Ford earnings down 45% in Q1; Sales up 9%

April 27, 2012
Ford earnings down 45% in Q1; Sales up 9%
By JACLYN TROP / The Detroit News
Ford Motor Co. reported a 45 percent decline in first quarter earnings Friday, narrowly beating analyst expectations.

Profits fell to $1.4 billion on revenues of $32.4 billion, from $2.6 billion the same quarter last year.

About half the decrease was due to a higher tax rate, with the remainder due to factors such as softening global markets and comparisons with a strong first quarter last year, the automaker’s best since 1998.

The company also announced Friday it is offering lump sum pension buyouts for retirees, the first program of its kind, according to spokeswoman Marcie Evans.

Ford’s $74 billion pension liability was $15.4 billion under funded at the end of last year.

It’s not clear how much money the buyouts will save the company, Evans said.

“It depends on how many opt in,” she said.

But the company’s operations are strengthening.

Ford’s sales grew nearly 9 percent to 539,624 vehicles in the first quarter compared with the same period last year even as it cut incentives by an average of 4.2 percent, or $120, per vehicle, according to Edmunds.

Ford’s performance was bolstered by sales of its fuel-efficient vehicle lineup and profitable trucks. The automaker has also found a sweet spot with small cars, such as its Focus and Fiesta models, as drivers shoulder higher gas prices.

Ford is on an upswing, reaching a milestone Tuesday when a major ratings house upgraded its debt to investment grade. It will receive the assets it mortgaged for a $26.5 billion loan in 2006 – including the blue Oval, glass house and plants – when a second ratings agency awards the company investment-grade status.

The automaker reported gains of $20.2 billion last year for its third consecutive annual profit. Last year’s results were boosted by a one-time accounting gain of $12.4 billion after moving deferred tax assets back onto the company’s books.

Now that the company is making more money, it will be taxed an about 35 percent instead of the roughly 8 percent it paid last year.

Analysts expected on average Ford to report .36 cents per share on $31.49 billion in revenue, according to Thomson Financial Network.

But a weak European market and a slowdown in the China market continue to concern Ford and analysts. Ford has invested $4.9 billion in China to double passenger car production capacity and catch up to its larger rivals.

“Compared to sluggish earnings in Ford’s beleaguered Europe and Asia-Pacific markets – where the company is investing billions of dollars – North America was the bright spot in the first quarter,” said Edmunds analyst Michelle Krebs.

Ford is making strides in fuel efficiency, announcing Friday that the new Ford Escape, a small SUV, has been certified at 33 miles per gallon, 5 miles per gallon better than the outgoing model.

“The fuel economy of the all-new Escape showcases the continued success of Ford’s development of smaller, yet more powerful engines,” said Raj Nair, group vice president, Ford Global Product Development. “Ford understands people want fuel-efficient vehicles without sacrificing power and space requirements.”

Chrysler Group LLC’s first quarter profits quadrupled to $473 million, the company reported on Thursday.

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