Ford (F -2.72%) reported net income of $1.6 billion, or $0.40 a share, for the first quarter on Wednesday, a better-than-expected result driven by a record profit in the company's North American unit.
Ford's result beat Wall Street's consensus estimate of $0.37 a share, and also handily topped Ford's $1.4 million net result in the year-ago quarter by 15%. It was Ford's 15th consecutive profitable quarter since emerging from the dark days of the financial crisis.
But despite the strong result, Ford still faces challenges – challenges that may turn into opportunities for further growth in time.
The best way to understand the state of Ford's global business is to look at the results for each of its divisions in turn. Here's how things broke down in the first quarter of 2013:
- North America continues to be the "engine" of Ford's business, as CEO Alan Mulally often says. Its pre-tax first-quarter profit of $2.4 billion was a bit less than some analysts had anticipated, but it was the highest for any quarter since the company started reporting the region's results separately in 2000. Ford's operating margin in North America was 11% during the quarter, an outstanding number that reflects Ford's strong pricing power and its very busy (and very profitable) factories. Ford has posted a double-digit operating margin for North America in four of the last five quarters.
- South America lost $218 million before taxes in the first quarter, a tough result but one that was better than expected. Ford had previously warned that the region could lose $300 million in the first quarter, as a currency devaluation in Venezuela and weakening exchange rates in Argentina hit the company's bottom line hard.
- Europe lost $462 million during the first quarter, and believe it or not that result is actually pretty good. Ford last fall unveiled a comprehensive restructuring plan for Europe, in response to deep recessions that have hammered new-car sales through the region, and said on Wednesday that it was already seeing signs that its changes were having a positive effect, though deep losses will likely continue for a while.
- Asia Pacific Africa posted a small pre-tax profit of about $6 million, but the story here continues to be a good one: strong growth offset by the big investments that Ford is making for even more growth over the next few years. Market share for the whole region was up 30% over the year-ago quarter; market share in China improved to 3.6%, a full point better than a year ago; and the company's big investment in new factories and facilities in the region is near its peak.
- Ford Credit, the company's in-house lending arm, posted a $507 million pre-tax profit, up $55 million from the year-ago quarter. The story here was good, with higher receivables and strong residual values for cars coming off lease driving gains.
The outlook: mixed, but brightening
Ford's guidance for the full year remains unchanged. The company expects North America's margins to come in around 10%, with full-year pre-tax profit somewhat higher than 2012's. South America is still expected to roughly break even, though the company is concerned about ongoing currency risk in Venezuela and Argentina.
Europe is still expected to lose $2 billion this year, worse than 2012, as industrywide new-car sales seem to be finding new ways to get even worse every month. And the company expects Asia Pacific Africa to roughly break even, as impressive sales growth will continue to be offset by Ford's (also impressive) level of investment in the region.