Ford Earns $1.65 Billion In Third QuarterBy Michelle Krebs October 26, 2011
Ford Motor Co. reported a third-quarter profit of $1.65 billion, exceeding analysts projections. It was Fords second-highest third-quarter profit, surpassed only by the 2010 third quarter when Ford earned $1.69 billion. It also was Fords 10th consecutive profitable quarter on a net income basis. The company delivered solid results despite an uncertain business environment, Ford President and CEO Alan Mulally said in a statement issued Wednesday. We accomplished this while continuing to invest for future growth and focusing on developing outstanding products with segment-leading quality, fuel efficiency, safety, smart design and value.
Ford lost money on its commodities hedging as commodity prices fell significantly instead of rising in late September. Strength came from increased overall sales volume, a richer mix of vehicles including more crossovers such as the redesigned 2012 Explorer (above), lower incentives and higher transaction prices from a year ago. Explorer sales have more than doubled this year, hitting the 100,000-unit mark for the first time since 2007, while utility vehicles and pickup trucks which generally carry higher price tags than cars are accounting for more than two-thirds of Fords U.S. sales. Explorer buyers paid an average of $38,108 per model, the highest amount since Edmunds.com began tracking prices in 2002. On Tuesday, Consumer Reports magazine said the Explorer had below-average reliability due largely to problems with its MyFordTouch infotainment system, while the entire Ford brand dropped to 20th from 10th place among 28 auto makes in the magazines annual reliability survey.
The bulk of Fords earnings in the third quarter came from automotive operations, which generated a pre-tax operating profit of $1.3 billion (an increase of $45 million compared with the same period last year) and produced positive automotive cashflow of $400 million. Ford Credit profits were down by $185 million to $581 million. Globally, Ford sold 1.346 million vehicles, up from 1.253 million from a year ago. As a result, revenues totaled $33.1 billion, a $4.1-billion increase from the third quarter of 2010. Ford paid down another $1.3 billion in debt, which now amounts to $12.7 billion.
U.S. Performance Improves
Fords U.S. vehicle sales in the quarter totaled 531,284, up 8.7 percent from a year ago, for a 16.7-percent market share, off a scant 0.4 percentage points from third-quarter 2010. In addition to the increased volume, Ford improved its financial performance by reducing incentives from the year-ago third-quarter to an average of $2,771 per vehicle, a hefty 10.4-percent drop from 2010, according to Edmunds.coms analysis.
As a result of lower incentives and a richer mix of vehicles sold including more utility vehicles Fords average transaction price amounted to $32,391 per U.S. vehicle in the third quarter, up 4.8 percent from the year-ago quarter. Though Fords incentives are up 3.9 percent in the third quarter from the second, the automaker still improved its average transaction price by 3.9 percent from the second quarter. Ford also is keeping tight control of its U.S. vehicle inventory, with the average days-to-turn the time from the vehicle being delivered to a dealership to a customer buying it at 49 days, better than the 60-day industry ideal and less than Fords year-ago levels, according to Edmunds.coms calculations.
For the full year, Ford said it plans to deliver continued improvement in pre-tax operating profit and automotive operating-related cashflow compared with 2010. For the year so far, Ford has earned $6.6 billion, up $227 million from the first three quarters of 2010 when Ford made $6.37 billion. In the United States, Ford sold 1,603,669 vehicles through September, a hike of 8.9 percent that resulted in a market share of 16.8 percent, down from 2010s 17.1 percent. Ford incentives for the year-to-date are down 13.8 percent to an average of $2,737 per vehicle, pushing the average transaction price up 3.3 percent to $31,709, according to Edmunds.coms calculations.
With solid financial performance followed by a new 4-year contract with the United Auto Workers union and a hike in its credit rating, Ford is under pressure to reinstate a dividend to its shareholders; it suspended the dividend in September, 2006. Ford CFO Lewis Booth would only tell analysts and media in Wednesdays conference call that the automaker would like to pay a dividend sooner rather than later but had nothing to announce.