Ford earns record $2.5 billion in record-setting first quarter
Ford Motor Co.’ s best financial quarter in its 112-year history is the latest sign of how far the auto industry has rebounded in the years following its near-collapse.
The Dearborn automaker, a decade removed from mortgaging its Blue Oval trademark and other assets to avoid bankruptcy, earned $2.5 billion in the first quarter, including a record $3.8 billion pre-tax profit and producing a record 9.8 percent profit margin.
And executives say it’s on track to perform as good or better than it did in 2015, when it made a record $10.8 billion pre-tax profit.
A week ago, Ford’s restructured crosstown rival, General Motors Co., said it’s on track for a banner 2016 and posted record first-quarter adjusted earnings of $2.7 billion before interest and taxes. And, while still lagging behind its Detroit counterparts, Fiat Chrysler Automobiles is still making millions on the backs of Jeep and Ram trucks.
Those strong profits come in an industry that’s selling new cars and trucks at never-before-seen rates with financing at record low interest rates. And, despite car production increasingly moving to Mexico, each of Detroit’s Big Three are investing billions in Michigan and surrounding states and creating thousands of union jobs as part of new lucrative deals with the United Auto Workers.
“Today, things are a lot different,” said Jessica Caldwell, senior analyst with Edmunds.com “The automakers have diversified their portfolios and it seems like some of the restructuring, although it was painful, really worked out.”
Ford’s earnings, which include earnings per share of 68 cents per share, are the start of financials that executives in the Glass House say will be as good or better than 2015, and will set Ford up for continued success. That’s in spite of an as-good-as-it-gets attitude from Wall Street, where investors believe the industry has reached a peak.
“I think we’re proving that to be a misconception,” Shanks said of that investor worry. “We’re seeing improvement in our operations outside North America.”
Ford’s stock, which has remained relatively flat despite strong numbers, rose 3.15 percent to $14.09 a share. Still, investors remain skeptical.
“The maturity of the U.S. economic cycle is restraining valuations, but we see better mix outweighing slower industry growth,” Efraim Levy, analyst at S&P Global Market Intelligence, said in a note.
As has been the case in recent years, Ford’s strong North American business led the way. It posted best-ever pre-tax profit of $3.1 billion — up $1.5 billion — and a record operating margin of 12.9 percent. The North American business was led by strong fleet sales of SUVs, its Transit vans and F-150 pickup.
The strong North America results show the importance of Ford’s F-150 and other profit-generating SUVs. This time last year, Ford was still dealing with low F-150 inventory levels due to the changeover, as well as the ramp-up of the Edge and MKX crossovers.
“It shows how massively important that truck is for Ford,” Kelley Blue Book senior analyst Karl Brauer said.
Ford made $434 million in Europe in its best quarter since 2008, thanks to lower costs and favorable mix of higher-priced vehicles. The automaker also more than doubled its profits to $220 million in Asia Pacific, driven in large part by China’s $443 million pre-tax profit.
Ford lost $256 million in South America due to a continued recession in Brazil, and it lost $14 million in the Middle East and Africa due to low oil prices and political turmoil.
“The first quarter was outstanding, and we are confident in our ability to drive strong results globally,” Chief Financial Officer Bob Shanks said in a statement.
The Dearborn automaker is coming off a year of record profits, and Ford on Thursday re-affirmed its guidance of full-year pre-tax results greater than or equal to 2015.
Shanks said he expects the first half of the year will be stronger financially than the second half, which is normal considering summer plant shutdowns that affect results in the second half of the year.
Later this year, Ford will begin selling notable nameplates like the Focus RS, Lincoln Continental and Raptor performance truck. It will also begin the change-over to the new aluminum Super Duty truck.
Beyond the day-to-day business of selling cars, trucks and SUVs, Ford has spent recent months positioning itself for the future as both an auto and a mobility company. In March, it created a subsidiary, Ford Smart Mobility LLC, to develop alternative transportation strategies and self-driving technologies in Dearborn and Palo Alto, California.
For the past year and a half, Ford has been working on initiatives that explore everything from car-sharing services to electric bicycles. It’s also investing heavily into the autonomous car space, testing its fleet of driverless Fusions in California, Arizona and Michigan and, earlier this week, joining a coalition to lobby lawmakers on autonomous technology.
Fiat Chrysler Automobiles NV on Tuesday posted a profit of 478 million euros ($539.4 million) in the first quarter. General Motors Co. last week reported a first-quarter net income of $1.95 billion — more than double from a year ago and strongly exceeding Wall Street expectations.