Ford’s Strong Return To Profitability Signals Rebound Of Auto Industry

A strong demand for its trucks resulted in a much larger profit than Wall Street was forecasting which pushed the United State based auto giant back into the path of profitability in a big way in the third quarter.

Profits of $2.6 billion excluding special items was reported by the company which was almost twice of what the company had earned on that basis, at $1.4 billion, in the same period a year ago. And it was far above the $932 million profit that analysts had forecast for the latest completed quarter.

The result of Covid-19 pandemic induced shutdowns of auto plants and deep plunge in car sales across the globe was losses for Ford as well as for other automakers in the first half of this year. For the first six months of 2020, Ford reported a net loss, excluding items, of $2.3 billion.

In the third quarter however, there was a strong rebound in sale though lower than what the company had reported in the same period a year ago. For the third quarter, therewas a 5 per cent year on year drop in the number of vehicles Ford sold to dealers globally at 1.18 million.

But the company still managed to report a 2 per cent year on year growth in its automotive revenue to $37 billion which was primarily because of strong pricing for the vehicles that the company did. $900 million to the company’s bottom line was added by the improved pricing of the company.

The results are a sign of a rebound in the auto industry overall.

Since the beginning of June, there has been a surge of more than 25 per cent in the stock prices of Ford, along with rivals General Motors and Fiat Chrysler.

Record earnings were also reported earlier on Wednesday by Fiat Chrysler.

But increasing worries among investors of increasing Covid-19 cases resulted in a broader market sell-off which also brought down the shares of all three automotive companies. But the better than expected third quarter results of Ford helped a 6 per cent rise in the stocks of the company while also pushing up stocks of GM.

GM is due to report results next week.

However warnings of more difficult times during the fourth quarter, and potentially a loss, were issued by Ford in terms of earnings before interest and taxes (EBIT).

Ford said its fourth quarter performance could be impacted by the ramping up production of a new version of the F-150 pickup truck, the best-selling vehicle in the US market. Higher costs associated with the coming launches of the Mustang Mach-E and Bronco Sport were also cited as potential headwinds for the company.

, as well as higher costs associated with the coming launches of the Mustang Mach-E and Bronco Sport, and lower earnings from Ford Credit. The company did say it should be profitable for the full year on an EBIT basis.

(Adapted from CNN.com)

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