NEW YORK (CNNMoney.com) -- Ford Motor reported a surprise profit for
the third quarter Monday, helped by a bump in sales from the Cash for
Clunkers program, a reduced cost structure and problems at its U.S.
rivals.
The company also announced plans late Monday to raise $3 billion in
order to further boost its balance sheet.
The only major U.S. automaker not to file for bankruptcy this year
earned $997 million, or 29 cents a share, compared to a loss of $161
million, or 7 cents a share on that basis a year earlier.
Excluding special items, Ford reported a profit of $873 million, or 26
cents a share, in the period. Analysts had been forecasting a loss of
12 cents a share for the quarter on this basis. Ford said it was the
first pre-tax operating profit since the start of 2008.
In a separate announcement, Ford said it will issue $1 billion in
common stock and $2 billion of debt that will be convertible to common
shares. The company said it will start issuing them beginning next
month. The automaker also said it hopes to extend the maturity of its
revolving credit facility by two years to 2013.
"We expect the moves will enhance Ford's automotive liquidity and over
time reduce the company's debt burden, providing an additional cushion
given the still uncertain state of the economy," said Ford President
and CEO Alan Mulally in a statement.
The company said cost cutting during the past year and an improved
outlook for sales leads it to believe Ford will be "solidly
profitable" in 2011, excluding special items.
That's the most bullish outlook Ford has offered investors since it
started losing money in 2005. The company had previously said it was
looking for break-even or better results that year.
Turning the corner. The guidance raised hopes that the company may
have turned the corner on nearly five years of losses for its key
North American auto operations.
"Our third quarter results clearly show that Ford is making tremendous
progress despite the prolonged slump in the global economy," said
Mulally.
The company said it lowered its structural costs by $1 billion
compared to a year earlier, with about half of that improvement coming
in North America.
While Ford did not need federal assistance or a bankruptcy
reorganization as rivals General Motors and Chrysler did, it was able
to win concessions from its unions that resulted in a $300 million
structural cost reduction. Ford also said it paid about $200 million
less for materials and commodities in the quarter.
Ford still faces some potential problems in the near term. In a vote
announced Monday afternoon, the United Auto Workers union rank and
file rejected additional contract concessions sought by Ford
management, including a freeze on entry level wages.
And Ford said it expects sharp declines in European sales in the next
year partly because an even larger Cash for Clunkers there this year
will steal demand from future months.
Still, Mulally told investors that the company remains hopeful it
could be profitable in 2010, not just by 2011, and that the longer
time frame in the new guidance is a way of being cautious.
"The reason we couched it that way is we're just not sure about the
strength of the recovery," Mulally said. Ford will detail further
guidance on 2010 profits when it reports fourth-quarter results in
January.
Digesting the details. Results in North America were helped by much
stronger sales than a year earlier, particularly in the United States,
where the company was one of the prime beneficiaries of the Cash for
Clunkers program that gave buyers up to $4,500 if they traded in a gas
guzzler for a more fuel efficient vehicle.
Even without the Cash for Clunkers program, which lifted the whole
industry out of the doldrums, Ford made gains on many of its rivals
during the quarter.
During the quarter, Ford's U.S. market share rose by 2.2 percentage
points to 14.6%. Ford benefited from steep market share declines at GM
and Chrysler in the wake of their bankruptcies, but it also posted
bigger market share gains than Japanese rivals such as Toyota Motor
(TM) and Honda Motor (HMC).
Shares of Ford (F, Fortune 500) gained more than 8% Monday.
The company reported overall revenue of $30.9 billion in the quarter,
down $800 million from the same period a year ago due to a decrease in
revenue at its Ford Credit unit.
0:00 /2:59Better days ahead for autos
Ford said that global auto sales rose $100 million from the third
quarter of 2008, to $27.9 billion. It sold 1.23 million vehicles
worldwide, up 5% from a year earlier, and its average net pricing also
improved along with its sales volume. Auto revenue in North America
soared by $2.9 billion, or 27%, to $13.7 billion.
Ford also said it made money on its auto operations, and that it
reported positive cash flow of $1.3 billion from its auto businesses.
The company had been burning through significant amounts of cash every
quarter since the second quarter of 2007 as it suffered from years of
ongoing losses.
"While we still face a challenging road ahead, our [company]
transformation plan is working and our underlying business continues
to grow stronger," Mulally added.
Ford's automotive unit earned $446 million in the quarter, compared to
a loss of $2.9 billion in the year-earlier period, as the company's
core auto operations in North America returned to profitability for
the first time since the first half of 2005. To top of page
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