Ford Outruns Analysts as Its U.S. Sales Climb

Ford Motor Co., profiting from robust car and truck sales in the United States, reported Wednesday that its second-quarter operating earnings rose 4% to $2.48 billion.

But the world’s second-largest auto maker said it is still struggling in Europe and South America.

Ford’s operating earnings translated to $2 a share and compared with $2.38 billion, or $1.91 a share, during the same period a year ago. Sales came to $42.3 billion, up 13% from $37.3 billion.

The results beat the average estimate of $1.95 by analysts surveyed by First Call Corp.

“Overall, the numbers were quite strong,” said analyst Gary Lapidus of Sanford C. Bernstein & Co. “Obviously, it’s all North America--the North American results were better than people expected.”

Ford reported net earnings of $2.34 billion, or $1.89 a share, including a one-time profit reduction of $146 million related to its January acquisition of the car making unit of Volvo of Sweden.

Ford said its automotive operations earned just under $2 billion in North America, up 19% from the year-ago period.

U.S. sales of cars and light trucks--sport-utility vehicles, minivans and pickups--are on track to break the 1986 industry record of nearly 16.1 million vehicles. In the first half of the year, sales were running at an annual rate of 16.7 million.

With a strong lineup of light trucks led by the Expedition SUV and Ranger pickup, Ford said it is well-positioned to continue profiting from the strong U.S. market.

“There are so many positive factors at work in the U.S. economy right now,” said Jac Nasser, Ford’s president and chief executive. “We’re confident vehicle sales will remain strong into 2000.”

News from overseas was not so bright.

Operating earnings in Europe totaled $214 million, down 31% from $310 million a year ago. Ford lost $120 million in South America after earning $14 million a year ago.

Ford did worse than expected in Europe, while South America was a disaster, Lapidus said. Ford said its biggest problems are in Brazil, where industry sales declined 20% in the first half. W. Wayne Booker, Ford’s vice chairman and chief financial officer, forecast no improvement before next year.

Booker said the addition of Volvo earnings did not affect Ford’s European results because the unit was “about break-even.”

Earnings improvements in the highly competitive European market will be gradual over the long term, Booker said. He acknowledged that without Volvo, Ford’s European market share would have declined in the second quarter.

Ford shares fell 56 cents to close at $52.94 on the New York Stock Exchange. So far this year, Ford’s stock is down 7%, clearly a frustration to Ford management.

“I wish I had the answer to that,” Booker said.

Some on Wall Street complain that although they like Nasser’s long-term strategy, they fear Ford doesn’t have a clear short-term plan to improve results overseas.

“The quarter is a reminder that despite what is clearly a compelling vision to transform the company longer term, there are some near-term challenges that Ford needs to address,” said analyst John Casesa of Merrill Lynch & Co.

Ford’s Detroit rival General Motors Corp. plans to report second-quarter results Tuesday, followed by DaimlerChrysler on July 29.