Ford's global picture brightens
Asia, S. America lift earnings as Europe losses shrink
DETROIT -- Powered by its booming North American region and rapidly expanding Asia Pacific business unit, Ford Motor Co. today posted a record third-quarter pre-tax profit of $2.6 billion, up $426 million from a year earlier.
For the first time since the second quarter 2011, Ford reported a combined profit in its three regions outside North America with big gains in South America and Asia Pacific Africa and narrowing losses in Europe.
"The great thing about that it's four consecutive quarters of growth and it's growth across all four regions and market share growth in all four regions," said CFO Bob Shanks in a conversation with reporters today.
Ford market share jumped to a record 3.7 percent in Asia Pacific Africa fueled by 4.3 percent market share in China, where the company has been in the midst of a building binge and new product offensive. Ford also increased market share in North America, Europe and South America.
Ford global wholesale volume grew 16 percent to 1.5 million units. Revenues jumped 12 percent to $36 billion, Ford said in a statement.
"The heavy lifting has been done in North America, they're working through their issues in Europe, and the China growth strategy is in place," said Michael Razewski, a New York-based principal at Douglas C. Lane & Associates, which oversees $3.4 billion including Ford shares. "This isn't necessarily a business that needs to be transformed anymore."
Buoyed by its gains, Ford today upgraded its full-year financial guidance. Ford expects pre-tax profits to be higher than 2012, up from the previous prediction of a figure that would be equal to or exceed last year's $8 billion. Ford expects its full-year loss in Europe to be lower than 2012's $1.7 billion loss -- it previously said losses would match 2012 levels.
Ford lifted its guidance despite continuing uncertainty over ongoing budget negotiations in Washington.
"Fiscal policy uncertainty poses a risk as negotiations on debt ceiling have been pushed out to first quarter 2013," said Ford CEO Alan Mulally in a conference call with journalists and analysts this morning.
But Shanks said Ford is "cautiously optimistic" about the prospects for the U.S. economy: "We're now looking at mid- to high-15 million (adjusted sales rate) for the month. We did see a tick down in University of Michigan consumer confidence index. Maybe in part consumers become immune to everything going on in Washington."
In its earnings report today, Ford said its net income dropped $359 million to $1.3 billion due to special pre-tax charges of $498 million. Those included a $250 million charge for employee separations, mostly in Europe, that are part of the restructuring there and $145 million connected with the company's U.S. voluntary retirement lump sum buyout program.
Ford also recorded a third-quarter record of $1.6 billion for automotive operating related cash flow.
Ford shares rose 1.4 percent on the news to close at $17.76 as the per-share profit results of 45 cents exceeded analyst expectations by 7 cents, Bloomberg reported. Ford shares had risen 35 percent this year through Wednesday.
North American gains
In North America for the third quarter, Ford reported a pre-tax profit of $2.3 billion, down $20 million from last year.
Ford's North American unit again carried the company as unit sales in the United States surged 12 percent over last year to 655,446, according to the Automotive News Data Center.
Ford's third-quarter operating margin in North America was 10.6 percent, down from 12 percent a year ago. North American revenues were $21.7 billion, up 2.2 percent from last year. For the nine-month period, Ford posted pre-tax profits of $7.1 billion in North America, up $608 million, while revenue improved 8.6 percent o $66.4 billion.
Outside North America, the company reported a combined pre-tax profit of $71 million for the quarter compared to a loss of $414 for the same period last year.
In South America, the automaker had a pretax profit of $159 million, up sharply from $9 million a year earlier. In Asia Pacific and Africa, Ford earned $126 million, nearly triple last year's figure.
Ford cut its pre-tax losses in Europe for the quarter to $228 million, from $468 million a year earlier. Ford said it expects its full-year loss in Europe to be less than the $1.73 billion it lost there in 2012.
"While we lost money in Europe, it was 51 percent less than last year," Shanks said. Ford is in the midst of a European restructuring plan modeled on the plan that turned around the company's America's business. It is closing two plants in the United Kingdom and one in Belgium.
Speaking of the European market overall, Shanks said: "We believe we have reached a level of stability. Signs point to very modest growth over the near term."
Bloomberg and Reuters contributed to this report.
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