* Pretax profit of 41 cts/share beats 37 cts/share estimate
* Higher structural costs tied to Europe overhaul, new cars
* Ford aims to build more volume off 9 platforms this year
By Deepa Seetharaman
DETROIT, April 24 Ford Motor Co posted a
higher-than-expected first-quarter profit on the strength of its
North American unit, but overall structural costs spiked as the
company took steps to re-invest in its global lineup and shore
up its European operations.
The No. 2 U.S. automaker paid an additional $900 million in
manufacturing, engineering and other costs partly due to its
efforts to ensure that Ford cars and trucks remain attractive in
an increasingly competitive market for new vehicles.
Under Chief Executive Alan Mulally, Ford is looking to build
more vehicles off global platforms, or chassis, to cut costs and
quicken product development. This year, Ford aims to build more
than 85 percent of its volume using nine global platforms.
"It costs so much to engineer a vehicle," Mulally said
during a conference call with analysts and reporters. "If you
can do that and you can then provide that vehicle to all four
regions of the world and everyone is sharing in that engineering
expense, clearly all parts of the business are benefiting.
"We actually can more rapidly and more realistically expand
our offerings around the world to a degree that we never have
been able to in the past," he added.
About 25 percent of the structural cost increase in the
quarter stemmed from Ford's efforts to restructure operations in
Europe, where an economic downturn has hit consumer demand for
new cars and trucks, Chief Financial Officer Bob Shanks said.
Higher costs also pinched Ford's margins in North America,
despite an increase in sales and transaction prices. North
American margins were 11 percent, historically high for the
company, but slightly lower than some analysts expected.
Barclays Capital analyst Brian Johnson said in a research
note that "Ford prefers to re-invest in the product content
rather than see margins run into the mid-teens."
Ford posted a first-quarter pretax profit of $2.1 billion,
or 41 cents per share. This topped the average analyst estimate
of 37 cents per share, according to Thomson Reuters I/B/E/S.
Revenue in North America, where Ford draws the bulk of its
earnings, increased by one-fifth as a recovering U.S. housing
market helped spur sales of the F-150 pickup truck.
EUROPE OVERHAUL ON TRACK
Ford also reiterated that it expects to lose $2 billion in
Europe this year, but added that its restructuring was on track.
Shanks told reporters that recent economic data in the
region painted a cloudy picture of when Europe would eventually
rebound. He added that automakers "seem to be running along the
bottom now" in Europe. The industry may see some stabilization
toward year-end or early 2014, he added.
During the quarter, Ford's market share in Europe was 7.7
percent. The company aims for European market share to be even
with 2012, when the company held 7.9 percent of the market.
"So we clearly expect to do better as we move forward in the
balance of the year," Shanks said.
Ford's first-quarter net income was $1.6 billion, or 40
cents per share, up from $1.4 billion a year earlier. Revenue
rose to $35.8 billion from $32.4 billion.
Ford's pretax profit in North America reached its highest
level since at least 2000, when it began reporting the region as
a separate unit. The company posted a $2.4 billion profit there,
with sales volume up 17 percent.
Ford lost $462 million in Europe, reflecting higher costs
and the economic downturn's impact on consumer demand for new
cars and trucks. In South America, Ford lost $218 million due to
unfavorable exchange rates, particularly in Venezuela.
In Asia Pacific/Africa, Ford earned $6 million. In China,
Ford's market share was 3.6 percent in the first quarter.
Fords shares were little changed at $13.36 in afternoon New
York Stock Exchange trading.