On Friday, Ford reported a fall in
quarterly profit that beat street expectations. Since then, the stock price has slid about $1
on macroeconomic concerns: Europe debt worries & disappointing domestic GDP
numbers.
In the first fiscal quarter of 2012,
ford earned $1.4 billion. This is a
large drop from a year earlier--the first quarter of 2011 yielded $2.55 billion
in earnings. Ford incurred higher taxes
in the most recent quarter, which dragged down profits with the help of losses
in Europe and Asia. CFO Bob Shanks said
that Ford has lowered its guidance on European demand for the next five years
and will lose about $500-600 million for this fiscal year. Guidance for the Asia Pacific area was also
lowered. But, there is some form of a silver lining. Increased productivity and
product launches should still help profitability in the rest of the year.
Ford showed strength in its domestic
market, with an increase in $289 million in pre-tax profit year-over-year. This is the highest quarterly profit in this division since 2000. Its operating
margins in this area increased 1.2% since 1Q2011 because they have been
focusing on a smaller product line. But,
there is a caveat in this improvement.
Ford has lost market share in the U.S., dropping from 16% to 15.2%.
On April 20th, 2012, Ford
announced a $5 billion investment in China.
New dealerships and factories should be completed by 2015. In the
conference call, management reaffirmed that although there are some concerns
about China’s future growth, middle class consumers’ demand in China is not
fully saturated.
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