Double Expectations: Ford Posts $2.1-Billion Profit
By Michelle Krebs April 27, 2010Ford Motor Co. reported a $2.1-billion net profit 
for the first quarter of 2010, the best quarter for the automaker in six years. Its results were roughly double what analysts had forecasted and represented a $3.5-billion improvement from 2009's first-quarter loss.
As a result, Ford said based on the quarter's performance, it expects to deliver "solid profits" for the full year of 2010, a year ahead of schedule.
"The Ford team around the world achieved another very solid quarter, and we are delivering profitable growth," Ford President and CEO Alan Mulally said in a statement issued Tuesday morning. Mulally holds a conference call with media and analysts later in the day.
"Our plan is working," he added, "and the basic engine that drives our business results -- products, market share, revenue and cost structure -- is performing stronger each quarter, even as the economy and vehicle demand remain relatively soft."
Excluding special items, Ford's pre-tax operating profit was $2 billion, an improvement of $4 billion from a year ago, marking Ford's highest quarterly pre-tax operating profit in six years.
Ford said in its statement, its performance is off to a more encouraging start than anticipated. "Based on Ford's improving performance, the gradually strengthening economy and its presentation assumptions, Ford now expects to deliver solid profits this year with positive automotive operating-related cash flow," the automaker said in its statement.
Earlier, Ford previously had said it would be profitable on an operating basis and be solidly profitable by 2011.
Ford is sticking with its forecast for U.S. vehicle sales to be in the range of 11.5 million to 12.5 million. Edmunds.com is forecasting industry light vehicle sales of 11.5 million for the full year. Ford expects its U.S. market to be equal to or improved compared with 2009.
To that end, Ford will increase production by 30,000 units in the U.S. from its previous plan. Indeed, Ford inventories are tight. Edmunds.com calculations show Ford vehicles took only 51 days to sell to a consumer from delivery to dealerships; that's Ford's lowest days to turn by a long shot in at least five years.
Ford sold 1,253,000 million vehicles in the first quarter of 2010, up from 986,000 in the 2009 first-quarter. Higher sales drove Ford to its highest U.S. market share gain since 1977. That pushed revenues to $28.1 billion, a hike of $3.7 billion. Ford's 2010 first-quarter results excluded revenues from Volvo, which were $3.5 billion because the sale of Volvo to China's Geely will be completed in the third quarter and Ford is de-coupling Volvo now from its financial results. The 2009 first-quarter revenues included Volvo.
Ford ended the quarter with $25.3 billion in cash reserves, an improvement of $4.4 billion from the year-ago quarter. Its debt stood at $34.3 billion at the end of the quarter, the same as the end of 2009's first quarter and an increase of $700 million from year-end 2009. Ford said on April 6, it paid down $3 billion of its debt, which will be reflected in its second-quarter results.
Ford made money in its automotive operations, including those in North America and Europe. Ford's automotive operations posted a pre-tax operationg profit of $1.2 billion, a $3.2 billion improvement from its $2 billion loss in the first quarter of 2009.
In North America, where all automakers including Ford have struggled to make money, the automaker had a pre-tax operating profit of more than $1.2 billion. In addition to higher sales and market share, Ford is fetching higher prices for its vehicles. During the first quarter, the average Ford vehicle sold for $30,204, roughly $1,300 a vehicle more than in the year-ago quarter. Ford paid less in incentives in the first quarter -- about $3,221 per vehicle, according to Edmunds.com calculations. That's the lowest level since 2007.
Ford of Europe pitched in a pre-tax profit of $107 million. Ford's other regions also posted profits as did Ford Credit.
"We remain cautiously optimistic about the positive signs emerging in the global economy, while knowing that the recovery is fragile and the global auto industry continues to deal with excess capacity," said Mulally in the company's statement. "For us, the most important thing we can do is to stay focused and continue to make progress on our plan."
On Monday -- the eve of Ford's earnings announcement -- the company's stock hit a new five-year high of $14.57 a share, compared with under $5 a share at this time a year ago. -- Michelle Krebs, Senior Analyst and Editor at Large
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As reported elsewhere, Ford will soon be weighing paydown of its $34 billion in outstanding debt vs product development.
But for now, they have clearly demonstrated that they are product focused, and as long as they remain so, the revenue for debt paydown will flow. This is how capitalism is supposed to work.
Well done, ford Motor Company!
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