Future looks bright for Ford as Europe makes a profit

Ford Europe has reported a pre-tax operating profit of $107 million, compared with a loss of $585 million a year ago.

Overall, the U.S. car manufacturer posted net income of $2.1 billion in the first quarter, almost twice the figure projected by analysts. The increase was fuelled by a 37 percent rise in U.S. sales.

The profit compared with a loss of $1.4 billion a year earlier. Revenue rose to $28.1 billion from $24.4 billion.

Ford said the improvement in Europe was explained primarily by higher volume, lower costs, and higher parts profit. First-quarter revenue in Europe was $7.7 billion, up from $5.8 billion a year ago.

The first-quarter results prompted Ford to advance its forecast for becoming “solidly profitable” to this year instead of 2011.

“Our plan is working, and the basic engine that drives our business results — products, market share, revenue, and cost structure — is performing stronger each quarter, even as the economy and vehicle demand remain relatively soft,” CEO Alan Mulally said in a statement.

Ford expects to build 625,000 vehicles in North America this quarter, 30,000 more than its previous guidance and 194,000 units above the year-earlier total.

Ford expects its automotive structural costs to be “somewhat” higher in 2010 compared to last year as the carmaker boosts production to meet demand.

The company still forecasts year-end sales in the U.S. to be between 11.5 million to 12.5 million units this year. In Europe, Ford has raised its guidance on full-year industry volume to 14 million to 15 million units. Ford’s previous guidance was 13.5 million to 14.5 million. Ford expects its U.S. and European market shares to be equal to 2009.

The change in industry volume forecasts reflects strong first-quarter sales, although Chief Finance Officer Lewis Booth says there still is uncertainty about the extent of payback from scrappage programs in Europe.

“There’s a lot of momentum at Ford right now in terms of customers’ perception of their products,” said Efraim Levy, a Standard & Poor’s equity analyst in New York, before today’s results were released. “We’re hitting the point where it’s time to give them the benefit of the doubt, rather than view them with skepticism.”

Redesigned models such as the Taurus sedan helped boost U.S. market share to 17.4 percent through March from 14.7 percent a year earlier, the biggest jump since 1977, according to Ford. This year, dealers will get the new Fiesta and Focus small cars after Ford’s reliance on trucks contributed to $30 billion in losses from 2006 through 2008 as fuel prices surged.

Source: Automotive News