"World cars," like the Fiesta, helped drive Ford earnings beyond analysts' expectations.
After disappointing analysts during the final months of 2010, Ford Motor Co. has delivered another surprise – but this time it has well exceeded even the more optimistic forecasts for the first quarter of the New Year, posting $2.6 billion in net income.
That’s a 22.4% year-over-year bump, and works out to 61 cents a share compared to a consensus forecast by a score of Wall Street analysts that Ford’s first-quarter 2011 earnings would come in at a still-respectable 50 cents a share. During the same period in 2010, Ford earned $2.1 billion, or 46 cents a share.
All told, the maker had its largest earnings for the January – March quarter since 1998.
“Our team delivered a great quarter, with solid growth and improvements in all regions,” said Ford president and CEO Alan Mulally.
Ford’s revenues jumped 18% in the latest quarter, from $28.1 billion to $33.1 billion. That reflected strong sales in a number of key markets, notably including Europe, where the maker was able to climb out of the red.
Along with its many competitors in crowded Europe, Ford has been battered by the weak economy and poor car sales in many key national markets. The maker earned $107 million during the first quarter of 2010 in Europe, but by the fourth quarter it had a $51 million loss. Pre-tax operating profits for the latest period bounced back to $293 million.
But the big gains came from the U.S., where the pre-tax operating profit surged 49%, to $1.8 billion. That reflected a variety of factors, including the maker’s decision to adopt a global product development strategy in which key vehicles, such as the Fiesta subcompact and new Focus compact, are designed and engineered for global sale, with only modest changes to reflect individual market needs.
“We continue to accelerate our One Ford plan around the world,” noted Ford’s Mulally.
But while small cars posted double-digit gains during the first quarter – maintaining the pace of the overall market – Ford’s F-Series pickup gained 23% despite mounting concerns about fuel prices. Ford redesigned the truck for 2011, adding a number of new and more fuel-efficient engines, a strategy that appears to be paying off since its full-size pickup sales are not showing the wholesale collapse the F-Series experienced during the mid-2008 fuel-price surge.
Worldwide, Ford sales increased 150,000 vehicles, to 1.4 million. But not all went as Ford – and the industry analysts – might have liked, the maker’s U.S. market share slipping a half point to 16% for the first quarter. But that reflected, in part, the decision to abandon the long-struggling Mercury division.
Ford also made a conscious corporate decision not to chase share – unlike arch-rival General Motors – by loading up the incentives.
“We are not chasing marginal and unprofitable market share,” said Chief Financial Officer Lewis Booth.
Ford was the only domestic automaker to avoid bankruptcy in 2009 – largely because the maker lined up $23 billion in debt, in late 2006, shortly after Mulally joined the company from a senior position with aerospace giant Boeing.
As the economy has slowly emerged from its recession, the CEO has put a high priority on paying down that debt. In 2010, it was reduced by $14.5 billion, to $19.1 billion. During the first quarter of the year, debt was further trimmed by $2.5 billion and now stands at $16.6 billion.
By comparison, the maker had $23.1 billion in cash available at the end of the first quarter, an $800 million increase from year-end.
In other parts of the world, Ford reported $210 million in pre-tax operating profits from Latin America, and $33 million in Asia-Pacific. The maker is continuing to push for growth in growing China, though it lags well behind rivals GM and VW in that market, now the world’s largest.
(China critical to Ford’ future. Click Here for that story.)