02 November 2009

Ford Makes 3Q Profit

It should be a dog bites man story. Ford Motor Company, an investor owned public company, didn't go bankrupt, didn't get a government bailout, and made a profit in the third quarter of 2009. It hasn't made a profit in 2009 as a whole and doesn't expect to do so, but hopes to make a profit in 2010.

General Motors Corp. and Chrysler LLC each received government bailouts followed by bankruptcy, their retired workers took huge hits in exchange for percentage ownership in the reorganized entities, and their current workers took pay cuts. Ford workers haven't accepted cuts and Ford is still on the hook for debts to retired workers and bondholders that its competitors have shed, yet it is still making a profit for one quarter so far this year.

Ford last made a full year profit in 2005, and increased its market share this year for the first time since 1995. It has even managed to hold onto its finanial arm, something that GM spun off and that Chrysler is shutting down.

UPDATE (11/2/09): Also, while a billion dollars of profits is nothing to sniff at, it also isn't that remarkable and works out to something on the order of $3 per car sold in the U.S. in the quarter. It is a safe bet that the average retail price of a Ford vehicle is $15,000 or more. So, Ford's margin is roughly 0.0002% of retail, and that overstates the matter by a factor or two or three by applying non-U.S. sale profits and financing profits to the U.S. sales. While shareholders weren't wiped out entirely at Ford as they were in GM and Chrysler (although collectively, they surely still have capital losses), the only people making real money in this operation are employees, bondholders, and car dealers. The parts suppliers are overwhelmingly losing money too.

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