Ford Swings to Q3 Profit, Boosts 2011 Guidance

(Updates with regional financial breakdown starting in 13th paragraph.)

DETROIT -(Dow Jones)- Ford Motor Co. (F) reported a third-quarter profit Monday and said it would be "solidly profitable" in 2011 on cost cutting and a turnaround in its North American business.

The North American unit recorded its first operating profit in more than four years, helped by higher pricing and market share, though Ford warned that the end of government incentives in Europe market could severely dent industry sales next year.

The company reported a third-quarter profit of $997 million, or 29 cents a share, beating market expectations. This compared with a year-ago loss of $161 million, or 7 cents a share. The company's key North America automotive unit also posted a pretax profit of $357 million, and the positive cash flow of $1.3 billion in the third quarter compared with a $7.7 million cash burn in the same period a year ago.

The back-to-back quarterly profit provides the first real evidence that Ford may have turned the financial corner and will meet its goal of turning a full-year profit in 2011.

The Dearborn, Mich., auto maker changed its full-year 2011 guidance for the total company and its North America operations from being "breakeven or better" to "solidly profitable" on a pretax basis excluding special items with positive automotive operating-related cash flow.

Difficult challenges still remain in the fourth quarter and the start of 2010. Government-backed incentives, which sparked sales around the world, including the U.S. and Germany, are now over. The economic recession is slowing the company's recovery in the U.S. while pushing sales to historic lows in Russia.

"While the company has confidence that the global economy will be improving, the near-term growth outlook remains rather uncertain," Ford said in a statement. "Looking at 2010 there is a high likelihood of a substantial decrease in European industry volumes. This decrease could more than offset U.S. sales volumes which may improve somewhat from this past quarter's results."

Ford has culled billions in dollars of costs from its expense base, but the U.S. United Auto Workers are expected to announce Monday a rejection of contract concessions by the union's rank and file.

Ford Chief Financial Officer Lewis Booth said the near-term outlook remains challenging an the company won't know the full-impact of sales without the scrappage programs until next year.

Still, Booth expects the auto maker to report a positive cash flow in the fourth quarter and he expects Ford Credit to remain profitable during the last three months of the year

He declined to comment on the UAW contacts and said the company is in "strong talks" to sell its Volvo unit to China's Geely Automobile Holdings Ltd.

Ford reported profits in all of its divisions except the Volvo unit which narrowed its pre-tax operating loss to $135 million compared with $458 million for the same period a year earlier.

The North America unit, which accounts for 42% of Ford's overall vehicle sales, reported a pre-tax operating profit of $357 million compared with a loss of $2.6 billion a year ago. The improvement came from lower material costs, job cuts and consumers buying more high-end models equipped with technology features.

The South America unit's profit fell to $247 million compared with $480 million compared with $480 million a year earlier. The drop was due to the currency exchange rate. Revenue fell 22% to $2.1 billion.

Europe's pre-tax operating profit grew to $193 million compared with $69 million. The improvement came from cost reductions. Revenue fell 21% to $7.6 billion.

The Asia Pacific Africa unit's profit jumped to $27 million compared with $4 million for the same period a year earlier. The increase came from cost reductions and higher vehicle pricing combined with lower incentives. Revenue fell 11% to $1.5 billion.

Ford Credit reported a net income of $427 million compared with $95 million a year earlier.

The auto maker expects full-year 2009 U.S. industry sales to be about 10.6 million new vehicles which is consistent with its prior guidance. In Europe, the company increase its forecast to 15.7 million vehicles.

Ford's shares were up 8% at $7.56 in premarket trade.

-By Jeff Bennett, Dow Jones Newswires; jeff.bennett@dowjones.com; 248-204-5542

(END) Dow Jones Newswires

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