Tuesday, November 3, 2009

Ford May Be on a Roll, But Consumer Data is Still Mixed

A third-quarter profit at Ford (F) gave a big push to that Ford bandwagon I wrote about here recently, even though Ford itself sounded some cautionary notes in its third-quarter presentation.

Results for Ford’s captive finance company, Ford Credit, illustrate why. Even though economists are reporting that the current recession is already ended, consumers are giving mixed signals.

For instance, repossessions as a percentage of Ford Credit’s total portfolio remain high, relatively speaking, at more than 3 percent. Ford Credit’s average loss per repossession is down, but that’s probably a function of improving used-car values, rather than a positive reflection on consumers. Improved used-car values mean higher values for repossessed cars and trucks. Ford Credit auctions them off to dealers.

At the same time, delinquencies over 60 days old are trending down at Ford Credit. That could mean consumers are having an easier time keeping up with payments, but it could also reflect higher standards at Ford Credit for who gets a loan in the first place.

Meanwhile, Standard & Poor’s upgraded Ford to “Buy” from “Hold” yesterday on the strength of a nearly $1 billion quarterly profit for Ford, versus the rating agency’s earlier prediction of a loss, plus Ford’s forecast that it will achieve profitability for a full year sooner than expected, in 2011.

Interestingly, even though Ford upgraded its 2011 forecast yesterday, the company continues to soft-pedal the short-term outlook for the rest of 2009 and 2010.

Media coverage of Ford’s results emphasized the “surprise” aspect of the net profit, although there had been some hints beforehand that Ford had good news in store.

Fox Business News, for instance, did a mostly admiring interview with Ford President and CEO Alan Mulally. Interviewer Liz Claman did get in a couple of pointed questions, although she kicked off the interview by saying, “Talk about how you did it, Mr. Mulally!” She later added, “They’re never going to let you retire, Alan.”

The pointed questions were whether Ford could sustain a profit without the help of Cash for Clunkers, which helped third-quarter results. Mulally hedged and reiterated Ford’s earlier guidance that it will achieve positive cash flow in the fourth quarter. That’s a good thing, but short of a promise that Ford will achieve a fourth-quarter net profit.

Claman also asked what Mulally planned to do, to address Ford’s “angry” UAW workers in the United States, who rejected Ford’s latest proposed concessions. Separately, the same question came up earlier in the day, in Ford’s conference call with reporters and analysts.

Characteristically, Mulally ducked the question whether the union workers are angry and resorted to a Mom-and-apple-pie statement about “providing opportunities” and “competitiveness.” That may be bland, but Mulally is smart to avoid providing the UAW with locker-room quotations that can be used against him. The Ford bandwagon is rolling anyway, without a lot of grandstanding.

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