Any colour for Ford… as long as it is black

Published on Monday 2 November 2009 21:06

CAR giant Ford reported its first profits growth in more than a year yesterday thanks to the US "cash for clunkers" scheme and cost-cutting efforts.

America's second-largest carmaker posted underlying pre-tax operating profits of $1.1 billion (672 million) for the three months to the end of September, reversing a loss of about $2.8bn a year earlier.

The group's key North American division also returned to the black for the first time since the first quarter of 2005.

Ford said it now expects to be "solidly profitable" on an underlying basis in 2011, having previously guided to deliver a break-even or better result.

Erich Merkle, an analyst at Autoconomy.com, agreed. He said: "As the market starts to turn and sales volumes start to recover, Ford should be solidly in the black next year, certainly ahead of schedule."

The firm – which employs about 35,000 people in the UK across its operations and dealerships – is benefiting from the US government's scrappage scheme to encourage sales of new cars.

But Ford also said better results were being driven by increases in market share and cost savings.

The group cut costs by $1bn during the quarter, having slashed jobs across the US and Europe, which offset an $800m drop in sales.

Alan Mulally, Ford president and chief executive, said: "Ford is making tremendous progress despite the prolonged slump in the global economy. Our solid product lineup is leading the way in all markets.

"While we still face a challenging road ahead, our One Ford transformation plan is working and our underlying business continues to grow stronger."

The group had been hit hard by plunging sales amid the recession, seeing 2008 full-year losses widen to $14.6bn after sales plunged by 36 per cent in the final three months of the year.

Ford launched a major restructuring to halt the decline, while the group has also driven out a lineup of new models.

The group also confirmed that its Focus and Escape models in the US had been among the top new vehicles bought under the so-called cash for clunkers scheme. Across Europe, Ford reported a pre-tax operating profit of $193m, up 180 per cent on a year earlier despite sales falling by 22 per cent.

Ford has four manufacturing bases in the UK at Dagenham in Essex, Bridgend, Southampton and Halewood. The company also has about 550 dealerships.

Until a US economic recovery takes off, cash will remain king for Ford, which borrowed more than $23bn in late 2006 to finance its turnaround and believes it has enough money to complete its restructuring.

Ford has also been cutting excess capacity and divesting brands to focus on its core marques, including Ford, Lincoln and Mercury. Last week, Ford named Zhejiang Geely Holding Group as a preferred bidder to acquire its Volvo brand.