Cost cutting is saving money at Ford
Keith Naughton -
BLOOMBERG - November 03, 2009
Ford is still climbing in more ways than one! It is great to see an American icon succeeding. --Ed.
Chief Executive Officer Alan Mulally, after cutting nearly half the automaker’s North American employees, is commanding $2,700 more revenue per vehicle as he looks to put the company on a path to growth.
Mulally posted his first back-to-back quarterly profits at Ford yesterday with a $997 million net income. The carmaker was expected to make a $632 million loss, based on the average of eight analyst estimates. Ford’s U.S. market share grew even as it cut discounts, delivering $1.9 billion in additional revenue, 74 percent of it in North America.
That progress, boosted by Consumer Reports magazine declaring Oct. 27 that Ford’s quality is now “world-class,” had a bigger effect on the bottom line than the additional $1 billion in savings the automaker recorded in the quarter. New models, like the redesigned Ford Taurus and Fusion sedans, also sold with more options, like voice-controlled audio systems.
“During the worst of times when we were restructuring ourselves to the lower demand to get back to profitability, we also continued to invest in a new product line,” Mulally said on Bloomberg Television yesterday. “It’s both having the vehicles that people really do want as the economy recovers but also having a very competitive cost structure to compete with the best.”
Ford will again seek savings from the United Auto Workers union, whose members rejected proposed concessions yesterday. And it is continuing work to strengthen its balance sheet, seeking to raise as much as $3.3 billion in convertible notes and common stock.
Ford gained 58 cents, or 8.3 percent, to $7.58 yesterday in New York Stock Exchange composite trading. The shares have more than tripled this year.
Growth Begins
Ford has already begun growing. It increased its U.S. market share 2.2 points to 14.6 percent in the third quarter over last year, the automaker said. The biggest growth, though, came in pricing power. Ford reduced discounts and boosted prices to gain $1.4 billion in higher payments for its models in North America, equating to $2,700 per vehicle.
This year, Ford has posted a net income of $1.8 billion and a pretax operating loss of $1.3 billion.
Mulally has now promised that the Dearborn, Michigan-based automaker will be “solidly profitable” in 2011. Analysts and investors say he’s being conservative.
“He’s under-promising in hopes of over-delivering,” said Bernie McGinn, president of McGinn Investment Management of Alexandria, Virginia, which owns about 320,000 Ford shares. “He has enough good news out there, why spoil people? But I absolutely do expect profit in 2010.”...
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