FDM Group Share News (FDM)

Car maker Ford has reported higher than expected third quarter profit and strong cash generation.The sharp improvement in profit came from the North American automobile operations, a higher contribution from financial services business Ford Credit and the lack of a loss from Volvo. The European vehicle operations fell into loss, though. Pre-tax profit doubled from $1bn to $2.06bn in the three months to September 2010. Revenues fell from $30.3bn to $29bn, but stripping out Volvo there was a 6% improvement in revenues.The business is benefiting from improved productivity and new products, as well as the recovering economy. Strong cash generation will enable Ford to pay down more of its $2bn revolving credit line and pay off the $3.6bn owed to VEBA retiree health care trust by the end of October. Some of the convertible debt may be converted into shares in the fourth quarter. A cash premium will be offered for conversionThe automotive business had cash of $23.8m and debt of $26.4bn at the end of September 2010. Cash should be equal to debt at the end of 2010 - depending on the conversion levels of the convertible debt. Ford's joint venture in China plans to invest $500m for a new engine plant in Chongqing that will more than double capacity.Fourth quarter production is expected to be 27,000 units higher than the fourth quarter of 2009 and 89,000 higher than this year's third quarter production of 1.26m. Ford says that it expects each of its operations to be profitable in the fourth quarter as it continues to gain market share in the US. Full year US market share is expected to be 8.6%. Ford Credit will not maintain its recent contribution because the main improvements in bad debt levels and provision have already shown through and the depreciation charge is increasing. Ford expects the car market to grow in 2011 and that all of its operations will be profitable, although Ford Credit is likely to make a lower contribution.