Ford posts $2.7B profit for 2009, expects to make money this year as well

Bryce G. Hoffman / The Detroit News

Ford Motor Co. will further increase first-quarter factory output in North America to 574,000 cars and trucks -- an increase of 145,000 units over 2009, and about 20,000 more than previously announced in December.

That news comes on the heels of the Dearborn automaker announcing that it will remain profitable in 2010 following the posting of a $2.7 billion profit for 2009.

The financial results add up to the first full-year profit the Dearborn automaker has had since 2005, putting it ahead of its goal of restoring solid profitability by 2011.

"2009 was an extremely challenging year for the global automobile industry," CEO Alan Mulally told reporters and analysts during a conference call. "For Ford, it was also a pivotal year and the strongest proof yet that our 'One Ford' plan is working. Despite the deep economic downturn, historically weak sales and the government-funded bankruptcies of our domestic competitors, Ford returned to profitability in 2009."

Ford's profit was a sharp contrast to the record $14.6 billion loss the company reported a year ago. Before taxes and excluding special items, the automaker's operating profit was $454 million.

Ford plans to share its success with workers.

Under a profit-sharing agreement with the United Auto Workers, the automaker will pay each of its 43,000 eligible U.S. hourly workers approximately $450. U.S. salaried workers will not be getting bonuses, but the automaker previously announced it was restoring merit pay increases and 401(k) matches that had been suspended.

UAW leaders have officially objected to the restoration of benefits for white-collar workers and urged members to sign a petition against the move.

UAW Vice President Bob King, who heads the union's national Ford section, welcomed Ford's announcement but said the union will not drop its grievance.

"They're just honoring the terms of the contract," he said "We are pleased that they're continuing to do well and provide jobs to hundreds of thousands of American workers. But they are two separate issues. We gave up a long laundry list of benefits. None of that is being restored."

While the numbers underscore the progress the company has made in its most far-reaching restructuring ever, Ford's full year profit came from its financial services division, not its core automobile operations.

In 2009, Ford's global automotive operations actually lost more than $1.4 billion, while its lending arm, Ford Credit, and other financial business earned the company nearly $2.4 billion.

However, automotive operations showed substantial improvement in the last half of the year -- particularly in the last three months.

The Dearborn-based company reported fourth-quarter 2009 earnings of $868 million. Excluding special charges and taxes, Ford's fourth-quarter operating profit totaled $1.8 billion, or 43 cents per share. It was Ford's third consecutive quarterly profit, and significantly better than the 26 cents per share Wall Street had expected, according to a survey of 13 analysts by Thomson Reuters.

Analyst Joe Amaturo of Buckingham Research called it "an excellent quarter."

Itay Michaeli of Citigroup said he expected investors to respond positively to the news, but said questions remain about 2010.

"The key to the story going forward is whether Ford -- and the macro environment -- can sustain pricing momentum and cost control during an upturn to meet lofty 2011 consensus earnings expectations," Michaeli said in a report issued before the market opened Thursday.

By 11 a.m., Ford shares had gained a nickel, up .43 percent at $11.60.

Ford profitable worldwide

For the fourth quarter, Ford's North American operations reported a pre-tax operating profit of $707 million, compared with a loss of $1.9 billion a year ago. The company attributed the gains to higher sales volumes, net pricing increases and lower materials costs.

In South America, the company reported a profit of $369 million, up from $105 million in the last three months of 2008.

Europe posted a profit of $305 million, compared with a loss of $338 million a year ago.

In Asia, the Pacific and Africa, Ford eked out a $19 million profit, compared with a loss of $208 million for the same period a year ago.

Ford's Swedish brand, Volvo, narrowed its loss to $32 million from $736 million a year ago. Ford is negotiating a sale of Volvo to a Chinese automaker.

The automaker's lending arm, Ford Credit, reported a pre-tax operating profit of $696 million, compared with a loss of $372 million a year ago. The company said the increase reflected lower residual losses due to higher auction values and lower provisions for credit losses.

The strong financial results are more good news for a company that has been riding high since sweeping the "Car of the Year" and "Truck of the Year" awards at the North American International Auto Show in Detroit earlier this month.

Ford, which is four years into a painful restructuring that has seen it eliminate tens of thousands of jobs and close 14 factories, was the only U.S. automaker not to seek a federal bailout and the only one to avoid bankruptcy.

Ford reduced its automotive structural costs by another $500 million in the fourth quarter. That brought its 2009 cost reduction total to $5.1 billion -- well ahead of its full-year target of $4 billion. The company said these improvements reflected lower manufacturing and engineering costs, a reduction in pension and retiree health care expenses, and lower advertising and sales costs.

Ford ended the year with $25.5 billion in cash reserves, nearly double the $13.4 billion it had at the beginning of 2009.

Challenges ahead

While Ford said it will remain profitable in 2010, the company cautioned that its costs will increase as it ramps up production to meet an expected increase in demand for its cars and trucks. It said this year's cash flow will be less than it reported in the second half of 2009.

Ford Chief Financial Officer Lewis Booth acknowledged that Ford's debt, which totals more than $34 billion, remains a competitive disadvantage. General Motors Co. and Chrysler Group LLC were able to shed much of theirs in bankruptcy court.

"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," Booth said. "We are committed to staying absolutely focused on executing our plan to deliver profitable growth."

bhoffman@detnews.com (313) 222-2443