CEO Alan Mulally and Chairman Bill Ford.
Ford Motor Co. topped Wall Street’s already optimistic earnings estimate with a 16% jump in first-quarter net income of $1.6 billion, or 40 cents per share.
That compared to last year’s 35-cent earnings and a 37-cent consensus estimate for the latest quarter among analysts polled by FactSet. The maker would have done still better were it not for problems in Europe which resulted in a $147 million decline in pre-tax earnings of $2.1 billion. But Ford’s results also were buoyed by the strongest results in North America in “at least” a decade.
“Our strong first quarter results provide further proof that our One Ford plan continues to deliver,” said Alan Mulally, Ford president and CEO. “Our plan remains centered on serving customers in all markets around the world with a full family of vehicles — small, medium and large; cars, utilities and trucks — each with the very best quality, fuel efficiency, safety, smart design and value.”
The operating margin rose to 11% in the home market where pre-tax earnings rose to $2.4 billion. That was the highest figure since at least 2000 when Ford began breaking out North American results as a separate business unit – and could, in fact, be an all-time record.
The strong performance reflected both the impact of ongoing cost-cutting efforts as well as the continued recovery of the North American automotive industry. In particular, demand was up for some of Ford’s most profitable products, including its F-Series pickups.
But the first quarter numbers weren’t entirely upbeat. While Ford eked out more modest earnings in its Asia Pacific Africa region, it suffered a modest loss in South America and remained mired deeply in the red in Europe where it expects to see losses increase for all of 2013 to about $2 billion.
For the quarter, Ford lost $462 million in Europe as sales plunged 20%, even worse than the overall downturn in a Continent where automotive sales are running at two decade lows. Even the Continent’s strongest players, such as Volkswagen and Daimler AG, today reported they also suffered losses in their home market.
(VW Q1 earnings plummet 38% for quarter. Click Here for that story.)
Europe is “a controlled mess,” said Adam Jonas, an influential automotive analyst with Morgan Stanley.
Ford’s European losses are compounded by the costs associated with the planned closure of three assembly plants, two in Britain and a third in Belgium, by 2014. But the maker expects that the closures will ultimately deliver annual savings of about $500 million and help bring production more in line with demand.
The ongoing question Ford and its competitors face is when the European market will bottom out. There are signs that Britain could slip into a triple-dip recession while even the Continent’s economic powerhouse Germany is beginning to feel the impact of the overall downturn.
As for Latin America, Ford saw a modest drop in revenue and earnings, the operating margin slipping into negative territory. It blamed exchange rate problems and weakened currency in Argentina, but also faced problems with trade restrictions in Brazil. Nonetheless, the company continues to predict it will break even in the region for the full year.
North America, which only a half-decade ago threatened to push Ford into bankruptcy – like its domestic rivals General Motors and Chrysler – proved the real powerhouse behind Ford’s latest earnings surge.
In the U.S., Ford saw its market share rebound slightly to 11.6% during the first quarter of 2013, up 0.1 points from the year-earlier period. That’s on top of the overall improvement in sales as the maker more than kept up with the U.S. rebound.
Ford did particularly well with some of its most profitable truck and crossover models, notably the big F-Series pickup which benefited not only from falling fuel prices but also from the nascent recovery in the U.S. housing market.
“Domestically, Ford had the best Q1 2013 performance of all Detroit-based automotive manufacturers,” said Jesse Toprak, Senior Analyst for TrueCar.
Overall unit sales were up 11% in the States, year-over-year, according to TrueCar data, boosting Ford’s U.S. market share from 15.5% to 16.2%. Incentives, meanwhile, were flat, at an average $2,852 a vehicle for the latest quarter – even while average transaction prices rose 3.3%, to $32,784 per vehicle.
Globally, Ford sold 1.497 million vehicles during the January to March period, up from 1.358 million the year before. That was, however, about 860,000 less than cross-town rival General Motors and about 930,000 short of global sales leader Toyota.
The maker’s first-quarter performance also was buoyed by its Ford Motor Credit arm, the captive finance subsidiary delivering a $507 million profit for the first quarter.
For all of 2013, Ford officials said they’re on track to maintain previous guidance – which calls for a pre-tax profit “about equal to 2012,” though the company’s operating margin may drop slightly.