FORD, THE only US auto manufacturer to forgo federal aid, may return to profitability by 2011 because of progress in cutting costs and making cars more fuel-efficient, chief executive Alan Mulally said.
“We’re on a good glide slope to get back to profitability in 2011,” Mr Mulally told shareholders yesterday at the company’s annual meeting. “We have sufficient liquidity, we’ve got a good product plan and we’ve got the restructuring in line with that product plan. Now it’s just staying on that plan.”
Ford went into yesterday’s meeting with 13 losses in the past 15 quarters. Mr Mulally previously said he planned for break-even results in 2011 without relying on government loans or a bankruptcy filing.
The Delaware-based group took advantage of a rising stock price to raise $1.6 billion by issuing 300 million common shares on Tuesday priced at $4.75, and then having underwriters buy 45 million more shares on Wednesday.
Mr Mulally plans to use the proceeds to buttress the balance sheet and finance a union-run medical fund.
The company’s shares rose again yesterday and have now more than doubled from early March, when Ford announced a debt-reduction plan that cut borrowings by $9.9 billion.
“Ford will continue to tap the equity markets opportunistically for the foreseeable future, as it seeks to bolster liquidity without seeking government aid,” Chris Ceraso, a New York-based Credit Suisse analyst, wrote in a note to investors yesterday. “This is the right strategy.”
He rates Ford as “neutral”.
Mr Mulally (63), presiding over his third annual meeting since joining Ford from Boeing in 2006, predicted global motor sales will fall 15 per cent this year.
While he hasn’t delivered profits or dividends, his borrowing of $23 billion shortly after he arrived cushioned Ford against losses including a record $14.7 billion in 2008 while adding new models and cutting jobs.
“We’re fully aware of the seriousness of the challenges we face,” Mr Mulally told shareholders.
“I’m confident that, not only will we survive this downturn, but that we will emerge as a lean company positioned for profitable growth.”
Ford lost $1.4 billion in the first quarter, beating analysts’ estimates.
That was smaller than General Motors’ $5.9 billion deficit and Toyota’s $8.2 billion loss in the year’s first three months.
Mr Mulally is shunning a federal rescue such as those extended to GM and Chrysler, which are being propped up with $19.4 billion in aid.
Chrysler filed for bankruptcy protection on April 30th and received an extra $4.5 billion in US financing, and GM is likely to end up in court protection by June 1st.
“We are fighting for the soul of manufacturing in America,” said Mulally.
“There is no reason why the US can’t continue to lead in this very important industry.”
On May 6th, Ford announced plans to spend $550 million to retool a Wayne, Michigan, sports-utility vehicle and four-wheel drive factory to make small cars, including an electric version of the Focus model.
The automaker is converting three North American truck factories to make fuel-efficient cars.
Executive chairman Bill Ford told shareholders the company will remain self-sufficient through what he called “this economic crisis of historic proportions”.
Companies that take federal aid must comply with requirements for running their businesses that are set by the US government. “We are masters of our own destiny,” he said. “We make our own decisions. And we intend to keep it that way.”
Mr Ford said the automaker is trying to use industry upheaval to overhaul its line-up with electric cars and hybrids.
“As bad as it’s been, and it’s just been horrible, we’re taking advantage of it to push through break-through technology,” he said.
“It’s changed the face of the company in a very positive way, but there’s been a lot of pain.”
Shareholders rejected a proposal opposed by directors to strip the Ford family of its 40 per cent voting control of the automaker, the fifth straight such failure.
The plan won the backing of 19.5 per cent of the shares voted, its lowest support ever and down from 27.2 per cent last year.
The board includes two family members, Bill Ford and Edsel Ford – (Bloomberg)
