Ford Reports Another Profit, and Sees More Gains Ahead

Ford Reports Another Profit, and Sees More Gains Ahead
By NICK BUNKLEY
Copyright by The Associated Press
Published: July 23, 2010
http://www.nytimes.com/2010/07/24/business/24ford.html?_r=1&hp


DEARBORN, Mich. — The Ford Motor Company on Friday said it earned $2.6 billion in the second quarter and expected to have more cash than debt by the end of 2011.

It was the fifth consecutive quarterly profit and best earnings report in more than six years for Ford, whose turnaround has been gaining momentum as it has increased sales and market share in the United States.

Ford, the only Detroit automaker not to file for bankruptcy protection or receive emergency federal aid, said it expected to be profitable in the second half of this year and deliver even stronger results in 2011. It said second-half profit in 2010 would be less than the $4.7 billion it earned in the first six months, however, due to seasonal changes in demand and new product introductions.

“We delivered a very strong second quarter and first half of 2010 and are ahead of where we thought we would be despite the still-challenging business conditions,” Ford’s chief executive, Alan R. Mulally, said in a statement. “Our progress is being led by the strength of our new products and our leaner, global structure.”

Excluding special items, Ford earned $2.9 billion before taxes, or 68 cents pa share. A year ago on that basis, the company lost $554 million, or 21 cents per share.

It earned $2.1 billion from its automotive operations, including $1.9 billion in North America, compared with losses a year ago. All other regions also were profitable

The automaker’s financing arm, Ford Motor Credit Company, earned $888 million. Executives said Ford Credit is not expected to perform as well in the second half but that it would finish the year more profitable than 2009.

Ford reported positive cash flow of $2.6 billion in the second quarter, leaving a total of $21.9 billion in reserves as of June 30. In 2008, Ford was burning through nearly $2 billion of its cash every month.

But the company ended the quarter with $27.3 billion in debt, even after paying down $7 billion. Executives said Ford would move into a net cash position by the end of next year.

Executives said Ford would move into a net cash position by the end of next year but declined to reveal specific plans to pay down more debt.

Ford carries considerably more debt than its cross-town rivals, which were able to wipe out much of their obligations through the bankruptcy process.

Ford’s sales in the United States rose 28 percent in the first half of 2010, nearly double the industry average. Its market share rose to 16.9 percent, from 16.4 percent a year earlier.

Sales across the industry have slowed in recent months, though, raising concerns about the economic recovery.

Ford now expects all automakers to sell between 11.5 million and 12 million vehicles in the United States this year, its chief financial officer, Lewis W. K. Booth, told reporters. Previously, Ford had expected industrywide sales to be as high as 12.5 million. In the first half, automakers were on pace for about 11.4 million sales in the United States. (Before the recession, new vehicle sales in the United States topped 17 million a year for most of the last decade.)

But Ford does not believe the economy is stalling.

“It’s a slow recovery, but we think it’s sustainable,” Mr. Booth said.

Mr. Booth said Ford expects to spend about $1 billion more on steel and other raw materials this year than in 2009 due to rising prices.

The company recently began selling its new subcompact car, the Ford Fiesta, and has several important model introductions on the horizon, including the Ford Explorer crossover vehicle and the Ford Focus compact car.