Ford overcomes sales dip to boost profits

Ford overcame a dip in global car sales volumes and a writedown in the value of a Russian joint venture to announce second-quarter net income up 6 per to $1.31bn.

The results were boosted by a return to profit in the troubled European market and record results in the core North American business. The company reaffirmed its forecast that full-year pre-tax profits will be between $7bn and $8bn.

However, South America recorded a $295m pre-tax loss, against a $151m profit for the same period last year, as economic problems in Venezuela and Argentina and Brazil's slowing economy hit demand and profitability.

Bob Shanks, chief financial officer, said the results reflected the "underlying strength" of the Ford business. As well as the economic problems in some parts of the world, the company is preparing a series of critical product launches, which have slowed production and distorted sales patterns.

"We are delivering strong results in a year of aggressive global product launches and difficult external conditions in many parts of the world," Mr Shanks said.

Group revenues declined 1 per cent to $37.4bn, as did wholesale volumes.

Looming product changes hit Ford particularly hard in the core North American market. The company is preparing later this year to launch a radically remodelled, aluminium-bodied version of its F150 pick-up truck, the market's best-selling vehicle. The company has been cutting back on incentives to buyers of existing models to ensure stocks are maintained during the 13 weeks that F150 production will be halted this year.

Vehicle volumes declined 5 per cent over the same period of 2013, while revenues declined 3 per cent to $21.2bn. Pre-tax profits were nevertheless up 5 per cent to $2.44bn as a result of lower costs and better parts and accessory profits.

Pre-tax profit in Europe was $14m, against a $306m loss for the same period last year, on revenues up 10 per cent to $8bn. However, the company took a $329m one-off charge to reflect the decline in the value of its Ford Sollers joint venture in Russia. There were also $152m in special charges for worker redundancy costs, mainly for closures of plants in the UK and Belgium.

Pre-tax results for the automotive sector as a whole grew 3 per cent to $2.17bn as improved results in the Middle East and Africa and in Asia-Pacific were outweighed by the South America loss. Pre-tax results in Financial Services declined 5 per cent to $429m, on revenue up 10 per cent to $2.1bn.

In reaffirming its full-year forecast, the company said it now anticipated bigger losses in South America than previously but better than expected profits in Asia-Pacific.

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