By Deepa Seetharaman and Ben Klayman
DETROIT, July 24 Ford Motor Co boosted its
full-year outlook and posted a second-quarter profit that
trounced expectations on stronger demand for its cars and trucks
in China and South America as well as a smaller-than-anticipated
loss in Europe.
The No. 2 U.S. automaker also was more optimistic about the
global picture, boosting its forecast for full-year operating
profit and industry sales in several regions including China and
"We're at the beginning of the phase where over the next
several years you'll start to see the operations outside North
America take on more and more significance," Chief Financial
Officer Bob Shanks told reporters. "You're starting to see
Ford shares were up 3.6 percent to $17.54, the largest
one-day percentage move so far this year.
The results reflected efforts to cut costs and simplify
operations under Chief Executive Alan Mulally, who was hired in
2006 to steer the company through its financial crisis.
Improving consumer sentiment suggested Europe, where an
economic downturn sent first-half industry sales to 20-year
lows, "may have begun to stabilize," Mulally said on a
conference call. Ford forecast a smaller loss in Europe this
year - $1.8 billion versus its previous outlook of $2 billion.
"They still have the Europe economic headwinds in their face
but maybe it's not blowing quite so hard," said Gary Bradshaw,
portfolio manager with Hodges Capital Management in Dallas,
which has boosted its holdings in Ford recently and now owns
about 250,000 shares.
For the second quarter, Ford reported a pretax profit of 45
cents per share, 8 cents better than the analysts' average
estimate, according to Thomson Reuters I/B/E/S. Revenue rose 15
percent to $38.1 billion.
The earnings report came days after Detroit filed for
bankruptcy, marking a new step for a city that boomed nearly 100
years ago, when Ford founder Henry Ford promised his employees
wages of $5 a day and helped create America's middle class.
CFO Shanks, who said the bankruptcy petition was not
affecting the automaker, noted Ford went through its own
"searing" restructuring that included closing numerous plants
around the world and cutting its work force almost in half.
"It is something you never forget," he said. "But as you can
see from the results that we have been announcing ... when you
work your way through it, when you come out the other end you
are much healthier."
The improvement is seen in Ford's core North American
operation, which reported a pretax profit of $2.3 billion,
boosted in part by higher truck sales.
Global vehicle prices, excluding the impact of incentives,
rose $1 billion in the quarter. Prices increased in every region
Overseas results especially pleased Wall Street as Ford
posted a best-ever quarterly profit of $177 million in Asia. The
$151 million profit in South America beat expectations, while
the $348 million loss in Europe was lower than last year.
Morgan Stanley analyst Adam Jonas described Asia as the
"star" of the quarter. The company now expects to be profitable
in the region this year instead of its previous forecast of
Taken together, operations in the three regions outside
North America broke even, Shanks said. In the first quarter,
they combined for a loss of $600 million.
TURNING POINT IN EUROPE
Ford is in the midst of overhauling its European business,
borrowing heavily from the playbook that led to its North
This week, it closed two U.K. factories and plans to close
its plant in Genk, Belgium, by the end of next year. Executives
said the restructuring plan in Europe is on track.
Shanks said Ford has reduced its reliance on the short-term
rental business in Europe and other low-profit sales strategies
to focus on selling cars to consumers and more profitable fleet
customers. He acknowledged the company increased incentives in
the region during the quarter, but not as much as rivals.
"There is a bit of a turning point here in the sense that
it's the first time we've had heard good news incrementally out
of Ford in Europe," said Citi analyst Itay Michaeli, who has a
"buy" rating on Ford shares.
Overall, Ford said its pretax operating profit this year
would be "about equal (to) or higher" than last year's $8
billion, rather than its previous forecast of "about equal."
It said its automotive operating margins this year would be
roughly the same as 2012, better than its previous outlook of
"about equal" or "lower."
The company also said 2013 automotive cash flow would be
"substantially higher" than last year's $3.4 billion. In the
previous quarter Ford had simply said "higher." In the first
half, Ford posted cash flow of $4 billion.
Ford is ramping up efforts in the United States. The company
plans a faster model changeover for the top-selling F-150
full-size pickup to take advantage as demand for such vehicles
grows at about three times the rate of the overall market.
With strength in its home U.S. market, Ford said it was
looking to hire 3,000 salaried workers this year, 800 more than
While many areas of Ford's headquarters were unused during
the downturn, employees are now fighting over space in the
building, Ford's human resources chief Felicia Fields told