The North American operations of Ford Motor Co. are on a roll, generating profits that are overcoming losses in Europe and Asia.
The No. 2 Detroit auto maker posted a first-quarter profit of $1.4-billion (U.S.) or 35 cents a share, and although that was decline from $2.55-billion, or 61 cents a share, a year earlier, its once-dreadful North American unit put on a stellar performance.
The Ford results, combined with those of Chrysler Group LLC released Thursday, show how what was once a money pit for the Detroit Three is now the star performer as Europe writhes in a sovereign debt crisis.
The Detroit Three, two of whom tumbled into Chapter 11 bankruptcy protection in 2009, are benefiting from a steady recovery in U.S. vehicle sales. But they are also being helped by reductions in debt of tens of billions of dollars and the elimination of the overcapacity of vehicle production that led to massive losses even before the recession hit in 2008.
“We are off to a good start for 2012 and we expect this to be a solid year in financial performance,” Ford chief executive officer Alan Mulally told analysts, investors and reporters on a conference call Friday.
The auto maker’s North American operations led the way with a pre-tax profit of $2.1-billion, a $289-million improvement from year-earlier levels and what Ford said is the highest quarterly profit since at least 2000.
That was enough to offset declining profit in South America and deepening losses in Europe and Asia-Pacific.
Ford posted a pre-tax loss of $149-million compared with a profit of $293-million a year earlier.
“This past quarter was the lowest industry that we have seen in Europe since 1995, so this is looking like the U.S. back in ’08, ’09,” Ford’s chief financial officer Bob Shanks said on the conference call.
In another similarity to the U.S. auto crisis, fewer customers are bringing their vehicles in for service and they’re spending less on repairs than they once did, Mr. Shanks added.
“What we clearly have to work on is our cost structure.”
Sergio Marchionne, chief executive officer of Italy-based Fiat, parent of Chrysler, renewed earlier calls for a Europe-wide solution to the problem of overcapacity, which is causing a destructive price war, even as government austerity plans deepen the slumps hitting several national markets.
“Europe is a problem for everybody; there’s just too much capacity there,” said Mirko Mikelic, a portfolio manager at Fifth Third Asset Management in Grand Rapids, Mich., which recently invested in Ford debt.
Ford took another step Friday to reduce costs in North America by saying it would offer a lump-sum payment to salaried retirees and former salaried employees to replace their pensions.
“This has never been done before by a company certainly of this size,” Mr. Shanks said, so he has no way of knowing how many former salaried employees will accept the offer. “But this is a big step forward and we are very, very excited about it.”
With files from Bloomberg NewsReport Typo/Error