The New York Times - By NICK BUNKLEY
The Ford Motor Company on Monday posted a surprise third-quarter profit of $997 million and said it had had its first profitable quarter in North America in more than four years.
The carmaker also said that, at least temporarily, it had stopped rapidly burning through its much-needed cash reserves. It reported positive cash flow of $2.8 billion during the quarter, ending September with $23.8 billion.
Through the first nine months of 2009, Ford, the only Detroit automaker to avoid bankruptcy this year, has had a profit of more than $1.8 billion. Still, it has lost about $1.3 billion when one-time items, like a major debt restructuring, are excluded.
Until now, its goal had been to break even or earn a full-year profit by 2011. On Monday the company said in a statement that it “now expects to be solidly profitable in 2011, excluding special items, with positive operating-related cash flow.” It did not indicate whether a fourth-quarter or full-year profit is expected this year, nor did it provide an outlook for 2010, citing continued economic uncertainty.
“We’re just not sure, mainly about the strength of the recovery,” Ford’s chief executive, Alan R. Mulally, said on a conference call with analysts and reporters. “Clearly we’re on a path and following our plan for solid profitability in 2011.”
The company’s earnings of $357 million in North America broke a streak of 17 consecutive quarterly losses there. That figure represents a $3 billion improvement from the same period a year ago, despite considerably lower sales across the industry.
Ford was helped by the government’s so-called cash-for-clunkers program, which lifted new-vehicle sales in July and August, but executives attributed most of the upturn to cost cuts and higher net pricing.
Shares of Ford stock were up 8.4 percent in morning trading. The firm Fitch Ratings raised its outlook for Ford to positive from stable after the company’s earnings report was released.
“We are very pleased with the progress we have achieved so far this year, and we have increased confidence in our ability to deliver on our plan,” Mr. Mulally said. “Ford faces significant challenges ahead, but we remain confident that we have the right plan and are taking the right actions to transform Ford into a lean company that delivers profitable growth for all of its stakeholders.”
The company posted an after-tax operational profit of $873 million, or 26 cents a share, beating even the most optimistic of forecasts by Wall Street analysts. Its overall profit is equal to 29 cents a share.
The profit occurred even as third-quarter revenue fell 3 percent, to $30.9 billion. The company said it now expected to reduce its annual structural costs by $5 billion this year, $1 billion more than its original target.
The United Automobile Workers union is expected to announce on Monday that its members soundly rejected a deal to help Ford further cut its labor costs. The deal would have generally matched concessions that workers at Chrysler and General Motors approved in the spring.
Ford workers ratified a deal in March that saves the company an estimated $500 million a year, but this time many expressed anger at being asked to make more sacrifices at a time when the company’s finances and market share are improving.
But Ford easily won approval of a separate deal from its 7,000 union workers in Canada over the weekend. The Canadian Automobile Workers union said 83 percent voted in favor of that deal, which freezes wages until 2012 and allows Ford to close its 41-year-old assembly plant in St. Thomas, Ontario.
The U.A.W. deal would have frozen wages for newly hired workers until 2015, combined some job classifications and barred the union from going on strike to demand higher pay or benefits. In rejecting the deal, workers gave up a $1,000 bonus that Ford would have paid them in March.
Many in the U.A.W. undoubtedly were influenced by Ford’s efforts to portray itself as different from G.M. and Chrysler since both those companies borrowed billions of dollars from the federal government and filed for Chapter 11 protection.
Ford has been having more success than its cross-town rivals at attracting customers, and its newest vehicles are winning commendations from sources like the magazine Consumer Reports, which last week declared Ford’s quality to be “as dependable — or better than — some of the industry’s best.”
The company’s sales in the United States are down 22 percent this year through September, the smallest decline among the six largest automakers; the industry is down 27 percent over all.
“We have created a very strong business, and we’re not taking any taxpayer money,” Mr. Mulally said.
As recently as two years ago, Ford was widely regarded as the laggard of the Detroit Three. (That unwelcome distinction is now held by Chrysler, which intends to outline its future plans with its Italian partner, Fiat, on Wednesday.)
Last year, Ford lost $14.6 billion, the most in its history. Mr. Mulally initially joined the leaders of G.M. and Chrysler in pleading with members of Congress to aid their companies, but Ford later decided to forgo emergency loans.
Despite its improvements, Ford remains heavily in debt. It borrowed $23.5 billion in 2006, a move initially viewed as an ominous sign of its future prospects but which turned out to be extremely fortunate after the credit markets collapsed.
