Ford first-quarter profit climbs 15% to $1.6bn on record North American performance
Strong sales of F-Series trucks, Fusion and Escape drive Ford to a $1.6bn net profit for Q1 2013, despite deepening losses in Europe and South America.
Ford Motor Company reported a 15% rise in net profit for the first quarter of 2013, delivering $1.6 billion despite mounting losses in Europe and South America. The result was driven by record North American earnings, with robust demand for the F-Series pickup, Fusion saloon and Escape SUV offsetting weak performance elsewhere.
The Dearborn-based carmaker’s revenue for the quarter climbed 10% to $35.8 billion, beating Wall Street expectations. North American pretax operating profit reached $2.4 billion, the highest since Ford began reporting the region separately in 2000. US sales of the F-Series rose 17% and the Fusion and Escape both posted first-quarter records, with Fusion sales up 25% to 80,558 units and Escape close behind at nearly 73,000.
North America delivers record results
Ford’s North American business remains the engine of its global profits. The company’s operating margin in the region was 11%, down slightly from 11.5% a year earlier, as higher costs for materials and increased hiring to meet demand ate into margins. Still, the $2.4bn pretax profit set a new quarterly record for the company. Average transaction prices for Ford vehicles in the US climbed by around $1,000 compared with the previous year, reaching $32,784 according to TrueCar.com.
Ford Credit, the company’s finance arm, contributed $503 million to results. The company’s operating cash flow remained positive for the twelfth consecutive quarter, and Ford plans to increase global production by 13% in the second quarter to 1.6 million vehicles.
Europe and South America drag on profits
Losses in Europe widened to $462 million as sales fell 20% amid a deepening recession and restructuring costs, including disruptions at the Genk, Belgium plant. Ford’s market share in Europe dropped, with the company deliberately cutting back on low-margin rental sales. The company reaffirmed its forecast of a $2 billion operating loss in Europe for the full year.
In South America, Ford posted a $218 million pretax operating loss, compared with a $54 million profit a year earlier, largely due to currency devaluation in Venezuela. Asia Pacific and Africa delivered a modest $6 million profit, aided by strong growth in China where Ford’s sales rose 54% in the quarter, led by the Focus.
Product mix and future plans
Ford’s strong quarter was underpinned by a shift in product mix towards more profitable trucks and SUVs in North America, but the company is also selling a higher proportion of smaller cars, which bring lower margins. Seven of the 15 new models promised for Europe by 2015 had launched by the end of the quarter, including the Fiesta and Kuga, but these were not enough to offset the regional downturn.
