Ford makes biggest profit in 13 years
Ford reports net income of $2.6bn thanks to demand for greener cars and economic recovery
Greener cars and a bounce-back in the global economy helped Ford report its largest first-quarter profit in 13 years as strong company results helped push US markets to post-financial crisis highs.
Ford's largest first-quarter profit since 1998 was driven in part by the return of US consumers to car dealerships. The company said buyers were favouring smaller, greener cars to cope with rising petrol prices. This week unleaded petrol averaged $3.87 (2.34) a gallon in the US, up from $2.85 a year ago.
Ford's impressive results and equally upbeat announcements from 3M, Caterpillar and United Parcel Service boosted the Dow Jones industrial average to a near three-year high of 12598 in morning trade while the FTSE 100 in London also rose on the back of Wall Street confidence to close at 6069, up 0.85%. The gains came as US consumer sentiment also appears to be on the mend. The Conference Board's index of consumer confidence registering its second-highest reading since the downturn.
Ford reported a net income of $2.6bn (1.6bn), or 61 cents a share, compared with $2.09bn, or 50 cents a share, during the same period a year earlier. Revenue rose to $33.1bn, up from $28.1bn in 2010. Excluding special items, Ford has posted operating profits for seven consecutive quarters.
Despite the trend to smaller cars, the average sales price rose. US consumers paid an average of $31,508 for Ford models in the first quarter, up 3.9% from $30,319 last year, according to car analyst Edmunds.com.
The improvements spanned Ford's global business. In Europe, first-quarter pre-tax operating profits more than doubled to $293m, compared with a profit of $107m a year ago. Ford South America's pre-tax o! perating profit rose to $210m from $203m and in Asia Pacific Africa profits were up to $33m from $23m. Ford said it expected to build 1.5m vehicles worldwide in the second quarter, 12,000 more than a year ago.
Alan Mulally, the Ford president and chief executive, said: "Our team delivered a great quarter, with solid growth and improvements in all regions. We continue to accelerate our 'One Ford' plan around the world, delivering on our commitments to serve our global customers with a full family of best-in-class vehicles and deliver profitable growth for all, despite uncertain economic conditions."
Ford cut its debt by $2.5bn in the first quarter and said its cash reserves now exceed its debt by $4.7bn. It reported $2.2bn of positive cash flow for the quarter, compared with a $100m outflow a year earlier.
Jessica Caldwell, senior analyst at Edmunds.com, said: "Ford's momentum stems from the company's balanced product portfolio and its commitment to refresh its line-up at an aggressive pace, which keeps dealers excited and continues the buzz among car-shoppers." She said that Ford was now well represented in every major product category: "The challenge for Ford will be maintaining this momentum there's more pressure when you're the one to watch."
But the good news was tempered by continuing signs of fragility in the economy. US crude prices remained at $112 a barrel, US house prices slid in February, according to the Standard & Poor's Case-Shiller house price index. Residential real-estate prices dropped in the 12 months to February by the most in more than a year, according to the index. Prices are now at levels last seen at the nadir of the US recession.
The Conference Board's poll stands in contrast to two other surveys this week, one by the New York Times/CBS and one for The Washington Post, which reported falling consumer confidence. According to the NYT/CBS poll Americans are now more pessimistic about the economic outlook than they have been since the early month's fo! llowing president Barack Obama's election.
The next big test of the strength of the economic recovery will come tomorrow as the stock markets nervously await a press briefing from Federal reserve chairman Ben Bernanke. In an unprecedented move Bernanke will brief the press after the meeting of the Federal Reserve Open Market Committee, the body that makes the key decisions about US interest rates.
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