Ford has beaten analyst expectations with third quarter net income of $1.6bn, which was 63% ahead of the same quarter last year. Investors were particularly buoyed by automotive operating margin up by 1.7 percentage points to 5% .
Cost-cutting was at the heart of the profit gain, but Ford also did well due to strong sales of the F-150 and higher transaction prices in the US. There were also record pre-tax profits for the quarter in Asia. CEO Jim Hackett described the quarter as solid, but acknowledged that there is a lot of work ahead as the company faces up to major challenges in the auto business.
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On the costs front, Hackett said there were net material cost efficiencies and lower structural costs (although the comparison with last year is also favourable because of recall cost timings).
“This quarter demonstrates that our team’s focus on fitness is showing early promise,” Hackett said.
In the US, the F-Series had its best Q3 since 2005 and Ford said that average transaction prices of $45,400 per truck were up $2,800 from a year ago. Third quarter operating margin North America was up 2.3 percentage points to 8.1%. Pre-tax profit for NA in the third quarter was posted at $1.7bn and Ford noted a ‘strong cost performance’.
However, Ford posted a Q3 $86m loss in Europe, blaming Brexit effects, commodities and the impact of the launch of the latest Fiesta. It said it continues to expect Europe to be profitable for the year, but below the 2016 level. Favourable market factors and recovery in Russia help to offset Brexit effects and higher commodity costs.
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