Big profits still fall short of analyst expectations.
Ford Motor Co. has posted its biggest profit since 1999 – although the numbers fell more than a billion dollars short of what many had anticipated the automaker would announce.
Ford officials said they earned $6.6 billion in 2010, which will trigger profit-sharing checks for 40,600 U.S. hourly workers of $5,000, more than union members have taken home since 2001, when profit sharing generated payments of $6,700.
“We’ve always said that all our stakeholders will benefit from the growth of the company and improving profitability, and I think this is a specific reflection of that,” said Ford Chief Financial Officer Lewis Booth. “It’s a delight to be paying profit sharing.”
One reason the maker fell short of analyst expectations was the one-time, $960 million charge it took to cover the cost of paying down debt. The maker took the prescient step of lining up extensive financing sources as the nation fell into recession. But it is now racing to pay down those loans and trim its operating costs. CEO Alan Mulally, in November, authorized paying down another $1.9 billion in outstanding debt.
That helped the maker end the year with debt of $19.1 billion, a $14.5 billion reduction, year-over-year.
Meanwhile, Ford said it finished 2010 with $20.5 billion in cash – meeting its goal of having more cash than debt.
Before the debt reduction and other one-time charges, Ford earned $1.3 billion, or 30 cents a share during the final quarter – still short of the 48 cents predicted by 17 analysts tracked by Thomson One Analytics.
After accounting for the one-time charges, earnings came to $190 million, or 5 cents a share, for the October – December quarter.
For the full year, earnings totaled $8.3 billion on an operating basis, or $1.91 a share, compared to $38 million, or 1 cent a share, for all of 2009. Nonetheless, Ford missed the $2.08 consensus reported by Thomson.
That didn’t sit well on Wall Street which, at the noon mark, Friday, saw Ford shares fall $2.70, to $16.08. The maker had been flirting with $19 in recent days, and trading at a 10-year high. The stock is up more than ten-fold since the industry hit bottom around the time rivals General Motors and Chrysler went into bankruptcy.
The collapse of Detroit’s Big Three was largely driven by the failure of their individual North American operations. Yet, in 2010, the home market was the biggest contributor to the maker’s earnings. Europe, on the other hand, still struggled with recovery. Ford was expected to be back in the black there during the final quarter, but instead reported a $51 million loss.
Ford is nonetheless counting on expansive growth in emerging markets, such as Brazil, Russia, India and China – the so-called BRIC countries – but it has been lagging behind rival GM in many of those markets, notably China, which is now the world’s largest single national automotive market.
In a speech earlier in the week, Ford CEO Alan Mulally noted, “We have…made it through the worst recession since the Great Depression.” The executive joined Ford in October 2006, shortly before the maker had to report a record $17 billion loss. The 2010 earnings mean he can now take credit for two annual profits in a row.
Industry analysts expect that track record to continue despite so-called headwinds, including rising raw material costs and the threat of another big run-up in fuel prices. Though short of expectations, analysts like Joe Phillippi, of AutoTrends Consulting, acknowledge it is a significant fact that Ford was able to report anywhere near as much of a profit in one of the worst years the industry has experienced in decades.
And that is expected to translate into more positive news, what with the U.S. market forecast to reach sales in the mid-12 million range this year.
Ford was able to gain share in 2010 and anticipates repeating that achievement this year. It is counting on an array of new models, many of them based off the maker’s compact C-car platform, including the next-generation “global” Focus and the new C-Max microvan. There’s also a new version of the Explorer SUV, and the critical Ford F-Series line-up received an array of new engines for the 2011 model-year.