Ford Posts $997 Million 3Q Profit

Edward Niedermeyer
by Edward Niedermeyer

Ford turned a profit in the second quarter of this year, thanks to a share offering and other debt-reduction actions which covered a $424M pre-tax operating loss. In the third quarter, however, Ford’s profit needs no such qualification. Pre-tax operating profits were $1.1B, including a $357M from North American operations. For the record, this marks the first Ford North America profit since Q1 2005. Perhaps more importantly, for an automaker that’s mortgaged up to (and including) its logo, Ford’s cash pile grew by $2.8B (on $1.3B positive cashflow), to $23.8B. On the strength of these surprisingly strong results, Ford has revised its 2010 guidance from being “break even or better” to “solidly profitable.” The future is looking far brighter for Ford than any of its cross-town rivals, but there are a few more considerations to keep in mind before we can pronounce Ford officially out of the woods. Even the Blue Oval is warning that its 2010 guidance will be revisited after full-year results are in.

Perhaps most importantly, 3Q profit from North American operations have to be seen in the context of Cash for Clunkers stimulus. Not only did volumes increase due to the $3B federal stimulus, but transaction prices were high as well. With the government offering up to $4,500 off of qualifying models, dealers were charging full price for much of the third quarter. Ford acknowledges [via the WSJ] that “lower material costs, job cuts and consumers buying more high-end models equipped with technology features,” contributed to its domestic profits. Whether Ford’s North American operations can turn a healthy profit without government stimulus remains to be seen.

In Europe, Ford’s sales have also been kept afloat on a wave of stimulus. Citing the end of clunker-stimulus in Germany, a slowdown in the UK and a savage downturn in the Russian market, Ford’s CFO notes:

Looking at 2010 there is a high likelihood of a substantial decrease in European industry volumes. This decrease could more than offset U.S. sales volumes which may improve somewhat from this past quarter’s results.

Though European pre-tax profits grew to $193M, revenue actually fell 21 percent to $7.6 billion. The falling revenue-increasing profit model was replicated in the Asia/Pacific region which posted $27M profits, despite revenue falling 11 percent to $1.5 billion. South American operations saw revenue fall 22 percent to $2.1 billion, although profits of $247M were down compared to last year on currency losses.

Ford’s overall revenue fell in the third quarter even when compared to 3Q 2008’s miserable performance. The major lesson from these third quarter results is that Ford is cutting its costs admirably to cope with reduced demand. The second major lesson: Ford needs to show it can keep revenue from falling further when post-clunker stimulus results come in in December. Meanwhile, a deeper downturn in European markets could spell real trouble in the short term, while modest gains in Asian growth markets point to longer-term challenges. By Detroit standards, however, these results are about as close to peachy as they’ve been in a long while. Just don’t tell the UAW . . . .

Edward Niedermeyer
Edward Niedermeyer

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  • Ohsnapback Ohsnapback on Nov 03, 2009

    It is going to be extremely interesting to see how Ford did during the non-CFC stimulative months, versus the CFC-laced ones. We'll know later today.

  • Orian Orian on Nov 03, 2009

    It's nice to see they are reporting a profit, but they aren't out of the woods yet - lets take a wait and see attitude towards this IMHO. I see a lot of improvement in their line up, but they still have the UAW parasite attempting to bleed them dry. Not to mention C4C - we'll know better by the end of the year...lets see how Q4 plays out for them.

  • Lou_BC Ironic, the Honda Ridgeline, a truck that every truck guy loves to hate is in 6th place.
  • 28-Cars-Later I keep forgetting I own it, but the space look on the ext cab reminds me of my 'Yota pickup of the same model year. I'm pretty sure there is some vintage of Hilux which features the same looking ext cab window (maybe '88?) its a shame these things are mostly gone and when available are $1,000,000,000 [INSERT CURRENT CURRENCY].
  • Sayahh Imagine if Ford had Toyota design and build a Mustang engine. It will last over 300k miles! (Skip turbo and make it naturally aspirated.) Maybe Yamaha will help tune it...
  • Sobhuza Trooper Isuzu's crime was to build some damn good trucks.Shame on them.
  • El scotto Listen, unless you were Lord Headly-Stempmoor or such when you got off the off the boat, boot in Canada, you got the short end of the stick. People got on the boat, these days a plane, to escape famine, becoming cannon fodder in yet another stupid war, or the government thought it was A-OK to let soldiers kill you. Juneteenth is just a way to right one of the more bad ideas in the American experiment. Instead we have commenters who were buying tater chips and diet soda at Wal-Mart and got all butt-hurt because they heard someone who wasn't speaking English. I'm going to go fix a couple of frankfurters with salsa and guacamole and wash them down with a lager or three