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Ford post surprise earnings, sees solid profit by 2011
2009-11-02
CHICAGO (AFP) - Ford Motor Co. on Monday posted surprise earnings of nearly a billion dollars in the third quarter and said it was on track to become "solidly profitable" by 2011 after years of painful losses. The number two US automaker swung to a profit of 997 million dollars from a loss of 161 million dollars the same period in 2008 as it continued to restructure to cope with slumping sales amid the worst global downturn in decades. The profit amounted to 26 cents per share, a huge surprise to analysts who had expected a 12 cent loss. The results came after Ford managed to increase market share in North America, Europe and South America and slash operating costs by 4.6 billion dollars in the first nine months of the year. "Our third quarter results clearly show Ford is making tremendous progress despite the prolonged economic slump," chief executive officer Alan Mulally said in a conference call with analysts and reporters. "While we still face a challenging road ahead, our transformation is working and our underlying business continues to grow stronger." Unlike rivals General Motors and Chrysler, Ford managed to cope with the economic crisis without resorting to bankruptcy protection or the need for billions of dollars in government aid. Ford's debt load after four years of restructuring has hit 26.9 billion dollars and the automaker on Monday announced plans to raise up to three billion dollars through an offering of new stock and convertible notes. Ford was also unable to win the same labor concessions granted to GM and Chrysler during the bankruptcy process after a tentative deal was overwhelmingly rejected by rank and file union members. Mulally, who declined to comment on the vote as results had not yet been announced, said the advantages of escaping bankruptcy and reliance on taxpayer money "clearly outweigh any potential disadvantages." Mulally attributed much of Ford's recent gains to the strength of its products -- which means it has been able to raise the average transaction price of its vehicles even as volumes have fallen -- and its success in restructuring its business after the losses began to pile up in 2005. While the bulk of the structural cost reductions are complete, Mulally said Ford will continue to focus on improving its competitiveness. Ford plans to increase production again in the fourth quarter after strong demand and careful production controls pushed dealer stocks to the lowest level in more than a decade. But the automaker said it expects its market share to stabilize after increasing 2.2 points to 14.6 percent in the United States and 0.6 points to 9.2 percent in Europe. Mulally said Ford was on pace to meet or exceed all of its financial targets and forecasted that the automaker may post at least an operating profit in the fourth quarter of 2009. He said the current positive results have allowed Ford to change its guidance for the full years 2011 from being "break even or better" to "solidly profitable" on a pre-tax basis. But he cautioned that it was too soon to predict how the automaker would fare next year due to uncertainties about the strength of the economic recovery. He also noted that European sales are expected to slump next year after popular scrappage programs wind down and those losses could "more than offset" the modest gains expected in the United States. For the key North America market, the company posted a pre-tax operating profit of 357 million dollars, its first profitable quarter since the first quarter of 2005. Ford also reported operating profits in its South America, Europe and Asia Pacific Africa businesses. Ford said third-quarter revenue was 30.9 billion dollars, down 800 million dollars from the same period a year ago. Ford has also managed to improve its cash position to 23.8 billion from 13.4 billion on December 31, 2008.
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