Ford’s financial outlook has been improving since Alan Mulally was hired as the company’s CEO in 2006. There is no better evidence than Ford’s 2010 financial results announced today: a net profit of $6.6 billion — the company’s highest net income in over ten years.
“Our 2010 results exceeded our expectations, accelerating our transition from fixing the business fundamentals to delivering profitable growth for all,” Mulally said in a prepared statement. “We are investing in an unprecedented amount of products, technology, and growth in all regions of the world.”
The recovering North American market was a particularly crucial one for Ford as it earned around $5.4 billion before taxes, rebounding from a loss of $639 million in 2009. In contrast, Ford saw a slight profit drop in the South American market, seeing profit drop by $88 million. The Asia Pacific Africa unit mirrored the kind of profit brought in by North American operations, turning a profit of $189 million, pre-tax, mainly from a higher volume and lower production costs. Outshining all other markets, Ford’s European operations gained around 226%, going from a loss of $144 million in 2009 to a profit of $182 million in 2010. In total, Ford’s worldwide after-tax earnings were up $3.9 billion compared to last year.
Ford’s overall financial performance in 2010 is made more impressive by the fact that it paid off some $14.5 billion worth of automotive debt and still managed to post a $6.6 billion profit. This debt reduction was roughly 43 percent of Ford’s total debt, bringing gross debt down to around $19 billion. Paying off that debt this year will save Ford over $1 billion in annual interest expenses moving forward.
Thanks to the combination of Ford’s 2010 financial performance and gross debt reductions, Ford also finished 2010 with more operating cash than debt. It now has around $20.5 billion in cash reserves on hand; putting cash holdings approximately $1.4 billion more than it has in outstanding debt. Gross cash is down $3.3 billion from the end of the third quarter of 2010, and down $4.4 billion from 2009, due to Ford’s aggressive effort to reduce its outstanding debt.
“The progress that we made improving our core automotive business has allowed us to significantly strengthen the balance sheet in 2010, and this will remain a key area of focus for us in 2011,” Lewis Booth, Ford executive vice president and CFO, said. “We continue to manage the business for long term profitable growth.”
Because of Ford’s incredible performance last year, all of its eligible full-time employees will share in the profits and receive a $5000 bonus.