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Ford surprises with $1B profit; sees profit in '11
By TOM KRISHER and DEE-ANN DURBIN, AP
DEARBORN, Mich. — Ford, the only Detroit automaker to dodge direct government aid and bankruptcy court, surprised investors with net income of nearly $1 billion in the third quarter and forecast a "solidly profitable" 2011.
The automaker said Monday earnings were fueled by U.S. market share gains, cost cuts and the Cash for Clunkers program, which drew flocks of buyers to showrooms this summer. Ford's shares rose 58 cents, or 8.3 percent, to $7.58 in pre-market trading.
The latest results signal that Ford's turnaround is on more solid ground. The company lost more than $14.6 billion last year and hasn't posted a full-year profit since 2005. While it made a profit in the second quarter, that was mainly due to debt reductions that cut its interest payments.
Dearborn, Mich.-based Ford reported third-quarter net income of $997 million, or 29 cents per share. Ford also forecast a "solidly profitable" 2011. Previously the automaker said it would be break-even or better.
Its key North American car and truck division posted a pretax profit of $357 million, the company's first quarter in the black since early 2005. Ford cited higher pricing, lower material costs and increased market share for the improvement.
Excluding one-time items, Ford earned 26 cents per share, blowing away analysts' expectations of a loss of 12 cents.
The earnings came despite an $800 million revenue drop. But Ford said it cut costs by $1 billion during the quarter, accomplished through layoffs in North America and Europe, reduced pension and retiree health care costs and improvements in productivity and product development.
Chief financial officer Lewis Booth said the company took in $1.3 billion more than it spent in the quarter, an improvement over its $1 billion cash burn in the second quarter.
"That's a huge deal," Booth said.
Ford's plan to create demand and get better prices for its products, coupled with cost cuts, gave the company confidence that it will make money in 2011, Booth said.
But Ford still faces obstacles in its turnaround. Last week, workers overwhelmingly rejected an agreement with the United Auto Workers that would have brought Ford's labor costs in line with rivals General Motors Corp. and Chrysler LLC. Workers objected to clauses limiting their right to strike and freezing entry-level wages, and felt the company was healthy enough and didn't need further concessions.
Ford also has $26.9 billion in debt, up $800 million from the second quarter.
The company avoided the same fate as rivals Chrysler and GM by mortgaging its factories and even the familiar blue oval logo to borrow $23.5 billion before credit markets froze last year.
Ford didn't quantify the impact of Cash for Clunkers, which offered buyers rebates to trade in their vehicles. The program helped Ford cut costly incentives and raise production.
It also won buyers; the fuel-efficient Ford Focus sedan and Ford Escape, a small SUV, were among the top five sellers under clunkers. Ford sales climbed 17 percent in August thanks to the program.
Ford's revenue fell $800 million for the quarter, to $30.9 billion, due mainly to its financial services arm, Ford Motor Credit, making fewer loans.
But the division still posted a pretax profit of $677 million, and revenue from auto operations rose slightly to $27.9 billion.
Ford also has benefited from consumer goodwill after it declined government bailout money and didn't go into bankruptcy over the summer as GM and Chrysler did. Ford grabbed sales from its rivals, posting the largest increase in market share of any automaker in September. Ford expects an overall gain in U.S. market share in 2009, a feat it hasn't accomplished since 1995.
By TOM KRISHER and DEE-ANN DURBIN, AP
DEARBORN, Mich. — Ford, the only Detroit automaker to dodge direct government aid and bankruptcy court, surprised investors with net income of nearly $1 billion in the third quarter and forecast a "solidly profitable" 2011.
The automaker said Monday earnings were fueled by U.S. market share gains, cost cuts and the Cash for Clunkers program, which drew flocks of buyers to showrooms this summer. Ford's shares rose 58 cents, or 8.3 percent, to $7.58 in pre-market trading.
The latest results signal that Ford's turnaround is on more solid ground. The company lost more than $14.6 billion last year and hasn't posted a full-year profit since 2005. While it made a profit in the second quarter, that was mainly due to debt reductions that cut its interest payments.
Dearborn, Mich.-based Ford reported third-quarter net income of $997 million, or 29 cents per share. Ford also forecast a "solidly profitable" 2011. Previously the automaker said it would be break-even or better.
Its key North American car and truck division posted a pretax profit of $357 million, the company's first quarter in the black since early 2005. Ford cited higher pricing, lower material costs and increased market share for the improvement.
Excluding one-time items, Ford earned 26 cents per share, blowing away analysts' expectations of a loss of 12 cents.
The earnings came despite an $800 million revenue drop. But Ford said it cut costs by $1 billion during the quarter, accomplished through layoffs in North America and Europe, reduced pension and retiree health care costs and improvements in productivity and product development.
Chief financial officer Lewis Booth said the company took in $1.3 billion more than it spent in the quarter, an improvement over its $1 billion cash burn in the second quarter.
"That's a huge deal," Booth said.
Ford's plan to create demand and get better prices for its products, coupled with cost cuts, gave the company confidence that it will make money in 2011, Booth said.
But Ford still faces obstacles in its turnaround. Last week, workers overwhelmingly rejected an agreement with the United Auto Workers that would have brought Ford's labor costs in line with rivals General Motors Corp. and Chrysler LLC. Workers objected to clauses limiting their right to strike and freezing entry-level wages, and felt the company was healthy enough and didn't need further concessions.
Ford also has $26.9 billion in debt, up $800 million from the second quarter.
The company avoided the same fate as rivals Chrysler and GM by mortgaging its factories and even the familiar blue oval logo to borrow $23.5 billion before credit markets froze last year.
Ford didn't quantify the impact of Cash for Clunkers, which offered buyers rebates to trade in their vehicles. The program helped Ford cut costly incentives and raise production.
It also won buyers; the fuel-efficient Ford Focus sedan and Ford Escape, a small SUV, were among the top five sellers under clunkers. Ford sales climbed 17 percent in August thanks to the program.
Ford's revenue fell $800 million for the quarter, to $30.9 billion, due mainly to its financial services arm, Ford Motor Credit, making fewer loans.
But the division still posted a pretax profit of $677 million, and revenue from auto operations rose slightly to $27.9 billion.
Ford also has benefited from consumer goodwill after it declined government bailout money and didn't go into bankruptcy over the summer as GM and Chrysler did. Ford grabbed sales from its rivals, posting the largest increase in market share of any automaker in September. Ford expects an overall gain in U.S. market share in 2009, a feat it hasn't accomplished since 1995.
We sure can use some good news.
