DEARBORN, Mich. – Ford proved it in North America. Now it’s proving it in the rest of the world: New vehicles, combined with cost cuts, can turn the business around.
The second-largest U.S. automaker raised its full-year profit guidance Thursday as it reported a strong third quarter that saw improving sales worldwide. Ford’s regions outside North America saw a combined profit for the first time in two years, and every region reported market share increases.
“The breadth, the depth and the quality of the growth is very exciting for us,” Ford’s Chief Financial Officer Bob Shanks told reporters Thursday morning.
Dearborn-based Ford Motor Co. earned $1.3 billion, or 31 cents per share, down 14 per cent from a year ago. The decline was due to special items, including a $250 million charge for restructuring in Europe and a $145 million charge for a pension buyout program in the U.S.
Without those one-time costs, Ford reported a pretax profit of $2.6 billion, or 45 cents per share. That was a third-quarter record for the company, and a pleasant surprise for Wall Street. Shares rose nearly 2 per cent.
Ford, which almost went bankrupt in the middle of the last decade, restored its North American operations to profitability by closing plants, laying off workers, selling non-core brands like Jaguar and using the savings to invest in much improved vehicles like the Fusion sedan and Explorer SUV.
The changes have led to growing sales and stable profits in Ford’s home market. The company earned $2.3 billion in North America in the third quarter, the same amount as in last year’s July-September period. Ford’s share of the market rose, although that was offset by investment in upcoming products.
Ford is now taking its playbook to other markets. In Europe, the company halved its third-quarter loss to $228 million. The company closed two plants in England in July, and expects to spend a total of $800 million this year and $400 million next year on restructuring actions. But it’s also introducing 25 new products by 2017 in an effort to stimulate sales. Among the first are the Fiesta subcompact and B-Max minivan, which were strong sellers in the third quarter.
In China, Ford’s new Kuga and EcoSport SUVs helped increase sales by 51 per cent during the quarter, and its profits doubled to $126 million in Asia despite a sales slowdown in India. In South America, where Ford had been plagued by currency issues and dated products, the new Ranger pickup and revamped Fiesta helped increase pretax profits to $159 million, up from just $9 million in the same period a year ago.
CEO Alan Mulally, the architect of Ford’s turnaround, said Thursday the results show the restructuring plan Ford adopted seven years ago is working. But he wouldn’t address one issue on many investors’ minds: Whether he has talked to Microsoft Corp., which is rumoured to be considering him as its next CEO. Mulally said only that his plan to stay at Ford through at least 2014 hasn’t changed.
James Schrager, a professor at the University of Chicago’s Booth School of Business, said the lack of an answer likely means Mulally has talked to Microsoft. But he had to duck the question, because if he admitted it, investors would react negatively, Schrager said.
Ford sold 1.5 million cars and trucks in the quarter, up 16 per cent. Revenue rose 12 per cent to $36 billion.
The company beat Wall Street’s expectations for earnings of 37 cents on revenue of $33.6 billion, according to FactSet.
Ford previously said it expected its full-year pretax profit to be equal to or higher than its $8 billion profit in 2012. Now it expects to exceed that.
Ford shares rose 31 cents, or 1.8 per cent, to $17.83 in afternoon trading.
Auto Writer Tom Krisher contributed from Detroit.