Ford posts record first-quarter profits

Ford Motor Co. said first-quarter net income increased 15 percent from a year earlier to $1.61 billion, as rising U.S. auto sales pushed North American profits to a record, offsetting deeper losses in Europe.

''It's a very good start to the year for us,'' CFO Bob Shanks told journalists Wednesday. Ford is seeking its fifth straight year of profit after losing $30.1 billion from 2006 through 2008.

Pretax operating profit fell 6 percent to $2.15 billion from a year earlier, dragged down by losses in Europe and South America, the company said in a statement.

Pretax operating profit in North America rose 14 percent to $2.44 billion, a record for any quarter. The previous record was $2.33 billion set in the third quarter of 2012. Ford first began reporting North America results as a separate business unit in 2000.

The automaker also posted a small pretax profit in its Asia Pacific Africa region.

Revenues rose 10 percent to $35.8 billion.

Ford's U.S. sales rose 11 percent through March in a market that advanced 6 percent, boosting its market share to 16.2 percent.

Europe woes

Ford earnings would have been even higher if not for the ongoing slowdown in recession-wracked Europe.

Ford's pretax operating loss in Europe widened sharply to $462 million from $149 million in the first quarter of 2012.

The worsening results primarily reflected higher costs, including those related to restructuring, and higher pension expenses due to lower interest rates. Weak industry sales and unfavorable exchange rates also contributed to the loss.

Ford reaffirmed its forecast for a 2013 loss in Europe of about $2 billion. In 2012, the loss was $1.75 billion.

"European operations continue to erode earnings with no immediate recovery on the horizon," said Jesse Toprak, senior analyst at TrueCar.com, before today's results were released. "Overall, however, Ford earnings should benefit from a recovering full-sized truck segment, particularly in the second half of 2013."

Ford posted a $6 million profit in its Asia Pacific Africa region, vs. a loss of $95 million a year earlier.

The pretax operating loss in South America was $218 million, compared with a $54 million profit a year ago.

At the Ford Motor Credit lending unit, pretax operating profit rose 12 percent to $507 million.

'Fabulous' North America

CFO Shanks said strong revenue and unit-sales growth was "very encouraging." For example, Ford's factory unit sales, also known as wholesales, and its revenues grew by double digits in both North America and Asia Pacific Africa.

In addition, operating cash flow was positive for the 12th consecutive quarter, he noted.

Shanks said the company's forecasts for overall performance, as well as results in each region, remain unchanged from guidance that the company offered when it released its 2012 results at the end of January.

In North America, Ford's pretax operating margin of 11 percent -- which Shanks called "fabulous" -- marked the fourth time in the last five quarter that the margin topped 10 percent.

He said North American profits might have been even larger except for certain cost increases. For example, Ford has added third shifts at several plants in a move to increase North American capacity by 400,000 units.

In addition, increased sales of smaller cars has meant the mix of highly profitable pickups and less-profitable small cars hurt profits to the tune of about $300 million, Shanks said.

Results in Europe, Shanks said, were "in line with what the markets expected" -- better than in the fourth quarter, but worse than the year-earlier results.

Hitting targets

A restructuring plan for Ford's European operations is "already hitting on the targets we said we'd achieve," Shanks said.

Several new or redesigned vehicles are selling well, he said, adding that Ford's lower market share in the region was mostly due to vehicle availability issues connected with the Ghent, Belgium, plant which has been in the midst of negotiations over its closure. Hourly workers there recently ratified a package of proposed separation benefits, while salaried employees there have agreed to a tentative proposal, and will soon vote on whether to ratify the agreement.

"As the information and consultation process moves forward, normal vehicle production levels at the plant have resumed," Ford said in a statement.

Shanks also said that Ford of Europe's order bank is "about 30 percent higher than at the time of the restructuring announcement" in October 2012 -- "and that's in a down industry."

Ford's performance has been bolstered by strong U.S. sales of the Fusion mid-sized sedan and Escape compact SUV, both redesigned for the 2013 model year. Both vehicles set all-time monthly and first-quarter sales records in March.

Ford is on a building binge in Asia, with seven plans under construction in the region: five in China and two in India.

Ford is in the midst of a Chinese product offensive, with 15 new products planned by 2015. The company introduced the Mondeo, Fiesta ST and Focus ST last week at the Shanghai auto show.

Bradford Wernle contributed to this report.

(Ford profit rises 15% on N.A. record was originally posted on Automotive News, sub. req.)

By James B. Treece- Automotive News