As we continue to pull the daily sheets from our Word of the Day calendar and accountants are busy counting the days of their fiscal calendars, the pencil pushers at Ford and Chrysler can rest easy for a moment because they just finished compiling the numbers for the second quarter.
Ford earned a net income of $2.4 billion in Q2, which is actually $201 million less than it had raked in by this time last year. The net income was affected by a reduction in staff, various dealership actions, pension settlements in Belgium and the move to eliminate the Mercury brand. The automaker enters the rest of the year with $32.2 billion in liquid assets, which will come in handy as Ford looks to expand its market share around the globe.
Chrysler as gone in a different direction than Ford for the second quarter of 2011. Compared to Q2 last year, the automaker is up 30 percent with net income of $13.7 billion. Chrysler's numbers should continue to grow as it releases new or redesigned models, and has paid off major debts owed to the United States and Canadian governments.
Ready to take a deeper dive into the quarterly earnings for both automakers? Click past the jump for the full financial reports.
Ford earned a net income of $2.4 billion in Q2, which is actually $201 million less than it had raked in by this time last year. The net income was affected by a reduction in staff, various dealership actions, pension settlements in Belgium and the move to eliminate the Mercury brand. The automaker enters the rest of the year with $32.2 billion in liquid assets, which will come in handy as Ford looks to expand its market share around the globe.
Chrysler as gone in a different direction than Ford for the second quarter of 2011. Compared to Q2 last year, the automaker is up 30 percent with net income of $13.7 billion. Chrysler's numbers should continue to grow as it releases new or redesigned models, and has paid off major debts owed to the United States and Canadian governments.
Ready to take a deeper dive into the quarterly earnings for both automakers? Click past the jump for the full financial reports.
FORD EARNS $2.4 BILLION NET INCOME IN SECOND QUARTER 2011; STRENGTHENS FOUNDATION FOR CONTINUED GLOBAL GROWTH
• Second quarter net income was $2.4 billion, or 59 cents per share, a $201 million decrease from second quarter 2010. Pre-tax operating profit was $2.9 billion, or 65 cents per share, a decrease of $64 million from second quarter 2010.
• Automotive pre-tax operating profit was $2.3 billion for the second quarter, an increase of $209 million from second quarter 2010.
• Ford Credit reported a pre-tax operating profit of $604 million for the second quarter, a decrease of $284 million from second quarter 2010.
• Total Company revenue was $35.5 billion in the second quarter, up $4.2 billion from second quarter 2010.
• Ford generated positive Automotive operating-related cash flow of $2.3 billion in the second quarter.
• Ford continued to reduce Automotive debt with an additional $2.6 billion of net debt reductions in the second quarter as a result of payments on its term loans and full repayment of the outstanding balance on its revolving credit line.
• Ford ended the second quarter with Automotive gross cash of $22 billion, an increase of $700 million
compared to March 31, 2011. Ford's Automotive gross cash exceeded debt by $8 billion, an improvement
of $6.6 billion during the first half of 2011.
• Ford ended the second quarter with $32.2 billion in total Automotive liquidity, an increase of $4.3 billion over the first half.
• For full year results, Ford plans to deliver continued improvement in pre-tax operating profit and Automotive operating-related cash flow compared to 2010.
DEARBORN, Mich., July 26, 2011 – Ford Motor Company today reported second quarter 2011 net
income of $2.4 billion, or 59 cents per share, a decrease of $201 million, or 2 cents per share, from second quarter 2010. The period was marked by continued Automotive growth, solid profitability and strong cash flow, and a continued focus on strengthening the balance sheet and investing for the future.
"We delivered very good second quarter results while growing the business globally and serving more customers in every region," said Alan Mulally, Ford president and CEO. "Despite an uncertain business environment, we further strengthened our balance sheet and continued to invest for the future."
Second quarter pre-tax operating profit was $2.9 billion, or 65 cents per share, a decrease of $64 million, or 3 cents per share, from second quarter 2010. Total Automotive results improved, offset by an anticipated reduction in Financial Services results.
For the first half of 2011, Ford earned a pre-tax operating profit of $5.7 billion, net income of $4.9 billion and reported Automotive operating-related cash flow of $4.5 billion. Ford continued to grow volume and revenue during the period.
Ford's second quarter net income was affected by unfavorable special items of $272 million, $177 million more than a year ago. The special items include personnel reduction actions, Mercury and other dealerrelated actions in North America, and pension settlements in Belgium.
Second quarter Automotive pre-tax operating profit was $2.3 billion, an increase of $209 million from second quarter 2010. Second quarter Ford Credit pre-tax operating profit was $604 million, a decrease of $284 million from second quarter 2010.
North America posted a second quarter pre-tax operating profit of $1.9 billion. South America, Europe and Asia Pacific Africa also were profitable.
Ford's second quarter revenue was $35.5 billion, an increase of $4.2 billion from second quarter 2010.
Ford generated positive Automotive operating-related cash flow of $2.3 billion in the second quarter.
Ford continued its focus on strengthening its balance sheet, with a net reduction in Automotive debt of $2.6 billion in the second quarter. The net reduction includes $2.3 billion of payments on its term loans and full repayment of the outstanding balance of $800 million on its revolving credit line. These actions were offset partially by an increase in low-cost loans to support advanced technology.
Ford ended the second quarter with $22 billion of Automotive gross cash, an increase of $700 million compared to March 31, 2011. Automotive gross cash exceeded debt by $8 billion, leading to a first-half improvement of $6.6 billion compared with the end of 2010.
Ford's Automotive liquidity totaled $32.2 billion, an increase of $4.3 billion in the first half.
"We are on track for solid results in 2011, including delivering on our guidance for improved full-year pre-tax operating profit and Automotive operating-related cash flow compared with last year," said Lewis Booth, Ford executive vice president and chief financial officer. "Going forward, we will continue building on this solid foundation for future investment and growth."
SECOND QUARTER 2011 HIGHLIGHTS
• Increased market share in the U.S. and Europe
• Remained No. 1 in Canada, including best June result in 22 years
• Increased sales volume by over 40 percent in Turkey and by over 30 percent in Russia
• Increased market share in China and ASEAN
• Focus, F-150 and MKX won IIHS Top Safety Pick; Focus won Euro NCAP's five-star rating
• Lincoln named the top brand in the 2011 AutoPacific Vehicle Satisfaction Awards
• Previewed 2013 Taurus at New York Auto Show
• Announced plans to build 1.0-liter three-cylinder EcoBoost engine and all-new eight-speed
transmission
• Announced $350 million investment with joint-venture partners to build Ford's first transmission plant in China with initial capacity of 400,000 six-speed transmissions
• Announced plan to add 340 new dealerships in China by 2015
• Made commitment to build next-generation small SUV in China
• Announced $72 million investment to increase production capacity at the Chennai Engine Plant in India
• Began production of Duratorq TDCi engine in South Africa
• Announced plan to export Ranger to 148 markets from South Africa
• Revealed new production plans in Europe that will enable the launch of at least 20 all-new or
significantly freshened vehicles in next three years
• Signed agreement for a 50-50 joint venture in Russia with Sollers to provide more products and expanded services for the market
• Announced plan to triple production capacity of electrified vehicles in the U.S. to more than
100,000 by 2013
AUTOMOTIVE SECTOR
Second Quarter First Half
Total Automotive pre-tax operating profit in the second quarter was $2.3 billion, an increase of $209 million from second quarter 2010. The improvement was driven by higher net pricing at each of the Automotive operations, favorable volume and mix in North America, and lower net interest expense. Net interest expense improved due primarily to debt repayments made since the beginning of second quarter 2010.
Total vehicle wholesales in the second quarter were 1.5 million units, up 101,000 units from second quarter 2010, as every business segment reported higher wholesales. Total Automotive revenue in the second quarter was $33.5 billion, up $4.7 billion from second quarter 2010.
North America: In the second quarter, North America reported a pre-tax operating profit of $1.9 billion, an increase of $10 million from a year ago. This reflects significant improvement in net pricing, driven by the strength of its products, and favorable volume and mix. These were offset by higher costs, including increases for new products, commodities, and structural costs. Wholesales in the second quarter were 736,000 units, up 77,000 units from a year ago.
Revenue was $19.5 billion, up $2.6 billion from second quarter 2010.
South America: In the second quarter, South America reported a pre-tax operating profit of $267 million, a decrease of $18 million from a year ago. This represents South America's 30th consecutive quarterly pre-tax operating profit. Net pricing was higher but was more than offset by higher commodities cost and increased structural costs due to local inflation. Wholesales in the second quarter were 135,000 units, up from a year ago. Revenue was $2.9 billion, up $300 million from second quarter 2010.
Europe: In the second quarter, Europe reported a pre-tax operating profit of $176 million, a decrease of $146 million from a year ago. The decrease was more than explained by higher commodities and structural costs. Adverse change in dealer stocks also was a contributing factor, reflecting actions to replenish dealer stocks in second quarter 2010 following the end of scrappage programs, compared to dealer stock declines in second quarter 2011. Wholesales in the second quarter were 422,000 units, about the same as a year ago. Revenue was $9 billion, up $1.5 billion from second quarter 2010.
Asia Pacific Africa: In the second quarter, Asia Pacific Africa reported a pre-tax operating profit of $1 million, a decrease of $112 million from a year ago. The lower profit primarily reflects higher costs, which include investments Ford is making to grow across the markets in the region, as well as unfavorable product-line and market mix. Wholesales in the second quarter were 226,000 units, up 17,000 units from a year ago. Revenue, which excludes sales at unconsolidated China joint ventures, was $2.1 billion, up $300 million from second quarter 2010.
Other Automotive: In the second quarter, Ford reported a loss in Other Automotive of $76 million, an improvement of $475 million from a year ago. The improvement primarily reflects lower net interest expense from significant debt reduction actions. For the first half, Ford's net interest expense was about $700 million lower than the same period last year.
FINANCIAL SERVICES SECTOR
For the second quarter, the Financial Services sector reported a pre-tax operating profit of $602 million, a decrease of $273 million compared with second quarter 2010.
Ford Motor Credit Company: Second quarter Ford Credit pre-tax operating profit was $604 million, a decrease of $284 million from second quarter 2010. In line with our expectations, the results reflect primarily lower credit loss reserve reductions and the non-recurrence of lower lease depreciation expense of the same magnitude as 2010.
OUTLOOK
Ford remains focused on delivering its One Ford plan, which is unchanged:
• Aggressively restructuring to operate profitably at the current demand and changing model mix
• Accelerating the development of new products that customers want and value
• Financing the plan and improving the balance sheet
• Working together effectively as one team, leveraging Ford's global assets
In the first half of 2011, the seasonally adjusted annual rate of sales was 12.8 million in the U.S. and 15.4 million units for the 19 markets Ford tracks in Europe.
Ford is maintaining its U.S. full year industry volume outlook in the range of 13 million to 13.5 million units. For the 19 markets Ford tracks in Europe, after a strong first half, Ford sees some sign of weakness related to the debt crisis and fiscal austerity programs. Ford now forecasts the industry in Europe to be in a range of 14.8 million to 15.3 million units, compared with 14.5 million to 15.5 million units previously.
As reported with first quarter results, quality remains mixed due to some near-term issues in North America, which Ford is addressing. Ford said it is pleased with progress made to date on those issues.
The company also said it is on track to achieve quality improvements in its international operations.
The company expects its full year U.S. total market share, its U.S. retail share of the retail market and European market share to be equal to or improved from 2010. In the first half, Ford's U.S. total market share was 16.7 percent, its U.S. retail share of the retail market was 13.9 percent and European market share was 8.4 percent.
Ford said its second quarter and first half performance were very good, and the company remains on track to deliver continued improvement for full year pre-tax operating profit and Automotive operating-related cash flow compared with 2010. In 2010, the company reported a full-year pre-tax operating profit of $8.3 billion and Automotive operating-related cash flow of $4.4 billion.
Ford said it continues to expect second half results will be lower than first half. In the Automotive sector, this reflects increasing commodities and structural costs, as well as seasonal factors that tend to favor the first half. At Ford Credit, lower profit in the second half primarily reflects the same factors affecting first half results.
Ford continues to expect commodities and structural costs to each increase by about $2 billion compared with 2010. The increase in structural costs is consistent with supporting higher volumes in the short term, as well as the company's plan to grow the business, strengthen its brand and improve its products through the business planning period. Ford said it expects its structural costs as a percent of net revenue to improve compared with 2010.
Based on first half performance and expectations for the full year, Ford continues to expect Automotive operating margin to be equal to or improved compared with 6.1 percent in 2010, despite higher commodities cost. In the first half, Automotive operating margin, at 7.3 percent, was down half a point compared with the same period a year ago.
Ford expects 2011 capital expenditures in the range of $5 billion to $5.5 billion. Capital spending in the first half was $2 billion.
Ford expects total company third quarter production to be about 1.4 million units, up 92,000 units from a year ago, reflecting continued strong customer demand for its products.
"We are making consistent progress on our commitment to deliver profitable growth for all," said Mulally.
"Going forward, we remain focused on aggressively managing short term challenges and opportunities and strengthening the foundation to deliver our mid-decade plan and serve a growing group of Ford customers around the world."
Ford's planning assumptions and key metrics, and production volumes, are shown below:
The financial results discussed herein are presented on a preliminary basis; final data will be
included in Ford's Quarterly Report on Form 10-Q for the period ended June 30, 2011. The
following information applies to the information throughout this release:
• Pre-tax operating results exclude special items unless otherwise noted.
• See tables following the "Safe Harbor/Risk Factors" for the nature and amount of special
items, and reconciliation of items designated as "excluding special items" to U.S. generally
accepted accounting principles ("GAAP"). Also see the tables for reconciliation to GAAP of
Automotive gross cash and operating-related cash flow.
• Discussion of overall Automotive cost changes is measured primarily at present-year
exchange and excludes special items and discontinued operations; in addition, costs that
vary directly with production volume, such as material, freight, and warranty costs, are
measured at present-year volume and mix.
• Automotive liquidity is defined as Automotive cash, cash equivalents, and marketable
securities and committed Automotive credit lines (including local lines available to foreign
affiliates).
• As a result of the sale of Volvo, 2010 results for Volvo were reported as special items and
excluded from wholesales, revenue and operating results.
• Wholesale unit sales and production volumes include the sale or production of Ford-brand
and JMC-brand vehicles by unconsolidated affiliates. JMC refers to our Chinese joint
venture, Jiangling Motors Corporation. See materials supporting the July 26, 2011
conference calls at www.shareholder.ford.com for further discussion of wholesale unit
volumes.
++ Excludes special items.
+++ Excludes special items and "Income/(Loss) attributable to non-controlling interests." See tables following "Safe Harbor/Risk Factors" for the nature and amount of these special items and reconciliation to GAAP.
Safe Harbor/Risk Factors
Statements included herein may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations, forecasts, and assumptions by our management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation:
• Decline in industry sales volume, particularly in the United States or Europe, due to financial crisis, recession, geopolitical events, or other factors;
• Decline in market share or failure to achieve growth;
• Lower-than-anticipated market acceptance of new or existing products;
• An increase in or acceleration of market shift beyond our current planning assumptions from sales of trucks, medium- and large-sized utilities, or other more profitable vehicles, particularly in the United States;
• An increase in fuel prices, continued volatility of fuel prices, or reduced availability of fuel;
• Continued or increased price competition resulting from industry overcapacity, currency fluctuations, or other factors;
• Adverse effects from the bankruptcy, insolvency, or government-funded restructuring of, change in ownership or control of, or alliances entered into by a major competitor;
• Fluctuations in foreign currency exchange rates, commodity prices, and interest rates;
• Economic distress of suppliers that may require us to provide substantial financial support or take other measures to ensure supplies of components and could increase our costs, affect our liquidity, or cause production constraints or disruptions;
• Single-source supply of components or materials;
• Labor or other constraints on our ability to maintain competitive cost structure;
• Work stoppages at Ford or supplier facilities or other interruptions of production;
• Substantial pension and postretirement health care and life insurance liabilities impairing our liquidity or financial condition;
• Worse-than-assumed economic and demographic experience for our postretirement benefit plans (e.g., discount rates or investment returns);
• Restriction on use of tax attributes from tax law "ownership change;"
• The discovery of defects in vehicles resulting in delays in new model launches, recall campaigns, reputational damage, or increased warranty costs;
• Increased safety, emissions, fuel economy, or other regulation resulting in higher costs, cash expenditures, and/or sales restrictions;
• Unusual or significant litigation, governmental investigations or adverse publicity arising out of alleged defects in our products, perceived environmental impacts, or otherwise;
• A change in our requirements for parts where we have long-term supply arrangements committing us to purchase minimum or fixed quantities of certain parts, or to pay a minimum amount to the seller ("take-or-pay" contracts);
• Adverse effects on our results from a decrease in or cessation or clawback of government incentives related to investments;
• Adverse effects on our operations resulting from certain geo-political or other events;
• Inherent limitations of internal controls impacting financial statements and safeguarding of assets;
• Substantial levels of Automotive indebtedness adversely affecting our financial condition or preventing us from fulfilling our debt obligations;
• Failure of financial institutions to fulfill commitments under committed credit facilities;
• A prolonged disruption of the debt and securitization markets;
• Inability of Ford Credit to access debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts due to credit rating downgrades, market volatility, market disruption, regulatory requirements, or other factors;
• Higher-than-expected credit losses;
• Increased competition from banks or other financial institutions seeking to increase their share of financing Ford vehicles;
• Collection and servicing problems related to finance receivables and net investment in operating leases;
• Lower-than-anticipated residual values or higher-than-expected return volumes for leased vehicles;
• Imposition of additional costs or restrictions due to the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Act") and its implementing rules and regulations; and
• New or increased credit, consumer, or data protection or other regulations resulting in higher costs and/or additional financing restrictions.
Ford cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will prove accurate, or that any projection will be realized. It is to be expected that there may be differences between projected and actual results. Ford's forward-looking statements speak only as of the date of initial issuance, and Ford does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise. For additional discussion of these risks, see "Item 1A . Risk Factors" of Ford's Annual Report on Form 10-K for the year ended December 31, 2010.
CONFERENCE CALL DETAILS
Ford Motor Company [NYSE:F] releases its preliminary second quarter 2011 financial results at 7 a.m. EST today. The following briefings will be conducted after the announcement:
• At 9 a.m. EST, Alan Mulally, Ford president and CEO, and Lewis Booth, Ford executive vice
president and chief financial officer, will host a conference call for the investment community and news media to discuss the 2011 second quarter.
• At 11 a.m. EDT, Bob Shanks, Ford vice president and controller, Neil Schloss, vice president and treasurer, and Mike Seneski, chief financial officer, Ford Motor Credit Company, will host a conference call for fixed income analysts and investors.
Listen-only presentations and supporting materials will be available on the Internet at
www.shareholder.ford.com. Representatives of the news media and the investment community
participating by teleconference will have the opportunity to ask questions following the presentations.
Access Information – Tuesday, July 26
Earnings Call: 9 a.m. EDT
Toll Free: 877.415.3184
International: 857.244.7327
Earnings Passcode: "Ford Earnings"
Fixed Income: 11 a.m. EDT
Toll Free: 866.318.8612
International: 617.399.5131
Fixed Income Passcode: "Ford Fixed Income"
Replays – Available after 2 p.m. the day of the event through Tuesday, Aug. 2.
www.shareholder.ford.com
Toll Free: 888.286.8010
International: 617.801.6888
Passcodes:
Earnings: 51847137
Fixed Income: 38855937
• Second quarter net income was $2.4 billion, or 59 cents per share, a $201 million decrease from second quarter 2010. Pre-tax operating profit was $2.9 billion, or 65 cents per share, a decrease of $64 million from second quarter 2010.
• Automotive pre-tax operating profit was $2.3 billion for the second quarter, an increase of $209 million from second quarter 2010.
• Ford Credit reported a pre-tax operating profit of $604 million for the second quarter, a decrease of $284 million from second quarter 2010.
• Total Company revenue was $35.5 billion in the second quarter, up $4.2 billion from second quarter 2010.
• Ford generated positive Automotive operating-related cash flow of $2.3 billion in the second quarter.
• Ford continued to reduce Automotive debt with an additional $2.6 billion of net debt reductions in the second quarter as a result of payments on its term loans and full repayment of the outstanding balance on its revolving credit line.
• Ford ended the second quarter with Automotive gross cash of $22 billion, an increase of $700 million
compared to March 31, 2011. Ford's Automotive gross cash exceeded debt by $8 billion, an improvement
of $6.6 billion during the first half of 2011.
• Ford ended the second quarter with $32.2 billion in total Automotive liquidity, an increase of $4.3 billion over the first half.
• For full year results, Ford plans to deliver continued improvement in pre-tax operating profit and Automotive operating-related cash flow compared to 2010.
DEARBORN, Mich., July 26, 2011 – Ford Motor Company today reported second quarter 2011 net
income of $2.4 billion, or 59 cents per share, a decrease of $201 million, or 2 cents per share, from second quarter 2010. The period was marked by continued Automotive growth, solid profitability and strong cash flow, and a continued focus on strengthening the balance sheet and investing for the future.
"We delivered very good second quarter results while growing the business globally and serving more customers in every region," said Alan Mulally, Ford president and CEO. "Despite an uncertain business environment, we further strengthened our balance sheet and continued to invest for the future."
Second quarter pre-tax operating profit was $2.9 billion, or 65 cents per share, a decrease of $64 million, or 3 cents per share, from second quarter 2010. Total Automotive results improved, offset by an anticipated reduction in Financial Services results.
For the first half of 2011, Ford earned a pre-tax operating profit of $5.7 billion, net income of $4.9 billion and reported Automotive operating-related cash flow of $4.5 billion. Ford continued to grow volume and revenue during the period.
Ford's second quarter net income was affected by unfavorable special items of $272 million, $177 million more than a year ago. The special items include personnel reduction actions, Mercury and other dealerrelated actions in North America, and pension settlements in Belgium.
Second quarter Automotive pre-tax operating profit was $2.3 billion, an increase of $209 million from second quarter 2010. Second quarter Ford Credit pre-tax operating profit was $604 million, a decrease of $284 million from second quarter 2010.
North America posted a second quarter pre-tax operating profit of $1.9 billion. South America, Europe and Asia Pacific Africa also were profitable.
Ford's second quarter revenue was $35.5 billion, an increase of $4.2 billion from second quarter 2010.
Ford generated positive Automotive operating-related cash flow of $2.3 billion in the second quarter.
Ford continued its focus on strengthening its balance sheet, with a net reduction in Automotive debt of $2.6 billion in the second quarter. The net reduction includes $2.3 billion of payments on its term loans and full repayment of the outstanding balance of $800 million on its revolving credit line. These actions were offset partially by an increase in low-cost loans to support advanced technology.
Ford ended the second quarter with $22 billion of Automotive gross cash, an increase of $700 million compared to March 31, 2011. Automotive gross cash exceeded debt by $8 billion, leading to a first-half improvement of $6.6 billion compared with the end of 2010.
Ford's Automotive liquidity totaled $32.2 billion, an increase of $4.3 billion in the first half.
"We are on track for solid results in 2011, including delivering on our guidance for improved full-year pre-tax operating profit and Automotive operating-related cash flow compared with last year," said Lewis Booth, Ford executive vice president and chief financial officer. "Going forward, we will continue building on this solid foundation for future investment and growth."
SECOND QUARTER 2011 HIGHLIGHTS
• Increased market share in the U.S. and Europe
• Remained No. 1 in Canada, including best June result in 22 years
• Increased sales volume by over 40 percent in Turkey and by over 30 percent in Russia
• Increased market share in China and ASEAN
• Focus, F-150 and MKX won IIHS Top Safety Pick; Focus won Euro NCAP's five-star rating
• Lincoln named the top brand in the 2011 AutoPacific Vehicle Satisfaction Awards
• Previewed 2013 Taurus at New York Auto Show
• Announced plans to build 1.0-liter three-cylinder EcoBoost engine and all-new eight-speed
transmission
• Announced $350 million investment with joint-venture partners to build Ford's first transmission plant in China with initial capacity of 400,000 six-speed transmissions
• Announced plan to add 340 new dealerships in China by 2015
• Made commitment to build next-generation small SUV in China
• Announced $72 million investment to increase production capacity at the Chennai Engine Plant in India
• Began production of Duratorq TDCi engine in South Africa
• Announced plan to export Ranger to 148 markets from South Africa
• Revealed new production plans in Europe that will enable the launch of at least 20 all-new or
significantly freshened vehicles in next three years
• Signed agreement for a 50-50 joint venture in Russia with Sollers to provide more products and expanded services for the market
• Announced plan to triple production capacity of electrified vehicles in the U.S. to more than
100,000 by 2013
AUTOMOTIVE SECTOR
Second Quarter First Half
Total Automotive pre-tax operating profit in the second quarter was $2.3 billion, an increase of $209 million from second quarter 2010. The improvement was driven by higher net pricing at each of the Automotive operations, favorable volume and mix in North America, and lower net interest expense. Net interest expense improved due primarily to debt repayments made since the beginning of second quarter 2010.
Total vehicle wholesales in the second quarter were 1.5 million units, up 101,000 units from second quarter 2010, as every business segment reported higher wholesales. Total Automotive revenue in the second quarter was $33.5 billion, up $4.7 billion from second quarter 2010.
North America: In the second quarter, North America reported a pre-tax operating profit of $1.9 billion, an increase of $10 million from a year ago. This reflects significant improvement in net pricing, driven by the strength of its products, and favorable volume and mix. These were offset by higher costs, including increases for new products, commodities, and structural costs. Wholesales in the second quarter were 736,000 units, up 77,000 units from a year ago.
Revenue was $19.5 billion, up $2.6 billion from second quarter 2010.
South America: In the second quarter, South America reported a pre-tax operating profit of $267 million, a decrease of $18 million from a year ago. This represents South America's 30th consecutive quarterly pre-tax operating profit. Net pricing was higher but was more than offset by higher commodities cost and increased structural costs due to local inflation. Wholesales in the second quarter were 135,000 units, up from a year ago. Revenue was $2.9 billion, up $300 million from second quarter 2010.
Europe: In the second quarter, Europe reported a pre-tax operating profit of $176 million, a decrease of $146 million from a year ago. The decrease was more than explained by higher commodities and structural costs. Adverse change in dealer stocks also was a contributing factor, reflecting actions to replenish dealer stocks in second quarter 2010 following the end of scrappage programs, compared to dealer stock declines in second quarter 2011. Wholesales in the second quarter were 422,000 units, about the same as a year ago. Revenue was $9 billion, up $1.5 billion from second quarter 2010.
Asia Pacific Africa: In the second quarter, Asia Pacific Africa reported a pre-tax operating profit of $1 million, a decrease of $112 million from a year ago. The lower profit primarily reflects higher costs, which include investments Ford is making to grow across the markets in the region, as well as unfavorable product-line and market mix. Wholesales in the second quarter were 226,000 units, up 17,000 units from a year ago. Revenue, which excludes sales at unconsolidated China joint ventures, was $2.1 billion, up $300 million from second quarter 2010.
Other Automotive: In the second quarter, Ford reported a loss in Other Automotive of $76 million, an improvement of $475 million from a year ago. The improvement primarily reflects lower net interest expense from significant debt reduction actions. For the first half, Ford's net interest expense was about $700 million lower than the same period last year.
FINANCIAL SERVICES SECTOR
For the second quarter, the Financial Services sector reported a pre-tax operating profit of $602 million, a decrease of $273 million compared with second quarter 2010.
Ford Motor Credit Company: Second quarter Ford Credit pre-tax operating profit was $604 million, a decrease of $284 million from second quarter 2010. In line with our expectations, the results reflect primarily lower credit loss reserve reductions and the non-recurrence of lower lease depreciation expense of the same magnitude as 2010.
OUTLOOK
Ford remains focused on delivering its One Ford plan, which is unchanged:
• Aggressively restructuring to operate profitably at the current demand and changing model mix
• Accelerating the development of new products that customers want and value
• Financing the plan and improving the balance sheet
• Working together effectively as one team, leveraging Ford's global assets
In the first half of 2011, the seasonally adjusted annual rate of sales was 12.8 million in the U.S. and 15.4 million units for the 19 markets Ford tracks in Europe.
Ford is maintaining its U.S. full year industry volume outlook in the range of 13 million to 13.5 million units. For the 19 markets Ford tracks in Europe, after a strong first half, Ford sees some sign of weakness related to the debt crisis and fiscal austerity programs. Ford now forecasts the industry in Europe to be in a range of 14.8 million to 15.3 million units, compared with 14.5 million to 15.5 million units previously.
As reported with first quarter results, quality remains mixed due to some near-term issues in North America, which Ford is addressing. Ford said it is pleased with progress made to date on those issues.
The company also said it is on track to achieve quality improvements in its international operations.
The company expects its full year U.S. total market share, its U.S. retail share of the retail market and European market share to be equal to or improved from 2010. In the first half, Ford's U.S. total market share was 16.7 percent, its U.S. retail share of the retail market was 13.9 percent and European market share was 8.4 percent.
Ford said its second quarter and first half performance were very good, and the company remains on track to deliver continued improvement for full year pre-tax operating profit and Automotive operating-related cash flow compared with 2010. In 2010, the company reported a full-year pre-tax operating profit of $8.3 billion and Automotive operating-related cash flow of $4.4 billion.
Ford said it continues to expect second half results will be lower than first half. In the Automotive sector, this reflects increasing commodities and structural costs, as well as seasonal factors that tend to favor the first half. At Ford Credit, lower profit in the second half primarily reflects the same factors affecting first half results.
Ford continues to expect commodities and structural costs to each increase by about $2 billion compared with 2010. The increase in structural costs is consistent with supporting higher volumes in the short term, as well as the company's plan to grow the business, strengthen its brand and improve its products through the business planning period. Ford said it expects its structural costs as a percent of net revenue to improve compared with 2010.
Based on first half performance and expectations for the full year, Ford continues to expect Automotive operating margin to be equal to or improved compared with 6.1 percent in 2010, despite higher commodities cost. In the first half, Automotive operating margin, at 7.3 percent, was down half a point compared with the same period a year ago.
Ford expects 2011 capital expenditures in the range of $5 billion to $5.5 billion. Capital spending in the first half was $2 billion.
Ford expects total company third quarter production to be about 1.4 million units, up 92,000 units from a year ago, reflecting continued strong customer demand for its products.
"We are making consistent progress on our commitment to deliver profitable growth for all," said Mulally.
"Going forward, we remain focused on aggressively managing short term challenges and opportunities and strengthening the foundation to deliver our mid-decade plan and serve a growing group of Ford customers around the world."
Ford's planning assumptions and key metrics, and production volumes, are shown below:
The financial results discussed herein are presented on a preliminary basis; final data will be
included in Ford's Quarterly Report on Form 10-Q for the period ended June 30, 2011. The
following information applies to the information throughout this release:
• Pre-tax operating results exclude special items unless otherwise noted.
• See tables following the "Safe Harbor/Risk Factors" for the nature and amount of special
items, and reconciliation of items designated as "excluding special items" to U.S. generally
accepted accounting principles ("GAAP"). Also see the tables for reconciliation to GAAP of
Automotive gross cash and operating-related cash flow.
• Discussion of overall Automotive cost changes is measured primarily at present-year
exchange and excludes special items and discontinued operations; in addition, costs that
vary directly with production volume, such as material, freight, and warranty costs, are
measured at present-year volume and mix.
• Automotive liquidity is defined as Automotive cash, cash equivalents, and marketable
securities and committed Automotive credit lines (including local lines available to foreign
affiliates).
• As a result of the sale of Volvo, 2010 results for Volvo were reported as special items and
excluded from wholesales, revenue and operating results.
• Wholesale unit sales and production volumes include the sale or production of Ford-brand
and JMC-brand vehicles by unconsolidated affiliates. JMC refers to our Chinese joint
venture, Jiangling Motors Corporation. See materials supporting the July 26, 2011
conference calls at www.shareholder.ford.com for further discussion of wholesale unit
volumes.
++ Excludes special items.
+++ Excludes special items and "Income/(Loss) attributable to non-controlling interests." See tables following "Safe Harbor/Risk Factors" for the nature and amount of these special items and reconciliation to GAAP.
Safe Harbor/Risk Factors
Statements included herein may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations, forecasts, and assumptions by our management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation:
• Decline in industry sales volume, particularly in the United States or Europe, due to financial crisis, recession, geopolitical events, or other factors;
• Decline in market share or failure to achieve growth;
• Lower-than-anticipated market acceptance of new or existing products;
• An increase in or acceleration of market shift beyond our current planning assumptions from sales of trucks, medium- and large-sized utilities, or other more profitable vehicles, particularly in the United States;
• An increase in fuel prices, continued volatility of fuel prices, or reduced availability of fuel;
• Continued or increased price competition resulting from industry overcapacity, currency fluctuations, or other factors;
• Adverse effects from the bankruptcy, insolvency, or government-funded restructuring of, change in ownership or control of, or alliances entered into by a major competitor;
• Fluctuations in foreign currency exchange rates, commodity prices, and interest rates;
• Economic distress of suppliers that may require us to provide substantial financial support or take other measures to ensure supplies of components and could increase our costs, affect our liquidity, or cause production constraints or disruptions;
• Single-source supply of components or materials;
• Labor or other constraints on our ability to maintain competitive cost structure;
• Work stoppages at Ford or supplier facilities or other interruptions of production;
• Substantial pension and postretirement health care and life insurance liabilities impairing our liquidity or financial condition;
• Worse-than-assumed economic and demographic experience for our postretirement benefit plans (e.g., discount rates or investment returns);
• Restriction on use of tax attributes from tax law "ownership change;"
• The discovery of defects in vehicles resulting in delays in new model launches, recall campaigns, reputational damage, or increased warranty costs;
• Increased safety, emissions, fuel economy, or other regulation resulting in higher costs, cash expenditures, and/or sales restrictions;
• Unusual or significant litigation, governmental investigations or adverse publicity arising out of alleged defects in our products, perceived environmental impacts, or otherwise;
• A change in our requirements for parts where we have long-term supply arrangements committing us to purchase minimum or fixed quantities of certain parts, or to pay a minimum amount to the seller ("take-or-pay" contracts);
• Adverse effects on our results from a decrease in or cessation or clawback of government incentives related to investments;
• Adverse effects on our operations resulting from certain geo-political or other events;
• Inherent limitations of internal controls impacting financial statements and safeguarding of assets;
• Substantial levels of Automotive indebtedness adversely affecting our financial condition or preventing us from fulfilling our debt obligations;
• Failure of financial institutions to fulfill commitments under committed credit facilities;
• A prolonged disruption of the debt and securitization markets;
• Inability of Ford Credit to access debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts due to credit rating downgrades, market volatility, market disruption, regulatory requirements, or other factors;
• Higher-than-expected credit losses;
• Increased competition from banks or other financial institutions seeking to increase their share of financing Ford vehicles;
• Collection and servicing problems related to finance receivables and net investment in operating leases;
• Lower-than-anticipated residual values or higher-than-expected return volumes for leased vehicles;
• Imposition of additional costs or restrictions due to the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Act") and its implementing rules and regulations; and
• New or increased credit, consumer, or data protection or other regulations resulting in higher costs and/or additional financing restrictions.
Ford cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will prove accurate, or that any projection will be realized. It is to be expected that there may be differences between projected and actual results. Ford's forward-looking statements speak only as of the date of initial issuance, and Ford does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise. For additional discussion of these risks, see "Item 1A . Risk Factors" of Ford's Annual Report on Form 10-K for the year ended December 31, 2010.
CONFERENCE CALL DETAILS
Ford Motor Company [NYSE:F] releases its preliminary second quarter 2011 financial results at 7 a.m. EST today. The following briefings will be conducted after the announcement:
• At 9 a.m. EST, Alan Mulally, Ford president and CEO, and Lewis Booth, Ford executive vice
president and chief financial officer, will host a conference call for the investment community and news media to discuss the 2011 second quarter.
• At 11 a.m. EDT, Bob Shanks, Ford vice president and controller, Neil Schloss, vice president and treasurer, and Mike Seneski, chief financial officer, Ford Motor Credit Company, will host a conference call for fixed income analysts and investors.
Listen-only presentations and supporting materials will be available on the Internet at
www.shareholder.ford.com. Representatives of the news media and the investment community
participating by teleconference will have the opportunity to ask questions following the presentations.
Access Information – Tuesday, July 26
Earnings Call: 9 a.m. EDT
Toll Free: 877.415.3184
International: 857.244.7327
Earnings Passcode: "Ford Earnings"
Fixed Income: 11 a.m. EDT
Toll Free: 866.318.8612
International: 617.399.5131
Fixed Income Passcode: "Ford Fixed Income"
Replays – Available after 2 p.m. the day of the event through Tuesday, Aug. 2.
www.shareholder.ford.com
Toll Free: 888.286.8010
International: 617.801.6888
Passcodes:
Earnings: 51847137
Fixed Income: 38855937
Chrysler Group LLC Achieved Modified Operating Profit of $507 Million in Second Quarter
2011, up 177 percent from Q2 2010; Fully Repaid Government Loans Six Years Ahead of
Schedule
AUBURN HILLS, Mich., July 26, 2011 – Chrysler Group LLC today announced its preliminary
financial results for the second quarter (Q2) 2011, demonstrating continued improvement in its
operating and financial performance.
In Q2 2011, Net Revenues increased 30 percent to $13.7 billion compared to Q2 2010. The increase was primarily due to increased volumes and positive pricing and mix attributable to the 16 all-new or significantly refreshed products in the marketplace. First half (H1) 2011 Net Revenues totaled $26.8 billion, up 33 percent from H1 2010.
The Company posted a Modified Operating Profit of $507 million in Q2 2011 (3.7 percent
of Net Revenues) compared to $183 million (1.7 percent of Net Revenues) in Q2 2010. The
Q2 2011 improved operating performance was primarily attributable to increased volumes,
positive pricing and mix, partially offset by increased advertising expenditures and
industrial costs, including depreciation and amortization. H1 2011 Modified Operating Profit was $984 million, three times higher than H1 2010.
"There is no doubt that Chrysler Group has taken a huge step forward this quarter," said Sergio
Marchionne, Chief Executive Officer, Chrysler Group LLC. "Refinancing our debt and repaying our government loans six years early, reinforces our conviction that we are on the right path to rebuilding this Company and restoring it to its rightful place on the global automotive landscape.
"We are changing both the image and substance of our company in order to regain the faith of
consumers. There is no substitute for hard work and we are committed to continuing to deliver on the business plan numbers we outlined," added Marchionne.
Modified Earnings Before Interest, Taxes, Depreciation and Amortization (Modified EBITDA)
was $1.3 billion in Q2 2011, or 9.5 percent of Net Revenues, reflecting a $438 million improvement from Q2 2010. H1 2011 Modified EBITDA was $2.5 billion, up 50 percent from H1 2010.
Interest Expense in Q2 2011 was $328 million, including non-cash interest accretion of $51 million.
This compares to Interest Expense in Q2 2010 of $313 million, including non-cash interest accretion of $58 million. Interest Expense was $676 million for H1 2011 compared to $624 million in H1 2010.
Net Loss amounted to $370 million and $254 million in Q2 and H1 2011, respectively, and included a non-recurring $551 million charge associated with the repayment of the U.S. Treasury and Canadian government loans. Excluding this charge, Adjusted Net Income in Q2 2011 was $181 million which compares to a Net Loss of $172 million in Q2 2010. Adjusted Net Income for H1 2011 totaled $297 million compared to a Net Loss of $369 million in H1 2010, an improvement of $666 million.
Free Cash Flow for the second quarter totaled $174 million primarily reflecting the improved cash from operations as a result of increased shipments, partially offset by capital expenditures.
Cash at June 30, 2011, was $10.2 billion compared to $9.9 billion at March 31, 2011. As of June 30, 2011, $1.3 billion is available on a revolving credit facility, bringing total available liquidity to $11.5 billion.
Gross Industrial Debt
(f)
at June 30, 2011, totaled $12.3 billion, lower than $13.3 billion at March 31,
2011, primarily due to the repayment of the U.S. Treasury and Canadian government loans utilizing proceeds from new debt financing and Fiat's exercise of its call option. Net Industrial Debt(f) decreased to $2.1 billion at the end of Q2 2011, a $1.3 billion improvement from March 31, 2011.
Worldwide vehicle sales of 486,000 in Q2 2011 represented an increase of 19 percent compared to
407,000 vehicles in Q2 2010. The improvement reflects greater consumer awareness and
consideration of our new products. This contributed to an increase in Chrysler Group's U.S. market share to 10.6 percent in Q2 2011, compared to 9.4 percent in the same period of 2010. Canadian market share increased to 14.9 percent for Q2 2011 compared to 12.9 percent for Q2 2010.
H1 2011 worldwide sales totaled 880,000 vehicles, an increase of 19 percent compared to H1 2010.
Vehicle sales in the U.S. and Canada increased 21 percent and 15 percent, respectively, for H1 2011, which outpaced the growth of the U.S. and Canadian markets. Market share in the U.S. was 9.9 percent in H1 2011 compared to 9.2 percent in H1 2010.
Worldwide vehicle shipments in Q2 2011 were 514,000 (exceeding 500,000 vehicles in a quarter
for the first time since the Company began operations in June 2009), an increase of 19 percent versus 433,000 vehicles shipped in Q2 2010. H1 2011 worldwide shipments totaled 999,000 vehicles, a 23% increase over H1 2010.
U.S. dealer inventory increased to 314,000 vehicles at June 30, 2011 (302,000 at March 31, 2011).
Days supply was stable at 68 days at June 30, 2011, compared to 67 days at March 31, 2011.
Significant Events: Second Quarter and Subsequent to June 30, 2011
Corporate Matters
On April 12, Chrysler Group announced that Fiat's ownership interest in the Company increased from 25 percent to 30 percent upon the Company's achievement of the second of three performance-related milestones outlined in its Amended and Restated LLC Operating Agreement.
On May 24, Chrysler Group made payments of $5.9 billion and $1.7 billion (including accrued interest and additional consideration) to fully repay the U.S. Treasury and Canadian governments, respectively, six years ahead of schedule. The Company completed new financing arrangements consisting of a $3.0 billion senior secured term loan, $3.2 billion of secured notes and a $1.3 billion revolving credit facility (which remains undrawn).
In connection with the refinancing transaction, Fiat exercised its call option to increase its ownership interest in Chrysler Group by an incremental 16 percent to 46 percent on a fully diluted basis. On July 21, Fiat paid $500 million to purchase the U.S. Treasury's 6 percent (fully diluted) ownership interest in Chrysler Group and $125 million to purchase the Canadian government's remaining 1.5 percent (fully diluted) ownership interest, bringing its fully diluted ownership interest to 53.5 percent. In addition, Fiat paid $75 million to obtain assignment of UST's rights under the Equity Recapture Agreement.
On June 3, 350 UAW-represented employees at Chrysler Group's Toledo Assembly Complex,
Company executives and elected officials welcomed President Barack Obama to the facility, which
builds the iconic 2011 Jeep® Wrangler, to celebrate the repayment of the U.S. Treasury loans.
The President thanked Chrysler employees for the role they played in the revitalization of the automotive industry and resurgence of the Company as demonstrated by the repayment of the government loans.
In a separate celebration, Chrysler Canada, upon repayment of the Canadian government loans,
thanked the Canadian federal and Ontario provincial governments for the support they provided the Company.
Product News
In the second quarter of 2011, the Jeep Grand Cherokee, with a new diesel powertrain, was
introduced in European markets alongside a restyled Jeep Compass, also powered by a diesel
engine.
Additionally, Chrysler Group officially elevated its in-house Street and Racing Technology (SRT®) team to a distinct company performance brand that promises to maintain its successful formula of designing, engineering and building benchmark American high-performance vehicles for Chrysler, Jeep and Dodge. Three additional SRT vehicles will launch in Q3 2011.
In June, Chrysler Group announced that it would invest $114 million in new equipment at its Trenton Engine Complex to support increased production of the Pentastar V-6 engine. The investment is estimated to create 268 new jobs and will repurpose nearly 400,000-square feet of the Trenton North Engine Plant. The Company also celebrated the construction of a new, state-of-the-art paint shop at a groundbreaking ceremony at its Sterling Heights Assembly Plant (SHAP). The event marked the beginning of an $850 million investment at SHAP and two local stamping plants announced by Chrysler Group in October 2010.
Chrysler Group vehicles continued to garner significant awards in Q2 2011.
The 2011 Chrysler Town & Country and Dodge Challenger ranked the highest in the minivan and mid-size sporty car segments, respectively, in the J.D. Power and Associates 2011 U.S. Initial Quality StudySM released June 23.
In May, the Chrysler brand was named the "Top Popular Brand" in AutoPacific's 15th annual Vehicle Satisfaction Awards, an industry benchmark for measuring the customer satisfaction of more than 68,000 new vehicle owners. In addition, the 2011 Chrysler Town & Country won the "Minivan" category and the 2011 Jeep Grand Cherokee won the "Premium Mid-size SUV" category.
The Chrysler brand's "Born of Fire" 2011 Super Bowl commercial was honored with five awards at the Cannes Lions 58th International Festival of Creativity, the world's leading celebration of creativity in communications, held in France. The spot won four "Gold Lions" for Best Direction, Best Use of Music, Best Script and Best Automotive Commercial. The brand also took home a "Bronze Lion" for Best Editing. More than 24,000 entries from around the world were showcased and judged at the Cannes festival.
Continuing the momentum of the Chrysler brand, the all-new 2011 Chrysler 300 was named "Car of
the Month" for July by NADAguides (National Automobile Dealers Association).
The Ram Truck brand launched a new advertising campaign in the second quarter focusing on the
capabilities of the entire product line and introducing the new tagline, "Guts. Glory. Ram."
Edmunds.com added the 2011 Ram 1500 to its 2011 Consumers' Top Rated™ vehicles list, naming it
the "Best Large Light-duty Truck", and in July, U.S. News & World Report named the Ram 1500 the
"Best Full-size Pickup" in the magazine's ranking of top vehicle choices.
The Fiat 500 has received more than 60 international awards since its debut. In May, members of the Texas Auto Writers Association (TAWA) selected the vehicle for two top honors, voting the Fiat 500 "Best Value" and "Best New Design" at the 2011 TAWA Spring Roundup. TAWA members also
selected the newly revamped Dodge Journey as the 2011 "Family Car of Texas." In June, Kelley Blue Book's kbb.com rated the 2012 Fiat 500 as the 2011 Coolest New Car Under $18,000.
The 2012 Fiat 500 Cabrio convertible launched in the United States in the second quarter and, almost immediately, was named the "Best Small Convertible of the Year" by the Southern Automotive Media Association at the press organization's first annual Convertible Drive event June 30 in Miami.
Connected World magazine awarded the Company's Mopar® brand, which encompasses service,
parts and customer care, a Value Chain Award in the automotive category for its industry-first
Electronic Vehicle Tracking System (EVTS). With Mopar EVTS, the consumer has the ability to
instantly track a stolen vehicle or receive excessive-speed and parameter text alerts.
2011 Guidance
The targets for 2011 are confirmed as follows:
Net Revenues of >$55 billion
Modified Operating Profit of >$2.0 billion
Modified EBITDA of >$4.8 billion
Adjusted Net Income of $0.2 - $0.5 billion*
Free Cash Flow
of >$1.0 billion
* Excludes the loss on the extinguishment of debt of $551 million in Q2 2011
Additional Information
The Company will hold an analyst webcast and conference call July 26, 2011, at 10:00 a.m. EDT, to present its preliminary Q2 2011 financial results. The call can be followed live and a recording will be available on the Chrysler Group website: www.chryslergroupllc.com. The preliminary Q2 2011 financial results press release and webcast presentation will be available the morning of the webcast at www.chryslergroupllc.com and www.media.chrysler.com.
The above results are presented on a preliminary basis. The Company intends to publish its financial statements as of and for the six months ended June 30, 2011, prepared in accordance with U.S. GAAP on or about August 12, 2011, when it plans to file its quarterly report on Form 10-Q.
Certain Chrysler Group preliminary financial results presented in accordance with IFRS will be
included in the Fiat S.p.A. earnings release and Semi-annual Report; these documents will be
available on the investor relations tab of the Fiat S.p.A. website http://www.fiatspa.com/en-
US/investor_relations/investors/Pages/investors.aspx on or after July 27, 2011. Fiat is required to consolidate Chrysler Group's financial results in its financial statements in accordance with IFRS and will present certain financial information about Chrysler Group as a separate business segment.
Non-U.S. GAAP Financial Information and Other Items
(a)
Adjusted Net Income (Loss) is defined as Net Income (Loss) excluding the loss on extinguishment
of debt. The reconciliation of Net Loss to Adjusted Net Income, Modified Operating Profit (defined below) and Modified EBITDA (defined below) for the three and six months ended June 30, 2011, is detailed in Table 1 of the attachment to the press release.
(b)
Modified Operating Profit (Loss) is computed starting with Net Income (Loss) and then adjusting
the amount to (i) add back the provision for income taxes, (ii) add back net interest expense
(excluding interest expense related to Gold Key Lease financing activities), (iii) add back all
pension, other postretirement benefit obligations (OPEB) and other employee benefit costs other
than service costs, (iv) add back restructuring expense and exclude restructuring income, (v) add back other financial expense, (vi) add back losses and exclude gains due to cumulative change in accounting principles, and (vii) add back certain other costs, charges and expenses.
The reconciliation of Net Loss to Adjusted Net Income, Modified Operating Profit and Modified EBITDA for the three and six months ended June 30, 2011, is detailed in Table 1 of the attachment to the press release.
(c)
Modified EBITDA is computed starting with Net Income (Loss) adjusted to Modified Operating Profit (Loss) as described above, and then adding back depreciation and amortization expense
(excluding depreciation and amortization expense for vehicles held for lease). The reconciliation of Net Loss to Adjusted Net Income, Modified Operating Profit and Modified EBITDA for the three and six months ended June 30, 2011, is detailed in Table 1 of the attachment to the press release.
(d)
Cash is defined as Cash and Cash Equivalents.
(e)
Free Cash Flow is defined as cash flows from operating and investing activities, excluding any debt related investing activities, reduced for financing activities related to Gold Key Lease financing. A reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow for the three and six months ended June 30, 2011, is detailed in Table 2 of the attachment to the press release.
(f)
A reconciliation of Financial Liabilities to Gross Industrial Debt and Net Industrial Debt at June 30, 2011, March 31, 2011, and December 31, 2010, is detailed in Table 3 of the attachment to the press release.
Attachment
These financial results are presented on a preliminary basis and will be superseded by the financial results included in Chrysler Group's Quarterly Report on Form 10-Q to be filed for the period ended June 30, 2011.
Table 1: Reconciliation of Net Loss to Adjusted Net Income, Modified Operating Profit and
Modified EBITDA
Table 2: Reconciliation of Cash Flows from Operating Activities to Free Cash Flow
Table 3: Reconciliation of Financial Liabilities to Gross Industrial Debt and Net Industrial Debt
Forward-Looking Statements
This document contains forward-looking statements that reflect management's current views with respect to future events. The words "anticipate," "assume," "believe," "estimate," "expect," "intend," "may," "plan," "project," "should" and similar expressions identify forward-looking statements. Such statements are subject to risks and uncertainties, including, but not limited to: the effective implementation of the Chrysler Group LLC 2010 – 2014 Business Plan outlined on November 4, 2009, including successful vehicle launches; industry SAAR levels; continued economic weakness, especially in North America, including continued high unemployment levels and limited available financing for our dealers and consumers; introduction of competing products and competitive pressures which may limit our ability to reduce sales incentives; supply disruptions resulting from the natural disasters in Japan in March 2011; and, our ability to realize benefits from our industrial alliance with Fiat. If any of these or other risks and uncertainties occur, or if the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. We do not intend or assume any obligation to update any forward-looking statement, which speaks only as of the date on which it is made. Further details of potential
risks that may affect Chrysler Group are described in Chrysler Group's Form 10 filed with the SEC.
2011, up 177 percent from Q2 2010; Fully Repaid Government Loans Six Years Ahead of
Schedule
AUBURN HILLS, Mich., July 26, 2011 – Chrysler Group LLC today announced its preliminary
financial results for the second quarter (Q2) 2011, demonstrating continued improvement in its
operating and financial performance.
The Company posted a Modified Operating Profit of $507 million in Q2 2011 (3.7 percent
of Net Revenues) compared to $183 million (1.7 percent of Net Revenues) in Q2 2010. The
Q2 2011 improved operating performance was primarily attributable to increased volumes,
positive pricing and mix, partially offset by increased advertising expenditures and
industrial costs, including depreciation and amortization. H1 2011 Modified Operating Profit was $984 million, three times higher than H1 2010.
"There is no doubt that Chrysler Group has taken a huge step forward this quarter," said Sergio
Marchionne, Chief Executive Officer, Chrysler Group LLC. "Refinancing our debt and repaying our government loans six years early, reinforces our conviction that we are on the right path to rebuilding this Company and restoring it to its rightful place on the global automotive landscape.
"We are changing both the image and substance of our company in order to regain the faith of
consumers. There is no substitute for hard work and we are committed to continuing to deliver on the business plan numbers we outlined," added Marchionne.
Modified Earnings Before Interest, Taxes, Depreciation and Amortization (Modified EBITDA)
was $1.3 billion in Q2 2011, or 9.5 percent of Net Revenues, reflecting a $438 million improvement from Q2 2010. H1 2011 Modified EBITDA was $2.5 billion, up 50 percent from H1 2010.
Interest Expense in Q2 2011 was $328 million, including non-cash interest accretion of $51 million.
This compares to Interest Expense in Q2 2010 of $313 million, including non-cash interest accretion of $58 million. Interest Expense was $676 million for H1 2011 compared to $624 million in H1 2010.
Net Loss amounted to $370 million and $254 million in Q2 and H1 2011, respectively, and included a non-recurring $551 million charge associated with the repayment of the U.S. Treasury and Canadian government loans. Excluding this charge, Adjusted Net Income in Q2 2011 was $181 million which compares to a Net Loss of $172 million in Q2 2010. Adjusted Net Income for H1 2011 totaled $297 million compared to a Net Loss of $369 million in H1 2010, an improvement of $666 million.
Free Cash Flow for the second quarter totaled $174 million primarily reflecting the improved cash from operations as a result of increased shipments, partially offset by capital expenditures.
Cash at June 30, 2011, was $10.2 billion compared to $9.9 billion at March 31, 2011. As of June 30, 2011, $1.3 billion is available on a revolving credit facility, bringing total available liquidity to $11.5 billion.
Gross Industrial Debt
(f)
at June 30, 2011, totaled $12.3 billion, lower than $13.3 billion at March 31,
2011, primarily due to the repayment of the U.S. Treasury and Canadian government loans utilizing proceeds from new debt financing and Fiat's exercise of its call option. Net Industrial Debt(f) decreased to $2.1 billion at the end of Q2 2011, a $1.3 billion improvement from March 31, 2011.
Worldwide vehicle sales of 486,000 in Q2 2011 represented an increase of 19 percent compared to
407,000 vehicles in Q2 2010. The improvement reflects greater consumer awareness and
consideration of our new products. This contributed to an increase in Chrysler Group's U.S. market share to 10.6 percent in Q2 2011, compared to 9.4 percent in the same period of 2010. Canadian market share increased to 14.9 percent for Q2 2011 compared to 12.9 percent for Q2 2010.
H1 2011 worldwide sales totaled 880,000 vehicles, an increase of 19 percent compared to H1 2010.
Vehicle sales in the U.S. and Canada increased 21 percent and 15 percent, respectively, for H1 2011, which outpaced the growth of the U.S. and Canadian markets. Market share in the U.S. was 9.9 percent in H1 2011 compared to 9.2 percent in H1 2010.
Worldwide vehicle shipments in Q2 2011 were 514,000 (exceeding 500,000 vehicles in a quarter
for the first time since the Company began operations in June 2009), an increase of 19 percent versus 433,000 vehicles shipped in Q2 2010. H1 2011 worldwide shipments totaled 999,000 vehicles, a 23% increase over H1 2010.
U.S. dealer inventory increased to 314,000 vehicles at June 30, 2011 (302,000 at March 31, 2011).
Days supply was stable at 68 days at June 30, 2011, compared to 67 days at March 31, 2011.
Significant Events: Second Quarter and Subsequent to June 30, 2011
Corporate Matters
On April 12, Chrysler Group announced that Fiat's ownership interest in the Company increased from 25 percent to 30 percent upon the Company's achievement of the second of three performance-related milestones outlined in its Amended and Restated LLC Operating Agreement.
On May 24, Chrysler Group made payments of $5.9 billion and $1.7 billion (including accrued interest and additional consideration) to fully repay the U.S. Treasury and Canadian governments, respectively, six years ahead of schedule. The Company completed new financing arrangements consisting of a $3.0 billion senior secured term loan, $3.2 billion of secured notes and a $1.3 billion revolving credit facility (which remains undrawn).
In connection with the refinancing transaction, Fiat exercised its call option to increase its ownership interest in Chrysler Group by an incremental 16 percent to 46 percent on a fully diluted basis. On July 21, Fiat paid $500 million to purchase the U.S. Treasury's 6 percent (fully diluted) ownership interest in Chrysler Group and $125 million to purchase the Canadian government's remaining 1.5 percent (fully diluted) ownership interest, bringing its fully diluted ownership interest to 53.5 percent. In addition, Fiat paid $75 million to obtain assignment of UST's rights under the Equity Recapture Agreement.
On June 3, 350 UAW-represented employees at Chrysler Group's Toledo Assembly Complex,
Company executives and elected officials welcomed President Barack Obama to the facility, which
builds the iconic 2011 Jeep® Wrangler, to celebrate the repayment of the U.S. Treasury loans.
The President thanked Chrysler employees for the role they played in the revitalization of the automotive industry and resurgence of the Company as demonstrated by the repayment of the government loans.
In a separate celebration, Chrysler Canada, upon repayment of the Canadian government loans,
thanked the Canadian federal and Ontario provincial governments for the support they provided the Company.
Product News
In the second quarter of 2011, the Jeep Grand Cherokee, with a new diesel powertrain, was
introduced in European markets alongside a restyled Jeep Compass, also powered by a diesel
engine.
Additionally, Chrysler Group officially elevated its in-house Street and Racing Technology (SRT®) team to a distinct company performance brand that promises to maintain its successful formula of designing, engineering and building benchmark American high-performance vehicles for Chrysler, Jeep and Dodge. Three additional SRT vehicles will launch in Q3 2011.
In June, Chrysler Group announced that it would invest $114 million in new equipment at its Trenton Engine Complex to support increased production of the Pentastar V-6 engine. The investment is estimated to create 268 new jobs and will repurpose nearly 400,000-square feet of the Trenton North Engine Plant. The Company also celebrated the construction of a new, state-of-the-art paint shop at a groundbreaking ceremony at its Sterling Heights Assembly Plant (SHAP). The event marked the beginning of an $850 million investment at SHAP and two local stamping plants announced by Chrysler Group in October 2010.
Chrysler Group vehicles continued to garner significant awards in Q2 2011.
The 2011 Chrysler Town & Country and Dodge Challenger ranked the highest in the minivan and mid-size sporty car segments, respectively, in the J.D. Power and Associates 2011 U.S. Initial Quality StudySM released June 23.
In May, the Chrysler brand was named the "Top Popular Brand" in AutoPacific's 15th annual Vehicle Satisfaction Awards, an industry benchmark for measuring the customer satisfaction of more than 68,000 new vehicle owners. In addition, the 2011 Chrysler Town & Country won the "Minivan" category and the 2011 Jeep Grand Cherokee won the "Premium Mid-size SUV" category.
The Chrysler brand's "Born of Fire" 2011 Super Bowl commercial was honored with five awards at the Cannes Lions 58th International Festival of Creativity, the world's leading celebration of creativity in communications, held in France. The spot won four "Gold Lions" for Best Direction, Best Use of Music, Best Script and Best Automotive Commercial. The brand also took home a "Bronze Lion" for Best Editing. More than 24,000 entries from around the world were showcased and judged at the Cannes festival.
Continuing the momentum of the Chrysler brand, the all-new 2011 Chrysler 300 was named "Car of
the Month" for July by NADAguides (National Automobile Dealers Association).
The Ram Truck brand launched a new advertising campaign in the second quarter focusing on the
capabilities of the entire product line and introducing the new tagline, "Guts. Glory. Ram."
Edmunds.com added the 2011 Ram 1500 to its 2011 Consumers' Top Rated™ vehicles list, naming it
the "Best Large Light-duty Truck", and in July, U.S. News & World Report named the Ram 1500 the
"Best Full-size Pickup" in the magazine's ranking of top vehicle choices.
The Fiat 500 has received more than 60 international awards since its debut. In May, members of the Texas Auto Writers Association (TAWA) selected the vehicle for two top honors, voting the Fiat 500 "Best Value" and "Best New Design" at the 2011 TAWA Spring Roundup. TAWA members also
selected the newly revamped Dodge Journey as the 2011 "Family Car of Texas." In June, Kelley Blue Book's kbb.com rated the 2012 Fiat 500 as the 2011 Coolest New Car Under $18,000.
The 2012 Fiat 500 Cabrio convertible launched in the United States in the second quarter and, almost immediately, was named the "Best Small Convertible of the Year" by the Southern Automotive Media Association at the press organization's first annual Convertible Drive event June 30 in Miami.
Connected World magazine awarded the Company's Mopar® brand, which encompasses service,
parts and customer care, a Value Chain Award in the automotive category for its industry-first
Electronic Vehicle Tracking System (EVTS). With Mopar EVTS, the consumer has the ability to
instantly track a stolen vehicle or receive excessive-speed and parameter text alerts.
2011 Guidance
The targets for 2011 are confirmed as follows:
Net Revenues of >$55 billion
Modified Operating Profit of >$2.0 billion
Modified EBITDA of >$4.8 billion
Adjusted Net Income of $0.2 - $0.5 billion*
Free Cash Flow
of >$1.0 billion
* Excludes the loss on the extinguishment of debt of $551 million in Q2 2011
Additional Information
The Company will hold an analyst webcast and conference call July 26, 2011, at 10:00 a.m. EDT, to present its preliminary Q2 2011 financial results. The call can be followed live and a recording will be available on the Chrysler Group website: www.chryslergroupllc.com. The preliminary Q2 2011 financial results press release and webcast presentation will be available the morning of the webcast at www.chryslergroupllc.com and www.media.chrysler.com.
The above results are presented on a preliminary basis. The Company intends to publish its financial statements as of and for the six months ended June 30, 2011, prepared in accordance with U.S. GAAP on or about August 12, 2011, when it plans to file its quarterly report on Form 10-Q.
Certain Chrysler Group preliminary financial results presented in accordance with IFRS will be
included in the Fiat S.p.A. earnings release and Semi-annual Report; these documents will be
available on the investor relations tab of the Fiat S.p.A. website http://www.fiatspa.com/en-
US/investor_relations/investors/Pages/investors.aspx on or after July 27, 2011. Fiat is required to consolidate Chrysler Group's financial results in its financial statements in accordance with IFRS and will present certain financial information about Chrysler Group as a separate business segment.
Non-U.S. GAAP Financial Information and Other Items
(a)
Adjusted Net Income (Loss) is defined as Net Income (Loss) excluding the loss on extinguishment
of debt. The reconciliation of Net Loss to Adjusted Net Income, Modified Operating Profit (defined below) and Modified EBITDA (defined below) for the three and six months ended June 30, 2011, is detailed in Table 1 of the attachment to the press release.
(b)
Modified Operating Profit (Loss) is computed starting with Net Income (Loss) and then adjusting
the amount to (i) add back the provision for income taxes, (ii) add back net interest expense
(excluding interest expense related to Gold Key Lease financing activities), (iii) add back all
pension, other postretirement benefit obligations (OPEB) and other employee benefit costs other
than service costs, (iv) add back restructuring expense and exclude restructuring income, (v) add back other financial expense, (vi) add back losses and exclude gains due to cumulative change in accounting principles, and (vii) add back certain other costs, charges and expenses.
The reconciliation of Net Loss to Adjusted Net Income, Modified Operating Profit and Modified EBITDA for the three and six months ended June 30, 2011, is detailed in Table 1 of the attachment to the press release.
(c)
Modified EBITDA is computed starting with Net Income (Loss) adjusted to Modified Operating Profit (Loss) as described above, and then adding back depreciation and amortization expense
(excluding depreciation and amortization expense for vehicles held for lease). The reconciliation of Net Loss to Adjusted Net Income, Modified Operating Profit and Modified EBITDA for the three and six months ended June 30, 2011, is detailed in Table 1 of the attachment to the press release.
(d)
Cash is defined as Cash and Cash Equivalents.
(e)
Free Cash Flow is defined as cash flows from operating and investing activities, excluding any debt related investing activities, reduced for financing activities related to Gold Key Lease financing. A reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow for the three and six months ended June 30, 2011, is detailed in Table 2 of the attachment to the press release.
(f)
A reconciliation of Financial Liabilities to Gross Industrial Debt and Net Industrial Debt at June 30, 2011, March 31, 2011, and December 31, 2010, is detailed in Table 3 of the attachment to the press release.
Attachment
These financial results are presented on a preliminary basis and will be superseded by the financial results included in Chrysler Group's Quarterly Report on Form 10-Q to be filed for the period ended June 30, 2011.
Table 1: Reconciliation of Net Loss to Adjusted Net Income, Modified Operating Profit and
Modified EBITDA
Table 2: Reconciliation of Cash Flows from Operating Activities to Free Cash Flow
Table 3: Reconciliation of Financial Liabilities to Gross Industrial Debt and Net Industrial Debt
Forward-Looking Statements
This document contains forward-looking statements that reflect management's current views with respect to future events. The words "anticipate," "assume," "believe," "estimate," "expect," "intend," "may," "plan," "project," "should" and similar expressions identify forward-looking statements. Such statements are subject to risks and uncertainties, including, but not limited to: the effective implementation of the Chrysler Group LLC 2010 – 2014 Business Plan outlined on November 4, 2009, including successful vehicle launches; industry SAAR levels; continued economic weakness, especially in North America, including continued high unemployment levels and limited available financing for our dealers and consumers; introduction of competing products and competitive pressures which may limit our ability to reduce sales incentives; supply disruptions resulting from the natural disasters in Japan in March 2011; and, our ability to realize benefits from our industrial alliance with Fiat. If any of these or other risks and uncertainties occur, or if the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. We do not intend or assume any obligation to update any forward-looking statement, which speaks only as of the date on which it is made. Further details of potential
risks that may affect Chrysler Group are described in Chrysler Group's Form 10 filed with the SEC.
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