Almost exactly a year ago, in an article asking readers to talk me out of the seeming insanity of buying Ford (NYSE:F) stock, I wrote this sentence:

Ford itself says it's hoping to break even in 2011 -- and that's the optimistic case.

As it turned out, it wasn't optimistic enough.

This morning, Ford announced its fourth-quarter and year-end numbers. I'll get to the details in a minute, but here's the bottom line: For 2009, the company earned $2.7 billion, versus a loss of $14.7 billion a year ago. That's its first full-year profit since 2005 -- and not because of accounting tricks or gimmicks, either.

That, folks, is what we call a pretty good start on a turnaround.

The nuts and bolts
The quarterly numbers are solid -- net income of $868 million, or $0.25 a share, versus a loss of $5.98 billion, or $2.51 a share, in the fourth quarter of 2008. Looking at the major business units, we see pre-tax operating profits that look like this:

  • North American automotive: $707 million, compared with a loss of $1.9 billion a year ago
  • South America: $369 million, compared with a profit of $105 million a year ago
  • Europe: $305 million, compared with a loss of $338 million a year ago
  • Asia Pacific Africa: $19 million, compared with a loss of $208 million a year ago
  • Ford Credit: $696 million, compared with a loss of $372 million a year ago

That's not just paper growth, either. Ford gained market share in North America, South America, and Europe, and held its ground in Asia. As Ford put it in the company's press release, "The increase is more than explained by higher volumes and favorable net pricing."

Margins are up, the product pipeline looks very strong, the company has reduced "automotive structural costs" by $5.1 billion in 2009 -- the turnaround plan called for $4 billion -- and it has $25.5 billion in "Automotive gross cash" in the bank.

Things are looking good enough that management has reinstated the 401(k) match and profit-sharing for hourly employees. Given more and more signs that consumers are starting to spend again -- as I was writing this, consumer bigwigs Procter & Gamble (NYSE:PG), Green Mountain Coffee Roasters (NASDAQ:GMCR), and Colgate-Palmolive (NYSE:CL) all posted better-than-expected sales -- Ford, with its strong products, positive press, and increasing sales momentum, looks ideally positioned to take advantage.

What's not to like?

I'll tell you what's not to like
We can't discuss Ford without discussing the enormous, smelly elephant in the living room: This company isn't just carrying debt -- it's mortgaged to the hilt. Ford has $34.3 billion worth of automotive debt as of the end of 2009, thanks to the mortgage-everything plan CEO Alan Mulally enacted shortly after arriving at Ford from Boeing (NYSE:BA).

The company continues to work on structuring that debt to keep it manageable -- during the fourth quarter, Ford issued $2.9 billion in a convertible debt offering and extended the maturities of $7.9 billion worth of revolving debt from 2011 to 2013. From all appearances, management is being as smart about debt management as it is about the other phases of its business. As long as the company (and the economy) doesn't stumble in a big way, the debt is unlikely to precipitate a crisis.

But it does add to the risk of Ford as an investment. And even if everything goes according to plan, that debt will be a drag on profits, and on cash available to spend on product development, for years to come.

That said …
Still, I'm awfully glad that readers didn't talk me out of buying Ford when it was cheap last year. It has been a seven-bagger for me so far -- how often do you see that in a 100-year-old industrial behemoth? -- and I hope some of you bought in as well.

If not, it might not be too late. While real concerns remain, I think Ford still has some room to run.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.