Ford Cuts Full-Year Outlook As Quarterly Profit Plunges

Ford Motor Co.'s net earnings tumbled 58% year on year to $1 billion (€827 million) in the second quarter of 2012. The company lost money in all regions except North America.

Revenue slid 6% to $3.3 billion (€2.7 billion), and vehicle sales shrank 5% to 1.45 million units. Pretax operating income fell 36% to $1.8 billion (€1.5 billion), including a 39% drop to $1.4 billion (€1.2 billion) at Ford's automotive unit.

Ford, which had predicted that full-year pretax operating profit would match last year's $8.8 billion (€7.3 billion), now expects to fall short of that goal. The company has slashed 2012 capital spending to $5 billion (€4.1 billion) from the $5.5-billion-$6 billion (€4.5 billion-€5 billion) originally planned.

A big reason for Ford's lower outlook is the European loss exceeding $1 billion (€827 million) it now predicts. The company still projects "significantly higher" North American pretax earnings and margin. But Ford now expects its market share to shrink in the U.S. and Europe instead of maintaining last year's levels.

In Europe, pretax operating losses widened to $404 million (€334 million) in the April-June period from $149 million (€123 million) in the first quarter and a $176 million (€145 million) profit in the second quarter of 2011. Revenue contracted 21% to $7.1 billion (€5.9 billion), and vehicle sales fell 15% to 359,000 units. Ford's sales decline exceeds the overall market because the company is avoiding the deep discounts offered by rivals a policy it pledged to continue.

Pretax operating income in North America rose 5% to a near-record $2 billion (€1.7 billion) in the second quarter. The unit's operating margin widened to 10.2% from 9.8% a year earlier. Revenue increased 1% to $19.7 billion (€16.3 billion) despite a 2% decline in vehicle sales to 719,000 units.

Ford's Asia-Pacific and Africa unit swung to a $66 million (€55 million) loss in the latest quarter from a $1 million (€827,000) profit a year earlier. In South America, the company narrowed its loss to $5 million (€4 million) from $267 million (€221 million) in the same period of 2011.