Blue Oval in the black
BY RON HAMMERTON | 27th Oct 2010
Fuelled by strong global demand for hot-selling cars such as the Fiesta, Ford today reported a net profit of $US1.7 billion ($A1.72b) for the September quarter – a $US690 million ($A700m) improvement over the same quarter last year.
This eclipses the company’s previous highest third-quarter profit of $US1.13 billion ($A1.15b) 13 years ago.
Ford said its cash reserves had allowed it to pay out $2 billion of its line-of-credit debt in the quarter, and it was now set to repay another $3.6 billion owed to its retiree health fund this Friday.
So far this year, Ford has cut its debt by $10.8 billion, slicing its annual interest bill by about $800 million.
Ford borrowed heavily to put its house in order before the global financial crisis – a move that gave it the cash reserves and necessary pace of reform to avoid the bankruptcy fate of cross-town rivals General Motors and Chrysler.
At the same time, Ford president and CEO Alan Mulally introduced a ‘One Ford’ policy to slash the number and cost of vehicle platforms around the world and strengthen the model line-up with more fuel-efficient and sharply styled vehicles, especially for North America.
Announcing the quarterly result, Mr Mulally said the One Ford plan was continuing to gain momentum.
“Delivering world class products and aggressively restructuring our business has enabled us to profitably grow even at low industry volumes in key regions,” he said.
“The key drivers for improvement in 2011 will be our growing product strength, a gradually strengthening economy and an unrelenting focus on improving the competitiveness of all our operations.” Globally, Ford sold 1.3 million cars for the quarter – up 91,000 units if Volvo is excluded from the 2009 tally.
Ford says its sales performance in North America would have been stronger except for delays in deliveries of its Mexican-made Fiesta due to a strike and bad weather.
The Fiesta has only just been introduced into the US where its has been an instant hit alongside the latest F-Series truck range, Taurus and Edge.
Sales in the US were up nine per cent, helping Ford to increase its market share by 1.3 percentage points – the second such gain in two years.
In the Asia Pacific Africa region, which includes Australia, sales were up 28 per cent. This included a massive 190 per cent increase in Blue Oval sales in India, where the Ford Australia-designed, Fiesta-based Figo has been a massive hit.
Regional profit was $30 million compared with $22 million a year ago on revnue of $1.8 billion – up from $1.5 billion last year.
One black spot for Ford in its latest results was Europe, where the company reported a pre-tax operating loss of $196 million against last year’s quarterly profit of $131 million. Revenue was also down, from $7.3 billion to $6.2 billion.
Ford’s global revenue for the quarter actually declined by $1.3 billion to $29 billion compared with last year, but if Volvo revenue is excluded from 2009 figures, Ford’s revenue showed an increase of $1.7 billion.
Ford sold the Swedish car-maker this year to Chinese manufacturer Zhejiang Geely Holding Group.
The Ford Automotive cash tin was holding $23.8 billion by the end of September – up $1.9 billion – giving the company access to almost $30 billion when including available credit lines.
Ford Credit – the Blue Oval finance company – contributed to its parent company’s success by paying a $1 billion distribution during the quarter after recording a pre-tax operating profit of $766 million, up $89 million.
Ford predicts continued improvement in its global operations in 2011, with the arrival of the new-generation Ford Focus in key markets, including North America, one of the driving forces.
According to US analysts, having hot-selling models with much improved customer appeal is helping Ford to maximise profit by minimising incentives compared with its rivals.
Edmunds estimates that Ford is paying an average of just $148 in incentives on a Fiesta, compared with Toyota’s $2114 on a Corolla.
