Ford (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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