Ford, the second-largest American automaker, after General Motors, on Tuesday reported flat profits for the third quarter, as the sharp downturn in its European business continued to undercut its strong performance in the North American market. The company said that it earned $1.63 billion in the quarter, compared with $1.65 billion in the same period last year. Its global revenues dropped slightly to $32.1 billion, down from $33.1 billion in the third quarter of 2011.
The results underscored both Ford’s success in its home market and its festering problems in Europe, where the auto market has fallen to its lowest sales levels in nearly 20 years.
Ford said its pretax profits in North America increased to $2.32 billion in the quarter, from $1.55 billion a year ago. The results were driven by new vehicles like the Escape S.U.V. and higher transaction prices.
But its European operations floundered because of lower sales and higher incentives. Ford reported a pretax loss of $468 million in the region during the quarter, compared with a pretax loss of $306 million in the third quarter last year.
The company forecast severe economic conditions in Europe into 2013 and possibly beyond. Ford’s chief financial officer, Robert L. Shanks, said it would be up to the North American operations to provide the bulk of its income until Europe recovers.
“It has been the foundation and still is,” Mr. Shanks said of the North American market.
Ford has now lost more than $1 billion in Europe this year, and has said it expects its full-year loss to exceed $1.5 billion. Last week, the company said it would close three factories in the region and eliminate 5,700 jobs to better balance production there with shrinking demand for new vehicles.
Ford’s chief executive, Alan R. Mulally, said the automaker would continue to face stiff challenges in Europe as it restructured. “While we are facing near-term challenges in Europe, we are fully committed to transforming our business,” he said in a statement.
Other auto companies in Europe have so far resisted making large-scale overhauls like Ford’s.
“This industry has a lot of excess capacity and needs to restructure,” Mr. Shanks said. “It won’t get any better if other companies avoid the situation.”
He said the company expected “difficult and interesting” discussions with its unions in Belgium and Britain about separation agreements for factory workers.
Ford’s other regional operations contributed little to its bottom line during the quarter. The company said it earned $45 million in pretax profits in Asia, in contrast to a $43 million loss a year ago. Pretax profits in South America fell to $9 million from $276 million a year ago.
The healthy profits in North America reflect Ford’s turnaround in its home market since a financial crisis crippled the United States auto industry in 2008. Unlike its rivals General Motors and Chrysler, Ford survived without a government bailout or filing for bankruptcy.
Since then, Ford has revamped its product lineup to offer a broader range of smaller, more efficient models. The company said its operating profits in North America were its highest since 2000, and it forecast similar results through the remainder of 2012.
“Ford’s more balanced product mix, with a stronger presence in the small-car segments, enabled the company to operate at highly profitable levels in the North American and Asian markets, whereas the European operations continued to struggle,” said Jesse Toprak, an analyst with the auto-research Web site TrueCar.
Ford ended the quarter with $24.1 billion in automotive cash reserves, an improvement from $20.8 billion a year ago.
The company produced 1.36 million vehicles in the third quarter, about the same number as a year ago. Ford said it would build 1.48 million cars, trucks and S.U.V.’s in the fourth quarter, an increase of 112,000 from the same period in 2011.
General Motors, the largest American automaker, is scheduled to report its third-quarter earnings on Wednesday. Chrysler, which has little exposure in the European market, said Monday that its profits improved 80 percent during the period.
Article source: http://www.nytimes.com/2012/10/31/business/ford-sees-little-change-in-net-income.html?partner=rss&emc=rss
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