Ford profit soars to $8.3 billion

FORD Motor Company has announced its biggest profit in 10 years, with operating profit rising from little better than break even in 2009 to $8.3 billion in 2010.

At the same time, the healthiest of the Detroit ‘big three’ motor companies slashed its debt by $14.5 billion or 43 per cent, while also announcing bonuses averaging $5000 for all 40,000 Ford full-time employees in the United States.

Cross-town rival Chrysler Group also promised $750 bonuses to employees, even though it recorded a full-year net loss of $693 million, weighed down by more than $1.23 billion in interest charges on loans. However, the result was a vast improvement on the $3.8 billion loss the previous year.

Ford’s employee bonuses do not apply to Ford’s Australian workforce, as subsidiaries such as Ford Australia set their own ‘merit increase’ bonus according to local performance.

Ford’s global revenue rose $17 billion, to $120.9 billion – a 16.3 per cent increase. Net income was $6.6 billion – a $3.8 billion increase from a year ago.

Vehicle sales climbed to 5.3 million vehicles, up 771,000 units on 2009, pushing automotive revenue to $111.2 billion, up $19.7 billion on a year ago.

Left: Ford president and CEO Alan Mulally. Below: Chrysler Group CEO Sergio Marchionne.

Ford president and CEO Alan Mulally said the 2010 results exceeded Ford’s expectations, accelerating the company’s transition from “fixing the business fundamentals to delivering profitable growth for all”.

“We are investing in an unprecedented amount of products, technology and growth in all regions of the world,” he said.

Last year, the operating profit was a meagre $38 million, but that broke a three year losing streak during which Ford racked up losses totalling $30 billion.

Ford’s 2010 profit would have been even bigger except for a $960 million charge in the final quarter, apparently to complete debt conversion offers.

The attack on debt in 2010 has slashed the company interest bill by $1 billion a year, helping the company’s automotive operation to end 2010 with $20.5 million in gross cash.

In Ford’s North American heartland, the full-year pre-tax profit was $5.4 billion, compared with a $600 million loss in 2009.

In the Asia Pacific Africa region, which includes Australia, Ford turned an $86 million pre-tax loss in 2009 to a $189 million profit in 2010 on sales of $2.2 billion, up from $1.7 billion the previous year.

Ford of Europe managed to eke out a profit increase, with the pre-tax result climbing from $144 million in 2009 to $182 million in 2010.

However, fourth quarter revenue and profit slipped on lower sales and smaller market share as European governments withdrew sales subsidies.

Ford’s long-time cash cow, Ford Credit, recorded a 50 per cent increase in global profit, up from $2 billion to $3.1 billion last year.

Ford’s chiefs have promised more of the same in 2011, with its global Focus small car rollout continuing in markets such as North America and Australia, as well as the launch of the new Australian-designed, Thai-built Ford Ranger.

“We expect continued improvement in 2011, driven primarily by our growing product strength, a gradually strengthening global economy and an unrelenting focus on improving the competitiveness of all of our operations,” said Mr Mulally said.

“We are delivering on our commitments to serve our global customers with a best-in-class full family of Ford products and delivering profitable growth for all associated with Ford.”

The $3 billion turnaround at Chrysler was driven by cost-cutting and manufacturing efficiencies, despite lower sales and higher launch costs.

Chrysler’s ‘modified operating’ profit – which takes into account a range of costs such as pensions and health fund contributions – was $763 million, which is better than the break-even forecast by the company.

Chrysler Group CEO Sergio Marchionne said Chrysler had delivered on both the product and financial fronts, surpassing many expectations.

However, our job is not yet done,” he said “We have a lot of work ahead to fulfill our five-year business plan objectives.”

Chrysler's net revenue of $41.9 billion for 2010 was slightly below the $42.5 billion called for in the five-year business plan that the automaker announced in November, 2009, and just short of some analysts' expectations.

Mr Marchionne said Chrysler expected to be back in the black in 2011.