DETROIT - Healthy light-truck sales in a robust U.S. economy produced record third-quarter profits at Ford Motor Co. despite losses in South America and Europe.
Ford earned $1.1 billion in the third quarter, up 11 percent from a year ago. The net income includes a one-time charge of $125 mil-lion to adjust retiree health-care and life-insurance liabilities at Visteon Auto- motive Sys-tems, Ford's parts subsidiary.
In calendar 2000, Ford expects a slight cooling in the hot U.S. auto market with the amount of vehicle incentives largely unchanged, said Wayne Booker, Ford vice chairman.
But the strong U.S. economy of 1999 fueled Ford's 14th straight quarter of record profits.
Net income from North American automotive operations totaled $1.0 billion, a 12 percent climb from the third quarter of 1998.
However, Ford said last week that turning around its operations in Europe and South America will take longer than expected.
European operations defy a short-term solution and will require two to three years for full recovery, Booker said. Ford will further restructure its European operations, he said, declining to give details.
This month, Ford moved to shore up its markets outside North America by decentralizing many of its marketing and product-development operations. Ford is creating more powerful regional operations in North America, Europe, South America and Asia Pacific in a bid to respond more quickly and accurately to consumer tastes.
In the third quarter, Ford lost $171 million in Europe, compared with a loss of $273 million in the period a year ago.
In the first nine months of 1999, Ford's European automotive operations have earned $83 million, down from $267 million in the same period of 1998. Last week, Ford told automotive analysts it no longer expects to meet its announced goal of increasing operating earnings year over year in Europe.
The company said its European performance is undermined by four factors: industry overcapacity, competition, Ford brand weakness and high costs.
Ford is cutting assembly capacity and costs while relying on Volvo and Jaguar sales increases to offset weak Ford brand performance. The company will buttress its Ford brand with new Ford Mondeo and Ford Transit models in 2000. While the Ford Focus has strong sales, the current Mondeo and the Ford Fiesta are lagging.
In South America, a weak Brazilian economy produced a $72 million loss in the third quarter, compared with a loss of $44 million a year ago. Brazil's economy has stabilized, Booker said. But Ford's long-term strength in the region requires completion of a planned assembly plant in the Brazilian state of Bahia, he said. Ford expects to break ground for the plant in the fourth quarter.
Booker also said Ford remains committed to investing in China.
'It isn't growing as fast as some people projected,' Booker said. 'It will continue to grow. Just by their sheer size, they will be a huge economic power in the future.'
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Ford also said:
U.S. marketing costs as a percent of gross revenue totaled 10.5 percent in the third quarter, down from 11 percent in the second quarter but up from 10.2 percent in the third quarter of 1998.
Total costs were down $300 million in the quarter. In the first nine months of 1999 Ford has cut its total costs by $700 million at constant volume and mix.
In calendar 1999, Visteon has gained new business contracts worth $1.7 billion annually. Thirty-six percent of the contracts are from non-Ford customers, and 37 percent of the contracts are outside North America.
Ford expects more labor costs in its new labor agreements in the fourth quarter, Booker said. He did not specify an amount. Ford has reached a contract agreement with the Canadian Auto Workers and has a tentative pact with the UAW.
The company has amassed $25.7 billion in cash, compared with $22.9 billion a year ago.