Think about this number: $6.3 billion (all figures in U.S. dollars). That’s how much Ford Motor has earned so far this year and it means the Dearborn, Mich., auto maker is now among the most profitable car companies in the world.
Yes, that’s correct. Ford Motor, which lost $14.8 billion in 2008, now trails only Germany’s Volkswagen Group among the top auto earners in the entire industry. Through three quarters, VW has earned $6.6 billion at current exchange rates.
However, VW has warned in a statement that growth “will not continue as strongly in the fourth quarter.” Ford, on the other hand, plans to boost fourth-quarter vehicle output in North America by 20,000 units, an increase of 3.5 per cent. Ford may yet win the title of world’s most profitable auto maker, depending on what happens in the fourth quarter.
“A few years ago, we were a discount brand in the smaller and medium-sized vehicles,” Ford CEO Alan Mulally said during a conference call to discuss record third quarter earnings of $1.7 billion. “The response we're getting now in the Mustang, the Taurus and the Fusion is that these are world-class, and people really want them. We’re on a positive and stable path for (pricing) values in vehicles.”
The term “pricing values” is industry-speak for the ability to charge more for vehicles – because buyers really want them. For instance, at an average price of $17,020, the Ford Fiesta subcompact is commanding about the same average price in the U.S. as the Honda Civic and the Toyota Corolla, but without ladling on the heavy incentives Honda and Toyota are offering. The story is exactly the same in Canada, with the average Fiesta transaction price at more than $19,000.
“We have moved into a new chapter for Ford: building cars and trucks people really want and value, and continuously improving our quality and productivity,” Mulally said in an e-mail to the New York Times.
Here’s what is most interesting of all. No, I’m not talking about Ford eliminating its net debt by the end of the next quarter. In fact, after Ford makes a payment to its U.S. health care trust, Ford’s total debt will be down to $22.8 billion, compared with $33.6 billion at the end of last year. By slashing $10.8 billion in debt this year, Ford will save an estimated $800 million in annual interest payments.
“Eight hundred million — that’s almost the cost of a product program,” said Mr. Booth, the chief financial officer in a call with analysts and reporters.
Honestly, the most interesting part of Ford’s third-quarter earnings report could be found in the details of where Ford is NOT making much money, or none at all. North America is doing fine, with $1.6 billion in pretax profit.
But surely South America can contribute more than $241 million. And Asia-Pacific-Africa simply must toss in more than $30 million. Europe? Europe lost $196 million in the third quarter. What a mess.
If Ford can find a way to spin off earnings from the rest of its global business, then the company’s 68 per cent improvement in year-over-year third quarter earnings will look like a pittance.
“One Ford” is the company’s new slogan. But right now only one of Ford’s four global regions is contributing to the bottom line. It’s time for the rest to put some serious money into the Ford kitty.
