How Ford got its profit margin back

Alisa Roth Nov 2, 2009

How Ford got its profit margin back

Alisa Roth Nov 2, 2009


KAI RYSSDAL: Ford cleared $997 million last quarter. A tidy sum considering this has been one of the worst years for car sales — ever. We figured Cash for Clunkers only went so far.

So we asked Marketplace’s Alisa Roth to find out how Ford did it, and where the road leads from here.

ALISA ROTH: This is the first time in four years that Ford has posted a profit in North America.

David Silver follows the auto industry for Wall Street Strategies — it’s a research firm. He says Ford is finally seeing the results of changes that it started making years ago.

DAVID SILVER: They’ve slashed production, they’ve closed a lot of factories across the country and across the world, and now with … as these UAW concessions that were made at the beginning of 2008 begin to filter in, it’s really allowing them to turn a profit.

Those union concessions meant Ford has spent less money on labor lately. Cash for Clunkers got people to buy cars. But the more important thing is Ford is finally building vehicles again that people want to buy.

Even so, David Silver says . . .

SILVER: They’re really not out of the woods by any means. Even CEO Alan Mullaly, he indicated that they’re not going to be solidly profitable until 2011.

Ford still has billions of dollars of debt to deal with. And its labor issues aren’t over. It’s still trying to thrash out a contract with the UAW.

Bruce Belzowski is a researcher at the University of Michigan’s Transportation Research Institute. He says Ford’s future will depend on a couple of things, beyond cutting back:

BRUCE BELZOWSKI: They have to be prepared for a more fuel-efficient future.

And he says Ford — like GM — will have to do well outside of North America.

BELZOWSKI: How the companies manage and continue to manage their global operations will have a big effect on their success going forward.

Because if it’s going to make it, Ford’ll need to be big in places like India and China, where the market for cars is still growing.

I’m Alisa Roth for Marketplace.

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