Ford Earnings: Exactly What We Wanted to See

It ain't sexy. It ain't the kind of news the average person will get excited about. But make no mistake, the news from Ford on Tuesday is exactly what you want to see out of the automaker.

Paul Sancya

Third quarter earnings blew away estimates. Excluding special items, Ford made $.48 a share, a dime better than the street was projecting. The $2.1 Billion profit means Ford has made $6.8 Billion this year.

Think about that for a second. Ford has not been this profitable since 2004 when the company made $4.3 Billion. And the folks in Dearborn expect a strong fourth quarter which means Ford could make more than $9 Billion in 2010.

And the real strength behind the profits is Ford in North America. In the third quarter, the company made $1.6 billion in the U.S. and Canada. A $1.3 billion improvement compared to last year. Just as impressive, Ford now expects to gain market share in the U.S. for two consecutive years for the first time since 1993.

This is a testament to Fords line-up not only connecting with buyers (market share improving) but those buyers increasingly willing to pay extra for add-ons and upgrades (profit per vehicle rising). It may sound cliche, but Ford is in the sweet

Meanwhile, and perhaps more important are three moves Ford is taking to cut its debt. The automaker is:

* Paying $2 billion to its revolving credit line.

* Paying $3.6 (and eliminating all of its obligation) to the UAW VEBA trust.

* Making $2.9 billion

These moves mean Ford will lower its net debt position to less than $3 billion and the company projects to be at net debt $0 by the end of the year.

Again, it's not sexy, but the improved balance sheet is huge for Ford. Ford is now within spitting distance of getting an investment grade credit rating and I expect it to happen fairly soon.


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