Ford Posts a Big Profit Despite Europe Loss

Ford Motor Company posts profitsFord (F) on Tuesday reported its 14th consecutive profitable quarter, with net income of $1.63 billion, or $0.41 a share. That solidly beat analyst estimates, which averaged about $0.30 a share according to a Bloomberg survey.

It's about equal to the $1.65 billion Ford reported a year ago. But the story behind the numbers is very different.

A Great Story for Ford at Home

While last year's profit was powered by decent results from around the world -- and a relatively favorable tax situation -- this year's different. Ford had outstanding results in North America in the third quarter. But those results were offset somewhat by ongoing struggles in Europe.

In North America, Ford posted a pre-tax operating profit of $2.3 billion, up sharply from the $1.6 billion that it earned a year ago. That comes despite a loss in U.S. market share, as Ford's improved pricing power increased its margins significantly.

The story in the U.S. is pretty simple: Many of Ford's production lines are maxed out, due to the popularity of strong new products such as the Focus and Explorer.

Because the economy has been only so-so, Ford has been reluctant to make the big investments needed to add assembly lines. Meanwhile, it can get great prices for its products -- with fewer discounts -- because demand is strong and the hot models are in short supply. That has boosted its per-car profits in its home market.

Troubles Overseas Mean Losses for a While Longer

Ford is investing for growth in Asia and South America, and those investments will cut into profits for a while. But the story in Europe is grim. Ford lost $468 million in Europe in the third quarter, and expects to lose over $1.5 billion overall in 2012.

That's a problem, but it's not just Ford's problem. Nearly all of the automakers that do business in Europe, including General Motors (GM) and Volkswagen (VLKAY), are struggling. The cause is a deep recession that has driven new-car sales to a near-20-year low, with no recovery in sight.

Last week, Ford announced a comprehensive plan to bring its European operation back to profitability. It's a good plan, but it'll take a couple of years to bear fruit. Meanwhile, losses are likely to continue -- but given Ford's strength at home, those losses shouldn't be too much of a problem for the Blue Oval.

At the time of publication, Motley Fool contributor John Rosevear (@jrosevear) owned shares of Ford and General Motors. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of General Motors and Ford.

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And they did it without a bailout. Imagine that. Doesnt GM have it's hand out agian?

October 31 2012 at 1:38 PM Report abuse +4 rate up rate down Reply

Rep. Paul Ryan, running mate of the presumptive Republican presidential nominee Mitt Romney, voted in December of 2008 to lend billions to General Motors and Chrysler. His vote puts him at odds with Romney and spotlights the difference in political needs of a sitting congressman versus an out of work governor.

Ryan was one of 32 Republican members of the House of Representatives who voted that year to lend money to the automakers from an already appropriated pot of money for the Department of Energy to make loans to automakers to aid in the development and manufacture of more fuel-efficient vehicles.

Ryan, a fiscal hawk, has said on different occasions that he did not want to see the automakers go bankrupt because, under a traditional bankruptcy, thousands of GM UAW retirees in his district could lose their benefits. Ryan's district includes Janesville, Wis., which was home to a GM plant that shuttered in 2008.

October 31 2012 at 11:00 AM Report abuse -2 rate up rate down Reply
2 replies to kafienkarl's comment

Oh how sad. You still have not found anything more useful to do with your time. Try contacting your local Salvation Army and see if the some volunteer opportunities for you dear, and stop wasting your time here posting your nonsense doll.

October 31 2012 at 12:09 PM Report abuse +4 rate up rate down Reply

Still, they are better for America than the P and VP we have now.

October 31 2012 at 1:37 PM Report abuse +2 rate up rate down Reply

Bush Feb. 2012
“I’d do it again,” proclaimed Bush, speaking to the annual convention of the National Automobile Dealers Association.
The bailout, which ultimately totaled $85 billion, was originally begun during the waning days of the Bush administration. With a specific rescue effort rejected by Congress, the former Commander-in-Chief decided to tap into a separate, $700 billion fund Capitol Hill did approve for the bailout of Wall Street and the banking industry.
“Sometimes circumstances get in the way of philosophy,” said the ex-president, during his speech in Las Vegas, referring to his normal stand in favor of free trade. “If you make a bad decision, you ought to pay,” he said, referring to the collapse of both General Motors and Chrysler.

October 31 2012 at 10:57 AM Report abuse -4 rate up rate down Reply
1 reply to kafienkarl's comment

Oh how unfortunate for you. Your George Bush derangement syndrome is getting out of control again darling.

October 31 2012 at 12:10 PM Report abuse +3 rate up rate down Reply

In all, the Bush Administration provided $25 billion in emergency assistance, $13.4 billion going to GM, another $4 billion to Chrysler. The Obama Administration added another $60 billion shortly after taking office.
Chrysler wrote off the money provided under Bush but last year paid back the loans the company received in 2009. General Motors, meanwhile, has returned $23 billion to the Treasury, partly by repaying loans and also by selling off more than half the shares taxpayers held in the automaker.
The government still holds a 26 percent stake, however, and GM officials appear to be waiting for a stock market recovery before staging a second stock offering. The maker’s shares plunged to less than $20 a share after the $33 price set during GM’s November 2011 IPO. The stock has rebounded recently, currently trading at just over $26 a share. But to break even, the Treasury would need to get more than $50 a share on its remaining GM holdings.
Concluding his speech to the NADA convention, Bush said “I didn’t want to saddle my successor with an additional economic crisis,” drawing a standing ovation from the dealers, the trade group’s President Bill Brady describing the decision as “courageous.”

October 31 2012 at 10:54 AM Report abuse -3 rate up rate down Reply
1 reply to kafienkarl's comment

Oh no. How sad. Your George Bush derangement syndrome appears to be re-surfacing again dear. Perhaps it would help if you found something more beneficial to do with your time instead of posting nonsense. It might help dear. At least try darling. It couldn't hurt.

October 31 2012 at 12:13 PM Report abuse +4 rate up rate down Reply

Despite the back-and-forth between President Obama and Mitt Romney over whether Mitt wanted Detroit to go bankrupt, both Chrysler and GM did exactly that. (Everybody also seems to forget that George Bush authorized the bailouts.) And the government engineered a reorganization that upended two centuries of bankruptcy law by handing the equity in Chrysler to the United Autoworkers to cover their pension plans, rather than honoring the claims of other creditors. This big favor to the UAW may have bred bad feelings among the millions of auto buyers who didn’t receive similar treatment from the government.

October 31 2012 at 10:46 AM Report abuse -5 rate up rate down Reply
3 replies to kafienkarl's comment

Ford's new C-Max will boost their sales big time. Great reviews on the C-Max so far, 47 miles per gallon, definetly a front runner with Toyota's Prius, as it beats overall miliage.

October 31 2012 at 10:28 AM Report abuse +3 rate up rate down Reply

People that want to blame government for everything can be wrong. FORD CEO wanted the government involved in the auto bailout. Why? the collateral damage of letting the so-called free market work it out would have been devastating. The big three use the same suppliers and many dealerships have all three competitors as product. Remember Bush wrote the first check. Personally, I wish the auto bailout didn't have to happen but it did for good reason. Was it perfect? nope. The notion that Romney has all the hindsight answers is pathetic. Romney wanted a less efficient bankruptcy. It's well known the creditors weren't their under his rendition. Romney is just flat out wrong and like we learned from Paul, Gingrich and Santorum ..Romney is a liar. pathetic.

October 31 2012 at 10:20 AM Report abuse -3 rate up rate down Reply
2 replies to kafienkarl's comment

You're pathetic by making this biased political bull. Neither Bush or Romney have anything to do with the Ford Motor company.

October 31 2012 at 10:31 AM Report abuse +4 rate up rate down Reply
2 replies to s.kohanski's comment

Bush started the auto bailout that FORD wanted period. Call me names all you want. The issue is Ford and the auto industry. Romney lied about Chrysler sending all of Jeep production overseas. A lie according to many resources one being the CEO of Chrysler. You brought up the bailout.

October 31 2012 at 10:37 AM Report abuse -3 rate up rate down

I said GM burned too many stockholders is what I brought up. You are nothing but a partisan hack for the promotion of our failing president. You Blame Bush for all of Obama's shortcomings. If BUsh first gave GM money on the bailout, how come you give Obama credit for saving GM ?

October 31 2012 at 10:47 AM Report abuse +4 rate up rate down

They both get credit. Keep up the name I know it feels good tough guy.

October 31 2012 at 10:49 AM Report abuse -5 rate up rate down Reply
1 reply to kafienkarl's comment

Partisan Hack

October 31 2012 at 11:03 AM Report abuse +3 rate up rate down

Ford will continue this trend as GM burned too many previous stockholders after getting bailed out. They dug their own grave. The only way they can survive another bad hit is to go crawling back to the UAW, the real owners of Government Motors.

October 31 2012 at 10:18 AM Report abuse +6 rate up rate down Reply

Go Ford !!

October 31 2012 at 10:13 AM Report abuse +5 rate up rate down Reply

It’s true that Ford was not “bailed out by our government,” as Chris says. However, the company’s president and CEO testified that his company would suffer if Congress did not pass legislation to provide financial support to the ailing auto industry. He urged Congress to pass the bill.

Mulally, Dec. 5, 2008: In particular, the collapse of one or both of our domestic competitors would threaten Ford because we have 80 percent overlap in supplier networks and nearly 25 percent of Ford’s top dealers also own GM and Chrysler franchises.

He also asked Congress to authorize a credit line of up to $9 billion for Ford in case the economy got worse and the company needed it.

Mulally, Dec. 5, 2008: In addition to our plan, we are also here today to request support for the industry. In the near-term, Ford does not require access to a government bridge loan. However, we request a credit line of $9 billion as a critical backstop or safeguard against worsening conditions as we drive transformational change in our company.

The Automotive Industry Financing Program — which was created under the Troubled Asset Relief Program — provided $79.69 billion to GM, GMAC and Chrysler. So far, they have paid back a little more than half of the money, or about $40 billion, according to Treasury’s daily report for Sept. 16 on TARP funds.

Ford did not receive any money under AIFP, but that doesn’t mean it didn’t get any federal assistance.

October 31 2012 at 10:11 AM Report abuse -4 rate up rate down Reply
2 replies to kafienkarl's comment

Who the hell is "Chris" ?

October 31 2012 at 10:36 AM Report abuse +2 rate up rate down Reply

Oh my how sad. Such a waste of time when you could be out doing volunteer work in your community Karl dear. You might feel better about yourself and maybe take away some of your bitterness if you do some good for others darling instead of wasting your time posting your nonsense here doll.

October 31 2012 at 12:20 PM Report abuse +3 rate up rate down Reply