March 29, 2023

Ford Sees Little Change in Net Income

Ford, the second-largest American automaker, said Tuesday that it earned $1.63 billion in the quarter compared with $1.64 billion in the same period last year. Its global revenue 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 profit in North America increased to $2.32 billion in the quarter from $1.55 billion a year ago. The results were driven by the introduction of 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, compared to a pretax loss of $306 million in the third quarter last year.

Ford has now lost more than $1 billion in Europe so far this year and has said it expects its full-year loss to top $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.

The company’s chief executive, Alan R. Mulally, said Ford would continue to face stiff challenges in Europe as it restructures.

“While we are facing near-term challenges in Europe, we are fully committed to transforming our business in Europe by decisively matching production to demand, improve revenue through new products and a stronger brand, improve our cost efficiencies and take advantage of opportunities to profitably grow our business,” Mr. Mulally said in a statement.

Ford’s other regional operations contributed little to its bottom line during the quarter. The company said it earned $45 million in pretax profit in Asia, compared with a $43 million loss a year ago. Pretax profit in South America fell to $9 million, down from $276 million a year ago.

The healthy profit in North America reflected Ford’s dramatic turnaround in its home market since the financial crisis that crippled the American auto industry in 2008. Unlike its Detroit rivals, General Motors and Chrysler, Ford survived without a government bailout or bankruptcy filing.

Since then, Ford has revamped its product lineup to offer a broader range of smaller, more fuel-efficient models. The company said its operating profit in North America was its highest since 2000, and it forecast similar results through the remainder of the year.

“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 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 will 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.

Article source:

DealBook: Morgan Stanley to Raise Stake in Brokerage Venture to 65%

Morgan Stanley's headquarters in Manhattan.Richard Drew/Associated PressMorgan Stanley‘s headquarters in Manhattan.

Morgan Stanley’s chief executive, James P. Gorman, has made it clear he wants to get his hands on the brokerage business it owns with Citigroup. Now, he will spend the next few months figuring just how much the business, Morgan Stanley Smith Barney, is worth to his bank.

The two financial firms will be wrangling over the value of a 14 percent stake in the joint venture, which Morgan Stanley announced that it would buy on Thursday.

It is an emblematic deal for Morgan Stanley. The financial firm has highlighted the group, which encompasses nearly 17,200 financial advisers and $1.7 trillion of client assets, as a pillar of its turnaround effort to reshape its strategy and to temper risk in the wake of the financial crisis.

Related Links

Morgan Stanley Smith Barney, led by Gregory J. Fleming, is proving to be a bright spot for its parent. Last year, Morgan Stanley’s global wealth management group, which includes the joint venture, posted net revenue of $13.4 billion, up from $12.6 billion in 2010. In the first quarter of 2012, global wealth management recorded pretax profit of $387 million, up 12.5 percent from the period a year earlier.

Despite the strength, the two banking giants may have a tough time hashing out the purchase price. One Wall Street executive joked Thursday that Morgan Stanley will be the low bid, and Citigroup will be the high one.

The joint venture was forged in the middle of the financial crisis in January 2009, when the deal was valued at roughly $20 billion. Since then, Citigroup has listed the 49 percent stake on its books at roughly the original level.

But Citigroup does not mark the price of the brokerage up or down with the market — and the bank believes it’s potentially worth more than its balance sheet would indicate. The firm has said that the midpoint of its current range of estimates for the brokerage is higher than the value on its books, according to a recent filing.

In the next week, the banks are expected to hire outside advisers to help them come up with a fair market value for their stakes. The process will be more art than science, since each side may have its own interpretation of the business.

The two banks have up to 90 days to agree on a price. But if they do not agree, an arbitrator will decide the matter.

After these negotiations are completed, Morgan Stanley will hold 65 percent of the joint venture. It has the option to buy another 15 percent next year, and the rest of it in 2014.

But Morgan Stanley is already acting like the outright owner. The firm has now moved most of the former Smith Barney advisers onto the Morgan Stanley system. It is expected Morgan Stanley will also eventually drop the Smith Barney from the brokerage’s name.

Article source:

DealBook: Deutsche Bank to Miss Profit Goal

Alex Domanski/ReutersThe headquarters of Germany’s Deutsche Bank in Frankfurt.

FRANKFURT — Deutsche Bank, Germany’s biggest lender, joined a growing list of banks buffeted by the sovereign debt crisis on Tuesday, saying it would not meet its 2011 profit target owing to investor uncertainty and a loss from its Greek bond holdings.

The bank said in a statement that it would not be able to achieve its goal of a pretax profit of 10 billion euros ($13.2 billion) for 2011. The bank also said it would cut 500 investment banking jobs, most of them outside Germany.

“The intensifying European sovereign debt crisis led to sustained uncertainties among market participants in the third quarter and thus to significantly reduced volumes and revenues,” Deutsche Bank said in a statement.

Related Links

The unit that includes investment banking was hardest hit by the turmoil, Deutsche Bank said. The financial firm said it would book a loss of 250 million euros from its holdings of Greek government bonds, reflecting their steep decline in value. Uncertainty caused by the sovereign debt crisis has also made investors reluctant to take risk, cutting into revenue that Deutsche Bank and other institutions like UBS make from trading.

Deutsche Bank’s profit warning came amid reports that Dexia, a bank based in Brussels, might be broken up because of its exposure to Greece. UBS said on Tuesday that it would make a small profit in the third quarter, despite a $2.3 billion loss from unauthorized trades that it discovered last month.

In addition, banks are under pressure from regulators to reduce their leverage, while corporations are refraining from activities like selling bonds that normally generate revenue for financial institutions. Deutsche Bank said it was seeing “a significant and unabated slowdown in client activity.”

Josef Ackermann, the Deutsche Bank chief executive, planned to discuss the outlook at an investors conference in London on Tuesday, the bank said.

Julia Werdigier in London contributed reporting.

Article source:

DealBook: UBS Issues Profit Warning on Weaker Economy

Oswald J. Grübel, chief of UBS, said the Swiss bank was likely to Christian Hartmann/ReutersOswald J. Grübel, chief of UBS, said the Swiss bank was likely to “book significant restructuring charges later this year” following a series of cost cuts.

UBS warned on Tuesday that it would probably miss an earnings target set two years ago, after its profit fell by half in the second quarter and the economy weakened.

Profit dropped to 1 billion Swiss francs, or $1.2 billion, in the April-June period, from 2 billion francs in the period a year earlier, the company said in a statement. The weak results came in the wake of a dismal performance at its investment banking unit, where pretax profit slumped to 376 million francs from 1.3 billion francs in the period a year earlier.

UBS, the biggest Swiss bank, said in 2009 that it intended to reach a pretax profit of 15 billion francs by 2014. But the chief executive, Oswald J. Grübel, said on Tuesday that target “is unlikely to be achieved” in the original time frame.

“Banks’ returns have declined over all in the last 12 months, reflecting deleveraging and the actions being taken in advance of increased capital requirements,” he said in the statement.

“We are responding to this changed environment and the weakening economic outlook by adapting our business and increasing efficiency,” he said.

Mr. Grübel added that UBS was likely to “book significant restructuring charges later this year” following a series of cost cuts.

New financial regulation in Britain is expected to reduce earnings at its investment banking unit by about 100 million francs before the end of this year, the bank said.

Mr. Grübel has been focusing UBS on its main wealth management and investment banking activities to repair a bank that was among the hardest hit in the financial crisis.

But some analysts have recently started to doubt Mr. Grübel’s plan would be enough to steer the bank back to strength. Its investment banking unit has continued to struggle and the stricter capital requirements have hurt profitability.

A string of departures by bankers, and lower appetite for risk among clients, have hampered efforts to repair the unit.

UBS said on Tuesday that it planned to cut costs of as much as 2 billion francs over the next two to three years. At the same time, a decline in demand for its services because of a weaker economic outlook is expected to “constrain growth prospects.”

UBS said it attracted 8.7 billion francs in net new money in the second quarter, less than the 22.3 billion francs in the first quarter. Pretax profit at its main wealth management and asset management operations fell in the second quarter from a year earlier, while wealth management in the Americas returned to profit.

Revenue at the entire bank fell 14 percent to 7.2 billion francs.

Article source: