July 24 (Bloomberg) -- Ford Motor Co. posted a second- quarter loss of $8.7 billion as it reduced the value of truck plants and loans to buyers of pickups and sport-utility vehicles by $8 billion.

Ford said it will convert three factories to produce small cars and double output of fuel-saving smaller engines as record gasoline prices sap U.S. truck sales.

The net loss of $3.88 a share compared with a profit of $750 million, or 31 cents, a year earlier, the second-largest U.S. based automaker said in a statement today. The loss excluding the asset writedowns was worse than analysts had estimated, and the shares fell in early New York trading.

``Every number was close, but every number was on the wrong side, on the negative side,'' said Dan Poole, vice president of equity research at Cleveland-based National City Corp. ``The $8 billion charge was quite a bit of a surprise.''

The results mark the sixth loss in eight quarters under Chief Executive Officer Alan Mulally, recruited from Boeing Co. to restore growth at the Dearborn, Michigan, automaker. Gasoline on its way to $4 a gallon and plunging sales of F-Series pickups forced Mulally in May to abandon his target of returning to profit in 2009.

Excluding costs Ford considers one-time expenses, the loss was $1.38 billion, or 62 cents a share. On that basis, Ford was expected to report a loss of 28 cents, the average estimate of 12 analysts surveyed by Bloomberg.

The shares dropped 40 cents, or 6.6 percent, to $5.63 at 8:43 a.m. before regular New York Stock Exchange composite trading.

Cash

Ford said it had $26.6 billion in automotive cash at the end of the quarter, down $10.8 billion from a year earlier. The company is ``confident'' it has enough liquidity, Chief Financial Officer Don LeClair told reporters.

Ford hasn't set a new goal for returning to profit, spokesman Mark Truby said. The company also hasn't made an estimate for how much cash it will burn as it restructures. Ford borrowed $23.4 billion in late 2006 to revamp operations.

Ford had pretax writedowns of $5.3 billion for its North American auto operations and $2.1 billion for vehicle leases at Ford Credit. The writedowns stemmed primarily from falling demand for large pickups and sport-utility vehicles, and LeClair said 85 percent of the Ford Credit writedown was tied to falling values for pickup trucks and SUVs.

Ford Credit had a loss of $1.4 billion, compared with a year-earlier profit of $62 million.

Product, Plant Changes

Ford said its plant in Cuautitlan, Mexico, in 2010 will produce the new Fiesta small car to be sold worldwide. Ford disclosed that plan in May.

SUV factories in Wayne, Michigan, and Louisville, Kentucky, will be converted to small cars. The Michigan plant will make the switch in 2010 and Louisville in 2011.

Production of Expedition and Navigator large SUVs, now made at Wayne, will be shifted to another Louisville plant that now makes only Super Duty F-Series pickups.

Also, a St. Paul, Minnesota, plant that builds the Ranger small pickup was given a two-year reprieve to 2011 to meet renewed consumer demand for the vehicle.

In addition, Ford said it would build a car-based Explorer to replace the current truck-based model in 2010 and new seven- passenger Lincoln ``crossover'' vehicle in mid-2009. Ford showed prototypes of those models in January at the Detroit auto show.

North American production capacity for 4-cylinder engines will double to more than 1 million units by 2011. A redesigned Mustang sports car and Taurus sedan will arrive in 2009.

Industry Decline

The F-150 slide has contributed to a 24 percent industrywide decline in full-sized pickup sales this year. U.S. auto sales have dropped eight straight months and are down 10 percent through June. J.D. Power and Associates, citing a deteriorating U.S. economy, yesterday reduced its forecast for the year to 14.2 million sales, the lowest in 15 years.

Ford is scaling back in 2008 after paring 46,300 jobs in North America the past two years. The automaker began dismissing salaried employees in June as part of a plan to trim those labor costs by 15 percent. About 4,200 U.S. factory workers accepted buyouts in the first quarter, and Ford is planning to make offers at most of its U.S. plants.

Gasoline averaged $3.76 a gallon during the quarter, a 25 percent increase from the same period a year earlier, according to motorist group AAA. Consumers responded by abandoning trucks and shifting to cars and smaller SUVs.

Trucks Down, Cars Up

Sales of the F-Series fell 31 percent in the quarter to 126,575, overwhelming sales gains for models such as the Focus and Fusion sedans. The F-Series accounts for about a quarter of Ford's U.S. vehicle sales.

The automaker lost $15.3 billion in the past two years, mostly because of deficits in North America. It hasn't boosted its U.S. market share since 1995.

Ford shares slid to a 23-year low of $4.36 on July 2, after reaching a high for 2008 of $8.48 on May 1. The shares had risen on a $100 million first-quarter profit that surprised analysts and disclosures by billionaire Kirk Kerkorian that he had acquired Ford shares. He holds a 6.5 percent stake.

So far, Mulally has the support of Kerkorian, whom he met with last month. Jerome York, an adviser to Kerkorian, said in an April 28 interview the automaker has ``really started moving the needle'' under its CEO.

Mulally has cited the rapid decline in F-Series sales and rising fuel prices for his retreat from the company's goal of a 2009 profit and for revamping his recovery plan.

``This is a structural shift and we needed to respond quickly,'' he told reporters May 22 in Detroit. ``It was clear to us that it was time to assume going forward we had more of a permanent shift.''

To contact the reporter on this story: Bill Koenig in Dearborn, Michigan, at wkoenig@bloomberg.net

Last Updated: July 24, 2008 09:03 EDT