The company's net income fell 45 per cent to $1.4 billion in the first quarter. Ford took a beating from plummeting European sales and weaker results in Asia and South America. It also started paying more in taxes.
North America came to the rescue, with a $2.1 billion profit, its best first-quarter performance since Ford began reporting the region separately in 2000. In a note to investors, Jefferies analyst Peter Nesvold said Ford is seeing success no one would have predicted before its turnaround took hold three years ago.
"These are levels of profitability that few ever expected to see from the Detroit Three," he wrote.
To see how far Ford has come, consider the first quarter of 2004, when Ford made $1.8 billion in North America. The company sold 1 million cars and trucks that quarter, when the market was stronger. In the most recent quarter, with a weaker market, Ford made more money even though it sold just 651,000 vehicles.
Ford is making more because it has better products, and because buyers are shelling out cash for upgrades like Ford's touch-screen dashboard and inflatable seatbelts. Auto pricing site TrueCar.com said U.S. buyers paid an average of $31,723 for Ford cars and trucks in the first quarter, up more than $1,200 from the year before.
Also in 2004, high-profit trucks made up 60 per cent of sales; now, they make up 40 per cent.
"It underscores our ability to make money on vehicles other than trucks," Chief Financial Officer Bob Shanks said.
Fitch Ratings is so convinced of Ford's turnaround that it upgraded the company to investment-grade status this week for the first time since 2005. Shanks said the company is seeing some benefits, although it was already paying lower interest rates on Ford Credit debt.
"The market had already voted that we were at the low end of investment grade," Shanks said.
Ford still has some housekeeping to do. The company said Friday it will offer lump-sum payments to about 90,000 U.S. white-collar retirees and former employees, which it believes is the largest such offer in U.S. history. Payouts will start later this year.
Ford doesn't yet know how much the plan will cost, but Shanks says it will relieve Ford of the risk of low asset returns.
"There's no exposure to the volatility of the obligations," he said. "They're just gone. They're just not anything we have to deal with."
Outside North America, though, Ford still has plenty to deal with.
First-quarter sales fell by 60,000 vehicles in Europe, where economic uncertainty kept buyers away. Ford lost $149 million in the region. New products coming this year will help, but Shanks said Ford's costs are still too high to make money with such depressed sales.
"We're going to have to work on all aspects of cost," he said. "It won't be an overnight story. It's something we'll attack piece by piece."
In South America, where profits fell 74 per cent to $54 million, Ford has older products than its competitors and is getting hit by negative exchange rates.
In Asia, where Ford lost $95 million, the company is seeing a slowdown in China's blistering sales pace and is investing heavily in new plant construction that won't yield profits in the near term. Ford also had trouble launching its new Ranger small pickup in Asia because of last year's floods in Thailand.
Ford's net income of $1.4 billion, or 35 cents per share, fell from $2.5 billion, or 61 cents, in the first quarter last year. Revenue fell 2 per cent to $32.4 billion.
That put the company ahead of Wall Street's expectations. Without one-time items, including buyouts of 1,700 U.S. factory workers, Ford earned 39 cents per share. Analysts polled by FactSet forecast earnings of 35 cents on revenue of $32.3 billion.
Ford's stock price fell 27 cents, or 2.3 per cent, to $11.60 in Friday afternoon trading.
Investors are concerned about how Ford will do in the second quarter, said Barclays analyst Brian Johnson. He also expected the company to get a bigger boost from pricing in North America than the $100 million improvement it reported.
In some ways, Ford is actually a victim of its own success. This was the company's 11th straight quarterly profit, and it was the first quarter since 2006 that the company paid a more typical tax rate of 32.5 per cent compared with the 8 per cent it had been paying. Ford decided at the end of last quarter to return some deferred tax credits and other assets to its books because it is solidly profitable. The change cost the company $612 million, Shanks said.
General Motors Co., which has not yet made a similar move, reported a 10-per cent tax rate in its fourth-quarter earnings.
GM is expected to post results similar to Ford's when it releases first-quarter earnings next Thursday. Analysts polled by FactSet expect net income of $1.4 billion, less than half of what GM reported a year earlier. Half of last year's profit came from the sale of a stake in parts maker Delphi Corp.
Chrysler Group reported its best quarterly profit in 13 years on Thursday. The company earned $473 million in the first quarter, mainly from strong U.S. sales, which rose 39 per cent during the quarter.