Best to come at Ford as record profit precedes sales surge

Detroit Bankruptcy

The success for Ford and the other Detroit Three carmakers is being achieved even as the Motor City this month filed for the largest municipal bankruptcy in U.S. history. The predecessors of General Motors Co. and Chrysler Group LLC sought court protection of their own in 2009 and received government bailouts. Ford avoided bankruptcy by borrowing $23.4 billion less than three years earlier.

“It’s a searing experience,” Chief Financial Officer Bob Shanks said of the company’s restructuring. “It’s something you never forget.”

For Detroit, “it’s just going to be good when it’s all said and done, and I think we’re a good example of that,” he said. “We went through a horrible restructuring. We know what it’s like.”

Ford earned $35.2 billion from 2009 through 2012 after losing $30.1 billion in the previous three years.

North America

In North America, Ford has earned $2 billion or more, with an operating margin of 10% or more, in five of the past six quarters. The $2.3 billion second-quarter profit in the region was achieved with U.S. industry sales still running at roughly 1.5 million vehicles short of the 2000 peak.

The results in North America are being driven by sales gains, especially of lucrative F-Series pickups, said Matthew Stover, an analyst with Guggenheim Securities. Reviving U.S. housing sales and a domestic energy boom are fueling demand for full-size trucks, with F-Series deliveries jumping 26% to 198,643 during the quarter.

“Everything came in a little bit better than what you’ve been looking for,” Stover, who is based in Boston, said in a telephone interview. “Collectively, that adds up to something.”

The consistent performance by Ford’s operations in North America will flow more to the bottom line as the turnaround efforts in Europe progress and as the company starts earning bigger profits in Asia, Shanks said.

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