New Ford CEO Jim Farley’s first earnings report in the top spot was a good one as the company came in with positive numbers for the third quarter.

Ford Motor Co. reported $2.4 billion in net income and $3.6 billion in adjusted EBIT earnings for the third quarter, making new CEO Jim Farley’s first earnings report in the top spot a pleasant one.

The strong numbers were largely generated by improved North American results as the region saw an uptick in sales during the period – compared with the previous quarter – despite the ongoing coronavirus pandemic. The positive numbers came on revenue of $37.5 billion, revealing margins of 6.4% on net income and 9.7% on an adjusted basis. Again, North America was the driver, reflected by its adjusted margin of 12.5%.

“We know that there’s huge value to be unlocked as we turn around our automotive operations,” said Jim Farley, Ford president and CEO. “There will be additional opportunity when we start growing again, which we will do with products and services customers can’t resist.”

(Ford outpeforms GM, FCA in third quarter sales.)

Farley attributed the strong third quarter to the company’s move two years ago to shift out of passenger car sales to focus on trucks and utes.

Farley further pointed out that it wasn’t off-the-chart sales that drove the positive results. In fact, third quarter sales for the automaker were down 4.9% compared with the year-ago results, albeit they were better than their Detroit rivals.

He believes the decision made by the company two years ago to pivot away from passenger car sales and focus on the company’s biggest sellers – and profit leaders – trucks and sport-utilities were the reason for the improved financials this quarters. While the company’s overall sales were down in Q3, what it sold was more profitable.

Those factors – together with Ford Credit’s strongest performance in 15 years – led to total- company adjusted EBIT (earnings before interest and taxes) margin of 9.7%. That was nearly five points higher than in prior year and above the 8% target Ford intends to achieve and sustain overtime. Automotive EBIT margin was 7.6% of revenue amid favorable third-quarter net pricing.

“We haven’t suddenly fixed the issues in our automotive business, but we have a clear turnaround plan to get that done,” said Farley. “That work is underway and we’re making progress.”

(Ford enjoys 25% Q3 sales increase in China.)

Ford Explorer sales were strong during the third quarter, jumping 74 percent.

Farley took over for former CEO Jim Hackett on Oct. 1, saying he planned to keep using Hackett’s playbook, but looked to accelerate the progress his predecessor had started. Hackett’s sudden move to retire appeared to come from rising pressure on him due to the slow progress of his turnaround plans.

The aforementioned success in Ford’s home region saw the automaker gain a point of market share, including an additional 1.7 points for F-Series pickups, pushing its total to 35 percent. Commercial vehicle sales and trucks combined to account for 57% of Ford’s sales during the quarter in North America.

The automaker turned positive results in every region but Europe, where it is still in the midst of a $1 billion restructuring plan. Even in Europe, sport utility sales were on the rise, jumping 9% during the quarter.

Ford took the profit to allay the fears of some observers concerned about its debt levels, by repaying the $15 billion credit line it drew down on during the first quarter of the year as it looked to bolster its cash reserves to battle through the impact of the COVID-19 pandemic. The company has $30 billion in cash reserves, plus it can still access the revolver is something occurred.

(Ford reports Q2 $1.1B net income, $1.9B adjusted EBIT loss.)

Despite all of the positive news for this quarter, Ford officials offered a much-less rosy outlook for the final quarter of 2020. They expect fourth quarter adjusted EBIT to be break-even at best, with a loss of $500 million being the low end of the forecast. However, it does expect “positive adjusted company EBIT for full-year 2020.”

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