Ford earns first profit in 4 years
Ford, the only U.S. automaker to avoid bankruptcy court, clawed its way to a $2.7 billion profit in 2009 and expects to stay in the black in 2010. It was the automaker’s first annual profit in four years.
Ford’s full-year revenue of $118.3 billion fell nearly 20 percent from 2008, but the Dearborn-based automaker benefited from cost-cutting, a $696 million profit in its credit arm and popular cars and trucks like the Ford Fusion midsize sedan and Ford Escape small SUV. It gained market share in North and South America and Europe, despite the worst U.S. sales climate in 30 years.
“While we still face significant business environment challenges ahead, 2009 was a pivotal year for Ford,” Ford CEO Alan Mulally said in a statement.
Ford shares ended higher/lower at $11.55 in afternoon trading.
Ford’s 2009 net income of 86 cents per share showed a significant improvement from the year before, when it lost a record $14.6 billion. Before severance payments and retiree health care charges, Ford made 43 cents per share.
The profit surprised Wall Street, where analysts expected an annual loss of 31 cents.
Ford made money in three of the four quarters last year. In the fourth quarter, it earned $868 million, or 25 cents per share, compared with a loss of $5.9 billion a year earlier. Ford’s quarterly revenue of $35.4 billion was up 22 percent from a year earlier.
Ford was able to predict a profit this year because of small signs of economic growth, lower costs and its ability to get higher prices for its vehicles, said Chief Financial Officer Lewis Booth. Previously, Ford had only forecast that it would be “solidly profitable” in 2011.
Fourth-quarter sales in Europe and North America were also stronger than expected, he said.
Still, Booth said signs of economic recovery were tenuous. Ford is expecting U.S. industry sales of 11.5 million to 12.5 million vehicles in 2010, up from 10.4 million last year. But that’s down from sales of 17 million as recently as 2005.
“We are worried about how fragile that may be,” he said.
The company said it cut manufacturing, engineering, sales and advertising costs by $5.1 billion last year, $500 million of that in the fourth quarter.
Booth did not think his company benefited from a spate of safety-related recalls at Toyota Motor Corp., but said Ford will look for opportunities to improve its market share.
“We’re going to focus on doing it with our own products,” he said.
The company said it would match or beat last year’s U.S. market share of 15.3 percent, which was up 1.1 percentage points.
Ford finished the year with $34.3 billion in debt, up $7.4 billion from the end of the third quarter. That was largely due to the company taking on $7 billion in debt it owes a retiree health care trust fund run by the United Auto Workers union. That puts Ford at a disadvantage to GM and Chrysler, which were able to shed debt in bankruptcy court.
Booth said the company has “an uncompetitive balance sheet” and will continue to work on cutting its debt this year. He would not say what steps it would take other than generating enough cash from operations to make payments.
“We’re not kidding ourselves. We know we’ve still got a lot of debt on our balance sheet,” he said.
Chicago is still buzzing from Ford’s high-powered announcement bringing the new Ford Explorer to be produced in the city and one union official said the positive earnings result is more good news for the company.
“I think it shows the company is viable,” said Carlo Bishop, president of United Auto Workers Local 551. “We didn’t take that bailout money and we’re still standing strong and working together, the UAW and Ford.”
The local represents hourly employees at the Chicago Assembly Plant.
Workers also got a bonus by Ford saying Thursday it will pay 43,000 eligible U.S. hourly employees $450 each for profit sharing as dictated in the 2007 contract agreement wtih the United Auto Workers. Bishop said workers he talked to about the bonus were surprised to hear about it, but he said that he expects details to be released in the next few days.
The automaker will not pay salaried employee performance bonuses under the company’s bonus plan for 2009 performance. However, merit increases are available this year and the company’s 401(k) matching program was reinstated Jan. 1.
Ford said that 12,000 workers would be brought to Chicago with the launch of the Explorer, but it is widely expected that current employees of the automaker will get the first crack at open positions. Bishop said plans are still being developed for how many people to hire, but he said the 28 members currently on lay off would be brought back first.
The first Explorer sport utility vehicle is expected to be assembled in the fourth quarter roll off the assembly line in the fourth quarter.
All of the vehicle’s stampings will be produced at Ford’s stamping plant in Chicago Heights.
While in Chicago Tuesday, Mark Fields, Ford’s president of the Americas, said that workers in the Chicago area are some of the “most passionate, skilled workers we have in our system” and that he was proud the vehicle could be assembled in Chicago.