Ford’s Quarterly Profits Drop 9%

Revenue at Ford Motor Co. rose 6% to $39.5 billion in the second quarter. And the company’s automotive cash flow climbed to an any-quarter record $4.2 billion. But net income fell 9% to $2 billion, as wholesale delivers stalled at 1.7 million units.

Ford warns its third-quarter results will be “very weak” because of slowing sales growth in the U.S. and new-truck launch costs. The company says it hopes to achieve earlier guidance of at least matching last year’s pretax profit and operating margin by improving its market analytics and taking unspecified steps to lower manufacturing costs.

In North America, the company’s pretax profit in April-June fell 5% to $2.7 billion. But strong fleet sales helped the unit increase its market share to 15.3% from 15.0%. Ford says the average retail selling price of its vehicles in North America rose by $1,300.

The company now predicts U.S. demand for new passenger vehicles this year will be somewhere between 17.4 million and 17.9 million, down from its previous midpoint range estimate of 18 million. Last year the U.S. light-vehicle market totaled 17.8 million units.

In Europe, Ford’s pretax profit nearly tripled to $467 million. Wholesales climbed 11% to 430,000 cars and trucks, and revenue grew 16% to $8.1 billion. The unit’s operating margin jumped 3.5 points to 5.8%.

Ford says the weakened British pound sterling caused by the U.K. vote to exit the European Union cost the company $60 million in the second quarter. It expects the cost to reach about $145 million in the second half of 2016 and as much as $500 million in 2017.

The company’s revenue in Asia Pacific rose 17% to $2.8 billion. But an eight-week plant shutdown for retooling cut wholesales by 21,000 units to 328,000 vehicles. Expansion costs and a weak yuan swung the unit to an $8 million pretax loss from a $210 million profit for the second quarter in 2015.

Ford reports its losses in South America deepened to $265 million from $185 million. Wholesales shrank 15% to 83,000 vehicles, and revenue fell 13% to $1.3 billion.

Ford Credit’s pretax profit plunged 21% to $400 million. But operating cash flow from automotive operations surged to a record $4.2 billion.