Profit gives Ford shareholders rare reason to cheer

WASHINGTON - During the depths of the car industry's collapse a year ago, Ford told shareholders at its annual meeting that they might have to wait until 2011 before the company started making money again.

It turns out they didn't have to wait that long.

Thanks to well-reviewed cars and trucks, aggressive cost-cutting and goodwill from consumers for avoiding a taxpayer bailout, Ford has posted four straight profitable quarters.

It has also more than doubled its stock price from below US$5 last May, and seized market share from floundering rivals GM and Toyota. Ford now expects to be solidly profitable this year.

And that likely means happier shareholders at tomorrow's 2010 Ford meeting in Wilmington, Delaware.

"Things are going very well for Ford," said Erich Merkle, president of the consulting company Autoconomy.com.

"If anything, they're going to be confident."

But there could still be some tough questions for Ford chairman Bill Ford and CEO Alan Mulally when they face shareholders.

Ford had US$34 billion in debt at the end of the first quarter, much of it stemming from the company's 2006 decision to mortgage its factories and other assets for US$23.5 billion to restructure its operations.

The debt puts Ford at a disadvantage to General Motors and Chrysler Group, which have only a fraction of Ford's debt after shedding most of it during bankruptcy reorganisation last year.

Ford paid US$1.5 billion in interest last year, or US$311 per vehicle it sold worldwide.

Ford chief financial officer Lewis Booth says the company has a plan to pay down the debt, but he hasn't given details. Ford paid off US$3 billion in April.

Fitch Ratings, which upgraded Ford's debt ratings last month, says Ford now has enough cash - US$25 billion ($35 billion) at the end of the first quarter - and better access to credit markets to begin paying down its debt.

The economic outlook also could hamper Ford's progress. US sales are expected to rise to 11.5 to 12 million vehicles this year, but that's still well below the 17 million of just five years ago.

Unemployment remains stubbornly high, sapping the pool of possible buyers. Ford pays more in labour costs than GM and Chrysler.

"Ford's performance has been outstanding, but there seem to be a growing list of factors that suggest profitability in subsequent quarters will fail to match what Ford posted in (the first quarter)," Credit Suisse car analyst Chris Ceraso said.

Ceraso said global expansion costs, rising prices for raw materials such as steel, high incentives in the US and Europe and declining profitability at Ford Credit all could affect the company as the year progresses.

Shareholders are expected to call for greater input on executive pay at the meeting.

Mulally's US$17.9 million pay package was one factor hourly workers cited last fall when they voted down further wage concessions that were accepted by workers at GM and Chrysler.

Another shareholder proposal demands more transparency on Ford's political contributions.

But shareholders do have reason to cheer. Here are numbers that show the differences between this year and when shareholders last met in 2009:

* Ford posted a US$14.6 billion loss in 2008. In 2009, it made a profit of US$2.7 billion.

* In the first quarter last year, Ford lost US$1.4 billion. This year, it posted net income of US$2.1 billion in the first quarter.

* Ford's US market share reached 16.6 per cent in the first quarter, up from 13.9 per cent in the same period a year ago. The jump in market share was Ford's biggest since 1977.

* Ford shares closed at US$4.96 last May 13, the day before the 2009 annual meeting. On Tuesday, shares closed at US$12.31.

With the recession over and car sales slowly improving, Ford will likely benefit more than many of its rivals, analysts say.

Ford has been taking share from Toyota Motor, which has recalled millions of vehicles because of safety issues.

"Building vehicles just for the sake of volume, those days are behind us," automotive analyst Michael Robinet said. "If you are going to build a vehicle, build it for a reason and try to make money."

- AP