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Ford swings to a profit in first quarter

The automaker posts earnings of $2.1 billion, bolstered by a strong turnaround in its North American operations. Ford’s F-Series pickup was the quarter’s top seller in the U.S.

April 28, 2010|By Jerry Hirsch, Los Angeles Times

In another sign that the U.S. auto industry was recovering from a deep downturn, Ford Motor Co. said Tuesday that it swung to a profit of $2.1 billion in the first quarter after posting a huge loss in the same period a year earlier.

The company was bolstered by a strong turnaround in its North American operations, which had an operating profit of almost $1.3 billion compared with a loss of nearly $665 million a year earlier.

Ford and other automakers are benefiting from an improved consumer outlook, said Efraim Levy, an analyst with Standard & Poor's Equity Research.

"People are starting to buy cars again and traffic in the dealerships is rising. There seems to be some more credit available to make purchases," he said.

Through the first quarter of this year, Ford's F-Series pickup truck was the best-selling vehicle in America and the only vehicle to cross the 100,000 sales barrier (103,359) year to date. Overall, Ford had three of the top 10 sellers, and its Focus compact car was No. 11.

The automaker sold 441,708 vehicles in the first quarter of 2010, according to Autodata Corp., up nearly 37% from a year earlier and outpacing the industrywide gain of just under 16% during the same period. Its market share, 17.4%, is almost 3 full percentage points up from a year earlier and trails only that of General Motors Co., according to Autodata.

International operations contributed to the quarterly profit, and "all of our automotive segments reported an increase in sales compared with 2009," said Ford Chief Executive Alan Mulally.

Higher profit at Ford Credit also boosted results. The automaker's finance operations posted an operating profit of $815 million compared with a loss of $62 million in the first quarter of 2009. Rising prices for used cars coming off lease and fewer defaults helped Ford Credit's performance.

"We expect to deliver solid profits this year," Mulally said, a prediction company executives had previously reserved to describe their expectations for next year.

However, Mulally offered a word of caution, noting that the "recovery is fragile" and that some of the regions where Ford sells cars are still plagued by "weak labor markets and tight credit."

Still, the company's results were better than most analysts had expected.

"A lot of things have come together at the right time at Ford. They didn't have to take federal money. Their product development is coming to fruition with models that resonate with consumers and make money for the company," said John Wolkonowicz, an analyst with IHS Global Insight.

Ford is using fewer incentives to move its cars, and the vehicles are being ordered with more optional equipment and higher trim levels, which makes them more profitable, he said.

Ford's profit amounted to 50 cents a share, compared with a loss of $1.4 billion, or 60 cents, in the same period a year earlier.

Sales rose 15% to $28.1 billion.

But the company is still working to pay down a mountain of debt accumulated from restructuring its operations before the recession and funding a union trust fund to pay retiree benefits.

"Ford was able to avoid a U.S. government bailout because they mortgaged the farm before the storm struck," said James Bell, an analyst with auto information company Kelley Blue Book. "Ford's success today is imperative to their ability to make full payments back to their lenders."

Ford ended the quarter with $34.3 billion in debt and $25.3 billion in cash. This month it made a $3-billion payment to its revolving credit line, but the payment was not reflected in its financial statements because it was made after the end of the first quarter.

The automaker will launch new generations of two key small cars, the Fiesta and the Focus, in the coming months, part of its transformation from a truck- and SUV-dependent company to a more balanced auto seller, Bell said. But its continued success in the marketplace is linked to consumer acceptance of the new models, he said.

Ford shares fell 89 cents, or 6.2%, to $13.57. The decline was more likely a result of the "general market malaise" resulting from Greece's credit problems than Ford's financial performance, said Shelly Lombard, analyst at Gimme Credit, a corporate credit research firm.

Other automakers also are recovering.

GM said Tuesday that it would invest $890 million at five factories to redesign its engines to be more fuel efficient. The automaker said the investment would preserve or create 1,600 jobs.

Mercedes-Benz owner Daimler said Tuesday that it had swung back into the black, reporting first-quarter profit of 612 million euros, or $806 million, compared with a loss of 1.3 billion euros, or $1.7 billion, Sin the same period a year earlier. The German company also raised its profit outlook for the year.

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