DETROIT — Ford Motor Co. has come a long way from the nearly
$30 billion in losses it racked up between 2006 and 2008.
After closing more than 10 plants and slashing 45 percent of
its workforce since 2006 in its long-ailing North American division, the
Dearborn-based automaker Monday reported net income of $997 million, or 29
cents per share, compared with a net loss of $161 million, or 7 cents per
share, a year ago.
For the first nine months of the year, Ford has now posted a
$1.8-billion profit. That’s a $10.6 billion improvement from the like period a
year ago.
Even the company’s long-struggling North American division
reported a pretax operating profit of $357 million — its first profitable
quarter since the first quarter of 2005. The company improved its cash position
by $2.8 billion, ending the quarter with $23.8 billion in cash.
What’s more, Ford said it “expects to be solidly
profitable in 2011,” excluding special onetime charges, “with
positive operating-related cash flow.”
Ford said a strong customer response to its new cars and
trucks, cost reductions and improved results at its financing arm, Ford Motor
Credit Co., contributed to the result.
The result was especially impressive because Ford’s
third-quarter revenue was $30.9 billion, down $800 million from the same period
a year ago.
“While we still face a challenging road ahead, our
transformation is working and our underlying business continues to grow
stronger,” Mulally said today during a conference call with analysts and
journalists. “We remain on track to achieve or exceed all of our 2009
financial targets.”
While the federal government’s cash-for-clunkers program
boosted Ford’s sales in the United States in July and August and similar
programs in Europe also benefited Ford, Mulally said Ford would have earned a
profit anyway.
“We have been increasing our share in this down market
every month for the last 10 months,” Mulally said in an interview with
CNBC. “So we are on a pretty steady trajectory of growth now.”
Given Ford’s strong third-quarter performance, several
analysts questioned on the conference call why Ford isn’t confident it can
become profitable sooner than 2011.
“We are just not sure, mainly about the strength of the
recovery,” Mulally said.
However, Mulally, who was recruited from Boeing Co. to Ford
in late 2006, said Ford is watching the economy closely and will provide an
updated profit outlook in January, when it reports year-end results.
Ford reported an operating profit of $1.1 billion, excluding
special items, during the third quarter, easily outperforming Wall Street’s
expectations. An operating profit is a company’s earnings from ongoing
operations before interest and taxes.
Analysts, on average, were expecting Ford to report a loss
of 12 cents per share, before onetime charges, for the July-September period,
according to estimates from Thomson One Analytics.
A big reason for Ford’s improved financial performance was a
$1.9-billion improvement in net pricing around the world compared with the same
period last year. Most of that, $1.4 billion, was achieved in North America.
Ford said its net pricing improved because it has cut
incentive costs and become more successful at selling vehicles with more
options and accessories both in the United States and in Europe. That includes
options such as Ford’s in-vehicle wireless communications and entertainment
technology, Sync.
Mulally also noted that the launch of the new Ford F-150,
which is a higher-priced vehicle, also contributed to the pricing gain.
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Lewis Booth, Ford’s CFO and executive vice president, said
Ford’s production cutbacks have allowed the company to also cut incentive
spending, because the company no longer has excess inventory it must discount
heavily in order to sell.
“It’s due to both the disciplined approach to
production …and incentives,” Booth said. “And a lot of this pricing
has to do with our product programs.”
Ford’s improvement also was boosted by cost cuts. During the
first nine months of this year, Ford said it has reduced automotive structural
costs by $4.6 billion.
Among the cost cuts: $2.4 billion from engineering and
manufacturing, $800 million in reduced pension contributions and $200 million
for advertising and marketing.
“We expect structural cost to be relatively stable now
that we have largely completed significant restructuring actions within our
manufacturing facilities and personnel reduction actions,” Booth said.
Since the second quarter of 2007, the last time Ford
generated cash, the automaker’s use of cash has been a critical concern for
Wall Street analysts.
But Monday, Ford reported it generated cash in the third
quarter.
Ford said it ended the third quarter with $23.8 billion of
automotive gross cash, an increase of $2.8 billion from the end of the second
quarter of 2009.
Last year, during the third quarter, Ford consumed $7.7
billion more than it took in.
“It’s a huge deal,” Booth said early this morning
in a discussion with journalists.
Booth said Ford also expects to report a positive cash flow
during the fourth quarter, but declined to forecast if it would be larger or
smaller than the third quarter.
Ford also announced Monday that it raised $565 million by
issuing 71 million new shares of stock during the third quarter. Booth said the
shares were issued as part of a program approved by the company’s board of
directors last year to raise up to $1 billion. Some money was raised last year,
but Ford put the program on hold last November as the economy worsened.
Over the past year, Ford has taken several actions in an
attempt to pay down debt, too. Ford is the only automaker that didn’t ask for
emergency federal loans, in part because it borrowed more than $23 billion in
2006. Now, the company must find a way to pay off more than $35 billion in debt
by 2013.
“We’ve made no secret that we have balance sheet
questions ahead of us, but we are not announcing anything here,” Booth
said.
After Ford’s UAW workers rejected a modified labor contract,
Mulally said that Ford plans to continue to work with the UAW to find ways to be
as competitive as possible on costs. The UAW was to announce the official
results later today.
“We have a long track record of working very
effectively” with the UAW, Mulally said. “The UAW has clearly
indicted that they do not expect Ford to be disadvantaged.”
Via McClatchy-Tribune News Service.
