Ford earnings down in 1Q

Michael Martinez
The Detroit News

Ford Motor Co.'s first-quarter earnings were lower than expected because of a strong U.S. dollar and the continuing rollout of the new F-150 pickup and Edge crossover. But executives and analysts expect stronger results through the rest of the year.

Despite the slow start to 2015, President and CEO Mark Fields said Ford is on track for a "breakthrough year" as it benefits from strong financial performances in North America and starts to reap the rewards of new vehicles.

The Dearborn automaker on Tuesday reported net income was $924 million in the first quarter, down $65 million from the same period a year ago. Its pre-tax profit of $1.4 billion was up $24 million from the same period last year. Earnings per share of 23 cents were down 2 cents. Revenue fell $2 billion to $33.9 billion.

Ford made $1.34 billion in North America, but that number could have been more than a billion dollars higher if not for lower production numbers for the F-150 (down 60,000 trucks from the same quarter last year) and Edge (down 15,000), according to Chief Financial Officer Bob Shanks.

"After the transition year of 2014, Ford was looking for 2015 to be the breakthrough year, but the turn has not yet occurred," Michelle Krebs, senior analyst at Autotrader, said in a statement. "The first quarter continued to be a struggle."

Starting next quarter, though, executives and analysts expect a different story. The Edge and F-150 should be at full production at their respective plants, and new plants will have opened in Ford's Asia Pacific region, allowing for added capacity and more money to be made overseas.

"I do think we'll see a better second half than first half," said Efraim Levy, equity analyst at S&P Capital IQ. "A lot of that will be product-driven."

Ford stock closed up 16 cents to $16.06 on Tuesday.

Ford has launched three vehicles so far this year: the Focus ST, Focus ST wagon and Edge. It plans to bring 15 new vehicles to showrooms this year.

Despite its financial success in North America, its $1.34 billion profit was $160 million less than it made here at the same time a year ago. That decrease can be attributed to slower sales of Ford's big-ticket items like the F-150 and Edge. Chief Financial Officer Bob Shanks said if production rates were normal, Ford's North America operating margin would have been 10 percent, not the 6.7 percent it reached.

"Months after the F-150 launched, Ford remains an automaker in transition," Karl Brauer, senior analyst at Kelley Blue Book, said in a statement. "The all-new aluminum truck is gaining traction in the marketplace, but its production rate isn't up to the previous version, and sales still aren't growing as fast as the segment average. ... The automaker's sales challenges should ease over the next 12 months as the F-150 hits its stride and updated models are brought to market."

Ford lost $189 million in South America, a $321 million improvement from a year ago. Ford lowered its guidance for the full year there, saying its financial results will be an "improvement" from a year ago. Previously, Ford had said it would have a "substantial improvement" there.

"South America is very much a commodity-driven region," Shanks said. "Right now we're in a weak commodity cycle."

Ford continues to struggle in Europe because of trouble in the Russian market. Ford lost $185 million there this quarter, a $9 million improvement from this time a year ago. It has pledged to remain in Russia and has continued to introduce new vehicles and invest there.

"We still hold the view that when the market stabilizes and ultimately recovers, it could be one of the biggest, if not the biggest market in Europe, and it's important for us to be there," Fields said.

Ford made $79 million in the Middle East and Africa and $103 million in Asia Pacific. After previously predicting a loss in the Middle East and Africa, Ford is now predicting to break even there this year as it adds capacity.

Much of Ford's success in Asia Pacific is attributed to China, where the automaker saw volume rise 10 percent.

"Our first-quarter performance (in China) is encouraging for us," Fields said. "I think we're well positioned with whatever the market throws at us."

Globally, Ford increased its market share 0.2 percentage points to 7 percent.

Ford re-affirmed its prediction of a 2015 pre-tax profit of between $8.5 billion-$9.5 billion.