September 27, 2023

North American Sales Lift Ford’s Results

Two other big automakers, Daimler and PSA Peugeot Citroën, said that they expected weak sales in Europe to drag down their profits throughout this year.

Ford, the nation’s second-largest automaker after General Motors, said its overall revenue grew 10 percent in the quarter to $35.8 billion, and its market share continued to increase in the United States.

And despite unsettled economic conditions in international markets, the company reiterated forecasts that its full-year profit would at least match its performance in 2012.

“Our strong first-quarter results provide further proof that our One Ford plan continues to deliver,” said Alan R. Mulally, Ford’s chief executive.

Ford said that strong sales in its core North American market propelled the company to its 15th consecutive profitable quarter.

The company’s sales in the United States rose 11 percent in the first three months of this year, compared with a 6 percent increase for the overall industry.

In North America, Ford posted a pretax profit of $2.4 billion, a 14-percent improvement over the same period a year ago. The company said it was the best quarterly performance since it began reporting the region as a separate business unit in 2000.

The company has steadily rebuilt its product lineup in recent years, bringing out new versions of mainstay vehicles like the Explorer sport utility vehicle and expanding production of smaller, more fuel-efficient cars like the Focus.

But Ford, like most other major automakers, continued to struggle overseas in the first quarter.

The company reported a pretax loss of $462 million in Europe — about triple the $149 million it lost in the region in the first quarter of 2012.

Ford has said it expects to lose up to $2 billion this year in Europe, where weak economic conditions have driven new-vehicle sales to their lowest level in decades. The company is closing a major assembly plant in Belgium and accelerating other cost cutting in the region.

Other automakers indicated that troubles in the European economy might depress sales there for some time.

Daimler, the German maker of Mercedes-Benz luxury cars, said Wednesday that it was backing off its profit forecast for this year because of conditions in Europe.

The French carmaker PSA Peugeot Citroën reported that its first-quarter sales dropped 10 percent because of weak demand in Europe. The company said it hoped to start talks with labor unions on wages and working hours in an effort to cut costs and improve competitiveness.

Ford’s chief financial officer, Robert Shanks, said in an interview Wednesday that despite the sustained slide in European sales, there were some “bright spots” in the Continent’s economy.

“We are starting to see some signs that the overall economy may be starting to stabilize,” Mr. Shanks said.

Auto sales in the most troubled markets in Europe — in particular Greece, Italy, Portugal, Ireland and Spain — appear to have hit bottom. “Some of these markets have flat-lined, which is a good thing,” he said. “Before, they were just dropping.”

While Europe continues to drag down Ford’s results, the company is pressing ahead with plans to introduce several new vehicles in the region.

Ford is also coping with a setback in South America, where it reported a pretax loss of $218 million, after earning a profit of $54 million in the first quarter of last year. The company said currency issues in Venezuela and Argentina depressed its results, but that it still expected to break even in the region for the entire year.

Results in Asia, where Ford is investing heavily in new factories and products, improved slightly. The company said it earned a pretax profit of $6 million in the region compared with a $95 million loss a year ago.

One analyst said that Ford’s overall performance showed that its turnaround was sustainable despite steep losses in Europe.

“As a global company, Ford is buffeted by winds affecting each of the world’s major markets,” said Jack Nerad, an analyst with the auto research site Kelley Blue Book. “Most recently the North American market has been on the mend and Ford has been buoyed by this trend.”

Unlike its domestic rivals General Motors and Chrysler, Ford was able to survive the recession without a government bailout and a bankruptcy filing.

In recent years the company has increased the number of models built on global vehicle platforms, which saves money on development costs. Ford is also streamlining production plans to reduce inventories.

Mr. Shanks said that Ford expected the United States car market to continue its recovery this year, with industrywide sales of 15 million to 16 million vehicles. He added that sales of full-size pickups appeared to be gaining momentum because of improved housing starts and other construction activity.

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Ford Posts 10th Straight Quarterly Profit

It was the tenth consecutive profitable quarter for Ford, which last week secured a new labor contract with the United Automobile Workers union and said it was close to restoring a dividend to shareholders.

Nearly all of the profit — $1.6 billion, the same as a year ago — came from North America, while losses in Europe increased 56 percent, to $306 million.

“We delivered solid results for the third quarter despite an uncertain business environment by continuing to serve our customers around the world with best-in-class vehicles,” Ford’s chief executive, Alan R. Mulally, said in a statement.

The overall profit is equal to 41 cents a share and brings the carmaker’s total earnings for 2011 to $6.6 billion, 4 percent more than the first nine months of 2010. Ford earned $1.69 billion, or 43 cents a share, in the third quarter of 2010. Revenue increased 14 percent to $33.1 billion.

The company earned a third-quarter pretax operating profit of $1.94 billion, or 46 cents a share, $111 million less than a year ago. That figure, which excludes special items related to job cuts, the end of the Mercury brand and dealer-related actions, is slightly above the consensus analyst forecast of 44 cents a share.

Operating profit was reduced by a $350 million non-cash charge related to commodity hedges after prices declined significantly at the end of September, Ford said. It projected that structural and commodity costs for all of 2011 would be $3.8 billion higher than 2010, less than its initial forecast of $4 billion.

Ford said it reduced its automotive debt by $1.3 billion in the quarter to $12.7 billion. It reported positive automotive cash flow of $400 million, but automotive gross cash declined by $1.2 billion to $20.8 billion.

Its chief financial officer, Lewis W. K. Booth, said the company is on track to surpass its 2010 full-year operating profit of $8.3 billion, even though its automotive operating margins would be slightly lower. Its operations have earned $7.7 billion so far in 2011.

“The core of the business is very strong,” Mr. Booth told reporters at Ford’s headquarters. “We’re doing all this while we’re investing for the future.”

Ford workers on Oct. 19 ratified a new four-year deal with the United Automobile Workers that the company says will increase its labor costs by less than 1 percent annually. Most of the company’s 41,000 U.A.W. members will get bonuses of $6,000 and profit-sharing checks of about $3,750 this month.

The new contract prompted Standard Poor’s and Fitch Ratings to upgrade Ford’s credit rating two notches, to BB-plus, which is one level below investment grade. Moody’s is considering a similar upgrade.

With the labor issue settled, analysts now say they expect Ford to resume paying a dividend to shareholders as soon as 2012. The company suspended its quarterly dividend in 2006.

Mr. Booth said Ford would restore its dividend “as soon as we think our balance sheet will stand it,” but he declined to give a specific timeframe.

Brian A. Johnson, an analyst with Barclays Capital , predicted in a note to clients this week that Ford would announce a dividend early next year and pay 36 cents for 2012, increasing to 55 cents in 2015.

“The key debate around Ford continues to be the sustainability of — or potential for improvement in — Ford North America pretax profits, especially in light of tailwinds from pricing and what may turn out to be lower than previously guided headwinds from commodities and structural costs,” Mr. Johnson wrote.

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