The second-largest U.S. automaker reported its 21st consecutive profitable period, with net income of $1.3 billion, or 32 cents a share, compared with $1.23 billion, or 30 cents, a year earlier, according to a statement Thursday. Excluding one-time costs, second-quarter profit was 40 cents a share, beating the 36-cent average estimate of analysts surveyed by Bloomberg. North American operations also reported record pretax results.
Rising sales in China and Europe helped to offset the negative effects of a currency crisis in Venezuela, as well as higher taxes and increased costs to introduce 23 new models worldwide this year. Ford sales in China soared 35 percent in the year's first half to a record 549,256 vehicles, while deliveries rose 6.6 percent in Europe, which is recovering from a deep recession. Ford has said profits will decline this year as it spends to roll out new models such as the aluminum-bodied F-150 pickup, its top seller.
“This was a very strong quarter for Ford, our strongest quarter since the second quarter of 2011,” Chief Financial Officer Bob Shanks told reporters this morning at the automaker's Dearborn, Michigan, headquarters. “Europe was a great, great outcome. It clearly shows the transformation plan is working and we're clearly on the way to a profit in 2015.”
Chief Executive Officer Mark Fields, 53, who took over July 1 when Alan Mulally, 68, retired, has said he'll continue his predecessor's policies, such as globalizing products and focusing on fuel-efficiency. Ford earned $42.3 billion in the last five years after losing $30.1 billion from 2006 to 2008.
Fields made his first executive appointments July 22, replacing Jim Farley as head of the Lincoln line with Kumar Galhotra, formerly Ford's vice president of engineering. Farley, who came from Toyota Motor Corp. in 2007, remains Ford's global marketing chief. Fields also hired Ken Washington, who ran Lockheed Martin Corp.'s Space Technology Advanced Research & Development Labs, to head Ford's research and advanced engineering.
“Mulally created a new attitude that was bought into by the succeeding generation of management,” said Bernie McGinn, CEO of McGinn Investment Management in Alexandria, Virginia, which holds about 400,000 Ford shares.
“Part of that is you never stop innovating. So if you need brains, you go get yourself a rocket scientist.”
In Europe, where Ford said it would return to profitability next year, it reported a $14 million pretax profit in the second quarter from a loss of $348 million last year. The automaker's sales in Europe are up 6.6 percent this year as industrywide deliveries rose for the 10th consecutive month in June.
“We expect a positive reaction to this strong set of results, particularly the surprise profit in Europe, something investors place outsized importance upon,” wrote Ryan Brinkman, an analyst at JPMorgan Chase.
Ford had record pretax operating income of $2.44 billion in North America in the second quarter, up from $2.3 billion last year. The company had an operating profit margin of 11.6 percent, which Shanks said was “pretty spectacular.”
Ford benefited from a good mix of profitable trucks and it reduced costs to manufacture and design its models.
In South America, the automaker reported a pretax loss of $295 million compared with a pretax profit of $151 million a year earlier. Ford said it now expects an even bigger loss in the region than it previously forecast. On April 25, the company had said losses there this year would exceed the $34 million it lost there in 2013.
“This is looking a bit worse in terms of what we had expected,” Shanks said of South America. “That's still a region where there are lots of challenges we have to work through.”
The company also said it expects improved earnings from its Ford Credit financial operation, up from a prior prediction that the lending unit's earnings would be equal to or better than last year.
In Ford's Asia-Pacific region, pretax earnings were a record $159 million. Ford sales in China surged 35 percent in the first half of the year, as it sold a record 549,256 vehicles on strong demand for its Kuga and EcoSport sport-utility vehicles and Focus and Mondeo sedans. Last year, Ford's sales in China surpassed Toyota.
“This is a transition year for Ford, a year of investing for much better things in 2015 and 2016,” said David Whiston, an analyst at Morningstar Inc. in Chicago. “In China, Ford is just going gangbusters.”