Post by TonyV on Jan 23, 2010 12:20:07 GMT -5
Posted: Jan. 23, 2010
From Ford's record losses to remarkable profit
Analysts expect automaker to turn profit with new product offerings
BY BRENT SNAVELY
FREE PRESS BUSINESS WRITER
Ford is poised next week to do what was unthinkable a year ago: The Dearborn automaker could report a profit for 2009.
Last year at this time, Ford reported a record $14.6-billion loss for 2008, the global recession was in full swing, and it looked like Ford might not survive 2009 without federal help.
Ford got by without the extra loans, gained share in the toughest sales market in decades and won a flurry of awards. All of which gives the company a strong tail wind into 2010.
"We have been, frankly, amazed at the quality of the management team's performance," said John Ramer, an investor in Wisconsin who bought Ford stock at a low $1.56 per share in late 2008.
On Thursday, Ford, which closed Friday at $10.52 per share and earned $1.8 billion for the first nine months of 2009, is poised to report a profit of more than $800 million in the fourth quarter, according to analysts reporting to Bloomberg News and Thomson One Analytics.
That could enable Ford to report a profit for the full year for the first time since 2005. While some analysts still expect Ford to report a loss for the full year, a few predict Ford's 2009 profit could be as high as $2.8 billion.
Ford's 2009 result has so far benefited from $3.2 billion in special, one-time charges. Excluding those, analysts expect Ford to lose about $1 billion from its operations in 2009.
"They are a lot further along on restructuring than we thought," said Eric Selle, a credit analyst with JP Morgan.
What Wall Street thinks
Wall Street thinks that Ford's slate of new car and truck launches -- at least six in the U.S., including heavy-hitters such as the Focus compact car built in Wayne -- will help the automaker keep its momentum going and earn a profit.
On average, analysts expect Ford will earn $3.61 billion this year, excluding special charges.
But Ford officials have consistently urged caution, saying only that the company expects to be "solidly profitable" by 2011.
In an interview on Jan. 12, Ford Chief Financial Officer Lewis Booth said he is paranoid about the expected economic recovery this year and what it might mean for Ford. "The economy," Booth said, is Ford's "biggest single challenge."
Booth said he thought any recovery would be fragile, and noted that unemployment remains high and there are concerns about inflation and interest rates. "There is a fair amount to stay worried about."
Showing improvement
But Booth's concerns stand in contrast with Ford's improving performance.
Ford won public favor in 2009 by emphasizing it was different from domestic rivals who received federal emergency loans. That helped Ford increase its 2009 U.S. market share by 1.1 percentage points to 16% of all cars and trucks. Ford also achieved its highest market share in Europe since 1998.
Along the way, Ford's stock price has soared from a 52-week low of $1.58 on Feb. 20 to a four-year high of $12.11 on Jan. 10.
Meanwhile, Booth said Ford is trying to expand quickly in fast-growing markets such as India, where Ford is planning to launch a small car called the Figo, and China, where it is building a new plant. At the same time, Ford is trying to reduce its debt.
"We've got to free up enough cash to continue growing in places like Asia," Booth said.
'Progress is real'
Ford ended the first nine months of 2009 with $26.9 billion in debt. Since then, Selle estimates that Ford's debt has increased to $36.8 billion. Most of the increase is because its obligations to a UAW-managed retiree health care trust are now classified as debt.
Ford President and CEO Alan Mulally has repeatedly vowed to make debt reduction a priority for Ford and earned high marks for refinancing Ford's debt twice last year, which helped Ford post a special gain of $4.7 billion last year.
Consequently, rating agencies have upgraded its credit.
Standard & Poor's credit analyst Gregg Lemos Stein said he upgraded Ford's rating because of reduced cash consumption, improved customer perceptions and market-share gains.
After spending $4.7 billion more in cash than it took in during the first half of the year, Ford reported it took in $1.3 billion more in cash during the July-September period than it spent.
"We think the progress is real," Stein said.
Planned launches praised
Ford's turnaround started with the so-called Way Forward restructuring plan that launched in January 2006.
Ford has closed 14 assembly and parts plants in North America and slashed its hourly workforce in half to just over 50,000. Ford also sold Jaguar and Land Rover, reduced its ownership in Mazda and is close to selling Volvo for $2 billion.
Last year, new products such as the redesigned Ford Fusion midsize sedan and the Fusion Hybrid helped the company gain market share in the U.S., while the all-new Ford Fiesta and Ford Ka subcompacts helped the company gain market share in Europe.
Over the next 15 months in the U.S., Ford plans to launch a redesigned Ford Edge and Lincoln MKX crossovers, a redesigned Super Duty pickup, a Mustang GT with a bigger V8 engine, an all-new Ford Explorer SUV and the Ford Focus compact car.
"We do not believe that Ford's competitors have as strong a product cadence," Michael Ward, automotive analyst for Soleil Securities, said in a Dec. 21 report.
Contact BRENT SNAVELY: 313-222-6512 or bsnavely@freepress.com
From Ford's record losses to remarkable profit
Analysts expect automaker to turn profit with new product offerings
BY BRENT SNAVELY
FREE PRESS BUSINESS WRITER
Ford is poised next week to do what was unthinkable a year ago: The Dearborn automaker could report a profit for 2009.
Last year at this time, Ford reported a record $14.6-billion loss for 2008, the global recession was in full swing, and it looked like Ford might not survive 2009 without federal help.
Ford got by without the extra loans, gained share in the toughest sales market in decades and won a flurry of awards. All of which gives the company a strong tail wind into 2010.
"We have been, frankly, amazed at the quality of the management team's performance," said John Ramer, an investor in Wisconsin who bought Ford stock at a low $1.56 per share in late 2008.
On Thursday, Ford, which closed Friday at $10.52 per share and earned $1.8 billion for the first nine months of 2009, is poised to report a profit of more than $800 million in the fourth quarter, according to analysts reporting to Bloomberg News and Thomson One Analytics.
That could enable Ford to report a profit for the full year for the first time since 2005. While some analysts still expect Ford to report a loss for the full year, a few predict Ford's 2009 profit could be as high as $2.8 billion.
Ford's 2009 result has so far benefited from $3.2 billion in special, one-time charges. Excluding those, analysts expect Ford to lose about $1 billion from its operations in 2009.
"They are a lot further along on restructuring than we thought," said Eric Selle, a credit analyst with JP Morgan.
What Wall Street thinks
Wall Street thinks that Ford's slate of new car and truck launches -- at least six in the U.S., including heavy-hitters such as the Focus compact car built in Wayne -- will help the automaker keep its momentum going and earn a profit.
On average, analysts expect Ford will earn $3.61 billion this year, excluding special charges.
But Ford officials have consistently urged caution, saying only that the company expects to be "solidly profitable" by 2011.
In an interview on Jan. 12, Ford Chief Financial Officer Lewis Booth said he is paranoid about the expected economic recovery this year and what it might mean for Ford. "The economy," Booth said, is Ford's "biggest single challenge."
Booth said he thought any recovery would be fragile, and noted that unemployment remains high and there are concerns about inflation and interest rates. "There is a fair amount to stay worried about."
Showing improvement
But Booth's concerns stand in contrast with Ford's improving performance.
Ford won public favor in 2009 by emphasizing it was different from domestic rivals who received federal emergency loans. That helped Ford increase its 2009 U.S. market share by 1.1 percentage points to 16% of all cars and trucks. Ford also achieved its highest market share in Europe since 1998.
Along the way, Ford's stock price has soared from a 52-week low of $1.58 on Feb. 20 to a four-year high of $12.11 on Jan. 10.
Meanwhile, Booth said Ford is trying to expand quickly in fast-growing markets such as India, where Ford is planning to launch a small car called the Figo, and China, where it is building a new plant. At the same time, Ford is trying to reduce its debt.
"We've got to free up enough cash to continue growing in places like Asia," Booth said.
'Progress is real'
Ford ended the first nine months of 2009 with $26.9 billion in debt. Since then, Selle estimates that Ford's debt has increased to $36.8 billion. Most of the increase is because its obligations to a UAW-managed retiree health care trust are now classified as debt.
Ford President and CEO Alan Mulally has repeatedly vowed to make debt reduction a priority for Ford and earned high marks for refinancing Ford's debt twice last year, which helped Ford post a special gain of $4.7 billion last year.
Consequently, rating agencies have upgraded its credit.
Standard & Poor's credit analyst Gregg Lemos Stein said he upgraded Ford's rating because of reduced cash consumption, improved customer perceptions and market-share gains.
After spending $4.7 billion more in cash than it took in during the first half of the year, Ford reported it took in $1.3 billion more in cash during the July-September period than it spent.
"We think the progress is real," Stein said.
Planned launches praised
Ford's turnaround started with the so-called Way Forward restructuring plan that launched in January 2006.
Ford has closed 14 assembly and parts plants in North America and slashed its hourly workforce in half to just over 50,000. Ford also sold Jaguar and Land Rover, reduced its ownership in Mazda and is close to selling Volvo for $2 billion.
Last year, new products such as the redesigned Ford Fusion midsize sedan and the Fusion Hybrid helped the company gain market share in the U.S., while the all-new Ford Fiesta and Ford Ka subcompacts helped the company gain market share in Europe.
Over the next 15 months in the U.S., Ford plans to launch a redesigned Ford Edge and Lincoln MKX crossovers, a redesigned Super Duty pickup, a Mustang GT with a bigger V8 engine, an all-new Ford Explorer SUV and the Ford Focus compact car.
"We do not believe that Ford's competitors have as strong a product cadence," Michael Ward, automotive analyst for Soleil Securities, said in a Dec. 21 report.
Contact BRENT SNAVELY: 313-222-6512 or bsnavely@freepress.com