Ford profit: $1 billion

[TonyV]

Posted: April 25, 2010
Ford profit: $1 billion
Strong 1st quarter is another high for rebounding U.S. auto industry
BY BRENT SNAVELY and JEWEL GOPWANI
FREE PRESS BUSINESS WRITERS

Ford, a year ago in danger of being dragged down with a collapse of its nearly bankrupt Detroit rivals, is projected to report nearly $1 billion in first-quarter profits Tuesday, the strongest indication yet that the U.S. auto industry is bouncing back more quickly than expected.



The expected profit announcement will follow news last week of General Motors' early repayment of $5.8 billion in government aid and word that Chrysler is on the path to break even this year.
Though taxpayers might never be fully repaid the nearly $85 billion in aid they provided the industry, and a singed Michigan must move aggressively to diversify its economy, a more optimistic outlook is sweeping through parts of Detroit's hallmark automotive sector.
"A year ago at this time, we were fearful General Motors would fail and take the whole industry down with it," Bill Ford, executive chairman of Ford Motor, told the Free Press on Thursday. "What a difference a year makes."
David Cole, chairman of the Center for Automotive Research in Ann Arbor, said the industry is at the cusp of "a really significant turnaround point," noting that it came "much faster than I think most people anticipated."
Business at Ford, which bypassed federal assistance, hasn't been stronger since the SUV craze collapsed. Customers increasingly prefer Ford's high-quality, technology-loaded, fuel-efficient cars, leading Ford to gain market share in the U.S. and Europe.
But Bill Ford says his great-grandfather's company has learned some hard lessons and won't return to the days of self-celebration.
"We're very pleased but very cautious," Ford said. "I know how quickly things can change, and I know how quickly self-satisfaction turns into self-destruction."

[TonyV]

Ford's $1B profit could be start of good year
Return to black expected to have bigger impact now
BY BRENT SNAVELY
FREE PRESS BUSINESS WRITER
Four years after launching its Way Forward turnaround plan and hiring now-lauded CEO Alan Mulally, Ford Motor stands at the threshold of what could be its comeback year.





When the automaker reports its financial results for the first quarter of 2010 on Tuesday, Ford is expected to report income, excluding special charges, of 31 cents per share, or nearly $1 billion, according to an average of estimates from analysts reporting to Thomson One Analytics.

Last year, by comparison, Ford lost $1.4 billion in the first quarter, including $362 million in special charges.

Ford ended 2009 with a surprise profit of $2.7 billion, which marked the end of three straight years of losses totaling nearly $30 billion.

While Ford also achieved the return to the black during a national recession and low industry sales, nearly all of the profit was because of special charges -- so the return to black was not as clearly victorious as it is expected to be this year.

Ford is expected to report a profit for 2010 of $1.40 per share, excluding special charges, analysts forecast. That translates into $4.75 billion, although analysts could upgrade or downgrade their forecasts based on the company's first-quarter results.

"We're expecting continued strong North American, European and South American performance," said Brian Johnson of Barclays Capital. "The real question is how strong?"

Mirko Mikelic, senior portfolio manager for Fifth Third Asset Management in Grand Rapids, said he is eager to see Ford's first-quarter results because they might be the best measuring stick yet of Ford's progress.

Last year's impressive results, he said, were because of onetime accounting benefits, as well as market share gains that came from General Motors and Chrysler bankruptcies.

"It's been tough to get a good picture of where they are really at," Mikelic said. "We'd like to see them report six to eight quarters of solid results."

Incentives could hurt
One factor that could eat into Ford's profit performance this year is the surge in incentives being forced into the industry by rival Toyota, which is trying to offset a dip in performance because of its recall crisis.

JP Morgan analyst Eric Selle said his biggest concern about Ford is how much the onslaught of no-interest financing deals might curtail Ford's profits.

"Last year, pricing was a big component of their turnaround and profits," Selle said.

Earlier this month, Mark Fields, Ford's president of the Americas, maintained that Ford's selective use of no-interest financing deals didn't hurt the company, and he signaled that the company would deliver strong results.

"Not only did we have good balanced share growth ... our incentives were down, and our revenue was up," Fields said.

For the first three months of the year, Ford's share of U.S. car and truck sales increased 2.7 percentage points to 17.4% -- Ford's biggest quarterly increase since the fourth quarter of 1977, Fields said.

There are other suggestions Ford's results could be good, too.

In Europe, Ford unseated Volkswagen as the best-selling brand in March, and the Ford Fiesta subcompact, which comes to the U.S. market soon, became the No. 1-selling car in the main 19 European countries where Ford operates.

Investors also are showing confidence in the company's steady and consistent progress. Ford's stock has risen nearly 40% this year, from $10.17 on Jan. 4 to $14.21 on Friday.

Challenges remain
Mikelic said Ford's biggest challenge is the economy and industry sales that remain below historic levels. Until industry sales improve to an annual rate of 13 million or more in the U.S., he said, no automaker will be really healthy.

Ford also has been behind rivals in picking up sales in China, one of the most important growth markets in the world.

Ford's ability to expand rapidly in fast-growing overseas markets is constrained by its debt. Ford paid off $3 billion of its debt earlier this month, leaving the company with about $31.5 billion in debt. Still, that's much more than GM's bankruptcy-cleansed debt of $17 billion.

Mikelic said Ford's credit rating remains below investment grade, making it expensive to borrow.

Executive Chairman Bill Ford said earlier this month that Ford has the ability to fund its expansion because it is adopting global platforms that allow the company to build the same cars around the world and save money.

"That's enabled us to not only introduce products more frequently, but also new technology as well," Ford said.