Ford's profit tops expectations, recall-hit GM misses

Thu Jul 24, 2014 4:17pm EDT
 
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By Ben Klayman

DETROIT (Reuters) - Ford Motor Co one-upped its larger rival General Motors Co in the second quarter, showing a profit in Europe for the first time in three years while GM was weighed down by recall-related costs in the United States.

Ford managed to eke out stronger earnings that sent its shares higher on Thursday, while GM shares fell 5 percent even though both automakers had good quarters in North America and poor results in South America.

Still, the picture remains cloudy for both automakers in the second half, which for Ford will carry heavy costs because of new vehicles. The tough outlook was echoed by South Korea's Hyundai Motor Co, which also reported second-quarter results on Thursday.

"GM came in a little bit below market estimates and Ford did better," said Mirko Mikelic, senior portfolio manager with Clear Arc Capital, which currently does not own either stock. "GM also has some headwinds with all the recalls. That obviously doesn't help them."

GM executives said the No. 1 U.S. automaker's underlying business is performing on or ahead of a plan outlined in January, when they said full-year operating profit would rise modestly from $8.6 billion last year. However, its results were overshadowed by the continued noise surrounding the costs associated with recalls, including one for a defective ignition switch linked to at least 13 deaths.

The Detroit company's second-quarter profit fell short of expectations, but Chief Financial Officer Chuck Stevens touted strong results in the two largest auto markets - China and the United States. He reiterated GM's financial targets, including returning to profitability in Europe by mid-decade, and said overall results would be slightly stronger in the second half.

Meanwhile, Ford's profit was driven by record results in North America and it reaffirmed its forecast for a full-year profit of $7 billion to $8 billion.

The No. 2 U.S. automaker also repeated its warning that second-half results will reflect heavy costs related to a record number of vehicle launches, including the critical F-150 full-size pickup truck, a high-margin vehicle that is being extensively redesigned.   Continued...

 
A man walks past a new Ford car at the Jacob Javits Convention Center during the New York International Auto Show in New York April 16, 2014.  REUTERS/Carlo Allegri