Despite a surprise profit of $100 million for the first quarter, Ford said Thursday that it still expects to lose money this year as the...
DEARBORN, Mich. — Despite a surprise profit of $100 million for the first quarter, Ford said Thursday that it still expects to lose money this year as the U.S. auto market deteriorates.
But the company’s stock surged nearly 12 percent as CEO Alan Mulally reiterated his promise that restructuring will return Ford to black ink for 2009.
The profit, Ford’s first since the second quarter of last year, came even while concerns about the U.S. economy kept many car buyers away from showrooms. Ford sales were off about 9 percent for the quarter, and the trend away from trucks and sport-utility vehicles accelerated, hurting its bottom line.
Yet Ford said it earned money anyway because of strong profits in Europe and South America, manufacturing cost reductions and successful hedging on commodity price increases.
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“The underlying business is improving,” Mulally said in a conference call with industry analysts and reporters. “We remain cautiously optimistic despite the external difficulties.”
But the question that has dogged Ford for years remains: Does the company, which lost $2.7 billion last year and mortgaged its assets to stay in business, have time to finish restructuring before it runs out of cash?
Mulally says the answer is yes, even as U.S. auto sales and the economy continue to unravel.
Ford’s management team, he said, adjusts its plan every week “as we deal with the realities and deteriorating business environment.” The key, as Mulally often repeats, is to drop factory capacity to match demand for Ford products.
Many analysts see the core North American market as a drag on Ford’s plan.
Based on economic concerns, the company reduced its industrywide estimate for U.S. light vehicle sales this year to a range of 15 million to 15.3 million. In January it had forecast full-year sales of 15.7 million.
Ford also cut second-quarter production estimates for North America by 101,000 vehicles compared with the same period last year, a figure that is 20,000 lower than guidance from the previous quarter.
And it said that 4,200 hourly workers accepted its latest early retirement and buyout offers, which isn’t enough. The company will offer more packages at individual plants, and wouldn’t rule out layoffs.
Mulally, hired from aviation giant Boeing to rescue Ford, points to progress made under the restructuring strategy, including $3.3 billion in cost cuts since the end of 2005.
Ford said its automotive sector had $28.7 billion in cash on hand and $11.9 billion in credit lines available as of March 31, for total liquidity of $40.6 billion. It expects to spend $12 billion to $14 billion through 2009 to cover losses and fund the restructuring, and Chief Financial Officer Don Leclair said that leaves plenty of cash.
Standard & Poor’s credit analyst Gregg Lemos-Stein agreed Ford has ample cash to withstand an economic downturn.
The quarterly profit came despite a $45 million pretax loss in Ford’s North American automotive market. That was an improvement over a $613 million loss in the year-ago quarter, driven by $1.2 billion in cost reductions.