Ford posts $8.7 billion second-quarter loss on truck slump

By David Bailey and Kevin Krolicki

DETROIT (Reuters) - Ford Motor Co posted a record $8.7 billion quarterly loss on Thursday as it wrote down the value of slumping truck and SUV operations and revamped plans in a bid to break its reliance on the gas-guzzlers that have been its franchise vehicles for a decade.

The second-quarter loss was deeper than analysts had forecast and Ford shares fell by 15 percent. Its bonds also traded lower.

Ford cautioned that it did not expect a U.S. economic turnaround until 2010 with oil prices remaining "high and volatile" and no relief for the high prices for steel and other commodities that have hit automakers hard.

In response to the sudden premium on fuel efficiency, the No. 2 U.S. automaker said it would retool truck plants in Michigan and Kentucky to make small cars in addition to an already announced conversion for a Mexican truck plant.

In addition, Ford will bring four previously unannounced small cars to North America, including a Mercury-branded derivative of its popular Focus. It also said it would double its hybrid output in 2009 and double its capacity to make fuel-saving four-cylinder engines by 2011.

Analysts have increasingly focused on whether Ford and rival General Motors Corp have the cash needed to ride out the economic downturn in a market moving away from the light truck segment the U.S. automakers have dominated.

Ford ended the second quarter with a cash position of $26.6 billion down $2.1 billion from the first quarter.

"We're confident that we have enough liquidity to get through," Chief Financial Don Leclair told reporters.

Calyon Securities Mark Warnsman said in a note he was "cautiously optimistic" about Ford's future but said the time it would take the automaker to complete its turnaround represented a risk for investors.

The collapse in demand for trucks and SUVs since the start of the year forced major automakers, including industry leader Toyota Motor Corp, to cut production. One analyst warned that Ford's results were a warning sign for GM.

"We think the quarter has a negative read across for GM, as the shortfall to Ford earnings seems to have been largely a function of a weaker (economy) not cost execution," Goldman Sachs analyst Patrick Archambault said in a note.

Ford said it was on track to cut 15 percent of its white-collar expenses by August 1 and would cut more deeply in 2009 after reducing recurring costs by $5 billion by year end.

Executives declined to offer a timeline for returning to profitability after more than $15 billion of losses the past two years, citing the industry's continued uncertainty.

"I think it really goes with the economy both with the United States and worldwide," Chief Executive Alan Mulally told analysts.

TRUCK LOSSES WEIGH HEAVILY IN CHARGES