DETROIT -- Ford Motor Co. had its best-ever quarter in North America and more than doubled its global earnings from a year earlier as redesigns of the F-150 and other high-profit nameplates began to pay off.
Ford posted third-quarter net income of $1.9 billion, up from $833 million in the same period of 2014.
It earned a pretax profit of $2.7 billion in North America, 89 percent more than a year ago and the most ever for any quarter. North American operating margins jumped to 11.3 percent, from 7.1 percent in the third quarter of 2014.
“The Ford team delivered an outstanding quarter -- with record third quarter profit, best quarter ever for North America, higher wholesales, higher revenue, higher market share and improved margin,” CEO Mark Fields said in a statement today. “We are delivering a breakthrough year.”
Revenue rose 9 percent to $38.1 billion. Ford’s global market share (7.6 percent) and automotive operating cash flow ($2.8 billion positive) both increased for the third consecutive quarter. Its pretax automotive operating profit more than tripled, from $686 million to $2.2 billion.
Net income was equal to 45 cents a share, just below the average Wall Street estimate of 46 cents. Ford attributed the shortfall to a higher tax rate than analysts had projected.
Regional results
Ford narrowed its losses in Europe and South America. Its pretax profit fell by more than half in the Asia Pacific region.
Ford’s U.S. sales rose 11 percent in the third quarter, compared with a 6.2 percent gain for the industry overall. Ford had managed a gain of just 1.8 percent in the first half of the year.
Ford sales in China fell about 4 percent in the third quarter and are down 1 percent this year through September. This month, the company said it would spend $1.8 billion to introduce more high-tech features, hybrid cars and plug-in vehicles in China, where it’s also building a test track.
Three quarters into this year, Ford already has generated 11 percent more operating profit and 44 percent more automotive cash than it did in all of 2014.
“We feel absolutely great about what the team has accomplished thus far this year and most recently in the third quarter,” CFO Bob Shanks told reporters at the company’s Dearborn headquarters this morning. “We just feel so good about so many aspects.”
Q4 will be weaker
Shanks said the fourth quarter will be weaker than the third due to cost increases that typically occur toward the end of a calendar year. Among the costs it expects to incur are signing bonuses as part of an expected, new four-year contract with the UAW. The union already has reached a deal with Fiat Chrysler Automobiles and a tentative agreement with General Motors.
Union members undoubtedly will see Ford’s record North American profit as evidence that the company can afford to offer a richer package than FCA workers received.
Shanks said Ford is looking for a “competitive and fair agreement” but declined to discuss what impact it’s likely to have on Ford’s costs in future quarters.
He said Ford expects a full-year North American operating margin of between 9 percent and 9.5 percent. It posted a 9.9 percent margin in the first three quarters.
Although Asia Pacific earnings dropped 55 percent in the third quarter to $20 million, Shanks said the region’s full-year results will surpass 2014’s, meaning fourth-quarter profits there would likely set a record.
He said that despite slightly better results, Ford still does not see “any signs of improvement yet in South America,” where it lost $163 million in the quarter. But Shanks said that that Europe is moving in a positive direction. Ford lost $182 million in that region, an improvement from the $439 million it lost there a year ago. The automaker has not said when it expects to post a profit in Europe.
“We’re on our way back, but we have a long way to get to what we would consider acceptable,” Shanks said.
Completion of the expensive F-150 model changeover means Ford now gets to reap the profits generated by higher transaction prices for the aluminum-bodied pickup. F-150 production, which declined 27 percent in the first half of the year, rose 33 percent in the third quarter, according to the Automotive News Data Center. Ford has spent much of the year rebuilding F-150 inventories to normal levels.
Production rising
Ford's total North American production rose 14 percent in the quarter, compared with a 2.7 percent gain in the first half. Because automakers book revenue from vehicles when they are shipped to dealers, production gains generally correspond with improved financial performance.
Sales are up significantly in the Ford brand's most profitable segments, with utility vehicles rising 16 percent in the third quarter -- including a 25 percent gain for the highly profitable, newly freshened Explorer -- and other light trucks up 14 percent. Ford introduced the $54,000 Explorer Platinum during the quarter and has a $60,000-and-up Limited version of the F-150 on the way.
Lincoln sales rose 15 percent in the quarter. The brand was helped by the redesigned MKX crossover, which went on sale in mid-summer.
Ford's average transaction price rose $2,100, or 6.6 percent, from September 2014 to September 2015, according to data it provided from the Power Information Network.
Many of Ford's higher-volume nameplates, including the F series, Escape, Fusion and Focus, command prices that are at least several hundred dollars above the average for their segment. The Edge, redesigned for the 2015 model year, sells for an average of $2,739 more than a typical midsize utility, according to Kelley Blue Book.
Stock price
Ford shares fell 5 percent to close at $14.87.
Brian Johnson, an analyst with Barclays Capital, said he doesn’t expect Ford’s improved performance to spark a rally in the automaker’s stock value. The shares have been stuck below $16 a share since late April.
“While Ford is posting strong results from its largest segment (with … one of its most important launches ever), the U.S. industry is showing no signs of slowing, and the company is quite healthy financially, unfortunately concerns of a U.S. peak carry the day,” Johnson wrote in a report this week.
