By Jerry Hirsch, Los Angeles Times –
Strong profits in the U.S. are offsetting growing losses in Europe, Ford Motor Co. reported Tuesday.
The automaker posted third-quarter net income of $1.6 billion, or 41 cents per share. Both were about the same as Ford’s results in the same quarter a year earlier.
Automakers are struggling with a slumping European economy and a host of regulations by governments in the region that restrict the type of massive industry restructuring the industry underwent in the U.S. three years ago.
Ford’s losses widened in Europe during the quarter, growing 53 percent from the same period a year earlier to $468 million.
Auto sales in Europe have fallen to the lowest level in 20 years and are not expected to rebound soon.
Last week, Ford announced a restructuring of its European operations and plans to shutter three plants there. The automaker said its operating losses from Europe could reach $1.5 billion this year. Through the first nine months of this year, they are already over $1 billion.
The plant closures, which include the layoff of about 6,000 workers, will yield annual savings annually of $450 million to $500 million when completed, Ford said.
“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, improve revenue through new products and a stronger brand, improve our cost efficiencies and take advantage of opportunities to profitably grow our business,” said Alan Mulally, Ford’s chief executive.
Peter Nesvold, a Jefferies & Co. analyst, said the large profit Ford is pulling out of its U.S. operations points the way to improved results in Europe as the recession in the region eases and Ford’s moves start to take hold.
“You’ve now seen what the company did in transforming North America. One has to believe the shares have tremendous upside if the company comes even close to replicating that success in Europe,” Nesvold said.
In North America, Ford said it achieved its highest quarterly profit and operating margin “since at least 2000, when the company started reflecting the region as a separate business unit.”
For the region, the automaker posted a record third-quarter pretax profit of $2.3 billion and a 12 percent operating margin. That compared with a gain of $1.55 billion and operating margin of 8.6 percent in the same quarter a year earlier.
Ford’s transition from a company that primarily sold large trucks and sport-utility vehicles to an automaker that also did well in passenger cars contributed to the profits.
“Ford’s more balanced product mix with a stronger presence in the small-car segments enabled the company to operate at highly profitable levels,” said Jesse Toprak, an analyst at auto price information company TrueCar.com. “Ford’s U.S. sales are up with lower incentives spending and higher transaction prices, indicating improved profitability for the company.”
Ford said its outlook for profits in North America for the full year remains unchanged. It expects “significantly higher pretax operating profit and margin compared with 2011, as consumers continue to respond to the company’s strong product lineup.”
Elsewhere, the automaker made only $9 million in South America, down from $276 million in the same period a year earlier. Ford said the decrease was primarily a result of unfavorable currency-exchange rates.
Ford’s business in the Pacific region and China amounted to a small pre-tax profit of $45 million, a swing from a loss of $43 million a year earlier. Ford expects to lose money in the region for the entire year.
Ford was the second U.S. automaker to report third-quarter financial results. On Monday, Chrysler Group said profits soared in the third quarter, helped by a remake of its product lineup and the introduction of the Dodge Dart compact sedan.
The Auburn Hills, Mich., automaker said its net income rose 80 percent to $381 million compared with the same period a year earlier. Revenue rose 18 percent to $15.5 billion.