Thursday, January 28, 2010

Ford Posts Profit; Toyota Torpedoes Sales/Production In More Countries

Ford posted a $2.7 billion profit for last year, as moves to streamline production, reduce costs, and building cars that people want to buy - all without government intervention. That's tremendously good news for the car maker.
Ford, the only U.S. automaker to avoid bankruptcy court, clawed its way to a $2.7 billion profit in 2009 and expects to stay in the black in 2010. It was the automaker's first annual profit in four years.

Ford's full-year revenue of $118.3 billion fell nearly 20 percent from 2008, but the Dearborn-based automaker benefited from cost-cutting, a $696 million profit in its credit arm and popular cars and trucks like the Ford Fusion midsize sedan and Ford Escape small SUV. It gained market share in North and South America and Europe, despite the worst U.S. sales climate in 30 years.

"While we still face significant business environment challenges ahead, 2009 was a pivotal year for Ford," Ford CEO Alan Mulally said in a statement.

Ford shares rose 32 cents, or nearly 3 percent, to $11.87 in premarket trading.
If the company can make a profit in the worst car market in decades, the company seems to be in a position to capitalize on a more sound fiscal footing and tremendous missteps by international rival Toyota.

Toyota is reeling from having to stop production and sales on its biggest selling vehicles and those problems are leading to recalls and cessation of sales/production in more countries. The recall on its cars now extends to China and Europe. The accelerator issue is due to some kind of a defect in the accelerators that are produced by CTS Industries of Elkhart, Indiana.

Apparently the problems develop over time as moisture somehow gets into the parts and prevents the accelerator returning to idle after pressure is taken off the pedal. This means that cars are more likely to run into the problem as they get older or if they're located in areas with higher humidity.

It's going to take time to identify the specific problem, produce a solution and get it implemented across the millions of affected vehicle and that's going to hit Toyota's bottom line hard. In fact, it's probably going to exceed the hit that Ford took over the Explorer mess by a significant margin because so many cars in the Toyota line are affected.

Still, it is interesting that Lexus vehicles are not affected by the recalls as yet. That's curious given that some of those vehicles are suffering from the same kinds of problems and the solution to date has been to call on owners to remove the car mats from the driver's side to prevent it from interfering with the pedal operation.

GM is hoping to benefit from Toyota's woes as well. They're starting a new incentive by paying $1,000 or free financing to Toyota owners to switch to a GM product. Funny, but it's not like GM has the funds to make that work. Yet, the gimmick might be enough to get some worried Toyota owners into GM showrooms.

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