which have traditionally been a strength. Ford is cutting its truck production by 40,000 units for the third quarter as it attempts to pare down inventory. Steinmetz said he wouldn't be surprised to see Ford implement a large scale employee buyout program similar to that at General Motors, which saw sales drop 26% in June. :titanic:
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