Ford’s Profit Drops as Customers Turn to Small Cars image

Ford announced its record profit margins are dropping in North America as customers turn from trucks to small cars.

“We continue to see consumers trading down to smaller vehicles,” Mark Fields, Ford’s president of the Americas, said yesterday at the Barclays Capital 2012 Global Automotive Conference in New York. “Less trucks, more small cars and those vehicles have smaller margins.”

Ford expects a North American margin drop of 8% to 10% in the near future, from 12% in the third quarter. The automaker’s margins have increased when it launched the new 2013 Escape SUV, with $4,200 more expensive than the previous model, while the redesigned 2013 Fusion is with $3,700 more expensive than the 2012 model. From January to September, Ford earned $6.47 billion before taxes in North America, more than its entire 2011 profit in this region.

“We have seen a pricing environment that has been fairly reasonable,” Fields said yesterday. “But in the fourth quarter, our margins will not be as strong.”

In South America Ford had profits before tax of $68 million and an operating margin of 1% from January to September. The automaker expects the results to get worse and announced it does not plan to add factory capacity here as new government policies already create more capacity than can be supported by sales.