UPDATED: 7/24/14 4:23 pm ET - adds stock close
DETROIT -- Ford Motor Co. posted a second-quarter pretax profit of $2.6 billion, bolstered by a record performance in North America and its first quarterly profit in Europe in three years.
The pretax profit was up $44 million from a year earlier. Ford’s second-quarter net income was $1.3 billion, an increase of $78 million compared with last year’s quarter. Ford’s net figure was trimmed by pretax special charges of $481 million, the company said in a statement today.
Revenue fell slightly to $37.4 billion.
Ford shares traded higher most of the day, closing 6 cents higher to $17.84.
“Our One Ford plan continues to deliver, enabling us to reach our 20th consecutive quarter of profitability,” said CEO Mark Fields, who assumed the job on July 1 after the retirement of Alan Mulally. Fields said 2014 will mark an important step toward accelerating growth.
The North American pretax profit was $2.4 billion. The European pretax profit was $14 million, compared with a $306 million loss a year earlier. Ford attributed the improvement there to lower costs and favorable exchange rates. Ford’s North American operating margin increased from 10.6 percent to 11.6 percent.
Ford also set a quarterly record for its fast growing Asia Pacific region with a $159 million profit, a 3.7 percent market share for the region and a 4.6 percent market share in China.
Ford attributed its North American results to robust industry sales, a strong product lineup and “continued discipline in matching production to demand.”
The company’s financial unit, Ford Motor Credit, posted a second quarter pretax profit of $434 million, down $20 million from last year. Ford said it expected the unit’s full year pretax profit to be higher than 2013, when it registered a $1.76 billion profit.
Ford affirmed its pretax profit guidance of a $7 billion to $8 billion pretax profit in 2014 during its busiest launch schedule in history. Ford is launching 23 new products worldwide this year including 16 in North America.
N.A. margins rise
Ford's operating margin in North America was 11.6 percent, up from 10.6 percent in the second quarter last year.
CFO Bob Shanks told reporters today that the quarterly profit in Europe was "just a great outcome.”
“Even though it was a small profit, it was a profit. It shows our transformation plan is working,” he said.
Ford officials said their guidance -- for Ford to return to profitability in Europe in 2015 -- remains unchanged. Ford’s European operations lost $1.4 billion in 2013. The company expects new introductions, including the Mondeo sedan and imports from the U.S. like the Edge and Mustang to bolster its position there going forward.
Said Fields: “We are confident in the trajectory we’re on in Europe ... We had the highest share in first half since 1997. That will allow business to grow and achieve profitability in 2015.”
Ford’s took two special charges in the second quarter totaling the $481 million, and both related to Europe. One was a $152 million in separation charges related to the closing of its Genk, Belgium, plant at the end of this year. The other was a $329 million impairment of its investment in its Ford Sollers joint venture plant in Russia.
Shanks said the impairment in Russia would not change Ford's commitment to Russia.
"This has nothing to do with our continued participation in the Russian market,” he said. “It is potentially the largest market in Europe, and we're continuing our participation in that market. We've got a number of launches planned there."
Regarding Ford's continued guidance of a $7 billion to $8 billion profit this year, Shanks said: "We expect the second half to be lower than the first half. Some of that is seasonal. Some of it is driven by the changes" including the launch of the 2015 F-150 pickup, coming later this year.
Ford is converting from a steel body to an aluminum body on its best selling and most profitable vehicle. That means factory changeovers at two plants will take longer than normal.
At the end of August, Ford will shut down its Dearborn truck plant for eight weeks while continuing to produce the 2014 model in Kansas City until the end of the year. Once Dearborn is up and running, Ford will shut down Kansas City for a similar time early next year.
Pressed today on whether Ford should allow a little extra margin of safety for such an unprecedented factory conversion, Fields expressed confidence. He said the company has been doing test builds for a year and tested its tools via computer simulation.
“We feel our development and tryout processes position us to be online for a quality launch,” he said.
Other launches coming in the second half include the Mustang and Edge crossover in North America and the Mondeo sedan in Europe.
Loss in South America
South America was the only region where Ford posted a loss -- $295 million, compared with a $151 million profit a year earlier. Ford attributed the loss to lower volume and mix, unfavorable exchange rates and higher costs.
Ford downgraded its guidance on South America for 2014 due to lower-than-expected industry volumes and unfavorable currency exchange rates. Ford lost $33 million in the region in 2013.
“The volatility of the region, including potential currency devaluations, adds uncertainty to short-term projections,” the company said.
Ford’s newest business unit, Middle East and Africa, reported a $23 million profit, up from $13 million last year. Ford created the new unit on Jan.1. The numbers were extrapolated from last year’s figures when the region was divided among other Ford business units.
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