Ford reports first North American profit in years

Ford Motor Company posted its first profitable quarter from its North American operations in almost five years as U.S. government incentives helped the auto giant keep from discounting its cars and trucks to the point of loss.

The company said third quarter pre-tax operating profit for the North American division was US$357-million. That helped the company report overall operating profit of US$1.1-billion after reporting a loss of almost US$3-billion in the year-earlier quarter.

The U.S. cash for clunkers incentive program was active and extremely popular for about half of Ford’s third quarter. During the US$3-billion program in which the U.S. government would give refund vouchers worth US$3,500 to US$4,500 on the trade in of older cars, the company’s F-150 pick-up truck, Escape SUV and Focus compact car were three of the more popular vehicles.

While only a very limited “Retire Your Ride” program existed in Canada and the third quarter and beyond, Ford offered its own incentives including $1,000 to buyers who turned in a car 15 years or older and up to $3,000 for those who opted for a new truck.

On top of other discounts, the in-house clunker program would have cut into profits from its Canadian operations, but stirring some buying activity was seen as paramount. Still, Canadian car sales were already performing much better than the critical U.S. market.

Against that backdrop, analysts weren’t expecting much from Ford. While they knew the U.S. government program had stirred sales, they did not expect the company to be profitable in North America or globally.

The adjusted pretax profit per share of 26 U.S. cents was far better than loss of about 20 U.S. cents expected by analysts. The company also says it expects to be “solidly profitable” in 2011.

“Our third quarter results clearly show that Ford is making tremendous progress despite the prolonged slump in the global economy,” Ford president and CEO Alan Mulally said in a statement.

After its long-time rivals Chrysler and GM fell into creditor protection earlier this year, Ford was able take advantage of its status as the healthiest, if still ailing, U.S. car maker. In the third quarter, Ford gained 2.2 percentage points of the total U.S. market share. In China, Ford sales rocketed 63%.

The reversal of fortune may make life more different for Ford as it continues to push for a new, more manageable contract with the United Autoworkers union. In the U.S., several branches of the UAW have voted down their agreements with the company.

Meanwhile, faced with threat of Ford pulling its operations out of Canada, the Canadian Auto Workers reached a tentative labour deal with the Detroit automaker Friday. The deal will see it scale back its operations in the country, including halting operations in St. Thomas, Ont., in 2011.

Ford, however, did agree to make a $2-billion investment in its plants in Oakville, Ont., where it committed to build two more vehicles, and in Windsor, Ont., where it promised to produce a new engine. The automaker also committed to keep 10% of its North American production in the country, which, while smaller than its current footprint of 13%, is still more than the percentage of cars it sells in Canada each year.

Photograph by: Jewel Samad/AFP/Getty Images