DETROIT Ford Motor Co (F.N), the No. 2 U.S. automaker, posted a higher-than-expected profit for the first quarter as the strength of its core North American unit offset weak results overseas, particularly in Europe, and higher taxes.
Ford's stock fell, however, as analysts said the company's profit outlook suggested that second-quarter results will fall short of estimates. Ford also said on Friday it lost U.S. market share in April because it cut back incentives too quickly.
During a conference call with analysts and in an interview, Chief Financial Officer Bob Shanks declined to provide specific projections, but said the second quarter would be hit by costs linked to new vehicle launches, added capacity and other items.
"There's a little bit of fear that second-quarter numbers are going to go down from here," Jefferies analyst Peter Nesvold said. Analysts project Ford will earn 42 cents per share in the second quarter, according to Thomson Reuters I/B/E/S.
Ford said earlier this month that it would lose U.S. market share this year as consumer demand for cars and trucks is outstripping Ford's capacity to build them.
But the market-share losses will not undercut profit in North America, Ford said. Upcoming models, such as the 2013 Fusion sedan and Escape sport-utility vehicle, will be able to command higher prices.
Still, Ford must strike a balance between maintaining profits and not raising prices so high that they ward off car shoppers. Ford's April sales were hurt in part because the company's vehicle prices were higher than the industry average.
"I think our results in April would probably show that consumers have looked at those prices and thought they might find a better deal elsewhere," Shanks said in an interview.
Ford will fine-tune its sales strategy in the coming months, but the automaker will not "go crazy" on incentives, he said.
Ford shares fell 2.3 percent to close at $11.60 on Friday, after falling as much as 2.9 percent earlier in the session.
FORD FOOTPRINT 'UNBALANCED'
In the quarter, Ford lost money in Asia as China's growth slowed and in Europe, where demand for cars is falling. Its profit in South America shrank.
But operations in North America posted their highest quarterly profit since 2000, when Ford first broke out results for the region.
As a result of weakness overseas, Ford will rely heavily on North America to meet its profit targets this year. Ford expects its 2012 pretax profit to be on par with 2011 levels.
Ford expects to be more profitable in the second half of 2012 than in the first.
"This company's footprint is so unbalanced," Morgan Stanley analyst Adam Jonas said. "That is probably the single biggest challenge facing the company today."
The automaker reported first-quarter net income of $1.40 billion, or 35 cents per share, down from $2.55 billion or 61 cents a share, a year earlier.
About half of the 45 percent drop in quarterly net income was due to a higher tax rate after Ford made an accounting change late last year, it said.
The decision to eliminate the so-called valuation allowance was a sign of Ford's confidence in its profit outlook. The change raised its effective tax rate from about 8.5 percent to roughly 33.5 percent.
Excluding one-time items, Ford reported a profit of 39 cents per share, compared with analysts' average estimate of 35 cents.
Revenue fell to $32.4 billion from $33.1 billion. Analysts had expected $31.27 billion.
Ford reported a pretax loss of $149 million in Europe where Shanks said auto sales fell to their lowest level since 1995. Ford reported an operating loss of $95 million in Asia. South America reported a profit of $54 million.
In the first quarter, North America posted a pretax profit of $2.1 billion. That was more than Ford's overall pretax profit of $1.8 billion.
RETURN OF THE BLUE OVAL
The quarterly results came days after Fitch Ratings upgraded Ford out of "junk bond" status, the first of the three major ratings agencies to do so.
As soon as one of the other major agencies boosts Ford to investment grade, the company will regain the rights to its iconic company Blue Oval logo. <ID: nL2E8FO2QU>
The Blue Oval was mortgaged along with most of the company's assets in 2006 as it borrowed $23.5 billion to fund a turnaround from near-collapse.
This enabled Ford to be the only major U.S. automaker to avoid bankruptcy and U.S. government bailout in 2009.
Ford also announced a plan to offer lump-sum pension buyouts to 90,000 salaried retirees and former employees who are vested in its pension plan, starting in the third quarter.
The buyout program, which Ford described as unprecedented in its magnitude, will take a year and help the company cut its pension obligations.
In the first quarter, Ford recorded $255 million in special charges, largely due to buyouts of workers represented by the United Auto Workers union. About 1,700 of Ford's 41,000 UAW-represented workers took the buyout package.
(Additional reporting By Bernie Woodall; Editing by Gerald E. McCormick, Lisa Von Ahn, Dave Zimmerman, Matthew Lewis and Richard Chang)