Ford Pulls in Big 2010 ProfitBy Bill Visnic January 24, 2011
With great power comes great responsibility, as the comic book said. For Ford Motor Co. this week, with great profit comes great responsibility: how best to manage it, anyway.
Ford will announce on Friday a full-year profit for 2010 of about $8 billion, according to various reports. Some analysts had earlier projected a profit of as much as $10 billion.
Either way, it represents an enormous turnaround for the Dearborn, Mich.-based automaker, which in less than a decade has been through three major restructurings - including the current One Ford program - and not all that long ago was considered the weaker when compared with chief rival General Motors Co.
Ford is expected to dish out plump profit-sharing checks, but that won't gloss over the fact the gaudy profit is certain to attract the attention of the United Auto Workers union, which in the past several years swallowed deep concessions to help all three Detroit automakers restructure and weather the recession - and now UAW leaders are talking forcefully about the obligation to allow the union to also taste the fruits of Detroit's nascent turnaround. Ford is scheduled to negotiate a new contract with the UAW this fall.
Money Rolling Even If Volumes Aren't
Despite an industry-wide sales improvement in 2010 that amounted to only about an 11-percent gain over 2009, one of the worst sales years in the U.S. in nearly 40 years, the vastly whittled-down workforces and fixed assets of Ford, GM and Chrysler are helping the automakers derive voracious profits in a market of comparatively meek volumes.
On the brink of insolvency in 2009, General Motors pulled off an initial public offering in November after the briefest of stints in Chapter 11 bankruptcy. Sergio Marchionne, CEO of Chrysler Group LLC, has been talking openly of leading his company back to public ownership by the end of this year. Both companies still owe billions of dollars to the U.S. and Canadian governments and the UAW, but after assessing the numbers from their newly revised cost structures, neither company appears particularly worried about those debts.
For Ford, profits have returned with surreal abruptness.
In a 2009 in which Ford's U.S. sales plunged to 1,656,88 - less than half its 2003 sales figure - the company still managed to earn $2.7 billion. It was Ford's first profit since 2004, when it sold nearly 3.3 million vehicles in the U.S. In the midst of the One Ford makeover in 2009, company guidance forecast Ford would not be profitable until 2011.
Instead, Ford's 2010 results will triple 2009's profits - although sales improved just 19 percent, to 1.935 million vehicles.
In the second quarter of 2010, GM earned $1.3 billion and followed with a $2-billion profit in the third quarter, its largest quarterly profit in more than a decade, although it, too, achieved those earnings at drastically lower sales volumes. The company late last year cautioned that its profit for the fourth quarter, which has yet to be announced, was unlikely to be as healthy as the prior two quarters. Nonetheless, GM is expected to produce its first full-year profit since 2004.
After fully shutting down four of its previous eight brands by the end of 2010, GM still led the U.S. market with 2,215,227 sales and will be profitable at that pace, although just a few years ago the company needed to sell upwards of 4 million vehicles in the U.S. to be profitable.