Ford posts Q3 net of $1.63 billion; record N.A. profits offset European losses
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DETROIT -- Ford Motor Co. posted a $1.63 billion third-quarter net profit, nearly matching its year-earlier total, as record high earnings in North America more than offset mounting losses in Europe.
Pretax operating profit rose to a record $2.16 billion from $1.94 billion a year earlier, the company said today.
Pretax operating profit in North America increased to $2.33 billion -- a record for any quarter since 2000, when Ford began tracking the region as a separate business unit -- from $1.55 billion a year earlier. The pretax loss in Europe widened to $468 million from $306 million in the third quarter of 2011.
"The Ford team delivered a best-ever third quarter, driven by record results in North America and the continued strength of Ford Credit," CEO Alan Mulally said in a statement. "While we are facing near-term challenges in Europe, we are fully committed to transforming our business in Europe."
Total global revenue was $32.1 billion, down from $33.1 billion a year earlier. Last year's net of $1.65 billion was Ford's second-highest quarterly profit ever.
North American strength
The rise in North American pretax profit came as revenues in the region rose 8 percent to $19.5 billion. Ford launched three important new or redesigned vehicles in the quarter: the Fusion mid-sized sedan, C-Max Hybrid and Escape compact crossover.
Ford said it expects its full-year 2012 North American pretax operating profits and margins to be significantly higher than in 2011.
"North America had positive volume and mix and positive net pricing," said Bob Shanks, Ford CFO. "This is the third quarter in a row we've earned over $2 billion in North America and where margins have been above 10 percent."
But Shanks said he doesn't expect the fourth quarter will be as strong in North America because of "normal seasonal increases" in costs. Those include increased marketing and advertising expenses to promote new models and the increased manufacturing expense caused by adding 400,000 units of new capacity, including the addition of a shift to its Louisville, Kentucky, assembly plant, which builds the Escape.
Ford earned $4.14 billion in North America in 2012's first half and had an operating profit margin of 10.8 percent in an industry where a 5 percent margin is considered respectable.
Ford's North American operating margin in the third quarter was a record 12 percent.
Ford's U.S. car and light truck sales rose 5 percent through September to 1.69 million, according to the Automotive News Data Center. But with the overall U.S. market up 15 percent, the company's market share in the first nine months fell to 15.5 percent from 16.8 percent a year earlier. Some of that market-share loss reflects the rebound of Japanese brands, which were production constrained in 2011 due to the devastating earthquake and tsunami in Japan.
Ford's vehicles are also commanding higher prices. The average price a consumer paid for a Ford model rose to $32,535 this year, up from $28,750 five years ago, according to researcher Edmunds.com.
Jesse Toprak, senior analyst at TrueCar.com, said that despite Ford's lost market share this year, its total U.S. sales "are up with lower incentives spending and higher transaction prices, indicating improved profitability for the company."
TrueCar estimates Ford's incentives fell 4 percent in the third quarter to $2,635 per vehicle, while its average transaction price rose 1 percent to $32,115 per vehicle.
European troubles
In Europe, Ford's revenues fell 26 percent to $5.8 billion from $7.8 billion a year earlier. Ford last week raised its estimate for losses in Europe this year to at least $1.5 billion, up from a previous forecast of a $1 billion loss.
Analysts say auto sales in Europe may fall to their lowest level in 19 years, prompting massive price discounting, as the sovereign-debt crisis saps consumer confidence.
Last week, Ford said it will close three plants in Europe: in 2013, an assembly plant in Southampton, England, and a stamping plant in Dagenham, England; and in 2014, an assembly plant in Genk, Belgium. The moves will trim 355,000 units of production, or about 18 percent of its European capacity.
Ford said last week it hoped to return to break even in Europe by mid-decade. Ford will cut 6,200 jobs by closing the plants. The move will carry a separation cost of slightly less than $100,000 per employee, Ford said.
The plan is loosely modeled on the plan that turned Ford's North American operations around.
Other operations
In South America, Ford's pretax operating profits collapsed 97 percent to $9 million from $276 million a year earlier, as revenues fell to $2.3 billion from $3.0 billion. Ford blamed the decline on unfavorable exchange rates, primarily the Brazilian real.
Ford Credit reported a pretax operating profit of $393 million, down from $581 million a year earlier. All Ford financial operations had a pretax profit of $388 million, down from $605 million.
In its Asia-Pacific Africa region, Ford swung to a profit of $45 million, from a loss of $43 million last year. Revenues rose to $2.6 billion from $2.3 billion.
Ford reported positive automotive operating cash flow of $700 million, up from $400 million for the third quarter of 2011.
Bloomberg contributed to this report
You can reach Bradford Wernle at bwernle@crain.com.
