Ford Q1 profit expected, focus now sustainability

Ford Motor Co is expected on Tuesday to post a first-quarter profit with North American production picking up amid a gradual recovery in U.S. auto industry sales overall.

After losses totaling $30 billion from 2006 through 2008, Ford surprised analysts with a profit last year and expects a profit in 2010 as well -- leaving investors focused on the sustainability and strength of its turnaround.

"It's progress and it's a long term job," Standard & Poor's equity analyst Efraim Levy said. "The main thing is the trajectory is in the right direction."

The automaker no doubt has benefited from the 2009 U.S. government bailouts of rivals General Motors GM.UL and Chrysler, and Toyota Motor Corp's massive recalls that led to congressional hearings this year, analysts say.

However, that edge may begin to fade with Toyota offering company record incentives to rebuild U.S. sales, Chrysler reporting a first-quarter operating profit and GM repaying government loans and calling a 2010 profit a possibility.

Consistency will be critical as Ford looks to generate positive cash flow, reduce a massive debt load and eventually return to an investment grade credit rating, analysts say.

"Ford needs to show six to eight quarters of solid results consecutively to show it is really turning the corner," said Mirko Mikelic, a senior portfolio manager at Fifth Third Bank.

Should Ford continue to provide solid results for several more quarters and maintain U.S. market share, then its bonds and equity will do well and eventually the automaker will regain its investment grade rating, Mikelic said.

Ford borrowed more than $23 billion in late 2006 to support a turnaround led by Chief Executive Alan Mulally, mortgaging most of its remaining assets including the blue oval logo.

Ford executives have been quick to describe the rebuilding as a work in progress in its early days with the economy remaining an unpredictable headwind.

The automaker ended 2009 with automotive debt totaling about $34.4 billion and Ford has made speeding up debt reduction a priority executives believe will be more easily achieved as the financial results improve.

Ford's stock has risen sharply in the past year, more than tripling from $4.49 to close Friday at $14.21 on the New York Stock Exchange, not far from a five-year high at $14.54 set in mid March.