Ford quarterly profit beats, but growth push adds costs
By Deepa Seetharaman
DETROIT (Reuters) - Ford Motor Co (F.N: Quote) posted a higher-than-expected first-quarter profit on the strength of its North American unit, but overall structural costs spiked as the company took steps to re-invest in its global lineup and shore up its European operations.
The No. 2 U.S. automaker paid an additional $900 million in manufacturing, engineering and other costs partly due to its efforts to ensure that Ford cars and trucks remain attractive in an increasingly competitive market for new vehicles.
Under Chief Executive Alan Mulally, Ford is looking to build more vehicles off global platforms, or chassis, to cut costs and quicken product development. This year, Ford aims to build more than 85 percent of its volume using nine global platforms.
"It costs so much to engineer a vehicle," Mulally said during a conference call with analysts and reporters. "If you can do that and you can then provide that vehicle to all four regions of the world and everyone is sharing in that engineering expense, clearly all parts of the business are benefiting.
"We actually can more rapidly and more realistically expand our offerings around the world to a degree that we never have been able to in the past," he added.
About 25 percent of the structural cost increase in the quarter stemmed from Ford's efforts to restructure operations in Europe, where an economic downturn has hit consumer demand for new cars and trucks, Chief Financial Officer Bob Shanks said.
Higher costs also pinched Ford's margins in North America, despite an increase in sales and transaction prices. North American margins were 11 percent, historically high for the company, but slightly lower than some analysts expected.
Barclays Capital analyst Brian Johnson said in a research note that "Ford prefers to re-invest in the product content rather than see margins run into the mid-teens." Continued...