As the only U.S. automaker not to receive federal bailout money, Ford Motor Co. set an example for the industry by posting big second quarter profit on lower expenses and increased market share.
Ford posted a profit of $2.3 billion, helped by a $2.8 billion restructuring gain. It was the first profit in over a year for the automaker. Excluding the one time items, it reported a loss of $638 million, lower than what analysts expected.
Although revenues fell to $27.2 billion during the quarter due to an overall slump in the automobile market, Ford’s results were encouraging by all measures.
Unlike rivals General Motors Corp. and Chrysler Group, Ford did not receive federal monetary aid or undergo surgical bankruptcy to remove its outstanding debt. Still, sidestepping the negative publicity following the bailout and bankruptcy allowed Ford to capture a bigger U.S. market share from its competitors.
The company also slowed its cash burn—using up $1 billion in cash over the last three months, compared to burning through $3.7 billion during the first quarter. Ford still has $21 billion of cash on hand to weather the recession.
Strong Transformation
Not too long ago Ford seemed to be teetering on the edge much like its Detroit siblings. Its turnaround is deemed by analysts as nothing short of remarkable given the economic environment—the company expects to break even in 2011.
Cost cutting and improving its products were key, the company said.
“While the business environment remained extremely challenging around the world, we made significant progress on our transformation plan,” said Ford CEO Alan Mulally in a statement. “Our underlying business is growing progressively stronger as we introduce great new products that customers want and value.”
On the cost cutting front, the company eliminated $10.1 billion in debt, cutting down annual interest payments by $500 million. Ford also issued $1.6 billion in stock, and has hinted that more stock offering may be in the cards to further cut its debt burden.
Ford has reintroduced the Taurus sedan next to its already popular Fusion model. Its Fiesta compact vehicle is the No. 2 selling car in Europe, and the company is planning to introduce the car to the North American market later this year. In addition, new versions of Ford Flex, Ford Fusion, Lincoln MKT, and Lincoln MKS are on tap for model year 2010.
“Saying no to bailout dough and putting Ford’s PR team into overdrive seems to have worked out pretty well,” said CarConnection.com columnist Richard Read.
Investors on Thursday snapped up Ford shares (NYSE: F), sending its stock up 60 cents, or 9.4 percent.
