Ford sees European profit by 2015 as overhaul picks up speed
DETROIT (Reuters) - Ford Motor Co (F.N) boosted its full-year global profit outlook on Thursday as its European picture brightened and stronger overseas demand sparked better-than-expected third-quarter results.
The No. 2 U.S. automaker now expects 2013 pretax profit to top last year's $8 billion and losses in Europe to be less than they were in 2012. Chief Financial Officer Bob Shanks said Ford sees the European unit being profitable in 2015.
Ford's ongoing overhaul in Europe has borrowed heavily from Chief Executive Alan Mulally's strategy that led to Ford's North American renaissance. Executives had forecast a return to breakeven in Europe by mid-decade.
"The team is actually doing a better job, even than what we had expected in terms of driving forward this transformation plan" in Europe, Shanks said on a conference call. "This still leaves us firmly on track, maybe more firmly on track, to a profit, not breakeven, but a profit by 2015."
Ford said previously its global profit would be equal to that of 2012 and losses in Europe would be about $1.8 billion.
Ford's third-quarter net income fell by a little more than one-fifth to $1.27 billion, or 31 cents per share, due to nearly $500 million in special charges, including $250 million spent on restructuring Europe.
Excluding one-time items, Ford posted adjusted third quarter earnings of 45 cents per share, 7 cents better than the average estimate of analysts polled by Thomson Reuters I/B/E/S.
Also during the call, Mulally said he would "be pleased" to fulfill his commitment to stay at Ford until at least the end of 2014. Whether he leaves earlier than planned has been the subject of much debate over the last two months.
He has been considered as a CEO candidate at Microsoft Corp (MSFT.O), Ford's partner on its Sync and MyFord Touch vehicle infotainment systems.
During the call, Mulally declined to say whether he has been in touch with Microsoft about the job. Microsoft CEO Steve Ballmer said in August he plans to retire within 12 months.
Ford shares rose 1.3 percent to $17.75 in mid-day trading on the New York Stock Exchange. They hit a session high of $18, the best since late January 2011.
OVERSEAS LIFTS FORD PROFIT
The third quarter marked the first time in more than two years that Ford reported a combined profit in its three overseas operations: Asia Pacific and Africa, Europe and South America.
Ford narrowed its losses in Europe to $228 million in the quarter from $468 million a year ago. The performance trounced Wall Street estimates of losses exceeding $400 million.
In South America, the automaker had a pretax profit of $159 million, up sharply from $9 million last year. In Asia Pacific and Africa, Ford earned $126 million, nearly triple last year.
During the first nine months of 2013, Ford lost $1 billion in Europe and spent $400 million to restructure those operations. Ford closed two U.K. factories in July and plans to shutter its plant in Genk, Belgium, by the end of next year.
Ford's vehicle prices stabilized in Europe in the third quarter and overall auto sales in Europe may see "very, very modest growth" in the near term, Shanks said.
Still, the broader European recovery remains patchy, with some Ford rivals reporting lower vehicle prices, Shanks said. French carmaker Renault (RENA.PA) reported a 3.2 percent drop in third-quarter revenue on Thursday, while Daimler raised its fourth-quarter profit outlook.
Morgan Stanley analyst Adam Jonas projected that Ford would reach near-breakeven in Europe next year. As a result, analysts may boost their 2014 earnings-per-share outlook - now currently at $1.79 - to $2.00 or more, he said in a research note.
Ford reported a North American pretax profit of $2.3 billion in the quarter, little changed from last year, despite stronger sales of pickup trucks. North American margins were 10.6 percent in the quarter, roughly on par with 10.7 percent during the first nine months of the year.
Ford executives said during the call that the margins were pinched in the quarter because Ford spent more on engineering. The automaker also faced higher compensation costs and sold more cars and small utilities like the Fusion mid-size sedan that have lower margins than pickup trucks.
During the third quarter, F-Series truck sales rose 18.1 percent, according to Kelley Blue Book. The F-series trucks and SUV derivatives such as the Expedition account for more than 90 percent of Ford's global profit, according to Morgan Stanley.
(Reporting by Deepa Seetharaman and Ben Klayman; Editing by Jeffrey Benkoe)