Consumers' 'Pent-Up Demand' a Driving Force for Ford: Mulally
Ford Motor Company had a strong second quarter,beating the Street by a 5 cents, with a profit of $2.9 billion, and revenue of $35.5 billion. Driving the better-than-expected results were sales in North America and being "profitable in all of our operations around the world," Ford Chief Executive Alan Mulally told CNBC Tuesday.
Also driving the results is the automaker's product line and "the pent-up demand for vehicles," Mulally said.
But some have cited Ford's rosy outlook as too optimistic, something Mulally said he doesn't buy into.
"The average age of vehicles is nearly 11 years now, and with the fuel prices being higher people want fuel-efficient vehicles," he explained.
The automaker is building cash, which is now $8 billion greater than its debts, Mulally went on to say. "Liquidity is so important, especially with the volatility of the world economies right now and what we've been through. So we have nearly $30 billion dollars in total liquidity, almost $22 billion in cash."
The plan is to continue to improve the company's balance sheet and to repay loans. Ford has repaid $2.6 billion worth of loans, he said. "We're down to $14 billion now [and] our goal is $10 billion for our new balance sheet."
After that, the automaker wants to move to investment grade and then reinstate its dividend. But Mulally noted that the most important thing is to use the cash to continue to grow the business.
In terms of the ongoing debt debate in Washington, Mullaly said it's weighing on everybody. "This is about confidence, it's about the direction in which [the U.S. is] going. I wouldn't say just about the debt ceiling, but also the budget deficits, the trade deficits and also the focus on the economy."
If the worst does happen and the U.S. goes into default, Ford's contingency plan would be to "restructure ourselves and resize our production to the real demand," Mulally concluded.
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