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Ford 2Q Earnings Fall 48 Percent on Production, China Woes

Ford Sign
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Dinged by slumping China sales and a fire at a U.S. parts factory that cut production of lucrative pickup trucks, Ford Motor Co.'s second-quarter net profit fell 48 percent from a year ago.

The company says it made $1.1 billion from April through June, or 27 cents per share, falling short of Wall Street expectations. Analysts polled by FactSet expected adjusted earnings of 31 cents per share.

Ford's performance slumped largely because the fire knocked out production of highly profitable F-Series pickup trucks for a little over a week in May. Ford said at the time it had enough inventory so that sales wouldn't take a big hit. China sales slumped due to aging products, and the company's joint venture there was about break-even.

Troubles in China as well as Europe caused the company to cut its full-year guidance to $1.30 to $1.50 per share. It had been $1.45 to $1.70.

Revenue was $38.92 billion, also short of expectations. Analysts expected $39.14 billion.

Ford said in a statement that it's still restructuring and redesigning the business to allocate capital to areas with higher returns. "This type of profound redesign will take time, and we will communicate as decisions are made," Chief Financial Officer Bob Shanks said. The restructuring will be a drag on future earnings. Ford said it will cause charges against pretax earnings of $11 billion, or $7 billion in cash, during the next three to five years.

The company said it's taking "urgent action" in China to fix the business, including cost cuts, building more vehicles in China and recruiting more local talent for top positions. Ford says it's also rolling out revamped vehicles with 60 percent of its lineup being refreshed or new by the end of next year.

Ford warned in May that the fire at Meridian Magnesium Products in Michigan would have a short-term impact on earnings. The plant makes front-end parts for Ford pickups and big SUVs. The ensuing parts shortage forced Ford to lay off about 7,600 workers at two truck factories for about a week. But the company went to great lengths to resume production SUVs, even flying equipment from the U.S. to a Meridian factory in Europe.

Ford's sales dropped in the U.S. by 0.8 percent during the quarter as sedan sales slumped. Although it sold 236,000 F-Series pickups during the quarter and is on a record sales pace, the company's North American pretax profit of $1.8 billion was $600 million less than a year earlier.

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