Ford's good news was joined by Chrysler. The company on Monday reported net income of $381 million, up 80 percent from $212 million a year earlier. The profit was due mainly to a 13 percent sales increase in the U.S., where Chrysler does three quarters of its business.
The company sold nearly 417,000 cars and trucks in the U.S. under the Jeep, Dodge, Ram, Fiat and Chrysler brands. Under the ownership of Italy's Fiat SpA, the Detroit company has been transformed since its 2009 trip through bankruptcy protection. It has posted profits since early last year and is now propping up Fiat, which is struggling with dropping sales in Europe.
While Ford's results in the U.S. trounced expectations, they were somewhat tempered by problems in Europe for all automakers, struggling through a recession that has been worse and more drawn out than the slow recovery in the U.S. Revenue dipped in the quarter compared with last year by 3% to $32.1 billion, and net income in the quarter was $1.6 billion, close to the same results from a year ago.
It will need its U.S. profits the next couple of years to off-set a bleak outlook in Europe. Ford lost $468 million in Europe, where auto sales are at their lowest level in nearly 20 years. The company says it expects to lose at least $3 billion in Europe over the next two years, including at least $1.5 billion this year.
Why such a strong result in the U.S amidst a slow recovery? Ford is getting higher prices and profit margins for its vehicles, and overall industry dales are tracking at a healthy 14.7 million units. During 2008, 2009 and 2010, Ford, like GM and Chrysler, restructured its operations, reduced excess manufacturing capacity and sold off or close unprofitable businesses like the Mercury, Jaguar and Land Rover brands.
In the third quarter, Ford earned about $2.3 billion in North America and saw an operating margin of 12 percent, a record high for the region.
"Twelve percent segment margins is just insane," said Jefferies analyst Peter Nesvold, who has a "buy" rating on Ford. "It is hard to believe that any OEM can sustain 12 percent segment margins over the long term."
Ford is amidst a couple of key new product launches -- the all-new Ford Fusion, Lincoln MKZ and C-Max. The C-Max, which is a hybrid that will also come as an extended-range electric, is meant to take on the Toyota Prius franchise in the hybrid/EV space, and is off to a good start. AOL Autos just named the new Ford Fusion the best family sedan in that hotly competitive category.
If there is a worrisome mark on Ford's outlook it is the continued bad publicity for its MyFord Touch infotainment system, which was excoriated by Consumer Reports this week for the second straight year. Ford finished 27th of 28 brands ranked by CR for reliability. Besides MyFord Touch issues, glitches in the new versions of the Explorer, Fiesta and Focus also contributed to the tumble as well.
That bad news so far is not hampering Ford sales and profits, but it could begin to dent the automaker's recovery if it doesn't accelerate changes and fixes.
Reuters and Associated Press contributing