Ford Motor Co reported its best first-quarter profit since 1998 as higher prices for such redesigned vehicles as its tiny Fiesta more than offset pressure from spiking commodity and oil prices.
The better-than-expected profit posted on Tuesday represented Ford's strongest first-quarter performance since the peak of the SUV boom and reassured investors after disappointing fourth-quarter earnings.
The result also showed the success that the No. 2 U.S. automaker has had in getting consumers to pay more for improved quality in its cars and new technology in vehicles like the new Focus compact.
Ford also said it expected to ride out the disruption in parts supplies from Japan with only a minimal impact to its production in Asia, setting the automaker up to take share from its Japanese rivals, analysts said.
Shares of Ford, which had slumped 15 percent since late January, were up 2.8 percent at $15.98 in the afternoon.
Ford shares have gained almost 10-fold from early 2009, but skeptical analysts and investors have cited higher engineering costs and disappointing results in Europe as they marked down the automaker's prospects earlier this year.
Chief Financial Officer Lewis Booth repeated that Ford expected full-year profit to rise and said the first-quarter results put the automaker on track to meet that forecast.
This is a great start to the year, Booth told reporters at Ford's headquarters in Dearborn, Michigan.
Ford is the leading truck maker, but Chief Executive Alan Mulally has pushed for better balance with the roll-out of such cars as the Focus and Fiesta. He has repeatedly said Ford will put profit above market share in a break with the practice of U.S. automakers in recent decades.
While Ford's first-quarter market share fell in North and South America, and Europe, its profit per vehicle in its home market rose more than 30 percent from last year to over$2,700.
Higher sales prices contributed $900 million to Ford's first-quarter pretax profit. By contrast, commodity price pressure and other material cost increases represented a drag of $700 million.
In its home market in the United States, average margins rose $250 per vehicle from a year earlier, Edmunds.com said.
Mulally said buyers' desire for more features in cars even as they shift to smaller vehicles was helping pricing. In one example, he said heated leather seats were one of the most popular options for the tiny Fiesta.
That success has made investors and dealers happy.
Ford continues to get market share. We expect this trend will continue, said Channing Smith, co-manager of Capital Advisors Growth Fund, which owns Ford shares.
Mike Jackson, CEO of the largest U.S. dealer group AutoNation, echoed Smith's assertion.
Ford was the first U.S. automaker to report earnings since the March earthquake in Japan, and its results signaled that its Detroit rival General Motors Co could also take share from Japanese competitors Toyota Motor Corp, Nissan Motor Co Ltd and Honda Motor Co, Morningstar analyst David Whiston said.
Ford's net income rose to $2.55 billion, or 61 cents a share, compared with $2.09 billion, or 50 cents a share, a year earlier.
Excluding one-time items, it earned 62 cents a share, easily topping the 50 cents that analysts polled by Thomson Reuters I/B/E/S had expected. It was the seventh straight quarter of operating profit.
Revenue rose to $33.1 billion from $28.1 billion last year. Analysts had expected $29.7 billion.
Mulally said results in later quarters of this year may not be as strong as the first quarter.
On a conference call with analysts, he said Ford was well-positioned for what he called a marked shift away from large cars and trucks to smaller, more fuel-efficient vehicles.
CFO Booth said since the March 11 Japan earthquake, Ford has lost the production of 12,000 to 14,000 vehicles in Asia, where it has shut several plants temporarily.
Any near-term production losses are likely to recover in late 2011 and into 2012, Ford said. Production in Ford's business regions outside of Asia has not yet seen much change.
For the first time, Ford disclosed its projected second-quarter global production figure of 1.46 million.
Mulally agreed that industry sales may slow during the summer, but used and new-car pricing may improve as inventories tighten due to the Japan crisis.
Ford said higher commodity costs including oil and gasoline prices may provide headwinds to growth for the rest of the year. It expects commodity and operational costs excluding materials to each be about $2 billion above last year.
J.P. Morgan analyst Himanshu Patel in a research note also pointed to stronger-than-expected results at Ford Credit that he called unsustainable.
Ford Credit earned $713 million in the first quarter on a pretax basis. Patel had expected $428 million and credited stronger-than-expected performance on lease residuals.
Ford regained its footing in Europe in the first quarter, showing a pretax operating profit of $293 million, up from $107 million a year ago. In the fourth quarter, Ford had a loss of $51 million in Europe.
(Reporting by Bernie Woodall and Ben Klayman; Editing by Derek Caney and Matthew Lewis)