For the third quarter of 2009, Ford's Automotive sector reported a pre-tax operating profit of $446 million, compared with a pre-tax loss of $2.9 billion a year ago. The improvement primarily reflects favorable net pricing, structural cost reductions, lower material costs and improved market share, offset partially by unfavorable exchange and lower industry volumes.
Worldwide Automotive revenue in the third quarter was $27.9 billion, up $100 million from a year ago. The increase is more than explained by favorable net pricing and higher volumes, primarily in North America, offset partially by unfavorable exchange. Total vehicle wholesales in the third quarter were 1,232,000, compared with 1,175,000 units a year ago.
Automotive structural cost reductions in the third quarter totaled $1 billion, including $500 million in North America. Manufacturing and engineering costs were $500 million lower, largely reflecting the continued benefits of improved productivity, personnel reduction actions primarily in North America and Europe, and progress on the implementation of Ford's common global platforms and product development processes. Pension and retiree health care costs were lower, reflecting the effect of the UAW Retiree Health Care VEBA agreement. Overall, Ford reduced Automotive structural costs by $4.6 billion during the first nine months.
Net pricing was $1.9 billion favorable, primarily explained by higher U.S. net pricing, reflecting the success of new products, a continued disciplined approach on incentives and selective top-line pricing.
North America: For the third quarter, Ford North America reported a pre-tax operating profit of $357 million, compared with a loss of $2.6 billion a year ago. The improvement was primarily explained by favorable net pricing, lower material costs, structural cost reductions, favorable series mix and improved market share, offset partially by unfavorable exchange and lower U.S. industry volume. Third quarter revenue was $13.7 billion, up from $10.8 billion a year ago.
South America: For the third quarter, Ford South America reported a pre-tax operating profit of $247 million, compared with a profit of $480 million a year ago. The decrease is more than explained by unfavorable exchange, primarily in Brazil and Argentina. Third quarter revenue was $2.1 billion, down from $2.7 billion a year ago.
Europe: For the third quarter, Ford Europe reported a pre-tax operating profit of $193 million, compared with a profit of $69 million a year ago. The improvement was more than explained by structural cost reductions, lower material costs and favorable net pricing, offset partially by unfavorable volume and mix and exchange. Third quarter revenue was $7.6 billion, down from $9.7 billion a year ago.
Asia Pacific Africa: For the third quarter, Ford Asia Pacific Africa reported a pre-tax operating profit of $27 million, compared with a profit of $4 million a year ago. The increase primarily reflects favorable net pricing, China joint venture profits, and cost reductions, offset partially by unfavorable exchange. Third quarter revenue was $1.5 billion, down from $1.7 billion a year ago.
Volvo: Volvo continues to be reported as an ongoing operation. The effects of "held-for-sale" accounting-related adjustments are reported as special items. For the third quarter, Volvo reported a pre-tax operating loss of $135 million, compared with a loss of $458 million a year ago. The improvement is more than explained by continued progress on cost reductions, favorable exchange, and higher volume and mix. Third quarter revenue was $3 billion, up from $2.9 billion a year ago. Also, as announced last week, Ford confirmed Geely as the preferred bidder in the ongoing discussions concerning the possible sale of Volvo Cars.
Other Automotive: Other Automotive, which consists primarily of interest and financing-related costs, was a third quarter pre-tax loss of $243 million.
FINANCIAL SERVICES SECTOR
Financial Services Sector* Third Quarter First Nine Months
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(in millions) 2009 O/(U) 2008 2009 O/(U) 2008
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Ford Credit Pre-Tax Results $677 $516 $1,287 $1,388
Other Financial Services (16) (14) (93) (83)
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Financial Services Pre-Tax Results $661 $502 $1,194 $1,305
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*excludes special items
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For the third quarter, the Financial Services sector reported a pre-tax operating profit of $661 million, compared with a profit of $159 million a year ago.
Ford Motor Credit Company: For the third quarter, Ford Credit reported a pre-tax operating profit of $677 million, compared with a pre-tax profit of $161 million a year ago. The increase primarily reflected lower residual losses due to higher auction values, and lower provisions for credit losses, offset partially by lower volume.
Other Financial Services: For the third quarter, Other Financial Services reported a pre-tax operating loss of $16 million in the third quarter, compared with a loss of $2 million a year ago.
OUTLOOK
Despite the severe global downturn, Ford said it continues to make progress on all four pillars of its plan:
-- Aggressively restructure to operate profitably at the current demand and
changing model mix
-- Accelerate the development of new products that customers want and value
-- Finance the plan and improve the balance sheet
-- Work together effectively as one team, leveraging Ford's global assets
Ford said it remains on track to achieve or exceed all of its 2009 financial targets and almost all of its operational metrics. Ford will also continue to pursue actions to improve its balance sheet.
Ford expects full-year 2009 U.S. industry sales will be about 10.6 million units, consistent with the guidance previously communicated by the company. In Europe, Ford now expects that full-year industry sales will be about 15.7 million units, which is higher than its previous guidance.
Ford expects fourth quarter 2009 production to be up compared with year-ago levels and third quarter 2009 production. This increase is to return to planned dealer stock levels and match production with market demand for Ford products.
Ford now expects full-year Automotive structural cost reductions of about $5 billion, exceeding its full-year 2009 target. These costs were reduced by $4.6 billion through the first nine months. Going forward, Ford expects structural costs to be relatively stable as the company has largely completed its significant restructuring actions over the past four years.
