Ford quarterly loss expected, focus on cash outflow

A line of Ford autos wait for delivery at the Sill-TerHar Motors Ford dealer in Broomfield, Colorado June 2, 2009.

DETROIT (Reuters) - Ford Motor Co (F.N) is expected to post a second-quarter loss amid the economic downturn that helped force auto parts makers and rivals General Motors and Chrysler into bankruptcy in the past three months.

Still, investors are likely to look past the expected loss and focus on whether Ford slowed its cash burn in the second quarter as it forecast and if it still sees the beginnings of a U.S. economic recovery in the second half of 2009.

And for Ford, with GM and Chrysler now through bankruptcy, the focus also will turn more toward how quickly the automaker will address an automotive debt burden that stood at $25.8 billion at the end of March and reverse years of losses.

Ford's automotive business burned through $3.7 billion in the first quarter and ended March with $21.3 billion in cash.

"I suspect they are going to have very good news for the quarter and I could see in the short term the stock going up more than it has," Morningstar analyst David Whiston said.

"Long term, I still think they have significant issues that investors need to be aware of. They are still burning cash and they still have a lot of debt on their balance sheet."

Analysts on average expect Ford to post a loss of 53 cents per share excluding one-time items, according to Reuters Estimates, compared with a loss of 62 cents a year earlier.

Last week, J.P. Morgan said Ford's second quarter results may be better than the analysts' consensus forecast due to improved pricing in North America and Europe, as well as sequential increases in production.

Credit Suisse narrowed its forecasted second-quarter and full-2009 per-share loss forecasts for Ford, while saying the automaker must address longer-term challenges, including debt.

TARGET: PROFITABILITY

Ford, which posted losses totaling $30 billion from 2006 through 2008, including a company record of $14.7 billion last year, has said it expects to return to profitability in 2011.

Chief Executive Alan Mulally told reporters on Tuesday that the automaker was on track in dealing with its debt.

"On our debt, we are right following on plan exactly," Mulally told reporters on the sidelines of a Ford event that showcased 2010 model year vehicles, as well as in-development plug-in hybrids and a battery electric compact car.

The automaker is restructuring its manufacturing operations to operate profitably in a smaller U.S. auto market and to meet an expected increase in consumer preferences for cars over larger SUVs and pickup trucks that drove profits a decade ago.

"We have a sufficient amount of liquidity to finance our entire transformation," Mulally said, adding: "As we continue our road to profitability the cash flow will just accelerate the improvement of our balance sheet."

Ford borrowed $23 billion in 2006 secured by most of its remaining assets, including the Blue Oval logo to support a multilayered restructuring and now carries a far heavier debt burden than the post-bankruptcy GM and Chrysler.

Chief Financial Officer Lewis Booth told Reuters earlier in July that GM and Chrysler may have "slightly cleaner" balance sheets than Ford, but face a range of continuing problems.

Ford cut its automotive debt by about $10 billion by completing a series of transactions in early April and raised $1.6 billion through a public stock offering in May it used to support funding for a U.S. union retiree healthcare trust.

J.P. Morgan expects Ford to focus on overall debt and suggested it could pursue an equity offering within a year.

Overall, U.S. sales have fallen about 33 percent in the first half of 2009, but it has gained U.S. market share.

Ford's U.S. sales were either slightly ahead of Toyota for No. 2 in the market behind GM in the first half if Volvo sales were included, or trail Toyota excluding Volvo sales.

Volvo, the last brand Ford has left from its former premier auto group after selling Aston Martin, Jaguar and Land Rover, is up for sale.

Ford shares closed at $6.20 Tuesday on the New York Stock Exchange, rising more than six-fold since the stock hit $1.02 on the exchange in late November when U.S. automakers were seeking government aid.

(Reporting by David Bailey; editing by Andre Grenon)