Higher Taxes, Europe Problems Cut Into Ford 1Q Profit

DEARBORN (WWJ) - Ford earned $1.4 billion in the first quarter. Solid profits, but a forty five percent decrease from the $2.5 billion dollar profit from the same period last year.

"Overall really a great first quarter and a good start to the year for Ford," said CEO Alan Mulally.

INTERVIEW: Ford CEO Alan Mulally talks with WWJ's Jeff Gilbert

Profits were impacted by a higher tax rate, and losses in Europe and Ford's Asia-Pacific-Africa region.

But higher sales lead to $2.1 billion earnings here in North America. That's the best showing since 2000.

"Ford has new product in most segments," said Michael Robinet, managing director with IHS Automotive Consulting. "They've hit the stride very strongly with consumers."

But, Robinet is concerned about ongoing problems in Europe.

"Ford, as well as other vehicle manufacturers are struggling with restructuring their European operations in the midst of unprecedented pressures."

Ford CEO Alan Mulally points out that the company's European losses—$149 million—are less than expected. He said they are working "decisively" to turn things around.

"We reduced our costs even more than we had in the plan originally, so we minimized the losses. We'll continue to match our production to the real demand by taking out shifts and reducing our costs."

Ford's Asia-Pacific-Africa region lost $95 million, but Mulally says that was due to new investments, which are expected to pay off over the long term.

Ford earnings were also impacted by the higher tax rate Ford is paying, now that it's consistently profitable. Ford is paying a 32.5 percent rate, compared to 8 percent last year.

Ford also spent money on buyouts.

If you take out all of the one time charges, Ford had a pre-tax operating profit of $2.3 billion. The company expects full year pre-tax operating profits to be in line with last year's.

Ford says it doesn't expect any production disruptions from the global shortage of nylon resins. The company says it plans to continue working closely with suppliers on the issue.

Mulally says Ford expects things to pick up as the year goes on.

"We have more new products that we're introducing in the second half of this year than we have in the past. So, that will definitely help on the revenue side."

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