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Ford Posts Strong 1st Quarter Profit

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by Jeff Gilbert
WWJ AutoBeat Reporter


Interview: WWJ AutoBeat Reporter Jeff Gilbert talks one on one with Ford CEO Alan Mulally

DEARBORN (WWJ) – Ford earned $2.6 billion dollars in the first three months of the year, its best first quarter performance in 13 years.

“A very positive quarter, lead by our strong product line,” said Ford CEO Alan Mulally, who said Ford’s earnings for 2011 should be an improvement over the $6.6 billion that they earned in 2010.

“That includes all of our investments, and growing our product line.”

This is a $466 million dollar increase over the first quarter of 2010, and an improvement from the fourth quarter of last year, when a disappointing fourth quarters caused Ford’s stock to plunge. 

Mulally said that the fourth quarter problems were caused by one time additional investments in products, and said the first quarter performance should underscore that.

“That was a planned increase in investment in costs,” he told WWJ AutoBeat Reporter Jeff Gilbert.  “I think everybody understands that now.  We didn’t have a recurrence of that in the first quarter, so they can see the fundamental goodness of the operation.”

Ford was profitable in all areas of the world, and earned $2.1 billion on its core automaking operations.

“It’s a focus on product, reducing the number of brands, and the number of areas they had to spend capitol on,” said analyst Mike Robinet, with IHS Automotive.  “Certainly Ford has really stuck to the knitting over the last few years, and it really shows in their performance.”

Ford’s first quarter sales jumped 12 per cent, and Ford has trimmed its debt from $33.6 to $14.5 billion.  That’s reduced interest costs by $1 billion a year.

“Ford earning’s report follows its best sales month in four years,” said Edmunds.com senior analyst Jessica Caldwell, in a statement. “Ford’s momentum stems from the company’s balanced product portfolio and its commitment to refresh its line-up at an aggressive pace, which keeps dealers excited and continues the buzz among car-shoppers.”

Going forward, analysts remain concerned about the impact of gas prices that have topped $4 a gallon in parts of the country, and are approaching that mark everywhere else.

Mulally says it’s a concern, but he doesn’t think that high gas prices will derail the economic recovery.

“Clearly we are continuing to recovery, which is fantastic,” he said.  “In Ford’s case, we’re probably in the best position we’ve ever been in for the consumer.”

Ford has improved the fuel efficiency of its fleet significantly since the last gasoline price spike in 2008, and has a number of small cars, including an all new compact Focus, and a subcompact Fiesta.  It’s also put far more fuel efficient powertrains into the F-150 pickup and Ford Explorer.

“Ford’s done a really good job of diversifying their portfolio,” said IHS Automotive’s Mike Robinet.  “They are very well protected when it comes to high fuel prices.”

Ford Chief Financial Officer Lewis Booth said Ford also continued to make progress paying off debt. The company, which took out a $23 billion loan in 2006 to revamp its operations, ended the quarter with $16.6 billion in debt, down $2.5 billion from the beginning of the year.
  
Ford said it now has $4.7 billion more cash than debt, an improvement of $3.3 billion from the start of this year.

Still, with all of the success that Ford has seen, any stumble could be magnified, says Edmunds.com’s Jessica Caldwell.

“The challenge for Ford will be maintaining this momentum – there’s more pressure when you’re the one to watch.”

Follow Jeff Gilbert on Twitter @jefferygilbert

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