December 5, 2020

Smaller Cars Lift Ford’s Profit to $2.55 Billion

Ford earned $2.55 billion in the quarter, or 61 cents a share, up from $2.09 billion, or 50 cents, in the period a year earlier. The results should ease some concerns that the company was losing momentum after fourth-quarter earnings missed expectations, though quickly rising gasoline prices and earthquake damage to auto parts plants in Japan still pose a threat to Ford and the rest of the industry.

Ford’s share rose 3 percent on Wall Street while General Motors shares were up 0.5 percent.

“Our team delivered a great quarter, with solid growth and improvements in all regions,” Ford’s chief executive, Alan R. Mulally, said in a statement. “We continue to accelerate our ‘One Ford’ plan around the world, delivering on our commitments to serve our global customers with a full family of best-in-class vehicles and deliver profitable growth for all, despite uncertain economic conditions.”

Typically, smaller cars result in lower profits. But new high-mileage models, including the Fiesta subcompact, allowed Ford to increase its pretax earnings in North America by 50 percent, to $1.8 billion. Globally, revenue rose 18 percent, to $33.1 billion.

On a per-vehicle basis, Ford generated about $1,519 in profit worldwide, an increase of 59 percent from the first quarter a year ago, even though revenue per vehicle sold was up only 9 percent, to $22,096.

The increases in sales and profit margins per vehicle offset higher commodity costs and investments in future growth, Ford said. Reduced debt has also cut interest payments.

The company cut its debt by $2.5 billion in the first quarter and said its cash reserves now exceed its debt by $4.7 billion. It reported $2.2 billion of positive cash flow for the quarter, compared with a $100 million outflow a year earlier.

“We are on track with what we said we’d do,” Ford’s chief financial officer, Lewis W. K. Booth, told reporters at the company’s headquarters. “We’re feeling pretty good.”

Mr. Booth said parts shortages related to last month’s earthquake and tsunami in Japan have cut production in Ford’s Asia-Pacific region by up to 14,000 vehicles, but that he expects the company to be minimally affected by the disaster.

“We’re not anticipating anything material,” he said. “We’re seeing fantastic efforts by the Japanese supply base to get their factories up and running.”

The company has been forced to substitute some parts, but “nothing that changes the quality of the vehicle,” Mr. Booth said. Ford also idled a truck plant in Kentucky for one week this month to conserve parts.

Excluding special items, Ford has posted operating profits for seven consecutive quarters. On that basis, its first-quarter operating profit of $2.6 billion was equal to 62 cents a share, up from $1.76 billion, or 46 cents a share. It was 22 percent higher than the consensus forecast on Wall Street, which expected an operating profit of about 51 cents.

In Europe, a recent trouble spot for much of the industry, Ford’s pretax profit grew to $293 million from $107 million in the first quarter of 2010.

Ford said it expects structural and raw-material costs to rise by $2 billion this year. In the first quarter its structural costs were $400 million higher, and commodity costs rose $300 million.

Ford said it expected to build 1.5 million vehicles worldwide in the second quarter, 12,000 more than a year ago.

“Our progress toward delivering profitable growth for all will continue as we aggressively manage short-term challenges and opportunities,” Mr. Mulally said. “We expect our annual volumes to continue to grow substantially, driven primarily by our growing product strength, a gradually strengthening economy and an unrelenting focus on improving the competitiveness of all of our operations.”

In the United States Ford’s sales jumped 12 percent in the first quarter, and it narrowly outsold its larger rival, General Motors, in March, though Ford’s market share fell 1.2 percentage points to 16.2 percent. For all of this year, Ford said it expects its share in the American and European markets to be equal to or better than 2010 levels.

In 2010, Ford rebounded from the recession that helped send its cross-town rivals into bankruptcy protection, earning a total of $6.6 billion.

Article source: http://feeds.nytimes.com/click.phdo?i=eff757ee09b5ef33b47aa1645c59c487

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