Ford swings surprise profit

Ford Motor Co posted an unexpected quarterly profit, led by strong results in Europe and a sharply narrower loss in North America due to cost-cutting, sending its shares up more than 16 per cent.

The automaker also cut its second quarter North American production plan and said it would offer more targeted buyouts to union workers at specific plants after getting about 4,200 workers to accept recent offers to leave the company.

Ford said it expects the rest of this year to be challenging. The company cut its full-year US auto industry sales outlook due to the weakening economy and rising gasoline prices.

Ford said it remains committed to returning its auto business to profitability next year.

"Particularly impressive was the continued strength in Europe," Calyon Securities analyst Mark Warnsman said in a research note. "The outstanding result in Europe would have meant little, however, if North America had not pulled itself back to close to breakeven."

Ford reported net income of $100 million, or five cents per share, compared with a net loss of $282 million, or 15 cents per share, a year earlier. Revenue fell eight per cent to $39.4 billion excluding the Jaguar Land Rover unit Ford is selling to Tata Motors Ltd.

Ford expects to complete the Jaguar Land Rover sale by the end of the second quarter.

Ford reported a profit from continuing operations of $525 million, or 20 cents per share, excluding special items, while analysts on average expected Ford to report a loss of 14 cents per share on that basis, according to Reuters Estimates.

Like other US automakers, Ford has been struggling with market share losses and a shift in consumer demand away from large sport utility vehicles to cars and smaller crossover SUVs built on passenger car platforms.

With truck-heavy vehicle lineups, GM, Ford and Chrysler LLC CBS.UL are feeling the pinch, while Toyota Motor Corp and Honda Motor Co Ltd expand market share.

Ford, which posted losses of $2.7 billion last year and $12.6 billion in 2006, has been cutting production capacity to match declining market share and meet the shift in demand for smaller, more fuel-efficient vehicles.

The automaker said cost-cuts totalled $1.2 billion in North America, which helped narrow the pre-tax operating loss in the region to $45 million from $613 million a year earlier.

Ford offered buyouts to its 54,000 United Auto Workers-represented employees and will offer targeted buyouts by plant and vehicle from this point. It did not give a target for either.

"It's really an issue of cutting their way close to profitability in North America," Argus Research analyst Kevin Tynan said. "That, as time goes by, gets harder and harder to do."

Ford cut its North American production outlook for the second quarter by 20,000 vehicles to 710,000, or about 101,000 lower than a year earlier. It has also said it remains ready to cut production more if demand falls further.

Ford said it would cut truck production in North America by 40,000 and increase car production.

The company also cut its full year forecast for US auto industry light vehicle sales to a range of 15 million to 15.3 million, from 15.7 million, a move executives tipped during a monthly sales conference call in earlier this month.