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Ford posts $1.7 billion in profits in 3Q
Ford Mustangs sits on the lot of a car dealership in Glenview, Ill.
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Kai Ryssdal: There was good news today from the Motor City: Ford Motor Company said it earned $1.7 billion in the third quarter -- its sixth profitable quarter in a row. It's been cutting costs, and it's going to pay down more of its debt. But Ford is doing something more interesting too -- building cars and trucks that drivers actually want to buy.
Marketplace's Alisa Roth explains exactly how Ford is kicking its turnaround into overdrive.
Alisa Roth: The U.S. economy may still be struggling to recover. But Ford's stellar results are largely because it's doing so well at home. Operating profit for the division was five times higher than in the third quarter last year. And that's important because Ford depends more on U.S. sales than its rivals GM and Chrysler do.
Kirk Ludtke follows the auto industry at CRT Capital Group.
Kirk Ludtke: I would say that volume and mix in North America was really, you know, the biggest driver of the year-over-year improvement, followed closely by pricing.
Ford is selling more cars here, because it's been introducing a range of new products -- from little fuel-efficient jobs like the Fiesta, which was brought over from Europe to big, heavy-duty pickup trucks. They're vehicles people really want to drive and that they're willing to pay top dollar for.
Dave Whiston is an auto industry analyst at Morningstar.
Dave Whiston: When you have a full line of model segments that customers are willing to pay up for, you can make a lot of money, even in a pretty depressed sales environment that we have now in the U.S. auto industry.
He says that means the company should be in great shape when the auto market really comes back.
Ford is already planning for the future. It says it's paying off a big chunk of debt early. And after years of cutting costs, it's investing $850 million in Michigan over the next two years to hire 1,200 workers and build more fuel-efficient cars.
I'm Alisa Roth for Marketplace.
Kudos to Ford, but a day late and a dollar short. American car companies used to be the market leaders, but these days they seem to merely be followers. Where is Ford's electric car design? where is their hydrogen fuel cell vehicle? The car company to gain the most over the past two years was Hyundai, and I suspect they will beat out Toyota in the coming years to claim what used to be Ford's and GM's mantle.
You might think these stellar profits by the American car makers means that the recession is over and good times lie ahead. Nope. It can be explained by two things: Cash-for-clunkers and the expiration of the Bush tax cuts. Both businesses and individuals know that big tax increases are coming next year, so they made their purchases this year ... and took advantage of the clunker tax credit as a bonus. That's business from 2011 pulled into 2010. So don't be surprised when the economy begins to falter early in 2011. I can't imagine what TRILLION dollar deficit "stimulus" the Government will think of next to keep postponing the inevitable day of economic reckoning. More than likely the Federal Reserve will print more money.
