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Jan 28

Ford Motor Company Turns Profit In 2009, Or Your Toyota Is Trying To Kill You

Comments (0) 10:00 AM posted by admin |

So I’m in Downtown Ypsilanti hanging out at The Savoy when someone runs up to me and hands me a press release. I thought it was particularly odd since the press release was actually dated for the next day, but crazy things are known to happen at The Savoy.

I’d like to encourage my readers that drive Toyotas to pull over to the side of the road so that in case your accelorator pedal sticks while reading this, you don’t drive into a bridge or something.

From Ford Motor Company President and CEO, Alan Mulally:

DEARBORN, Mich., Jan. 28, 2010 – Ford Motor Company [NYSE: F] today reported a full year 2009 pre-tax operating profit, excluding special items, of $454 million, a $7.3 billion improvement over a year ago. The company said it now expects to be profitable for full year 2010 on a pre-tax basis excluding special items, for North America, total Automotive and total company, with positive Automotive operating-related cash flow.

Ford posted full year net income of $2.7 billion, or 86 cents per share, driven in part by favorable net pricing, structural cost reductions, net gains on debt reduction actions and strong Ford Credit results. This marks the company’s first full year of positive net income since 2005 and a $17.5 billion improvement over 2008.

“While we still face significant business environment challenges ahead, 2009 was a pivotal year for Ford and the strongest proof yet that our One Ford plan is working and that we are forging a path toward profitable growth by working together as one team, leveraging our global scale,” said Ford President and CEO Alan Mulally. “In every part of the world, we are providing customers with great products, building a stronger business and contributing to a better world. Our progress has helped us gain market share in most of our major markets.”

Net income for the fourth quarter was $868 million, or 25 cents per share, a $6.8 billion improvement over a year ago. Excluding special items, Ford posted pre-tax operating profits totaling $1.8 billion during the fourth quarter, a $5.5 billion improvement from a year ago. On an after-tax basis, excluding special items, Ford posted an operating profit of $1.6 billion in the fourth quarter, or 43 cents per share, compared with a loss of $3.3 billion, or $1.40 per share, a year ago.

Ford North America operations posted a pre-tax operating profit in the fourth quarter, excluding special items, of $707 million, its second straight profitable quarter. Ford South America, Ford Europe and Ford Asia Pacific Africa also posted pre-tax operating profits in the fourth quarter.

As a result of Ford’s 2009 U.S. financial performance, the company will pay profit sharing to 43,000 eligible U.S. hourly employees consistent with the 2007 UAW-Ford Collective Bargaining Agreement. The average amount is expected to be approximately $450 per eligible employee. As previously announced, Ford is not awarding salaried employee performance bonuses globally under the company’s bonus plan for 2009 company performance. However, the company did announce that U.S. salaried employees will receive merit increases in 2010, and the company’s 401(k) matching program was reinstated on Jan. 1, 2010.

Ford’s fourth quarter revenue was $35.4 billion, up $6.4 billion from a year ago. Revenue for the full year was $118.3 billion, a decline of $19.8 billion versus a year ago.

Ford reduced its Automotive structural costs by $500 million in the fourth quarter. In 2009, Ford achieved $5.1 billion in Automotive structural cost reductions, exceeding its full year target of about $4 billion, largely driven by lower manufacturing and engineering costs, including personnel reduction actions and progress on implementing its common global platforms and product development processes.

Ford finished 2009 with $25.5 billion in Automotive gross cash, compared with $23.8 billion at the end of the third quarter of 2009. Automotive operating-related cash flow was $3.1 billion positive during the fourth quarter. For the full year, Automotive operating-related cash flow was $300 million negative; an improvement of $19.2 billion from year-ago levels.

Ford continued its balance sheet strengthening actions during the fourth quarter. The company issued $2.9 billion in a convertible debt offering and also reached an agreement with its revolving lenders to extend the maturities of $7.9 billion of debt commitments to 2013 from 2011.

“We delivered very encouraging results in the fourth quarter and for full year 2009 despite severe economic headwinds, although our transformation remains a work in progress,” said Lewis Booth, Ford executive vice president and chief financial officer. “We are committed to staying absolutely focused on executing our plan to deliver profitable growth.”

FOURTH QUARTER HIGHLIGHTS

  • Announced a $2.3 billion investment in Brazil over five years to modernize plants and expand production for Ford’s operations in South America
  • Announced a $450 million investment to produce a new hybrid and plug-in hybrid at Michigan Assembly Plant beginning in 2012 and develop and assemble hybrid battery packs in Michigan. The investment will create 1,000 new jobs for the plant
  • Completed the transfer of UAW retiree health care assets and liabilities to the UAW Retiree Medical Benefits Trust, including a $500 million prepayment, removing a substantial health care liability from the balance sheet
  • Revolving lenders agreed to extend the maturity of $7.9 billion worth of debt commitments to 2013 from 2011
  • Issued $2.9 billion of convertible notes to strengthen the balance sheet
  • Announced that Ford and Geely expect to reach a definitive sale agreement for Volvo Cars in the first quarter of 2010, with closing of the sale likely in the second quarter of 2010
  • Introduced the new Fiesta small car for the U.S. market with production starting in the first quarter of 2010
  • Approximately 600,000 customers in Europe and Asia have purchased the new Fiesta since its European debut in late 2008
  • The 2010 Ford Fusion Hybrid and Ford Transit Connect were named North American Car and Truck of the Year, respectively. The Ford Fusion was named Motor Trend’s 2010 Car of the Year
  • Launched the next generation Ford Focus ECOnetic in Europe with even lower CO2 emissions
  • Unveiled refreshed versions of S-MAX and Galaxy for the European market, going on sale in the spring
  • Launched the new Ford Focus 1.6L Flex in Brazil, a hatchback with the new Sigma Flex Fuel engine
  • The Ford Ikon sedan led its segment in a J.D. Power study of initial quality for the Indian market
  • Strong products drove full year market share gains in North America, South America and Europe, while maintaining share in the rapidly growing Asia Pacific Africa region. Ford continued making improvements in transaction prices and margins
  • In the U.S., Ford, Lincoln and Mercury fourth quarter sales were up 13 percent versus a year ago, leading to the first full year market share gain since 1995. Fusion sales rose 22 percent, setting a new annual record and the F-Series was the No. 1 selling truck for the 33rd straight year
  • In South America, Ford Brazil achieved its best ever full year sales in 2009 by selling 325,000 units, a 15 percent sales increase over year ago levels
  • Ford Europe’s fourth quarter sales increased 19 percent. Led by the Fiesta, Focus and Ka, Ford strengthened its position as Europe’s No.2 brand. Ford Europe market share of 9.1 percent increased a half point for the year, setting an 11-year high
  • Ford Asia Pacific Africa’s fourth quarter sales rose 53 percent. Full year sales were up 15 percent in the region and marked an annual record. Ford sales in China led the full year increase, up 45 percent from year-ago levels

For the fourth quarter, Ford’s Automotive sector reported a pre-tax operating profit of $1.1 billion, compared with a loss of $3.3 billion a year ago. The improvement reflects primarily favorable net pricing, higher volume and mix, lower material costs, and structural cost reductions, offset partially by unfavorable exchange.

Worldwide Automotive fourth quarter revenue was $32.6 billion, up $7.3 billion from a year ago. The increase is more than explained by higher volumes and favorable net pricing. Total vehicle wholesales in the fourth quarter were 1,440,000 units, compared with 1,139,000 units a year ago.

As mentioned earlier, Ford reduced its Automotive structural costs by $500 million in the fourth quarter. In 2009, Ford achieved $5.1 billion in Automotive structural cost reductions, exceeding its full year target of about $4 billion, reflecting primarily lower manufacturing and engineering costs, a reduction in pension and retiree health care expenses, and lower advertising and sales costs as Ford completed major restructuring actions.

On Dec. 31, 2009, Ford concluded its agreement to establish a new VEBA trust that assumed the obligation to provide retiree health care benefits to eligible active and retired UAW Ford hourly employees and their eligible dependents. As part of this agreement, Ford transferred assets into the trust, including two notes which, following payments made on the notes on Dec. 31, 2009, totaling $2.5 billion (including a $500 million prepayment), had a fair value of $7 billion.

Net pricing in the fourth quarter was $1.7 billion favorable compared with a year ago, which was explained by improvements across all of Ford’s Automotive operations, including the continued disciplined approach on incentives and selective top-line pricing in the U.S.

North America: For the fourth quarter, Ford North America reported a pre-tax operating profit of $707 million, compared with a loss of $1.9 billion a year ago. The improvement was explained primarily by higher volume and mix, favorable net pricing and lower material costs, offset partially by unfavorable exchange. Fourth quarter revenue was $15.8 billion, up from $11.3 billion a year ago.

South America: For the fourth quarter, Ford South America reported a pre-tax operating profit of $369 million, compared with a profit of $105 million a year ago. The increase is more than explained by favorable net pricing and higher volume and mix, offset partially by unfavorable exchange. Fourth quarter revenue was $2.6 billion, up from $1.7 billion a year ago.

Europe: For the fourth quarter, Ford Europe reported a pre-tax operating profit of $305 million, compared with a loss of $338 million a year ago. The improvement was explained primarily by lower material costs, higher volumes, favorable net pricing, and structural cost reductions, offset partially by unfavorable product mix. Fourth quarter revenue was $8.7 billion, up from $7.6 billion a year ago.

Asia Pacific Africa: For the fourth quarter, Ford Asia Pacific Africa reported a pre-tax operating profit of $19 million, compared with a loss of $208 million a year ago. The improvement reflects primarily favorable net pricing, China joint venture profits and structural cost reductions. Fourth quarter revenue was $1.6 billion, up from $1.4 billion a year ago.

Volvo: For the fourth quarter, Volvo reported a pre-tax operating loss of $32 million, compared with a loss of $736 million a year ago. The improvement is explained primarily by structural cost reductions, higher volume and mix, favorable net pricing, and lower material costs, offset partially by unfavorable exchange. Fourth quarter revenue was $3.9 billion, up from $3.3 billion a year ago. Based on Ford’s plan to sell Volvo, beginning in the first quarter of 2010 all of Volvo’s financial results will be reported as special items and excluded from Ford’s operating results.

Other Automotive: Other Automotive, which consists primarily of interest and financing-related costs, was a fourth quarter pre-tax loss of $298 million.

For the fourth quarter, the Financial Services sector reported a pre-tax operating profit of $683 million, compared with a loss of $384 million a year ago.

Ford Motor Credit Company: For the fourth quarter, Ford Credit reported a pre-tax operating profit of $696 million, compared with a loss of $372 million a year ago. The increase reflected primarily lower residual losses due to higher auction values and lower provisions for credit losses, offset partially by lower volumes.

2010 OUTLOOK
Despite the severe global downturn, Ford said it continues to make progress on all four pillars of its plan:

  • Aggressively restructure to operate profitably at the current demand and changing model mix
  • Accelerate the development of new products that customers want and value
  • Finance the plan and improve the balance sheet
  • Work together effectively as one team, leveraging Ford’s global assets

Ford says that it plans to be profitable for full year 2010 on a pre-tax basis excluding special items, for North America, total Automotive and total company, with positive Automotive operating-related cash flow, based on its assumptions.

Although positive, full year Automotive operating-related cash flow is expected to be less than the run rate implied by the strong second half 2009 cash flow. Recent performance was heavily influenced by seasonal factors, including normal year-end inventory reductions, and significant non-recurring factors such as tax refunds and higher production to rebuild depleted dealer stocks.

Capital spending is expected to be in the range of $4.5 billion to $5 billion, as Ford continues to focus on its product plan. This planning assumption excludes Volvo and joint ventures that will be deconsolidated with the adoption of the new accounting standard effective Jan. 1, 2010 related to the consolidation of variable interest entities. On a comparable basis, 2010 capital spending is up about $1 billion from 2009.

The company has completed major cost reduction actions over the past four years to substantially restructure its business, including personnel levels, facilities and related costs, and the settlement of the UAW retiree health care VEBA agreement. Ford expects Automotive structural costs to be somewhat higher compared with 2009 as it increases production to meet demand.

Ford expects U.S. full year industry sales will be in the range of 11.5 to 12.5 million units, including medium and heavy trucks. For the 19 markets Ford tracks in Europe, the company expects full year industry sales will be in the range of 13.5 to 14.5 million units, including medium and heavy trucks.

The company said it expects its full year U.S. total market share and its share of the U.S. retail market to be equal or improved compared with 2009. Europe market share is expected to be about equal to 2009.

Ford Credit expects to be profitable in 2010, but lower than 2009 based on lower average receivables and the non-recurrence of certain favorable 2009 factors.

Ford’s full year 2011 guidance remains unchanged. Based on its planning assumptions, the company remains on track to be solidly profitable on a pre-tax basis excluding special items, with positive Automotive operatingrelated cash flow.

“We are more convinced than ever that Ford has the right plan to lead us through the near-term economic and external operating pressures and continue to deliver profitable growth,” Mulally said. “The entire extended Ford team is absolutely committed to building on our progress and working together as a lean global enterprise focused on automotive leadership and delivering products with the best quality, fuel efficiency, safety, smart design and value around the world.”

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