Ford earnings up 71% in 1st quarter


DEARBORN, Mich. -- Ford Motor Co. said yesterday that its earnings jumped in the first quarter, as strengthening sales in Europe and South America compensated for what the company called a surprisingly weak auto market in the United States.

The earnings disappointed Wall Street analysts, who had expected a stronger performance from Ford's core North American operations. Shares of Ford rose 62.5 cents, to $27.75, yesterday on the New York Stock Exchange.

In total, earnings rose 71 percent, to $1.55 billion. But in the first quarter last year Ford took an extraordinary charge of $440 million to account for the sale of First Nationwide bank, reducing its profits to $904 million. Excluding the charge, Ford's earnings improved by 15 percent.

Revenue during the quarter rose 14.5 percent, to $34.8 billion, and Ford made large gains in market share at home and abroad.

Within the United States, strong sales of light trucks like the Explorer sport utility vehicle raised Ford's share of the market to 26.6 percent, from 24.8 percent a year ago. Ford said that was its biggest share of the domestic market since 1978.

The Ford profit margins on sales in the United States deteriorated during the first three months of the year, however.

"The quarter was a small disappointment, particularly because of the margins in the U.S. business," said John Casesa, auto analyst with Wertheim, Schroder & Co.

Ford, which aims for profit margins of 5 percent, said the margins in its auto operations in the United States were 4.2 percent, down from 4.5 percent a year ago.

Rebates and other incentives were not the culprits. Instead, Ford said, the weakening dollar and increased product costs ate into profits.

David McCammon, vice president for finance at Ford, said currency fluctuations had raised the cost of the parts that Ford bought in Germany and Japan by about $100 million in the quarter.

He declined to quantify the increased costs, except to say that they could account for "two or three percentage points" of profit margin.

He said the costs to which he was referring included expensive equipment like the new engines that Ford was putting in products like its Contour and Mystique sedans.

Such costs will ultimately be paid off as more of those vehicles are sold, but in the short term they will eat into profits, he said.

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