Ford Motor Co. reports $1 billion profit for third quarter
Tuesday, November 3, 2009
Ford, the only major American automaker to avert bankruptcy and spurn a government bailout, signaled its growing strength Monday, posting a third-quarter profit of about $1 billion and lifting hopes that the U.S. industry can recover.
The financial results marked the first time Ford's North American operations have been profitable since 2005, and the turnaround reflects the fact that the automaker has drastically cut costs, slashed tens of thousands from it workforce and produced more appealing cars, analysts said. The government incentive program "Cash for Clunkers," also provided a boost.
Yet Ford's recovery remains fragile. The United Auto Workers announced just hours after the earnings report that its members at Ford plants voted overwhelmingly to refuse to give up their right to strike on wages when the current contract expires in 2011.
"We haven't had a raise in five years," said Nick Kottalis, president of the local at the truck plant in Dearborn, Mich. "It's peculiar that Ford was asking for all these concessions while they were making all this money. A lot of the people on the line were asking, 'Was this all a big lie?' "
The union's stance is far from the biggest challenge facing the company, however.
Unlike General Motors and Chrysler, which went through bankruptcy to cleanse their balance sheets, Ford is burdened by more than $23 billion in debt and has billions in other obligations that are restraining its prospects. It was the crush of just such obligations that brought GM and Chrysler to the brink of annihilation earlier this year.
Maybe even more daunting, the demand for new cars in the United States remains weak. The U.S. market generated more than 16 million in sales during its peak a few years ago; this year it is forecast to run about 10 million. Next year it has been pegged at slightly more than 11 million.
"As long as demand is this low, it's hard for anybody to make money in the automobile business," said Louis E. Lataif, a former Ford executive who is now head of the school of management at Boston University.
Indeed, the general economic uncertainty has clouded Ford's view of the immediate future.
The company said it expects to return to "solid profitability" in 2011. But company officials stopped short of predicting results for next quarter or next year.
"We're just not sure, mainly about the strength of the recovery," Ford's chief executive, Alan R. Mulally, said on the conference call with analysts.
Ford reported a profit of $997 million (29 cents a share), for the three-month period, compared with a loss of $161 million (7 cents) a year earlier. An aggressive effort to cut costs helped the bottom line.