Problems face Ford despite $1 billion profit

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By William Ehart

Ford Motor Co. reported a third-quarter profit of nearly $1 billion Monday, a testament to the automaker's shrewd financial and product moves in recent years, but analysts worry the company could become a victim of its own success.

The same day, the United Auto Workers union (UAW) announced that Ford workers rejected a new contract pushed by union leaders, at least in part because its members felt that Ford was so healthy they didn't have to make further concessions.

Ford reported net income of $997 million, or 29 cents per share, in the quarter, compared with loss of $161 million, or 7 cents, a year ago. Analysts had expected a loss. The company also posted its first operating profit since early last year and said it expected to be "solidly profitable" in 2011.

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A new union contract would have lowered Ford's labor costs in line with General Motors Corp. and Chrysler Group LLC. It also included a no-strike provision. Workers are barred from striking Ford's domestic rivals for several years as a condition of their bankruptcy restructurings.

"The UAW contract is up in 2011, and I think there could be a strike," said John Wolkonowicz, an analyst with IHS Global Insight in Lexington, Mass.

"I think [Ford Chief Executive Alan] Mulally is not going to give in to them. There could be a strike just as the market heats up.

"Ford will be the focus. They work with one manufacturer to set a pattern for the industry, so they'll choose the company they can strike because then they have some clout," Mr. Wolkonowicz said.

Independent auto analyst Tom Libby agreed.

"Going forward, that's very important because in the long run it puts them at a disadvantage versus the other two companies. That's a very core cost, labor per unit. Per-unit costs have got to be in line with the competition if you are going to be sustainable long term."