Ten years after it nearly crashed, the carmaker is returning an extra $1bn to its shareholders
Ford is on track to report record profits for last year and this, crowning its comeback nearly ten years after it mortgaged all its assets, including its famous blue oval badge, for $23.5 billion to stave off collapse.
A company that in 2006 was losing money on every car it produced, was facing a $17 billion annual loss and was being outsold by Honda and Toyota is set to report a record pre-tax profit at the upper end of its predicted $10 billion to $11 billion range for last year. Moreover, according to Mark Fields, Ford’s president and chief executive, this year will be “equal or higher”.
“In 2015 we achieved a breakthrough year, as promised,” Mr Fields said. “For 2016, we’re looking forward to delivering another outstanding year.”
After six years of consistently strong results, Mr Fields said that the carmaker was able to reward its shareholders and would pay a $1 billion supplemental cash dividend.
Ford’s achievements mirror the recovery of the entire American car industry, but they are all the more remarkable because it was the only one of Detroit’s “Big Three” auto manufacturers not to accept a government bailout — although it did receive loans from Washington to help to produce more fuel-efficient cars. The federal government spent about $50 billion bailing General Motors out of its 2009 bankruptcy. Chrysler took $12.5 billion before being fully subsumed by Fiat.
Much of the credit for Ford’s recovery goes to Alan Mulally, who was brought in from Boeing as chief executive in 2006 to rescue the company and who once described Ford’s borrowings as “the world’s largest home improvement loan”.
Mr Mulally, who retired in July 2014, used the money to restructure the company and to simplify its product portfolio, dropping brands such as Aston Martin, Volvo and Jaguar. He knocked heads together in a notoriously fractious management and cut overheads, reducing employee numbers by 60,000 and slashing retired workers’ healthcare benefits. Under Mr Fields, the company has enthusiastically embraced both electric vehicles and new technology, including voice-activated control, pedestrian detection systems and hands-free parking.
With Bill Ford, the company’s executive chairman and the great-grandson of Henry Ford, behind him and at a time when 60 per cent of vehicles sold in the United States are still traditional petrol-powered light trucks, Mr Fields also has championed the concept of “mobility”. This means moving away from the traditional model of a car in every garage to the idea of helping people to move around, either in their own cars, in ride shares or even a network of on-demand autonomous electric rental cars.
“We see a world where vehicles talk to one another, drivers and vehicles communicate with the city infrastructure to relieve congestion and people routinely share vehicles or multiple forms of transportation for their daily commute,” Mr Fields said this month at the Consumer Electronics Show in Las Vegas.
The company is even inching closer to break-even point in Europe after years of bleeding cash ojn the other side of the Atlantic, after an aggressive push to introduce 25 new models.
“They were willing to bet the ranch in 2006 and it has paid off really well,” Michelle Krebs, a senior analyst with AutoTrader.com, said.
Other big risks that Ford took included moving to a single platform for production and swapping almost every steel body panel in their popular F-150 pick-up truck for a lightweight aluminium alloy.
“They have focused on the race for profits rather than the race for sales,” Ms Krebs added, in the process lifting margins to up to 11 per cent.
Despite the recovery of Ford and other big carmakers, investors have lingering doubts. Ford’s shares have lost more than a fifth of their value since late October. Some analysts attribute this to fears that rising interest rates may lessen the attraction of easily available car loans and concerns that car and truck sales, which hit a record 17.4 million last year, may have peaked.
That said, others dismiss these fears as overblown. James Albertine, an analyst with Stifel who has just put out a “buy” recommendation for Ford shares, believes that there is still earnings upside for the company. “We do not think fundamentals are anywhere near as bad as sentiment at the moment,” he said.
Mustang leads the charge in UK
In further evidence that the American carmaker is back on track, the Ford Mustang is being introduced in Britain in right-hand drive for the first time in nearly five decades. Proving that Ford is not all about sensible cars, such as the Fiesta and the Focus, the Mustang has a price tag starting at £30,000 and can be ordered with a five-litre V8 engine. The original Mustang, above, came out in 1964 in America and was an instant hit at $2,368. It sold more than a million in the first 18 months.
Photo: Credit Scott Olson/Getty Images
Source: © Times Newspapers Limited 2016