By Christina Rogers
Ford Motor Co. said steady demand for pickup trucks and
sport-utility vehicles pushed North American second-quarter profit
to record levels, helping offset softer conditions in China and
continued losses in Europe.
The Dearborn, Mich., auto maker said Tuesday it earned $1.9
billion in net profits during the quarter, a 44% increase compared
with the same three-month period a year ago. The auto maker's
operating earnings of 47 cents per share solidly outpaced analyst
expectations even as it saw revenue decline slightly to $37.3
billion due to the negative impact of foreign exchange.
Higher vehicle prices, aided by new products and consumer's
deciding to buy bigger vehicles amid low gas prices, helped the
company's core U.S. operation recover after a sluggish performance
over the first three months of the year. Although the wider Chinese
industry is weakening, Ford posted a record-high 4.6% market share
in China and reported a slight profit in the Asia-Pacific
region.
The results come less than a week after crosstown competitor
General Motors Co. said demand for big trucks also supercharged its
quarterly results. The U.S. rivals are striving to consistently
maintain 10% operating margins in North America, and both companies
surpassed that benchmark in the second quarter.
Detroit's finances are strengthening as quadrennial labor talks
with the United Auto Workers union kick off. UAW officials aim to
replace a contract expiring in mid-September with a more generous
deal for its members; domestic auto makers are likely to point to
their combined first-half profits of $9 billion in North America as
reason to stick to a profit-sharing model. By promising auto
workers they can share in the upside, GM, Ford and Fiat Chrysler
Automobiles NV hope to keep fixed costs low.
Ford's North America results come as the auto maker is still
working to finish launch activities related to a redesigned version
its top-selling F-150 pickup. Stronger pricing and a rich product
mix (buyers are opting for higher-end versions) are helping to
offset a truck shortage that is hampering sales and denting market
share.
Operating margins were 11.1% in North America and 7.8% in Asia
Pacific, but swung to a second-quarter loss of $14 million in
Europe. Ford reported pretax profit of $2.9 billion, up from $2.6
billion a year earlier.
The performance cheered Ford executives.
"Can we collectively say 'wow'?," Chief Financial Officer Bob
Shanks said, referring to the second-quarter results as he kicked
off a meeting with reporters early Tuesday at Ford's headquarters.
"It's a very robust performance report card for the company."
Ford Motor Co. reported a 44% jump in net income for the second
quarter. An earlier version of this article incorrectly said it was
46%.
Encouraged by brisk sales of its new F-150 truck, Ford
reconfirmed its full-year guidance, saying it expects operating
profits of $8.5 billion and $9.5 billion. "We think we now see a
path to get into the upper half of that range," Mr. Shanks
said.
In North America, Ford reported second-quarter operating income
of $2.6 billion, up $157 million. Ford's performance was bolstered
by record transaction prices on its new F-150 truck, which rose to
$44,000 during the quarter, up $3,600 from the same year-ago
period.
Ford sharply dialed back its industry projections in China, as
car-market growth has downshifted amid a broader economic slowdown.
It now expects sales to flat or down for the entire industry this
year.
In its Asia-Pacific region, where Ford has recently spent $5
billion to expand factory production in China, sales were down
slightly but pretax profits rose to $192 million, up $33 million
from a year earlier.
Mr. Shanks said the company is optimistic the new-car market
will continue to grow in China over the long term, reaching 30
million in industrywide sales by 2020. Ford, with about 5% of the
Chinese car-market, is counting on the region to drive most of its
growth through the end of the decade.
"The reality is China is still the biggest market in the world,
and in our view, it will continue to grow as we get to the end of
the decade," Mr. Shanks said.
Write to Christina Rogers at christina.rogers@wsj.com
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