Ford overcame some headwinds, according to CEO Alan Mulally, with its 3Q profit.
Barely a week after getting union approval for a new 4-year contract that should ultimately reduce its labor costs, Ford Motor Co. announced a $1.65 billion net profit, or 41 cents a share, for the third quarter of 2011. It marks the Detroit carmaker’s tenth consecutive quarter in the black.
But the latest numbers marked a slight decline from year-ago earnings, which totaled $1.69 billion. And the results for the July – September period were down even more sharply from the second quarter of this year, when Ford reported a $2.4 billion net profit.
But Ford had previously signaled it might have a weaker quarter, reflecting not only the cost of launching new products but also the impact of rising commodity prices.
“We delivered solid results for the third quarter despite an uncertain business environment,” contended CEO Alan Mulally, in a prepared release.
The $1.65 billion profit comes almost exactly a week after the United Auto Workers Union confirmed its members had ratified their latest 4-year contract. That agreement will lead to billions of dollars in new U.S. investments and the addition of thousands of new jobs. Mark Fields, Ford’s President of the Americas has indicated the contract will very slightly increase initial labor costs but is expected to actually reduce overall costs, long-term, largely by replacing current workers with lower-paid “new hires.”
That has impressed the credit reporting agencies, S&P and Fitch both bumping Ford’s debt rating up to “BB+” in recent days, just a step short of the investment grade that remains a top priority for CEO Mulally. The last time Ford held that status, which would help it lower borrowing costs, was in 2005.
Ford has also impressed analysts with its steady pay down of the debt it incurred during the run-up to the most recent recession. While it took on some additional low-interest loans from the Department of Energy it paid off another $1.8 billion in existing loans, so as of September 30, Ford’s debt stood at just $14 billion – a $1.3 billion overall decline, and about half its recent peak.
Mulally intends to pay off another $10 billion, he has said, over the next four years.
Recent developments have struck a responsive chord with investors, Ford shares climbing to a $12.43 close yesterday, a significant improvement from the maker’s $9.05 52-week low – but still way off the $18.97 high.
Analyst Joe Phillippi, of AutoTrends Consulting, said he expects investors to respond even more positively if Ford follows through with rumored plans to restore its dividend. Various analysts are predicting the dividend could be back in place by the beginning of 2012 and would likely run in the range of $0.30 to $0.50 next year.