DEARBORN, Mich. — Ford's string of quarterly financial improvements continued late last week, as the automaker reported that it beat income and revenue performance expectations again, reaching levels not seen in more than five years.

Ford revealed that its second-quarter net income totaled $2.6 billion, or 61 cents per share. The company calculated the figure to be a $338 million improvement from the second quarter of last year.

Executives emphasized each of their major business operations around the world recorded improved profits.

Excluding special items, Ford indicated its pre-tax operating profit in the second quarter is $2.9 billion, or 68 cents per share. The amount showed an improvement of $3.5 billion from a year ago and a $932 million improvement from the prior quarter.

The manufacturer also determined its performance during the second quarter of this year was its best quarterly financial showing since the first quarter of 2004. In fact, Ford boasted that it has now posted an automotive and total company pre-tax operating profit for four consecutive quarters.

Ford North America recorded a second quarter pre-tax operating profit of $1.9 billion, a $2.8 billion improvement from second quarter of 2009.

To say the least, Ford president and chief executive officer Alan Mulally is delighted with the company's financial performance.

"We delivered a very strong second quarter and first half of 2010 and are ahead of where we thought we would be despite the still-challenging business conditions," Mulally declared.

"We remain on track to deliver solid profits and positive automotive operating-related cash flow for 2010, and we expect even better financial results in 2011," he continued.

"Our progress is being led by the strength of our new products and our leaner, global structure," Mulally went on to highlight. "Customers are responding to our strongest ever product lineup — a full family of vehicles with world-class quality, fuel efficiency, safety, smart design and value."

Delving deeper into its financial report, Ford noted its second-quarter revenue was $31.3 billion, up $4.5 billion from the same period a year ago. Excluding Volvo revenue from 2009, the company computed its revenue in the second quarter climbed $7.4 billion as compared to 2009, a gain of more than 30 percent.

Elsewhere, the manufacturer pointed out its automotive operating-related cash flow came out positive, totaling $2.6 billion during the second quarter. It explained the amount derived primarily from reflecting pre-tax operating profits and favorable changes in working capital.

Ford said it finished the second quarter with $21.9 billion in automotive gross cash, a decrease of $3.4 billion since the first quarter. Management determined the drop occurred as a result of substantial debt reduction actions.

Including available credit lines, Ford figures its total automotive liquidity was $25.4 billion at the end of the quarter.

Turning to their debt load, Ford executives revealed they ended the second quarter with automotive debt of $27.3 billion, an amount that's $7 billion lower than the previous quarter.

As the automaker highlighted earlier this year, that debt reduction came through a $3.8 billion payment by Ford to the UAW Retiree Medical Benefits Trust and a $3 billion repayment of Ford's revolving credit facility.

Executives insist the debt reduction should save them more than $470 million in annualized interest savings.

In other elements of its second quarter financial report, Ford mentioned special items were recorded as an unfavorable pre-tax amount of $95 million.

Furthermore, the company had $229 million of personnel and dealer-related charges related primarily to the plan to discontinue production of the Mercury brand. However, management determined that particular figure was offset partially by $94 million of favorable held-for-sale adjustments for Volvo and a $40 million gain related to the full pre-payment of Ford's VEBA Note A debt obligation at a discount.

"The first half cost associated with Mercury discontinuation and total U.S. dealer reductions is expected to be somewhat less than half of the total expected special item charges for these actions during the 2010 to 2011 period," Ford executives explained.

If Volvo had continued to be reported as an ongoing operation, Ford management said it would have reported a second quarter pre-tax operating profit of $53 million for Volvo. That amount would have represented a $290 million improvement compared to the second quarter of 2009.

Lewis Booth, Ford's executive vice president and chief financial officer, also offered his reaction to the company's second-quarter performance.

"Our fundamental business is strong and we continue to gain momentum around the world," Booth asserted.

"Profits improved across our global business operations in the second quarter and we made continued progress in paying down our debt and strengthening our balance sheet," he added.

Industry Analysis of Ford Performance

Soon after Ford executives rattled off their second quarter financial report, Jonathan Banks offered his commentary about the automaker's lineup and market position. Banks is the executive automotive analyst at NADA Used Car Guide.

"Ford's average auction price performance has shown some of the strongest year-over-year improvement based on our analysis of one- to five-year-old prices," Banks noted.

"In the past five years, Ford's product investments have created some clear winners in the Fusion, Edge and Focus while maintaining competitiveness in virtually every segment. These products have dramatically improved Ford's perception and were grounded with strong actual quality," he continued.

Beyond the vehicles themselves, Banks touched on several other elements he believes are helping Ford perform well.

"Ford's product line, new management and perceived strength by avoiding bankruptcy has resonated with consumers in the form of improved demand for the brand," Banks indicated.

"Ford's new-vehicle pipeline looks promising with the new Fiesta, Focus, Explorer and Edge driving interest and traffic into Ford showrooms," he went on to say. "This coupled their business strategy of aligning production with new-car demand will help support strong used-car prices during the remainder of the year."

Banks wasn't alone in sending positive comments Ford's way. Also chiming in with his assessment following the quarterly report was James Bell, executive market analyst for Kelley Blue Book's Kbb.com.

"Surpassing most analysts' and their own expectations with higher profits in the second quarter of 2010, Ford Motor Co. continues to prove the accuracy of its axioms: good product equals good business," Bell determined.

"Not only are the latest vehicles from Ford and Lincoln exceeding customer expectations from a quality, design, and technology perspective, but these same customers are then rewarding the company back paying higher average transaction prices per vehicle, according to Kelley Blue Book transaction data," he continued.

"All of these have translated to solid quarterly results surpassing the $2 billion mark," Bell also pointed out. 

He went on to point out other areas where Ford has distinguished itself against both domestic and foreign automakers, again using Kbb.com activity as a reference.

"Even though Ford's debt load is higher than post-bankruptcy GM and Chrysler, they have been able to make progress on these loans with a gamble made a few years ago that customers would pay more for better, more attractive and technologically advanced vehicles," Bell declared.

"While this seems like an obvious conclusion, it pays to mention that they are continuing their gambling streak by making further investments in new and exciting products in both the near and long-term future," he went on to say.

"Based on recent Kbb.com shopper activity, Ford also has benefited from a clear ‘reshuffling of the deck' spurred by Toyota's recall troubles earlier this year," Bell explained. "Ford should, however, keep an eye on Hyundai as they rise from being a ‘budget carmaker' to a maker of vehicles consumers aspire to own, as more and more shoppers are defecting from Toyota and considering Ford and Hyundai."

Ford Global Financial Update

Tunring back to the automaker's financial discussion for the second quarter of 2010, Ford highlighted its worldwide automotive sector reported a pre-tax operating profit of $2.1 billion. The company compared that amount with a loss of $1.1 billion a year ago.

Management contends the improvement primarily reflected favorable volume and mix, net pricing and exchange.

The company noted its total vehicle wholesales in the second quarter were 1.4 million, compared with 1.2 million units a year ago. Meanwhile, the manufacturer said worldwide automotive revenue in the second quarter was $28.8 billion while a year ago it was $23.6 billion.

Executives reiterated that wholesales, revenues and operating results for 2010 exclude Volvo, while 2009 results include Volvo.

Ford offered a deeper breakdown by global region of its financial performance:

—North America: For the second quarter, Ford North America reported a pre-tax operating profit of $1.9 billion, compared with a loss of $899 million a year ago and a profit of $1.2 billion in the first quarter of 2010. The company explained the year-over-year improvement was primarily driven by favorable volume and mix, net pricing and exchange. Management also determined second-quarter revenue was $16.9 billion, up from $10.7 billion a year ago.

—South America: For this region, the company indicated a pre-tax operating profit of $285 million. The amount was higher than both the year-ago amount ($86 million) as well as the total from the previous quarter ($203 million). The company believes the year-over-year increase reflects primarily favorable net pricing, favorable exchange, and higher volume, offset partially by higher commodity and structural costs. As a result, executives determined second quarter revenue was $2.6 billion, up from $1.8 billion a year ago.

—Europe: Ford Europe calculated a pre-tax operating profit of $322 million, a figure much higher than a year ago or the previous quarter. At the same point in 2009, the profit amount was $57 million. The figure in the first quarter of this year came in at $107 million. Executives think the year-over-year increase was sparked primarily by lower costs, driven in part by lower spending related to distressed suppliers and a warranty reserve adjustment not expected to reoccur, offset partially by unfavorable net pricing. All told, second quarter revenue here was $7.5 billion, up from $7 billion a year ago.

—Asia Pacific Africa: For the second quarter, Ford Asia Pacific Africa computed a pre-tax operating profit of $113 million, continuing a major turnaround. This past quarter the profit amount came in at $23 million whereas the company sustained a loss of $27 million a year ago. The company asserted the significant year-over-year improvement is more than explained by higher volume, reflecting primarily higher industry, lower costs, and favorable exchange. Consequently, second quarter revenue was $1.8 billion, up from $1.2 billion a year ago.

—Other Automotive: Ford indicated its other automotive category consists primarily of interest and financing-related costs and resulted in a second quarter pre-tax loss of $551 million. Executives broke down this figure by noting a net interest expense of $459 million and $92 million of unfavorable fair market value adjustments associated primarily with Ford's investment in Mazda.

Status of Ford Financial Services, Production

Like other segments of the automaker's entire operation, Ford Motor Credit Co. enjoyed a healthy performance level during the second quarter.

Ford Credit reported a pre-tax operating profit of $888 million compared with a profit of $646 million a year ago and a profit of $828 million in the first quarter. Management attributed the year-over-year increase primarily to a lower provision for credit losses and lower residual losses due to higher auction values, offset partially by the non-recurrence of prior year net gains related to unhedged currency exposures and lower volume.

Executives believe they're going to continue to make progress on all four pillars of their business plan, which include:

—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

Ford Credit now expects full-year 2010 profits to be higher than its 2009 profits. During the second half of this year, the operation thinks profits will be lower than the first half. It's all because officials expect smaller improvements in the provision for credit losses and depreciation expense for leased vehicles compared with the improvements during the first half.

"Ford expects to have solid financial results in the second half, continuing to exceed the expectations it had earlier this year," executives highlighted.

"As in most years, Ford's first half results will be stronger than second half, reflecting normal seasonality – including lower second half volumes related to planned shutdowns and product launches," they went on to state. "This year, Ford also expects higher investment and costs in the second half to support growth and key product introductions, as well as higher commodity costs and smaller reductions in reserves at Ford Credit."

Stemming what the company perceives to be strong demand for Ford vehicles, the company expects third-quarter production to rise by 126,000 units compared with year-ago levels. Beyond demand, Ford said the climb reflects maintenance of competitive stock levels and the non-recurrence of prior-year stock reductions.

However, the OEM projects third quarter production to be off from second-quarter levels by about 174,000 units. The reason management cited was planned vacation shutdowns during the third quarter that generally are used to prepare for new models.

Looking farther ahead, Ford mentioned fourth quarter production also will be affected by planned holiday shutdowns and new product changeovers for vehicles such as Focus and Explorer.

"Overall, Ford's third and fourth quarter production schedule is lower than the first half but consistent with the company's strategy to match supply with demand," executives emphasized.

The automaker is banking on full-year 2010 U.S. industry volume to be in the range of 11.5 million to 12 million units. In the 19 markets Ford tracks in Europe, executives believe full-year industry volume is expected to be in the 14.5 million to 15 million unit range, reflecting a stronger-than-expected first half offset by a weaker second half.

Ford also now expects its full-year 2010 U.S. total market share and its share of the U.S. retail market to be improved compared with 2009. The automaker said its Europe market share for the full year is now projected to be about equal to the first half of this year, but lower than 2009, reflecting the company's decision to limit increases in incentives in the region.

"Ford is on track to improve full-year quality for all regions, compared with a year ago," the company declared.

Executives also believe Ford has achieved significant structural cost reductions during the past four years.

In 2010, the manufacturer thinks full-year automotive structural costs to be about $1 billion higher to support growth and key product introductions. Management also stated its cost structure continues to improve as a percentage of revenue while full-year commodity costs could increase by about $1 billion.

The company noted its capital expenditures were $1.9 billion in the first half. Ford expects full-year capital spending to be about $4.5 billion to support its product plan as the company continues to realize efficiencies from its global product development processes.

"Overall, Ford is on track to deliver solid profits and positive automotive operating-related cash flow for 2010, providing a solid foundation for continuing growth," management stressed.

More About Future Ford Outlook

Overall, Ford said its performance gives it great confidence going forward. The OEM contends it has aggressively restructured its business to be profitable in the current environment.

Going forward, executives anticipate Ford will continue to:

—Expand its business, particularly in the growth regions of the world, such as China and India.

—Improve its overall cost structure and achieve competitive costs while strengthening further its operational excellence.

—Take actions to strengthen its balance sheet and become investment grade.

"Our business performance this year and the growing success of our products give us great confidence going forward," Mulally insisted.

"Our plan is to continue to enhance our operational excellence and improve our competitiveness to continue to deliver profitable growth for everyone associated with Ford," he concluded.