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Ford Profit Surprise 2009-11-03

Posted by clype in Articles of Interest, Money.
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While its cross-town rivals stumbled through bankruptcy this summer, ‘The Ford Motor Company’ pressed its advantage, and delivered surprising news on 2009-11-02 MO that its cost-cutting efforts and improving sales helped it earn nearly 65 000 million GBP in the 2009Q3.

But now it faces new challenges in maintaining that lead; both ‘General Motors’ (‘GM’) and ‘Chrysler’, with the stigma of their bankruptcies receding, are moving ahead with their own comeback plans.

Under prodding from a new board, ‘GM’ is aggressively marketing a 60-day money-back guarantee on its vehicles that most likely will result in market share gains to be announced on 2009-11-03 TU.

Meanwhile ‘Chrysler’ and its new partner, ‘Fiat’, on 2009-11-04 WE will disclose an ambitious five-year plan to streamline its product line-up and introduce more fuel-efficient models.

‘Ford’ is also running into resistance from its unionised work force as it tries to cut costs further.

Its improving fortunes were the main reason cited by ‘The United Automobile Workers’ (‘The UAW’) on 2009-11-02 MO for rejecting another round of labour concessions that would have roughly matched concessions that workers at ‘Chrysler’ and ‘GM’ approved in the spring.

‘The UAW’s’ president, Mr. Ron Gettelfinger, and its vice president in charge of the ‘Ford’ unit, Mr. Bob King, said in a statement that the car maker’s third-quarter profit was ‘evidence of the contributions that ‘Ford’ workers have made.’

‘Ford’, which earned 644.93 million GBP  in the third quarter and made money in North America for the first time since 2005, has turned itself around largely by cutting costs and introducing cars that consumers want to buy, rather than resorting to deep discounts to lure shoppers into showrooms.

But ‘Ford’ also took advantage of the unfavourable perception that many consumers had of ‘GM’ and ‘Chrysler’, which have needed huge infusions of federal aid to survive. Even ‘Toyota’ has been losing money and, after significant recalls, been forced to defend its quality.

Toyota, like ‘GM’ and ‘Chrysler’, is plotting its own turnaround effort, with a new president, Mr. Akio Toyoda, focused on restoring its once-pristine reputation.

‘These difficult times have caused us to do some important soul-searching and approach the business in new and better ways,’ Mr. Bob Carter, head of the ‘Toyota’ division in the USA, told reporters in Detroit on 2009-11-02 MO.

‘Ford’ is hardly sitting still under its chief executive, Mr.Alan R. Mulally, who joined the automaker three years ago from ‘Boeing’ and, so far, has been the rare outsider to achieve success in Detroit.

‘This is not so much a turning point as it is a proof point of the value of the plan and the strategy we’ve been following for three years,’ Mr. Mulally said in an interview.

‘Ford’ did not offer a forecast for next year, and said only that it expected ‘solid profitability’ no later than 2011, after previously saying it expected to break even that year. It is also more wary of making such predictions, after being forced to reverse rosy forecasts in the past.

Moody’s Investors Service‘ on 2009-11-02 MO raised ‘Ford’s’ credit ratings based on the ‘substantial progress’ it has seen in the automaker’s performance and financial health.

‘The evidence we see indicates that Ford is on track in its plans to re-establish a sustainable and competitive business model,’ Mr. Bruce Clark, a senior vice president at Moody’s, said in a note to investors.

‘Ford’ is also taking more steps to improve its balance sheet and increase the amount of available cash it has on hand.

The company ended the third quarter with 154 000 million GBP in cash, and reported positive cash flow of 181 000 million GBP during the three month period.

  • ‘Ford’s’ chief financial officer, Mr. Lewis Booth, said on 2009-11-02 MO that the company also would seek to raise about 194 000 million GBP by issuing new stock and equity-linked securities.

The route that ‘Ford’ has taken thus far to profitability is one that, by all accounts, ‘GM’ and ‘Chrysler’ need to follow themselves.

When Ford’ chose not to ask for government loans, the company was freed to continue spending on new products like its ‘Fusion’ and ‘Taurus’ sedans.

‘GM’ and ‘Chrysler’, by comparison, had to rein in much of their product development programs to conserve cash while they awaited federal aid.

A report by the US Government Accountability Office released on 2009-11-02 MO  said that the US federal government was unlikely to recover much of the 524 000 million that was invested in ‘GM’ and ‘Chrysler’, their suppliers and related financing companies.

But with cleaner balance sheets and taxpayer cash to spend, ‘GM’ and ‘Chrysler’ are hoping their own turnaround efforts will take hold.

‘Ford’ proved during the third quarter that it can increase revenue and turn a profit even as the overall market slumps. In its core North American market, the company increased revenue by 26 percent, to 886 000 million GBP. It also reported a pre-tax profit of 231 million GBP, compared to a loss of 168 000 million GBP in the third quarter of 2008.

‘This improvement was primarily explained by favorable net pricing, lower materials costs, structural cost reductions, and improved market share,’ the company said.

‘Ford’ had the lowest average incentive costs of the three Detroit-based car manufacturers during 2009-10, according to the car research Web site Edmunds.com. As the car manufacturer continues to bring out new products, like the coming ‘Fiesta’ and ‘Focus’ small cars, its incentive spending could fall even more, as consumers tend to be willing to pay closer to sticker price for new models.

The company also said that it had reduced its costs by 298 000 million GBP in the first nine months of the year, already exceeding its full-year goal of 249 000 million GBP.

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