To say that Ford had a bad day quarter is an understatement:

(From the NY Times): “DETROIT — The Ford Motor Company , stunned by abysmal sales of its most profitable vehicles and a sudden shift in consumers’ tastes, said Thursday that it lost $8.7 billion in the quarter, its worst ever, and would overhaul its North American plants to focus on small cars.

The company will also take $8 billion in write-downs and will bring six small cars to the United States from Europe as part of a reorganization aimed at countering record-high gasoline prices.

The loss, equal to $3.88 a share, included write-downs of $5.3 billion on Ford’s North America assets and $2.1 billion on the lease portfolio of the Ford Motor Credit Company.

Ford earned a profit of $750 million, or 31 cents a share, in the second quarter last year.

The company lost $1 billion from continuing operations, down from a profit of $483 million a year ago. It lost $1.3 billion in North America, where $4-a-gallon gasoline has caused consumers to clamor for more fuel-efficient vehicles. Ford said it would overhaul three truck factories in North America so that they can build small cars, a segment for which demand has been surging.

“While we have no intention of giving up our longtime truck leadership, we are creating a new Ford in North America on a foundation of small, fuel-efficient cars and crossovers,” Mark Fields, the president of Ford’s Americas division, said in a statement.

Ford’s revenue fell to $38.6 billion in the second quarter from $44.2 billion a year ago, in part because the company has sold three European brands, Jaguar, Land Rover and Aston Martin.

The company’s automotive operations earned a profit in every region except North America, where Ford has eliminated 4,000 hourly jobs in the last three months and is cutting 15 percent of salaried costs. Revenue in North America dropped 25 percent, to $14.2 billion from $19 billion.

The Ford Motor Credit Company, the financing arm that until recently had been a consistent source of income, reported a $294 million loss, compared with a $112 million profit last year.”

Personally I think it’s a good sign that they’re going to start bringing over cars from their European operations to North America to help capture the public’s increased interest in compact cars, whether it will be enough or too little too late remains to be seen. At the very least it does show that Ford is beginning wake up and smell the coffee, so at the very least it’s a step in the right direction.

To give you an idea of how things are going for Ford right now, there are Ford dealerships in the Seattle area offering ‘08 Ford F-150 pick-up trucks for less then their ‘08 Ford Focuses , and ‘07 and ‘08 Explorers for about the same price as a Focus. It’s a sad state of affairs when your most profitable vehicles are now being sold for similar prices as your least profitable ones.

However the fact that the company is profitable outside of North America provides insights into what the company needs to do in order to turn things around, namely they need to focus on improving the product mix, fixing their cost structure and focus on making profitable sales instead of trying to make sales at any cost. When a struggling automaker is selling vehicles with a MSRP of $30k for $14k just to keep sales volume “strong”, avoid costs incurred when plants are shut down, etc, they’re not on the path to recovery. Ford (in addition to Chrysler and GM) need to let go of some of the old ideas around managing their workforces, maintaining sales volume, etc, and note how companies like Honda are able to out earn them despite selling significantly fewer cars.

In the end it’s not just about changing the product mix to suit consumer’s shifting tastes, it’s about a wholesale change to Detroit’s overall operating model.

You can read the NY Times’ coverage in full here .

Posted in Categories: Contributor, Eurozone, External Research, Stocks, USA.