European Deficit
The operating profit in North America topped Ford’s previous record of $2.3 billion in 2012’s third quarter. The region’s operating margin was 11%, ahead of the company’s full-year forecast of 10% in an industry where 5% is considered respectable.
A worsening economic slump in Europe stemming from that region’s debt crisis is holding Ford back. The automaker lost $462 million in that region during the first three months of the year. Ford reiterated its forecast that its full-year losses in Europe will widen to about $2 billion in 2013 from a $1.75 billion deficit a year earlier.
Venezuela’s devaluation in February and trade restrictions by Brazil and Argentina also are denting Ford’s results in South America. The company said it lost $218 million there in the first three months of the year, beating its forecast of about $300 million given in March.
Ford’s Asia Pacific Africa operations earned $6 million in the quarter after losing $95 million a year earlier. Ford is investing $4.9 billion in China, where it’s trying to catch up with market leaders GM and Volkswagen AG.
Revamping Europe
Ford is restructuring its European operations to try to end losses. The automaker plans to shutter three European factories by 2014, which is leading to disruptions across its plants as production is consolidated. Those closures will eventually save Ford $500 million a year, said Adam Jonas, an auto analyst at Morgan Stanley.
Ford has deferred by a year the introduction in Europe of the Mondeo, sold in the U.S. as the Fusion, because it’s now built at one of the plants due to be shut, at a cost of about $200 million, Jonas said. The company faces about $400 million of accelerated depreciation this year that will not recur once the three factories close, he said.
Lincoln Headache
As Ford revamps in Europe, it’s also trying to crack the luxury market, one of the company’s biggest headaches. Sales for its Lincoln line plunged in January to the brand’s worst monthly showing in almost 32 years as production of the MKZ sedan was slowed for quality checks. Ford said supply would be back to normal this month.
Lincoln deliveries in the first quarter fell 24% from a year earlier, the most of any brand with at least 100 sales, to 15,899. Toyota’s Lexus ES sedan, with 16,801 deliveries, by itself outsold all of Lincoln in 2013’s first three months.
“It’s time to focus on the luxury car and utility segments that buyers move up into,” Tynan, the Bloomberg Industries analyst, said in a telephone interview. “That’s going to be important, longer term, to keep loyal customers in the fold.”
