Ford Earns First Profit in 4 Years

January 28, 2010 - 3:02 PM
Defying economic conditions that sent its U.S. rivals into bankruptcy court, Ford Motor Co. 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.

In this photo made Nov. 29, 2009, a 2010 Ford Ranger pickup truck sits at a Ford dealership in Denver. Ford Motor Co. said Thursday, Jan. 28, 2010, it made $2.7 billion in 2009, its first annual profit in four years. (AP Photo/David Zalubowski)

Dearborn, Mich. (AP) - Defying economic conditions that sent its U.S. rivals into bankruptcy court, Ford Motor Co. 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 14 percent from 2008, but the Dearborn-based automaker benefited from $5.1 billion in cuts to manufacturing, engineering and advertising and a $1.3 billion profit at Ford Credit. It gained market share in North and South America and Europe despite the worst U.S. sales climate in 30 years. Share in Asia was flat.
 
Ford CEO Alan Mulally said 2009 was "pivotal" but Ford has work to do.
 
"Ford's transformation remains a work in progress and is far from complete," he said in a conference call with analysts and media. Back in 2006, Ford was considered the weakest of the three domestic automakers.
 
Ford shares fell 14 cents, or 1 percent, to $11.41 in early afternoon trading after Ford halted production of some full-sized commercial vehicles in China. The vehicles contain gas pedals built by the same company behind the accelerators in Toyota Motor Corp.'s recall. Mulally said Ford is still determining if there is a problem.
 
Ford's 2009 net income was 86 cents per share. It lost a record $14.6 billion, or $6.50 per share, in 2008. Excluding special items, Ford's earnings per share for the year were flat.
 
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. Quarterly revenue of $35.4 billion was up 22 percent.
 
For the quarter, Ford made 43 cents before special items. That surprised Wall Street, where analysts expected 26 cents per share.
 
JPMorgan auto analyst Himanshu Patel retained his neutral rating on Ford, saying fourth-quarter profits were largely driven by Ford Credit and could be unsustainable. He also said tax penalties for Ford's underfunded pensions are affecting the shares' value.
 
Previously, Ford was only willing to say it would be "solidly profitable" in 2011. It now predicts a profit - excluding special items - for 2010 because of signs of economic growth, lower costs and its ability to get higher prices for its vehicles, Chief Financial Officer Lewis Booth said. The 2010 Ford Fusion midsize sedan is selling for $2,000 more than the 2009 model because Ford is doing less discounting and customers are upgrading options.
 
Still, Booth said the recovery is tenuous. Ford predicts U.S. sales of 11.5 to 12.5 million vehicles in 2010, down from 17 million as recently as 2005. Consumer spending remains weak in the U.S. and Europe, credit is tight and Ford expects payback from last year's Cash for Clunkers schemes in Europe.
 
Ford expects to match or beat last year's U.S. market share of 15.3 percent, which was up 1.1 percentage points. It was Ford's first U.S. market share increase since 1995.
 
Mulally said Ford could benefit from safety-related recalls at Toyota. On Thursday, Ford pledged to give $1,000 to current Toyota, Lexus, Scion, Honda or Acura drivers who trade in vehicles or have leases expiring by June 30. The trades must be 1995 vehicles or newer.
 
"With a void right now and people needing vehicles, there's going to be even more interest in Ford," he said.
 
The automaker finished the year with $34.3 billion in debt, up $7.4 billion from Sept. 30. The company took on $7 billion in debt it owes a retiree health care trust fund run by the United Auto Workers union. It puts Ford at a disadvantage to GM and Chrysler Group, which were able to shed debt in bankruptcy court.
 
Booth said the company has "an uncompetitive balance sheet" and will work on cutting debt this year, but he wouldn't say what steps it will take.