Ford CEO Alan Mulally hails the maker's best-ever third quarter -- despite ongoing problems in Europe.
Despite a European slump likely to cost it more than $1.5 billion in red ink this year, Ford handily topped Wall Street forecasts with a $2.2 billion pre-tax operating profit and $1.63 billion in net earnings.
The after-tax figure was a whisker short of the $1.65 billion earned during the third quarter of 2011 and nearly matches the $1.94 billion Ford reported in net earnings for all of last year.
The maker scored better than expected despite taking a few serious hits, including heavier than expected losses in Europe and a series of reports that faulted Ford’s recent quality. The Detroit maker took a particularly sharp fall in the latest Consumer Reports automotive reliability index, released yesterday.
Nonetheless, CEO Alan Mulally put an understandably positive spin on the third-quarter news. “”The Ford team delivered a best-ever third quarter, driven by record results in North America and the continued strength of Ford Credit,” proclaimed the former Boeing executive.
Mulally did acknowledged Ford has some work ahead, however, referring to plans announced last week to reduce European capacity by 18% by closing two assembly plants and a component facilities, a move that will cost about 6,200 jobs in Belgium and the UK.
(For more on Ford’s turnaround plan for Europe, Click Here.)
“While we are facing near-term challenges in Europe, we are fully committed to transforming our business in Europe by moving decisively to match production to demand,” the chief executive said, “improve revenue through new products and grow a stronger brand, improve our cost efficiencies and take advantage of opportunities to profitably grow our business.”
While Ford is hoping that the cuts will help it drive its European operations back to profitability over the next couple years it now anticipates a $1.5 billion loss – up from an earlier forecast of $1 billion in red ink for all of 2012. For the third quarter alone, Ford of Europe generated $468 million in losses.
But things were decidedly different in North America where Ford continues to rebound after facing a near-death situation during the last recession. For the July – September quarter the maker earned $2.3 billion in North America, the third consecutive quarter with profits for the region topping the $2 billion mark.
In fact, Ford saw North American margins surge to 12%, among the best in the industry and the highest level the maker has seen since 2000. By comparison, the Asia-Pacific region, which includes China where Ford is struggling to gain traction, had a more modest 1.2% margin. South American margins were 0.8% and Europe had a loss of 8%.
With Ford still lagging rivals like General Motors and Volkswagen in China, and Europe still a mess, “North America will continue to carry the load” for some time, predicted Bob Shanks, the maker’s chief financial officer.
The strong showing in the Americas should put another feather in the cap for Mark Fields, considered the increasingly likely successor for CEO Mulally – though despite recent reports that Fields would receive a promotion to position him as the next chief executive, the Ford board has so far failed to take that step.
Ford’s third-quarter income works out to 40 cents a share. Industry analysts surveyed by Thompson Reuters had collectively forecast a figure of 30 cents.
The maker’s strong numbers came despite a sharp increase in its current tax rate, now at 30%, or three times what the maker paid during the third-quarter of 2011 when it was still able to offset its liabilities with losses from the U.S. economic downturn.
Despite some concerns that the U.S. auto industry could lose some steam during the final months of the year, Ford is now forecasting sales for all of 2012 – including heavy-duty vehicles – will come in at 14.7 million.
The maker isn’t the only domestic to deliver an earnings surprise. Chrysler yesterday reported an 80% jump in profits for the quarter. (Click Here for that story.) General Motors, meanwhile, is planning to release its own earnings early tomorrow. Like Ford, it expects to show a significant increase in losses from Europe.