DETROIT (Reuters) - Ford Motor Co (F.N) posted an unexpected quarterly profit on Thursday, led by strong results in Europe and a sharply narrower loss in North America due to cost-cutting, sending its shares up more than 16 percent.
The automaker also cut its second quarter North American production plan and said it would offer more targeted buyouts to union workers at specific plants after getting about 4,200 workers to accept recent offers to leave the company.
Ford said it expects the rest of 2008 to be challenging. The company cut its full-year U.S. auto industry sales outlook due to the weakening economy and rising gasoline prices.
Ford said it remains committed to returning its auto business to profitability in 2009.
“Particularly impressive was the continued strength in Europe,” Calyon Securities analyst Mark Warnsman said in a research note. “The outstanding result in Europe would have meant little, however, if North America had not pulled itself back to close to breakeven.”
Ford reported net income of $100 million, or 5 cents per share, compared with a net loss of $282 million, or 15 cents per share, a year earlier. Revenue fell 8 percent to $39.4 billion excluding the Jaguar Land Rover unit Ford is selling to Tata Motors Ltd (TAMO.BO).
Ford expects to complete the Jaguar Land Rover sale by the end of the second quarter.
Ford reported a profit from continuing operations of $525 million, or 20 cents per share, excluding special items, while analysts on average expected Ford to report a loss of 14 cents per share on that basis, according to Reuters Estimates.
Like other U.S. automakers, Ford has been struggling with market share losses and a shift in consumer demand away from large sport utility vehicles to cars and smaller crossover SUVs built on passenger car platforms.
Ford, which posted losses of $2.7 billion in 2007 and $12.6 billion in 2006, has been cutting production capacity to match declining market share and meet the shift in demand for smaller, more fuel-efficient vehicles.
The automaker said cost-cuts totaled $1.2 billion in North America, which helped narrow the pretax operating loss in the region to $45 million from $613 million a year earlier.
Ford offered buyouts to its 54,000 United Auto Workers-represented employees and will offer targeted buyouts by plant and vehicle from this point. It did not give a target for either.
“It’s really an issue of cutting their way close to profitability in North America,” Argus Research analyst Kevin Tynan said. “That, as time goes by, gets harder and harder to do.”
Ford cut its North American production outlook for the second quarter by 20,000 vehicles to 710,000, or about 101,000 lower than a year earlier. It has also said it remains ready to cut production more if demand falls further.
Ford said it would cut truck production in North America by 40,000 and increase car production.
The company also cut its full year forecast for U.S. auto industry light vehicle sales to a range of 15 million to 15.3 million, from 15.7 million, a move executives tipped during a monthly sales conference call in early April.
Given that sales ran at about a 15.2 million seasonally adjusted annual rate in the first quarter, Ford is not banking on a significant rebound in industry sales in the rest of 2008. The outlook is about in line with forecasts from analysts and other carmakers.
Ford said it was expecting second quarter U.S. auto sales to be lower industrywide than the first quarter, followed by a lift in sales in the second half of the year.
“Next quarter when the fiscal and monetary policy starts to kick in, I think we’ll know a lot more about the pace of the recovery,” Ford Chief Executive Alan Mulally told analysts and reporters on a conference call.
Ford also said its Ford Motor Credit Co reported net income of $24 million in the first quarter, down from $193 million a year earlier, mainly reflecting a higher provision for credit losses, depreciation on leased vehicles and higher net losses related to market valuation adjustments from derivatives.
Ford shares were up $1.24, or 16.49 percent, at $8.76 on the New York Stock Exchange early Thursday afternoon.
Additional reporting by Ben Klayman; Editing by Gerald E. McCormick, Derek Caney, Toni Reinhold