Ford Beats Wall Street's Expectations with Q1 Results

The quarterly results from the automakers are coming in. VW and Hyundai have posted decreases in profits and Ford, while incurring a big loss has beat Wall Street's expectations as well, sparking a rally in Ford's shares. I shudder to think of what we'll be seeing in GM's Q1 report. That one promises to be a shocker.

The markets are all about expectations. Successive big losses or better then expected numbers? It's all in how you want to frame it, but in any case the market is clearly encouraged by Ford's results. Maybe just maybe we're starting to see some signs that the economic freefall is ending. Not based on these numbers but in some other metrics we've seen.

Revenue has fallen from $39.2 billion to $24.8 billion, a startling drop. It just goes to show you the magnitude of Ford's cost cutting. The loss comes out to $1.4 billion and cash burn is down dramatically from last year. Ford is confident in it's ability to make it through 2009 without government aid.

The big "bet the farm" loan the company took out in 2006 is what's keeping them going through this patch. They originally intended it to carry them to profitability this year, but obviously the disastrous collapse in the market interrupted those plans.

CEO Alan Mulally says Ford is on track to exceed it's $4 billion cost cutting target for the year and Ford now expects to either break even or possibly hit profitability in 2011. Chief Financial Officer Lewis Booth is confident that Ford will continue to reduce cash burn throughout the year and that he is "comfortable" that Ford will get through this year without any government aid.

Beyond that, he declined to speculate due to the "Very, very difficult environment".  They do say that they expect to make it through the downturn without government aid. It will truly be a feat if they are able to pull that off. I suspect the American public will reward them for being able to do that; dissatisfaction with the bailouts is very prevalent.

The narrower Q1's losses came about through cost cutting and better vehicle pricing. Part of the losses have to do with special one-time charges as well. Rather then look at where the company was last year at this time, Ford wants you to see how they are doing compared with Q4 of last year, when things really turned sour. The cash stockpile now sits at $21.3 billion, down from $28.7 billion last year.

On a pretax basis Ford lost 75 cents a share. Analysts estimated a number closer to $1.23 per share. Ford is still burning through cash at an alarming rate, but hopefully they can slow it down significantly this year. Unlike GM with it's plant shutdowns, Ford says inventory is at good levels and is actually raising it's production forecast for the end of the year.

Hopefully the economy will start to rebound at the end of the year like everyone is hoping. The company has about $10 billion in cash that it can burn through before it hits the $10 billion mark required for sustained operations. It's a race against the clock!