Ford Profit Comes as Toyota Hits a Bump
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As a Boeing executive in the early 1990s, he made a pilgrimage to Japan to study Toyota’s manufacturing methods, which he used to speed up assembly of Boeing’s 777 jets.
When he joined Ford in late 2006, Mr. Mulally liberally borrowed from Toyota’s playbook — focusing on fuel efficiency, quality and so-called global cars to sell in markets around the world. He even hired away a top Toyota executive, James Farley.
“The finest production system in the world,” Mr. Mulally called Toyota during a dinner with journalists in December 2006.
This week, at least, the student is doing better than the teacher.
Ford, which managed to skirt the problems that forced crosstown rivals General Motors and Chrysler to seek government bailouts, reported a surprising profit on Thursday of $2.7 billion for 2009, its first in four years.
The sharp swing to profit for Ford, from a record loss of more than $14 billion in 2008, stands in sharp contrast to current problems at Toyota, which is struggling to contain the fallout of a global recall over concerns about accelerator pedals.
The fact that Ford is surging while Toyota — the same company whose success has caused the Detroit automakers to lay off thousands of workers — is stumbling is not lost on Bill Jackson, president of United Automobile Workers Local 588 in Chicago Heights, Ill.
“There’s some sympathy and some irony there,” he said. “A lot more irony than sympathy, though.”
Because of its profits, Ford plans to issue profit-sharing checks of roughly $450 each to its 43,000 hourly workers.
“A year ago, we did not know where our fate was; the Big Three were getting hammered in Congress and we were on a downward spiral,” said Mr. Jackson, who represents 700 workers at a Ford stamping plant that is going to be adding jobs. “In a year, it’s turned around.”
Ford’s profit for 2009 — which Mr. Mulally called a “historic and pivotal” year — partly results from deep cost cuts and layoffs. Ford’s hourly work force is now less than half what it was five years ago. But Ford also took the risky step of borrowing more than $23 billion in 2006, giving it enough cash to weather the sharp downturn in the industry.
In addition, Ford continued introducing new vehicles, and marketing their fuel efficiency. Consumers showed they were willing to buy them even without the heavy incentives that undercut the Detroit automakers’ business in the past.
“They looked like a company in its death throes,” said Louis E. Lataif, a former Ford executive who is dean of the Boston University School of Management. “To their credit, they kept their focus on what really mattered, which is product, and at the end of the day that’s going to carry the company.”
Stock in Ford reflects its improvement. The shares slipped 14 cents, to $11.41, on Thursday but are up from less than $2 as recently as last February.
Ford executives were also managing expectations on Thursday, saying they still faced many challenges. The company has $25.5 billion in cash on hand, nearly twice the amount from a year ago.
But it still owes more than it has in its reserves and it is carrying more debt than its competitors. It paid $1.5 billion in interest last year.
“We know we have some work to do to improve our balance sheet,” Ford’s chief financial officer, Lewis W. K. Booth, said in an interview. “I don’t feel anything other than a sense of great urgency when it comes to improving the business. We know that nobody is guaranteed a future.”
Mr. Booth said Ford expected to have an operating profit and positive cash flow in 2010. Previously, executives had set 2011 as a target for consistent profitability.
As of Jan. 1, Ford — as well as G.M. and Chrysler — eliminated responsibility for health care coverage for hourly retirees, which now is handled by a U.A.W. trust fund.
In addition, Ford said it cut its annual structural costs by $5.1 billion in 2009, $1 billion more than it had planned.
The profit was a cause for celebration for Ford workers who in recent years elected to turn down lucrative buyouts in the hope that the company still had a future.
The profit-sharing checks that plant workers will receive in March are the first that any Detroit automaker will have given out since 2006. Still, they are a pittance compared with the $8,000 payments Ford made a decade ago, when it even had enough money to fly banner-toting planes over some Michigan factories to thank employees.
Ford was profitable in every region of the world in the fourth quarter, including North America for the second consecutive quarter. North America has been the greatest source of difficulty for all automakers, but it was Ford’s most profitable region in the quarter, with pretax earnings of $707 million, excluding one-time items.
On the year, Ford increased market share in the United States for the first time since 1995. For all of 2009, Ford’s market share rose to 16.1 percent, from 15 percent in 2008.
Ford earned $868 million in the fourth quarter over all, in contrast with a loss of $6 billion a year earlier. Its overall operating profit for 2009, excluding one-time items like charges for retiree health care and a windfall from a debt-restructuring effort, was $454 million. Its financing arm, Ford Motor Credit, posted a 2009 profit of $1.9 billion, after losing $495 million in 2008. Sales in the fourth quarter rose to $35.4 billion, from $29 billion a year earlier.
“During the worst economic recession in 30 or 40 years,” Mr. Mulally said in a conference call with analysts and reporters, “because of the strength of the plan we put in place a few years ago, we were not only able to survive but also to create a foundation that is delivering now profitable growth during that year.”