Ford Takes Right Steps and Finally Walks into Operating Profit

With all of the seeming doom and gloom that has surround the auto industry lately, it's rare when you see a bright spot that points to a potential turnaround, or at least a slide that has been halted.

Ford has announced that turnaround in its profit picture and posted a fourth quarter operating profit for last year, while predicting an operating profit for 2010. Today's announcement to automotive and business reporters reported the first full year profit for the automaker since 2005.

Alan Mulally, Ford's chief operating officer, was somewhat optimistic, telling reporters it showed that Ford was continuing to make slow, but steady progress in the face of the worst economy the industry has faced in about 30 years.

"While we still face significant business environment challenges ahead," Mulally said in a prepared statement, "2009 was a pivotal year for Ford and the strongest proof yet that our One Ford plan is working." He indicated that by working together as a team the company "is forging a path toward profitable growth" leveraging its global scale.

Ford, in its year-end wrapup, reported its net income of $868 million for the quarter, compared to a lost of $5.9 billion a year earlier. Its success for the year squelched a three-year string of losses that the automaker had experienced between 2006 and 2008. For 2009, Ford reported a net operating profit of $2.7 billion. This compares with a loss of $14.8 billion in 2008.

The automaker was able to achieve its profit thanks to large gains from debt reduction and other items, not the least of which was its successful string of vehicles and vehicle changes that earned Ford's 2010 Fusion the North American International Auto Show Car of the Year Award earlier this month, as well as taking the Truck of the Year Award with its Transit Van. For has also restyled its Taurus into a vehicle that is highly sought after by buyers and it has proven to have a series of extremely popular crossover vehicles in its Edge and its Mercury twin, the MKX. Ford's also Flexed its muscles in the specialty crossover market as its Flex crossover took off. In every way, this was a good year for Ford and the profit books showed it.

For the fourth quarter, for example, Ford's operating profit was $1.6 billion, compared with a $3.3 billion loss a year ago. Ford's net operating profit was $8 million, compared with a loss of $7.3 billion last year.

Also, Ford finished the year with $25.5 billion in cash-on-hand while last year it finished the year with more than $34 billion in debt.

Ford's Chief Financial Officer Lewis Booth told the assembled reporters that the company expected to be profitable in 2010, in issuing the automaker's first forecast for next year. This statement was foreshadowed, if you watched the financial press three months ago, when it changed its prediction for 2011 from break-even to solidly profitable.

For the quarter, Ford also predicted its manufacturing output would be up a modest 20,000 units from 550,000 to 570,000 units.

Today's good news follows three years when Ford posted combined total losses of $30 billion, including a record-setting lost of $14.7 billion in 2008. This news is quite a turnaround for the automaker and may indicate the industry has turned the corner, albeit slowly.

On another note, Ford, the Associated Press reported, has halted the production and sale of vehicles that used the same gas pedal assembly that has plagued Toyota with a sales halt and production stop. The unit, made by CTS, which has also indicated it is ramping up production of new, improved units as quickly as possible, was apparently used in vehicles that were slated for the China market.