From Clunker to Cruiser, Ford Posts Quarterly Profit

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In business, it's often said you can't shrink your way to profits. Ford Motor Co. might beg to differ. The struggling automaker posts a $100 million profit in the first quarter, bouncing back from a two-year period in which it lost more than $15 billion.

ROBERT SIEGEL, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

MELISSA BLOCK, host:

And I'm Melissa Block.

In the business world, it's often said that you can't shrink your way to profit. Well, today, the Ford Motor Company might argue with that. The automaker posted a $100 million profit in the first quarter, coming back from a disastrous couple of years. In a two-year period, Ford lost more than $15 billion. Profits in overseas market helped this quarter, but as Michigan Radio's Dustin Dwyer reports, the biggest change came in North America where Ford has done a lot of cost cutting.

DUSTIN DWYER: In order to get cost down by more than $1 billion, Ford has been cutting everywhere it can. It's eliminated close to 50,000 jobs over the past couple of years, that's almost a third of its total workforce. Ford CEO Alan Mulally says, it's all part of the campaign to make the company smaller.

Mr. ALAN MULALLY (CEO, Ford Motor Company): The most important thing that we do in any business is make sure that you're sized for the real demand and you're profitable at that size.

DWYER: At Ford, the real demand has been shrinking for years. But the company was still sized for much higher production. In fact, Ford was selling many of its vehicles at a huge discount to rental car companies because dealers couldn't clear out everything that Ford built. So Ford has drastically cutback its operations. Many analysts say the cuts have helped, but today's announcement from Ford represents just one profitable quarter. Auto industry consultant Jim Hall says if Ford wants to profitable long term, cost cutting alone won't be enough.

Mr. JIM HALL (Auto Industry Consultant): They haven't quite a while ago because, remember, you can do all you want from a cutting standpoint in reducing headcount, but when all is said and done, you have to do it on the strength of product.

DWYER: Mulally says, he gets that. And he says Ford is focused on building only the cars and trucks that people really want. The problem is, right now with a rocky U.S. economy, fewer people really want a new car, and those that do want smaller cars that have smaller profit margins than Ford's traditional big sellers like F-series pickup trucks.

Mr. BOB THIBODEAU (Ford Dealer, Detroit): There were a lot of people driving F-series trucks that they probably shouldn't have been driving that truck.

DWYER: Bob Thibodeau runs a Ford dealership north of Detroit. He's standing outside on the lot and he says, with today's high gas prices, people who don't need truck or an SUV have been trading-in for small cars like the Ford Focus.

Mr. THIBODEAU: It's a difference in profits for us, as well as it is for the company.

DWYER: A big difference. On average, these pickups sell for twice as much as the smaller Focus, and the profit margins are similarly high. Ford CEO Alan Mulally says he knows the rest of this year will be challenging. But he says, if things get too bad, Ford will just have to adapt.

Mr. MULALLY: The real essence of this plan is being responsive to the changing marketplace, the customer demand, the economies, and then making the adjustments that are needed very quickly.

DWYER: Those adjustments could include even more cuts in the months to come. Even Mulally says those cuts won't make Ford profitable for the full year. But he says, with new vehicles coming out, he expects Ford will turn a profit in 2009. And after that, he says, the company can get back to growing.

For NPR News, I'm Dustin Dwyer in Ann Arbor, Michigan.

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