Ford Motor Co reported its best first-quarter profit since 1998 as higher prices for redesigned vehicles including its small Fiesta offset pressure from spiking commodity and oil prices.
Ford's better-than-expected profit, and strongest first-quarter since the peak of the SUV boom, reassured investors after a disappointing fourth quarter.
It also showed the success the No. 2 U.S. automaker has had in getting consumers to pay more for improved quality and technology in vehicles like the Focus compact.
Ford also said on Tuesday that it expected to ride out the disruption in parts supplies from Japan with a minimal effect on its production in Asia, setting the automaker up to take market share from Japanese rivals.
Ford's shares, which had slumped 15 percent since late January, closed up 0.8 percent at $15.66 on Tuesday, after reaching $16.18 earlier in the day.
The stock has gained almost 10-fold from early 2009, but analysts and investors 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 would 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 America, South America and Europe, its profit per vehicle in its home market rose more than 30 percent from last year to more than $2,700.
Higher sales prices contributed $900 million to Ford's first-quarter pretax profit of $2.8 billion. Commodity price pressure and increases in the cost of other materials represented a drag of $700 million.
In its home market, Ford's average margins rose by $250 per vehicle from a year ago, according to Edmunds.com.
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 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 AutoNation , the largest U.S. dealer group, said product quality was a major factor.
There is a renaissance going on with Detroit product which is the real deal. he said.
Ford was the first U.S. automaker to report since the March earthquake in Japan, and its results signaled that General Motors Co could also take share from Toyota Motor Corp <7203.T>, Nissan Motor Co Ltd <7201.T> and Honda Motor Co <7267.T>, Morningstar analyst David Whiston said.
Ford's net income rose to $2.55 billion, or 61 cents per share, from $2.09 billion, or 50 cents per share, a year earlier. Excluding one-time items, it earned 62 cents per share, topping analysts' average forecast of 50 cents per share, according to Thomson Reuters I/B/E/S.
It was the seventh straight quarter of operating profit.
Since losing $30 billion between 2006 and 2008, Ford has been able to lower the number of vehicles its needs to sell to break-even. The company has not provided a break-even production figure, but made an operating profit in 2009 when U.S. auto sales of 10.4 million were the lowest in nearly three decades.
Ford on Tuesday maintained its outlook for U.S. industry light vehicle sales this year at near 12.7 million to 13.2 million.
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 that since the March 11 Japan earthquake, Ford had lost the production of 12,000 to 14,000 vehicles in Asia, where it has temporarily shut several plants.
Ford said it was likely to recover any near-term production losses late in 2011 and into 2012. Production in Ford's business regions outside 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 he said used- and new-car pricing might improve as inventories tighten due to the Japan crisis.
Ford said higher commodity costs including oil and gasoline prices may limit growth for the rest of the year. It expects both commodity and operational costs excluding materials to be about $2 billion more than last year.