Ford Reports Largest Profit in 11 Years

Ford Reports Largest Profit in 11 Years

The Ford Motor Company said on Friday that it earned $6.6 billion in 2010, its largest profit in 11 years, a result of surging global sales and cost cuts made during a lengthy turnaround.

But the fourth quarter fell short of most Wall Street estimates, breaking from a recent trend of positive earnings surprises from the company.

The performance for the year, a substantial reversal from several years ago when Ford appeared to be the sickliest of Detroit’s automakers, means the company’s 40,600 hourly workers will receive profit-sharing checks averaging $5,000.

The checks, required under Ford’s contract with the United Automobile Workers union, will total more than $200 million and are the biggest Ford has handed out since 2001.

Ford ended 2010 with more cash than debt for the first time since before the recession began. The company eliminated 43 percent of its debt in 2010, though it still owed $19.1 billion.

“Our 2010 results exceeded our expectations, accelerating our transition from fixing the business fundamentals to delivering profitable growth for all,” Ford’s chief executive, Alan R. Mulally, said in a statement. “We are investing in an unprecedented amount of products, technology and growth in all regions of the world.”

From October through December, Ford earned $190 million, or 5 cents a share, after taking a $960 million charge related to a debt-conversion offer. That compared to earnings of $886 million, or 25 cents a share, in the period a year ago. Its fourth-quarter revenue rose $1.6 billion to $32.5 billion.

Excluding the debt-conversion charge and other one-time items, Ford earned $1.3 billion for the quarter, its sixth consecutive operating profit, though analysts had expected the company to do considerably better on an operating basis. Excluding one-time items, the automaker had a profit of 30 cents a share in the quarter; analysts had forecast 48 cents.

Lewis I. Booth, Ford’s chief financial officer, said that sales in Europe were lower than expected and that the company spent considerable resources introducing numerous new models around the world.

In addition, Ford’s debt level remains a concern for analysts. While General Motors and Chrysler were able to eliminate tens of billions of dollars in obligations during their 2009 bankruptcies, Ford now carries more debt relative to its rivals. It had $20.5 billion in cash as of Dec. 31, $4.4 billion less than a year earlier, though its total liquidity increased.

Mr. Booth said Ford would continue to pay down debt but did reveal any specific plans. The company hopes to improve its balance sheet enough to regain an investment-grade credit rating, which would reduce borrowing costs.

Ford said its debt-reduction efforts in 2010 cut annual interest costs by more than $1 billion.

The full-year profit of $6.6 billion — Ford’s second consecutive annual profit — was equal to $1.66 a share, and was more than twice as much as the $2.7 billion, or 86 cents a share, that it earned in 2009 when industrywide sales were in a historic slump. Revenue for the year rose $4.6 billion, to $120.9 billion.

Analysts have projected that Ford could perform significantly better in the year ahead, on the strength of new models like the Focus sedan that arrives at American dealerships shortly. The company said it expects “continued improvement” in its pretax operating profit and cash flow.

In North America, Ford earned a pretax profit of $5.4 billion in 2010, compared to a $639 million loss a year earlier. The U.A.W. profit-sharing checks are based only on the company’s performance in the United States, which the company does not report separately.

The checks, to be distributed in March, are the fourth-largest Ford has paid to its workers since profit-sharing was added to the union contract in 1983. The record was $8,000, given out in 2000 when the company had more than 100,000 hourly employees. A year ago, the checks averaged $450.

“It’s obviously a great pleasure that we’re a profitable company again,” Mr. Booth told reporters at the company’s headquarters. “We’ve always said all our stakeholders will benefit from the growth of the company.”

The checks precede the contract talks that Ford and the other Detroit automakers will have with the union this fall. Union leaders have said their members deserve to benefit from the industry’s upswing. Mr. Booth declined to discuss the negotiations.

Ford increased its market share in the United States for a second consecutive year, the first time it has achieved that since 1993. It surpassed Toyota, which struggled with quality issues related to numerous recalls, to become the nation’s second-largest seller of cars and trucks.

Shares of Ford have doubled in the last year and increased nearly tenfold in two years. They closed at $18.79 Thursday.

source: nytimes.com