Ford Posts $2.1 Billion First Quarter Profit
By Chris Haak
It doesn’t seem as if things could go much better for Ford these days, particularly in terms of relative performance. While its crosstown rivals are still struggling from either buyer apathy, taxpayer ire, or a dearth of new products, Ford has clearly pulled away from the pack in the past two quarters. Its first quarter 2010 financial results underscore that point.
The company reported this morning that it posted net income of $2.1 billion USD for the quarter, up from a loss of $1.4 billion in Q1 2009. Revenue rose to $28.1 billion this year from $24.4 billion in the year-earlier period. The company’s automotive operations had a pre-tax operating profit of $1.2 billion, against a loss of $1.9 billion a year ago. Automotive cash declined slightly from Q4 2009 to Q1 2010, from $25.5 billion to $25.3 billion. At that burn rate, which has slowed dramatically, Ford is in a very solid position. Too, CFO Lewis Booth attributed the $200 million cash decline to depleting its year-end inventory and building up new vehicles for the 2010 model year. Mr. Booth asserted that the company has positive cash flow; this is anotherr example of the hazards of quarter-to-quarter comparisons.
The company also increased its second-quarter production plans to 625,000 units, up 30,000 units from its previous forecast. Also, the company sounded a more optimistic tone about its prospects for profitability; it has moved up the timetable for being “solidly profitable” from 2011 to this year, 2010.
Good news continued on market share, incentive spend, and transaction prices. The company’s market share jumped from 14.7 percent in Q1 2009 to 17.4 percent in Q1 2010, as its sales gains so far this year were nearly double those of its rivals. Autodata Corp. reported that Ford spent the least on incentives among domestic-brand manufacturers, and buyers were choosing more expensive options and paying more for their cars, leading to average transaction prices $2,041 above those in the year-earlier period.
Not all the news was great, however. While Ford has clearly been the beneficiary of GM’s, Chrysler’s, and Toyota’s struggles in buyers’ eyes, it also did not have the financial benefit of washing away most of its debts in bankruptcy as GM and Chrysler did. This means that Ford still has to repay its substantial $34.3 billion in debt. By comparison, Old GM held $29.02 billion USD in long-term debt on 12/31/2008 and New GM held just $5.56 billion in long-term debt on 12/31/2009.
Ford’s dramatic sales turnaround from first quarter 2009, while good news, should not be taken out of context with the longer-term picture: the company sold 441,708 vehicles in the first quarter of 2010, but that’s just a fraction of the 1.08 million vehicles that it sold in the first quarter of 2000. Clearly, the company still has further to go if it plans to have its best years ahead of it. They’re definitely on the right track, with the right leadership, and some impressive new products coming down the pike. Let’s see if Ford can continue to execute.
