Ford swings to first full-year profit since 2005

Ford Motor Co. swung to its first annual net profit in four years and said it will remain profitable - on a pre-tax basis during the next two years.

The second-largest U.S.-based auto maker must now weather a fragile automotive market, especially in Europe, where the loss of incentive programs is expected to reduce overall industry sales by as much as 2 million vehicles this year.

Meanwhile, the company will have to shrink its debt of $34.3 billion at the end of the year, almost twice the size of General Motors Co. which, along with Chrysler Group LLC, filed for bankruptcy protection earlier this year.

"We are not kidding ourselves about our debt," Chief Financial Officer Lewis Booth said in an interview following the earnings release. "We have an uncompetitive balance sheet and we are working on it. We are acutely aware that we have too much debt on our balance sheet."

The profitable year gives Chief Executive Officer Alan Mulally bragging rights on his turnaround plan since he wasn't anticipating an annual profit until 2011. Mulally has worked internally to improve production, slash jobs, sell off brands and unite the company since his arrival in 2006.

However, J.P. Morgan analyst Himanshu Patel said Ford's results were not as "high quality" as recent quarters since most of the profit was driven by the auto maker's lending arm, Ford Motor Credit. The unit reported a profit of $1.3 billion compared with a loss of $1.5 billion for the same period a year earlier.

The auto maker's profit was "entirely driven by volatile financial services profits which benefited substantially from unsustainable lease residual gains in the fourth quarter," Patel said in a research note Thursday.

Booth said Ford Motor Credit will remain profitable this year although it will be lower than the 2009 results.

"Our receivables will take a substantial hit in 2010 as the industry continues to downsize and we are rolling off receivables from Jaguar, Land Rover and Volvo," Booth said.

Ford shares, which had started climbing earlier in the trading day, fell 9 cents to $11.45.

Net income for the fourth-quarter was $868 million, or 25 cents a share compared with a loss of $5.98 billion, or $2.51 a share. Excluding items, the company reported a 43-cent earnings-per-share profit, exceeding the Thomson-Reuters analyst estimate of 26 cents a share. The auto maker's fourth-quarter revenue rose 22% to $35.4 billion.

Ford's full-year 2009 profit was $2.7 billion, compared with a loss of $14.7 billion the previous year. Revenue for the full-year declined 14.3% to $118.3 billion.