Ford profit takes a hit from Europe

Although Ford Motor Co. continues to make large profits in North America, its second-quarter earnings fell by more than half because of losses in Europe and other regions of the world.

Ford earnings slipped 57% to just over $1 billion in the second quarter from $2.4 billion the same period last year. Earnings per share dropped to 26 cents from 59 cents a year earlier. Revenue also declined, falling 6% to $33.3 billion.

However the automaker continues to post strong results in North America. Its operating profit in the region rose 5% to just over $2 billion.

The automaker was upbeat about its profit prospects in the U.S. in the coming months as it launches new designs of high-volume models, including the Fusion sedan and Escape sport utility vehicle. It also is working to revive the Lincoln brand and start selling a newly designed MKZ entrylevel luxury sedan this year.

Analysts said Ford did better than expected, given the negative economic news spewing from Europe during the last quarter.

Results from the second quarter come “as some relief for a very beaten up auto stock,” said Adam Jonas, an analyst with Morgan Stanley.

Ford shares fell 9 cents, or 1%, to $8.97 a share.

Asked about Ford’s sagging share price in recent months, the automaker’s chief executive, Alan Mulally, said, “It’s in the context of a very tough business environment worldwide.”

Although Ford acknowledged problems in Europe and elsewhere, the automaker signaled that its strong performance in North America will be nearly enough to offset the expected declines for the full year, Jonas said.

Other analysts also saw some positives in Ford’s report.

“Ford’s intermediate term prospects are favorable, despite near-term challenges posed by Europe,” said Evan Mann, an analyst with Gimme Credit, a corporate bond research firm.

Ford’s liquidity remains strong, with cash exceeding total debt, and its automotive operations continue to produce strong cash flow, he said.

As expected, Europe was the big problem for the automaker in the second quarter. Ford had an operating loss of $404 million in the region compared with a gain of $176 million a year earlier.

“Given the deteriorating external environment in Europe, Ford now expects its full-year loss in Europe to exceed $1billion,” the company said in its earnings report. “The magnitude of this loss will be affected by a number of factors, including the overall economic environment, competitive actions, and Ford’s response to these developments.”

Previously the company said its losses would be in the $500 million to $600 million range.