SunPower gets creative with Ford to bolster plunging profit margins

SunPower is looking to U.S. consumers and a partnership with Ford to offset a rough patch in the solar panel market.

On the surface, SunPower's deal with Ford is interesting on multiple fronts. SunPower and Ford plan to offer a 2.5 kilowatt rooftop solar power system to produce 3,000 kilowatt hours of energy. The idea is that this SunPower system would offset the electric costs of charging a Focus Electric.

This deal is essentially a sales lead venture. Ford customers will express an interest and SunPower's dealers---400 in the U.S.---would make contact. It's unclear how many Ford Electric buyers will be willing to fork over about $10,000 for a solar power system.

From a business perspective, SunPower needs more partnerships like the one it cut with Ford. The company is being hit from multiple fronts and is watching it pricing power erode quickly. Meanwhile, demand in Europe has been tricky to navigate as subsidies end. Fortunately for SunPower it cut a deal with Total that gives it cheap access to capital and relationships with utilities, a sector that carries the company's sales.

The company on Tuesday reported a second quarter net loss of $18.4 million, or $1.06 a share, on revenue of $592.2 million. The loss excluding charges and other items came to 19 cents a share. Wall Street was expecting a weak quarter given SunPower already issued a profit warning. Gross margins in the second quarter were 12.45 percent, down from 20.33 percent in the first quarter.

Nevertheless, SunPower CEO Tom Werner said that the company is focusing on more small-scale projects focused on rooftops and parking garages---especially in areas like Germany and Italy. SunPower's North American business is strong, but the deal with Ford indicates some diversification should the U.S. ditch tax credits like Europe did. Werner added that the company has reallocated resources from its utility and power plant unit to its residential and commercial business. SunPower will also work to save costs.

Werner said:

As a result of the abrupt changes in the Italian market, we have restructured and realigned the company to address the preference for small scale solar systems in Europe. Our industry-leading, high efficiency technology is ideally suited for roofs and parking structures.

The big question is whether SunPower can grow its North American rooftop business. So far, SunPower has focused on utilities. Here's a look at the North America pipeline.

But now SunPower is thinking small in an effort to improve its profit picture.

Werner reiterated a shift to rooftops on an earnings conference call:

We expect to complete construction of more than 60 megawatts of North American commercial business by the end of the year. We are also expanding our North American commercial business model to Europe as those markets increasingly favor rooftop systems.

Related:

• Ford, SunPower partner on rooftop solar for EV owners
• SunPower cuts sees Q2 losses ahead as solar panel margins dip
• 3 noteworthy solar installations
• Total closes SunPower deal: Big oil goes solar
• Total closer to SunPower stake: Oil money flows to solar as clouds loom

CNET: Ford EVs to come with household solar-panel option

This post was originally published on Smartplanet.com