DEARBORN -- The auditorium at Ford World Headquarters was packed with employees to hear Alan Mulally, president and CEO, discuss third-quarter financials at the Global Town Hall.
"The business performance is absolutely solid this quarter," said Mulally.
Ford reported 2011 third-quarter net income of U.S. $1.6 billion, a decrease of $38 million, from third-quarter 2010. During the quarter, volume was up 7 percent and revenue was up 14 percent, compared to a year ago. Ford also saw market share increases in North America, Europe and Asia Pacific Africa.
"Ford continued to be the best-selling brand in the U.S. We don't say that enough. The No. 1 brand in the U.S., what do we think of that?" he said to a crowd of applause.
For the third quarter, Ford Credit a reported net income of $350 million, a decrease of $147 million from a year earlier. On a pre-tax basis, Ford Credit earned $581 million in the third quarter, compared with $766 million in the previous year.
"The Ford Credit plan was to be lower," he said. "They are absolutely operating at a world-class efficiency level and really contributing to our One Ford plan."
North America posted a third-quarter pretax operating profit of $1.5 billion, virtually unchanged from a year ago, despite having to overcome a significant non-cash charge related to commodities hedging. South America reported a pretax operating profit of $276 million, an increase from $241 million last year. Europe and Asia Pacific Africa posted a loss for the period.
"Europe as we know is dealing with a really tough situation – slowing economy, sovereign debt, over capacity and low production volumes due to seasonal shutdowns," said Mulally. "But they are also managing their cost during this period. We continue to keep to keep an eye on the situation and we are developing a better plan to deal with it."
Within automotive results, pretax operating profit was reduced by approximately $350 million for unrealized mark-to-market adjustments on commodity hedges, most of which affected the North America results. These adjustments occurred because of the significant decline in commodity prices copper, aluminum and precious metals near the end of September.
It's a noncash adjustment that over time will reverse if commodity prices go up or the company will realize the value of lower prices if the commodity prices stay low .
Mulally also discussed the dividend at the opening of the question and answer session.
"As you know, we stopped the dividend in 2006," he said. "We've always had it in our plan to reinstate the dividend. When we say profitable growth for all, we mean our customers, suppliers, employees and Ford store owners and the investors themselves. We've always said that the dividend is a very important component of profitable growth for all.
"What we told investors again today, is that we are on track to improve our balance sheet and create a much healthier business with operating cash flow. We believe that we will be reinstating the dividend sooner rather than later. When we do reinstate the dividend, part of strategy is to keep the dividend in place. Meaning we don't reinstate it and back off. We want to make sure that when we start the dividend again we can honor our commitment to keep the dividend going even through a cycle going forward."
During the session, one employee asked about the continuing issue with MyFord Touch® and what Ford is doing to respond to the problem.
The improvements are going to come through pretty quickly – some patches are already available at dealerships, Mulally discussed. One of the main issues Ford is working is the capability of the system as well as simplifying.
"We believe that it’s a key technology for Ford and consumers going forward. If you think about it, we all want to have an integrated life and not be disconnected. People are going to do it anyway, so the fact that we are making it safe and voice-activated is a good thing. I think we are actually making a significant improvement in reducing driver distractions," he said.
Responding to a question from around the globe, Mulally addressed the reason for introducing the Fiesta to India even though the Figo is having major success.
"The Figo is so neat and we tripled our market share in India with this one vehicle. The Fiesta also is B-size vehicle, but on a global platform, and we are able to offer a lot more value. Over time we'll fill in the rest of the product line in India. We are absolutely committed to using our full family of vehicles, global platforms and One Ford plan worldwide in all of our markets," he said.
Another employee asked Mulally about not quite reaching investment grade.
"You earn the right for investment grade, and you do it with consistency of purpose," he said. "We have not been the model for that in the past. We've gone through the biggest transformation that I know of and now we are profitably growing the company. We are consistently now – not just making great products and services – but we're actually growing the business. And that's what investment grade reflects.
"For us to move up to being one level below investment grade, after everything we've been through, is an unbelievable testament to what all of us have done and where we have positioned the company to grow."
Before concluding the Town Hall, Mulally wanted to share one last item with employees.
"Remember five years ago, we leveraged all of our assets to borrow $23.5 billion – including the Blue Oval. And the criterion for us to get the Blue Oval back is that we have two of the rating agencies rate us investment grade. We're really close. All this work that we've been doing to create a profitably growing company for all of us with sustained performance, and now we are one notch away from investment grade and having the Blue Oval returned to us. Is this a good quarter or what?"