Ford Australia posts $13m profit

FORD Australia president Marin Burela has promised further gains in profitability in 2010 and beyond after announcing today that the company had returned to the black with a net after-tax operating profit of $13 million for 2009 – its first positive result since 2005.

Ford Australia has attributed the $287 million turnaround to its ability to maintain a healthy sales revenue ($3.14 billion, compared with $3.9b in 2008) with fewer vehicle sales - down almost eight per cent last year.

It follows the third-largest local manufacturer's $274.4 million operating loss in 2008 – the deepest in its history – and losses of $87.1 million and $40 million in 2007 and 2006 respectively.

The financial result is well short of the $148 million profit Ford Australia achieved in 2005, but, according to Mr Burela, came ahead of expectations.

The company was not anticipating a return to profitability until at least 2011 under its previous strategy of building the Focus small car at its production plant in Broadmeadows.

That plan was scrapped last year, with Ford deciding instead to upgrade its current Australian-built models in 2011. The Falcon will gain a four-cylinder engine and a new-generation liquid-injection dedicated-LPG inline-six, while the Territory will pick up a turbo-diesel engine.

“We have been performing very solidly in 2010 and my expectation is that we will build on the profits that we have reported in 2009,” Mr Burela told GoAuto. “We are very bullish in terms of where the industry will be heading – we think the industry will be a million-plus this year.

“We’re moving into 2011 with new products coming through, we are continuing to invest, and we will deliver both on share, on profitable growth, and we will deliver value to our customers. As we have in 2009, we will do it in 2010 and beyond.

“That is our objective. That’s the plan that we’ve put into place. And I’m confident that we will deliver on that.”Ford’s financial results follow the March 31 announcement from GM Holden that it suffered a record net loss of $210.6 million in 2009 after revenue plunged by more than a third on the previous year, down from $5.8 billion to $3.8 billion.

Most of the blame for this was placed on the demise of Pontiac export deal to the US, but Holden said it had returned to profitability during this calendar year.

Toyota Australia is yet to publish its financial results for its previous fiscal year (ending March 31, 2010), but posted a net profit of $123.4 million in 2008/09, on top of profits of $242 million and $184 million in 2007/08 and 2006/07 respectively.



Mr Burela (left) said the key things Ford Australia focussed on to achieve a return to profitability were “making sure that we were delivering profitable volume and profitable vehicles throughout the year”.

“We focused very, very heavily on our manufacturing footprint and our manufacturing efficiencies,” he said.

“We built cars to order. We did not build cars to inventory. Our inventories across the country have been very critical key business indicators for us, and we have managed this with an absolute laser focus.

“I am extremely pleased to see that our inventory turn and sales rate on a monthly basis is now achieving the highest level of turn ratio in the industry in Australia. We are just about turning all of our stock on a monthly basis as we are selling them through our network.

“Our manufacturing cost per unit has gone down, our manufacturing efficiency has gone up. Our throughput across all of the business elements have improved month over month.

“We have touched every single element of the Ford of Australia business.”Mr Burela said Ford restructured its business “very quickly” in response to the global financial crisis, making sure that it balanced supply and demand. These included cutting around 15 per cent of its workforce late in 2008.

“When we went into this restructuring... there were some out there who were critical of the steps that we were taking. But as I said back in October 2008, we knew that we were taking the right steps to ensure that we created a very stable and a very viable platform for us to continue to move forward in 2009,” he said.

“And we have delivered on those commitments.”Mr Burela said Ford had been generating a positive cashflow since the latter part of 2009 and that it had reduced its debt levels – that is, inter-company borrowings – by between 42 and 45 per cent. He also said the company had grown its cash reserves.

“And yet at the same time, we have continued to invest in R&D (and) in new product actions,” he said, adding that the company’s R&D expenditure grew by 21-22 per cent, or around $55 million, in 2009 compared to the previous year.

He said this expenditure exceeded the level of federal government support Ford Australia received during the period, which included an increase in funding under the former Automotive Competitiveness and Investment Scheme (ACIS) of about 18 per cent – dollar figures for which Mr Burela was not able to produce – as well as about $40 million under the Green Car Innovation Fund (GCIF).

“We’re not complacent by what we’re announcing today,” Mr Burela said. “We’re very, very focused on the fact that we are in a very dynamic industry – one that changes very quickly – but we believe that we have put the building blocks in place, and the foundation is solid, to take us forward.”According to VFACTS statistics, Ford Australia sold 96,501 vehicles last year for a 10.3 per cent market share. That was the same share it achieved in 2008, and enough for it to hold its podium position behind Toyota and Holden, but overall sales were down 7.8 per cent (or 8214 units).

Of its locally produced vehicles, the Territory SUV was down 15.5 per cent (to 10,884 units), while the Falcon ute was down 3.3 per cent (on 12,180) and the all-important Falcon passenger car range was down 2.9 per cent to 31,023.

While it achieved some success with its Fiesta light car, up 45 per cent (with 8861 sales), its Focus was down 29 per cent (11,089) in the crucial small-car market.

Other models hit hard in 2009 were its Mondeo mid-sizer (-13.3 per cent), the Escape compact SUV (-42.1 per cent) and its 4x2 Ranger utility (-29.1 per cent), although the 4x4 version was up 12.8 per cent.

Industry figures released this week show that Ford’s market share has, year to date, slipped to 9.1 per cent but its 30,162 sales volume YTD is up 8.4 per cent on the same period last year. Its sales in April climbed 19.8 per cent, and, YTD, most of its models have improved.

Notable exceptions here include the Focus, down 25.2 per cent YTD, and the Falcon ute, down 6.3 per cent.

Last week, the Australian subsidiary’s parent Ford Motor Co posted a pre-tax operating profit of $US2 billion ($A2.2b) for the first quarter of 2010 – a $US4 billion improvement on the first quarter last year – and recorded a $US1.2 billion operating profit for its automotive operations.

Ford Asia Pacific Africa – which includes Ford Australia – posted a $US23 million profit for the quarter after a $US97 million loss for the same period last year.

As GoAuto has reported, Ford Motor Co CEO Alan Mulally declared the ‘One Ford’ plan was delivering “profitable growth”, and predicted solid profits for 2010.

“Our plan is working, and the basic engine that drives our business results – products, market share, revenue and cost structure – is performing stronger each quarter, even as the economy and vehicle demand remain relatively soft,” he said.