Ford confounds analysts, posts $100 million profit in first quarter

24 April 2008

Ford Motors has translated the lower expenses equals more gains into reality by reporting an unexpected first-quarter profit of $100 million or 5 cents per share, compared to a loss of $282 million, or 15 cents a share, in the corresponding period last year.

Excluding costs the company considers one-time expenses, the profit was even more spectacular at $525 million, or 20 cents a share. This contrasted widely with analysts' estimates of a loss of 15 cents per share even this time round. The one-time expenses of $416 million included $223 million in job-cutting expenses and $108 million to reduce the number of US dealers.

This amazing turnaround was achieved  in the face of declining US sales, due to major cost cutting and job shedding. Ford's US sales of cars and light trucks fell 9 per cent during the quarter compared with an industry wide decline of 8 per cent. (See: With employees as brand ambassadors, Ford set to re-claim its title in the US)

Ford's sell off of loss-making marquee brands Jaguar and Land Rover made major headlines around the world, and it had also embarked on a brand new marketing campaign to regain its lost position in its home country.

With more expense reductions about to kick in and the company stepping up new-vehicle introductions, Ford's chief executive Alan Mulally may be poised to deliver on his promise to stop losses that totaled $15.3 billion in the last two years. He had already cut losses at the auto major by an appreciable amount and is expected to continue in the same vein. (See: Ford awards CEO Alan Mulally $21.7 million for cutting losses by $10 billion)

Pre tax profit rose to $257 million in South America from $113 million. It increased to $739 million for Ford of Europe from $219 million. The company's operations in Asia Pacific and Africa posted a pretax profit of $1 million after a $26 million deficit a year earlier.