Big Second Quarter Profit At Ford
Ford posting a surprisingly strong 2.6 billion dollar second quarter profit, with promises of more earnings next year, after a slowdown in the second half. "I love the word 'earnings." said CEO Alan Mulally.
Mulally told WWJ AutoBeat Reporter Jeff Gilbert that he expects Ford to be "solidly profitable" in 2010 and improve on that in 2011.
It was Ford's fifth straight quarterly profit, and it's strongest showing since 2004. Shortly after that, earnings slowed, and the red ink began to mount.
"Ford is in a fundamentally different place now," said Mulally, who added that they've completely changed the structure of the entire company. "You add our fundamental structure allows to be profitable and competitive with the best in the world with this great profit line, Ford is in a fundamentally different place than it's ever been."
Ford earning 2.1 billion in its core auto making operations, and making money around the world, including North America, where it made 1.9 billion dollars.
The second quarter profit is about a billion dollars more than analysts were expecting.
"It clearly shows they certainly are on the right track," said Eric Merkel of Autoconomy.com. "They've got product that people want to buy."
Analysts have pointed to Ford's big debt as a red flag going forward. Chrysler and General Motors were able to lower a lot of their debt through bankruptcy.
"We reduced our debt by 7 billion dollars this quarter," said Mulally. "And we also announced that we believe we'll be net positive cash, meaning more cash than debt by the end of 2011."
Ford now has 21.9 billion dollars in cash, down from 25.3 billion in the first quarter. The automaker ended the quarter with $27.3 billion in debt, which will cut its interest payments by $470 million per year.
Ford's debt has helped finance a series of highly regarded new products, which has helped the Detroit automaker grab buyers' attention.
Ford said it expects to end 2011 with more cash than debt. It now has $21.9 billion in cash, down from $25.3 billion in the first quarter due to debt
Ford says the second half of the year will be weaker because of seasonal plant shutdowns, costs for new product launches and rising prices for raw materials like aluminum.
In 2011, Ford will also be facing a United Auto Workers Union that will be seeking to regain some things given up in previous contract negotiations. Ford is also the only one of the domestic three that doesn't have a no-strike plege from the union.
"They know the importance of using our earnings to reduce our debt to get back to investment grade, so we can reduce our cost of capital, so we can invest even more," said Mulally.
The automaker said U.S. sales, which hit a 30-year low in 2009, remain weak, with many shoppers not yet confident enough about the economy to buy new cars. Ford cut its forecast for total U.S. auto sales to a range of 11.5 million to 12 million. The company had predicted sales of 11.5 million to 12.5 million cars and trucks. Ford held its third-quarter production forecast steady at 1.27 million vehicles worldwide.
Ford ended the quarter with 17.2 percent of the U.S. market, up from 16.9 percent at the end of the first quarter, according to auto information site Edmunds.com.
by Jeff Gilbert, WWJ AutoBeat Reporter
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Listen to WWJ AutoBeat Reporter Jeff Gilbert's one-on-one interview with Ford CEO Alan Mulally.
