Ford profit falls as European losses offset strong U.S. results

Although Ford Motor Co. continues to make large profits in America, its second-quarter earnings fell by more than half because of losses in Europe and other regions of the world.

Ford earnings slipped 57% to just over $1 billion in the second quarter, compared with the same period a year earlier. Earnings per share dropped to 26 cents from 59 cents a year ago. Revenue also declined, falling 6% to $33.3 billion.

However the automaker continues to post strong results in the U.S. and North America. Its operating profit in the region rose 5% to just over $2 billion.

Analysts said Ford did better than expected, given the negative economic news spewing from Europe during the last quarter.

Results from the second quarter “comes as some relief for a very beaten up auto stock,” said Adam Jonas, an analyst with Morgan Stanley & Co.

In morning trading, Ford shares fell 5 cents, or 0.6%, to $9.01.

While Ford acknowledged problems in Europe and elsewhere, the automaker signaled that its strong performance in North America will be nearly enough to offset the expected declines for the full year, Jonas said.

Other analysts also saw some positives in Ford’s report.

“Ford’s intermediate-term prospects are favorable, despite near-term challenges posed by Europe,” said Evan Mann, an analyst with Gimme Credit, a corporate bond research firm.

He noted that Ford’s liquidity remains strong, with cash exceeding total debt, and that its automotive operations continue produce strong cash flow.

As expected, Europe was the big problem for the automaker in the second quarter. Ford had an operating loss of $404 million in the region compared to a gain of $176 million in the same period a year earlier.

“Given the deteriorating external environment in Europe, Ford now expects its full-year loss in Europe to exceed $1 billion,” the company said in its earnings report. “The magnitude of this loss will be affected by a number of factors, including the overall economic environment, competitive actions, and Ford’s response to these developments.”

S&P; Capital IQ analyst Efraim Levy said, “Europe will likely remain a challenge, with no quick solution. South America will also likely be pressured by market conditions and government rules.”

Ford’s South American operations were barely profitable, with net income of just $5 million in the second quarter, down from $267 million in the same period a year earlier. The automaker was hurt by higher costs in the region and unfavorable exchange rates.

The automaker lost $66 million in China and in its Asian and Pacific region operations compared with a profit of $1 million a year earlier.

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