Ford on the road to 'solid profitability'

NEW YORK - Ford, the only major US car company to avoid bankruptcy this year, promised what has been unheard of from the motor city of Detroit for years: a return to "solid profitability".

The company, which has been picking up market share from its bankrupt rivals Chrysler and General Motors, said its North American operations were in the black in the last three months for the first time since early 2005.

The turnabout came after the revived demand for its vehicles enabled it to avoid some of the deep discounting it previously used to get people into showrooms. The quarterly profit coincided with the US government's "cash for clunkers" scheme, which provided a taxpayer subsidy for drivers who traded in their old vehicle for a more fuel-efficient new car.

"Ford is making tremendous progress despite the prolonged slump in the global economy," said the chief executive, Alan Mulally. "While we still face a challenging road ahead, our transformation plan is working and our underlying business continues to grow stronger."

He refused to give a short-term profit forecast, declining to update guidance for next year, but promised that the company would manage "solid profitability" in 2011, instead of the "break-even or better" mantra of the past several months.

Ford has seen its share of the US market edge up this year to almost 16 per cent in the first nine months, from less than 15 per cent in the same period of 2008. This week all the major carmakers will report October sales, which analysts will examine for signs that the market is reaching a stable level of demand. The cash-for-clunkers boost over the summer gave way to a slump in September.

For the three months to the end of September, Ford recorded a net profit of US$997 million ($1378 million), up from a loss of $161 million a year earlier.

Having burned through $4.7 billion in cash in the first half of 2009, it 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.

It also reported a 180 per cent increase in profits from its European operations, despite selling fewer cars.

Even so, the signs of health come at a tricky moment as the company is trying to negotiate more concessions from its workers.

Ford received $500 million in annual labour cost savings by renegotiating contracts with the United Auto Workers 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, but US workers reportedly rejected the latest plan.

- INDEPENDENT