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Stock of the Day
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Ford (F)
Ford Jumps Back Into Black
This recession has brought the worst and the best out of some companies. Some companies have revealed cracks in their foundation while others have shown strong and well established businesses. At one time, Ford Motor Company was teetering between the two. The automaker had a number of issues and sales were declining at a rapid pace, but it still didn't take a bailout from the government. It seems like the dynamic at the company shifted in the right direction during the early part of 2009 and it has finally started benefiting from this shift. Ford Motor Co. surprised Wall Street on Monday and posted a third-quarter profit of $997 million and said it had its first profitable quarter in North America in more than four years. How was the automaker able to make a turnaround so quickly? Will future quarters be as successful?
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Ford Motor Co. has come a long way from the nearly $30 billion in losses it racked up between 2006 and 2008. The company received kudos from the government and taxpayers for avoiding bankruptcy without an infusion of cash from Uncle Sam. Ford's North America division has been the driving force behind years of declines, but even this section improved during the quarter. The company reported a pre-tax operating profit of $357 million in North America, compared with a loss of $2.6 billion in the region a year ago. With unemployment at record levels and consumer spending declining, people are still wondering how the company was able to deliver these results. The company may have been able to avoid bailout funds, but the government's intervention in the auto industry did bring the company back to profitability. The widely-praised and criticized Cash for Clunkers program was the main factor that helped the automaker beat analysts' expectations. During the incentive program, Ford was one of the automakers that saw an increase in demand, so much so that it had to add shifts back at some of its factories to keep up. Even without the program, the company made gains on many of its rivals during the quarter. A strong customer response to its new cars and trucks, cost reductions and improved results at its financing and lending arm, Ford Motor Credit Co., also contributed to its success in the third quarter.
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Now that the plug has been pulled on the Cash for Clunkers program, there is a strong possibility that the same issues will resurfaced at Ford. Consumers are still weary of the economy and the jobs market, so purchasing a new car is most likely not at the top of their lists. However, Ford is more confident than ever that its recent transformation will continue to propel the company in the right direction. Ford CEO Alan Mulally reiterated that point by saying, “Our solid product lineup is leading the way in all markets. While we still face a challenging road ahead, our 'One Ford' transformation plan is working and our underlying business continues to grow stronger.” The automaker, which promised to break even in 2011, now says it will be “solidly profitable” within two years. The success or failure of future quarters rest largely in the hands of consumers. Unless consumer confidence and spending continue to increase, the company will likely see issues from the past resurface.
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Other Stuff on Ford
Meltdown 101: Ford has suffered less than rivals -- The company has been riding a wave of positive public sentiment since it steered clear of bankruptcy protection and avoided taking federal bailout money.
Ford has cut 45% of workers since 2006 -- The automaker has been slashing hourly workers at a record pace.
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Profile |
Click here to view a detailed profile of Ford.
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