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The Daily Wildcat

The Daily Wildcat

 

    Ford reports $1.69 billion profit for third quarter

    DETROIT — Ford on Tuesday said it earned $1.69 billion, or 43 cents per share, for the July-September period — its largest third quarter profit since 1990.

    The Dearborn, Mich., automaker also said it used $2 billion in cash to pay off debt in September and will reduce its debt by a total of $5.6 billion by this Friday when it makes a cash payment to the UAW’s retiree health care trust fund, known as a voluntary employee beneficiary association.

    With that payment, Ford will have met all of obligations to the fund, which the company and the UAW agreed to create in 2007.

    “”We are clearly ahead of where we thought we could be on improving our balance sheet,”” Ford President and CEO Alan Mulally said Tuesday during a conference call with analysts and reporters. “”Also, it is great to be able to honor all of our retirees and to do it earlier, rather than later.””

    The automaker has been reducing its high debt levels over the past several quarters as the business continues to generate positive cash flow.

    Excluding special charges, Ford reported third quarter earnings of 48 cents per share, or 10 cents more than the average estimate forecasted by analysts reporting to Thomson One Analytics.

    “”Overall, the results were very good, and the cash guidance bodes well for continued balance sheet improvement into 2011,”” Goldman Sachs analyst Patrick Archambault said in a report Tuesday.

    Ford CFO Lewis Booth said Ford’s performance is improving because the company is gaining market share in the U.S. and it is increasingly able to sell its cars and trucks for higher prices.

    “”What we are seeing is as we launch our new products, we are closing the transaction gap that we have with our Asian competitors,”” Ford CFO Lewis Booth said Tuesday.

    Through September, the second-largest U.S. automaker’s share of U.S. industry sales was 16.7 percent, or 1.5 points higher than it was for the same period last year, according to Autodata.

    “”We are on track to gain full-year market share in the U.S. for the second straight year, marking the first time since 1993 that we have achieved consecutive annual increases,”” Mulally said.

    Booth said Ford has already delivered on its earlier promise for a solid profit for 2010 with year-to-date profits of about $6.29 billion.

    While Ford reported a $196 million pre-tax loss in Europe for the third quarter, Booth said Ford expects all of its divisions will report a profit for the final three months of the year as well as 2011.

    Ford, the only U.S. automaker to survive the recession without filing for bankruptcy, was able to survive because it used almost all of a $23.5 billion loan it received in 2006 to fund its operations.

    But that debt put Ford at a disadvantage compared with General Motors and Chrysler when those companies emerged from bankruptcy with less debt.

    Ford Treasurer Neil Schloss said the company is using the cash it is generating to pay off some of its debt, which should save the company about $800 million annually in interest payments.

    As of September 30, Ford’s total debt stood at $26.4 billion. On Friday, after Ford pays $3.6 billion to the UAW’s trust fund, Ford will have reduced its total debt by $10.8 billion for the year.

    Ford also launched debt offerings on Tuesday for $3.4 billion of its debt. Ford is offering the debt holders notes that could later be converted into stock.

    And even without the debt offerings, Ford expects the company’s total cash should exceed its total debt by the end of the year.

    “”As we generate positive operating cash flow, we have the opportunity to pay down debt,”” Booth said.

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