In an update on its turnaround, Ford said it is on track to have a lower cash outflow due to its restructuring than the $17 billion it had previously forecast for the period 2007 through 2009. reflecting slightly lower restructuring costs and better operating results.
Ford now expects its total cash outflow through 2009 in the range of $15 billion to $16 billion, Ford Chief Financial Officer Don Leclair said.
But the results could complicate Ford's contract talks with the United Auto Workers union that formally began this week.
Ford is seeking sweeping concessions to bring its labor costs in line with Japanese automakers operating in the United States.
Mulally said that while union concessions on retiree health care and work rules contributed to its gains, Ford needs to show further progress.
"We still have a long way to go to be fully competitive," he said on a conference call with analysts.
Tynan of Argus Research said Ford's negotiators could point to the continuing weakness in the company's home market in talks with the UAW.
"The company could make the case that we are still not profitable in North America, and we need more," he said.
Auto Business Improves
Dearborn, Michigan-based Ford, which has seen some recent sales success for its new crossover models like the Ford Edge and has won quality accolades, said second-quarter revenue rose to $44.2 billion from $41.9 billion a year earlier.
Ford's auto operations swung to a profit of $378 million before taxes and excluding special charges, while finance arm Ford Motor Credit contributed a net profit of $62 million.
The Ford Motor Credit profit was down sharply from $242 million a year earlier, reflecting higher borrowing costs and lease expenses and a more cautious stance on credit loss reserves.
In North America, Ford's loss narrowed to $279 million during the quarter before taxes and excluding special items.
JP Morgan analyst Himanshu Patel said much of the turnaround reflected higher production of Ford's high-margin F-Series Super Duty work trucks.
"We continue to like Ford (and) GM (General Motors) medium-term on (the) labor restructuring opportunity," he said in a note to clients.
Bear Stearns analyst Peter Nesvold said Ford's progress since Mulally left Boeing last year to take over the CEO post at Ford has been "encouraging," noting that the automaker has topped Wall Street cash-flow projections for three consecutive quarters.
Ford said special items contributed $443 million to its second-quarter pretax results, including $206 million from the sale of its Aston Martin unit.
Ford also said it cut costs by $600 million in the second quarter and $1.1 billion through the first half on reduced warranty costs, lower costs for retiree health care and a smaller payroll.