Ford's shares surged 9 percent as the surprising profit and increased outlook overshadowed an expected announcement around midday that the United Auto Workers union has rejected a tentative cost-cutting deal with the automaker.
Ford, the only large U.S. automaker to avoid bankruptcy in 2009, said cost-cuts, an earnings increase from its Ford Motor Credit Co arm and market-share gains in North America and other key areas supported the third-quarter results.
Ford burned through $4.7 billion in cash in the first half of 2009, but reported $1.3 billion of positive cash flow in the third quarter—its first positive cash flow since the second quarter of 2007. It said it expects positive cash flow in the fourth quarter as well.
"That's a huge deal," Chief Financial Officer Lewis Booth said of the positive cash flow. Booth was speaking to reporters after the release of the results.
The company also reported its first quarterly operating profit in its key home market of North America since the first quarter of 2005.
"Our third-quarter results clearly show that Ford is making tremendous progress despite the prolonged slump in the global economy," Chief Executive Alan Mulally said in a statement.
Ford said it was confident the global economy would be improving by 2011, but it added the near-term growth outlook "remains rather uncertain."
Some analysts believe Ford will be profitable in 2010.
"Ford proved they can be profitable at much lower sales levels. A lot of it came from cost-cutting but also from market share gains," said Erich Merkle, an Autoconomy.com analyst.
"Now, 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", he said.
North American Profit
Ford reported a net profit of $997 million, or 29 cents per share, for the third quarter, compared with a net loss of $161 million, or a 7 cents per share, a year earlier.
Operating profit was 26 cents per share excluding one-time items. On that basis, analysts on average expected a loss of 12 cents per share, according to Thomson Reuters I/B/E/S.
Revenue fell $800 million to $30.9 billion.
From its automotive business, Ford reported a $446 million pretax operating profit worldwide, including positive results in all four of its regions—North America, South America, Europe and Asia Pacific.
Ford posted losses totaling $30 billion from 2006 through 2008. It remains saddled with a much heavier debt load than General Motors or Chrysler following their bankruptcy reorganizations.
Still, Ford has been seen as in much better shape than its U.S. rivals in its finances and product lineup. Ford has cut thousands of salaried and hourly workers in restructuring over the past four years, but has maintained its product cycle.
Ford and other automakers are fighting through a plunge in auto sales in North America due to the recession. The company left its 2010 U.S. auto industry sales forecast at 12.5 million vehicles, including medium and heavy trucks, but said it would give an updated outlook early next year.
"Clearly, there are still economic headwinds," Booth said.
Ford said it expects 2009 U.S. auto industry sales of 10.6 million vehicles. It previously forecast a range of 10.5 million to 11 million.
Until a U.S. economic recovery takes off, cash will remain king for Ford, which borrowed more than $23 billion 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 Ford, Lincoln and Mercury. Last week, Ford named Zhejiang Geely Holding Group as a preferred bidder to acquire its Volvo brand.
Ford executives declined to comment on the expected rejection of a tentative agreement with the UAW until the results are released by the union.
Ford and UAW leaders reached the agreement in mid October, but the vote among some 41,000 Ford UAW workers met stiff opposition over a "no-strike" clause on wages and benefits. The pact included some production commitments and a $1,000 bonus.
The automaker received $500 million in annual labor cost savings from concessions negotiated with the UAW in February, but said it needed more cuts to align long-term costs with those of GM and Chrysler.
Ford's union workers in Canada ratified a cost-cutting deal over the weekend to preserve most of the Ford jobs in Canada.
Ford Motor Credit profits rose to $427 million in the third quarter from $95 million a year earlier.
Ford shares were up 63 cents, or 9 percent, at $7.63 in early New York Stock Exchange trading.
