Despite strong vehicle sales, Ford reported a drop in third quarter earnings of 22% to $1.3 billion.

Strong vehicles sales in North America had Ford Motor Co. poised for a record-setting third quarter profit, but they were offset by losses in Europe and restructuring charges, the company reported.

Ford’s net income dropped 22% to $1.3 billion or 31 cents per share after special charges of nearly $498 million due to restructuring in Europe and North America and a loss by the company’s European operations.

The automaker reported a record third quarter 2013 pre-tax profit of $2.6 billion, which was $426 million higher than a year ago. The increase reflects continued strong performance in North America and a combined profit from the regions outside North America. In addition, Ford Credit remained profitable.

Ford’s net income for the third quarter of $1.3 billion, or 31 cents per share, was down $359 million, or 10 cents per share, compared with a year ago due to pre-tax special item charges of $498 million, which included $250 million for separation-related actions, primarily in Europe, and $145 million associated with Ford’s U.S. salaried retiree voluntary lump sum payout program, which was part of the company’s pension de-risking strategy.

Cash flow from Ford’s automotive operations was $1.6 billion, a third quarter record, marking the 14th consecutive quarter of positive performance. The company ended the third quarter with strong liquidity of $37.5 billion, an increase of $400 million compared with the end of the second quarter of 2013, according to the third quarter financial report.

“Ford’s record results in the third quarter show the strength of our One Ford plan around the world,” said Alan Mulally, Ford president and chief executive officer.

“Working together, we remain committed to serving customers in all markets with a full family of vehicles, offering the very best quality, fuel efficiency, safety, smart design and value,” he said.

Total company third quarter pre-tax profit of $2.6 billion was $426 million higher than a year ago. Third quarter earnings per share of 45 cents were 5 cents per share higher than a year ago.

For the sixth time in the last seven quarters, Ford’s North America operations achieved a pre-tax profit of $2 billion or more and an operating margin of 10% or more. Third quarter pre-tax profit was about equal to last year’s record profit. Favorable market factors — volume and mix and net pricing — were offset, for the most part, by higher costs, including investment in new products.

Third quarter results were aided by a strong industry and a robust full-size pickup segment, along with Ford’s strong product lineup, U.S. market share growth, continued discipline in matching production to real demand and a lean cost structure — even as the company invests more in product and capacity for future growth.

In the first nine months of the year, North America’s operating margin was 10.7%, five-tenths of a percentage point lower than a year ago, while pre-tax profit was about $7 billion, up about $600 million. Wholesale volume and revenue both improved 15% compared with 2012.

In Europe, Ford lost $228 million. The loss was $240 million smaller than a year ago, with all factors favorable, except costs associated with restructuring. Europe’s results have improved sequentially in each quarter this year, Ford said.

Wholesale volume and revenue improved in Europe from a year ago by 5% and 12%, respectively, the second consecutive quarter of year-over-year top-line improvement. The volume increase reflects higher industry sales, lower dealer stock reductions than a year ago and higher market share.

Ford’s operations in Asia Pacific Africa reported its fifth consecutive quarterly profit with pre-tax results of $126 million, an improvement of $81 million compared with a year ago. Third quarter results reflect favorable top-line factors, offset partially by higher costs, as the company continues to invest for further growth.

(Ford cutting C-Max, Focus production to offset surplus. For more, Click Here.)

In the third quarter, wholesale volume was up 35% from a year ago, and revenue, which excludes the company’s China joint ventures, grew 7%. The higher volume reflects mainly improved market share, with higher industry volume and favorable changes in dealer stock also contributing. Higher revenue primarily reflects favorable volume and mix.

Asia Pacific Africa’s third quarter market share was 3.7%, six-tenths of a percentage point higher than a year ago and a quarterly record. The improvement was driven by China, where Ford’s market share improved eight-tenths of a percentage point to equal last quarter’s record of 4.3%, reflecting mainly strong sales of the Kuga, EcoSport and Focus.

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Ford’s operations in South America also were profitable in the third quarter.

During the quarter, Ford contributed $1.1 billion to its global funded pension plans, which included about $700 million of discretionary payments to its U.S. funded plans as part of the company’s effort to reduce its legacy costs.

The company settled about $700 million of pension obligations related to its U.S. salaried retiree voluntary lump sum program, and has settled $3.4 billion since the program began in August 2012. The lump sum program is about 80% complete and concludes at the end of the year.