Ford Motor Co
The No. 2 U.S. automaker also cut its 2011 profit margin forecast, suggesting a weaker-than-expected fourth quarter. It cited slowing growth in China, pricing pressure in Europe and provided no timetable for when it might resume paying a long-anticipated dividend.
Ford shares fell as much as 7.2 percent on Wednesday before paring losses somewhat.
Investors and analysts had been looking to the earnings report as a turning point where the automaker could detail plans to pay its first dividend since it slid into crisis in 2006. Ford has posted profits for 10 straight quarters.
The quarter included a noncash charge of about $350 million to write down the value of hedges Ford had taken to offset the risk of rising raw material costs. Instead, the cost of aluminum, copper and precious metals fell sharply in September as concerns about weaker global growth mounted.
Falling commodity costs led to similar writedowns this quarter by discount carriers Southwest Airlines Co
A decline in raw material costs was supposed to help profits, however, Jefferies analyst Peter Nesvold said. Investors are showing some frustration that even as raw material costs are coming down it's not benefiting EPS.
Ford said the charge will either reverse if commodity prices rise or be offset by lower parts costs over the next 18 months.
The company in 2011 has not maintained gains made last year in U.S. market share and quality ratings.
Its U.S. market share has remained flat this year after showing a rise in 2010 to 17 percent from 15 percent the previous year. On Tuesday, influential watchdog Consumer Reports said Ford fell to 20th place from 10th place in its vehicle reliability study.
With general economic concerns, the quality issues Ford has had and Japanese competitors ramping up production, the company has its work cut out for it heading into 2012, Edward Jones analyst Matt Collins said.
Analysts gave the quarter lukewarm reviews, with J.P. Morgan calling it so-so and Citi describing the results as a bit messier than expected.
Revenue rose 14 percent to $33.1 billion. But net income slipped to $1.65 billion, or 41 cents per share, down from $1.69 billion or 43 cents per share a year earlier.
Excluding one-time items, Ford earned 46 cents per share, 2 cents higher than what analysts polled by Thomson Reuters I/B/E/S had forecast.
The company also cut its 2011 outlook for its automotive profit margin, saying it now expects 5.7 percent, down from 6.5 percent through the first three quarters. Last year, Ford's margin was 6.1 percent and it had previously forecast it would match or beat that level.
J.P. Morgan analyst Himanshu Patel said Ford's margin outlook implied a fourth-quarter profit of 23 cents a share. Analysts were expecting 32 cents.
Another disappointment for investors was the lack of news about a dividend, Jefferies, Nesvold said.
Ford Chief Financial Officer Lewis Booth refused to be drawn into specifics on a payout. We're on record as saying we'd like to pay a dividend sooner rather than later.
LOSSES IN EUROPE, ASIA
While Ford posted a pretax profit of $1.55 billion in North America as U.S. auto sales steadied over the summer and avoided the renewed slump some analysts had feared, losses were reported for Asia and Europe.
In Asia and Africa, the pretax operating loss was $43 million, compared with a $30 million profit last year. Ford said slowing growth in China contributed to the shortfall.
In Europe, Ford saw its loss widen to $306 million from $196 million a year ago. Booth said the caution for Ford's outlook partly reflected the risk of a competitive crunch in a region where automakers sacrifice margin by offering deeper discounts and by turning to lower-margin sales to fleet operators like rental agencies.
The pressure is really on margins in Europe, he said of the auto industry.
Booth reiterated Ford could restart a dividend before it regains an investment-grade credit rating.
After last week's agreement between Ford and the United Auto Workers union on a new four-year labor contract, Fitch Ratings and Standard and Poor's both raised the company's credit rating to within one notch of investment grade. Ford was last at investment grade in 2005.
Ford said recent floods in Thailand have cut fourth-quarter production so far by 17,000 vehicles due to supplier problems, but the company's plant was unaffected.
The company forecast its fourth-quarter global production at 1.37 million vehicles, up 22,000 from a year ago.
In North America, fourth-quarter production will be 660,000 vehicles, up 15,000 from its previous forecast. Of this total, about two-thirds will be trucks and sport-utility vehicles and a third will be passenger cars, Booth said.
Costs related to the contract ratification by Ford's 41,000 unionized U.S. factory workers were not reflected in the third-quarter results. Those costs will be reflected in fourth-quarter results, Booth said.
Ford lowered its automotive debt by $1.3 billion in the quarter, to $12.7 billion. Ford's debt-reduction efforts will save about $1 billion in interest payments in 2011 compared with 2010.
Ford shares were down 5.1 percent at $11.80 on Wednesday afternoon, off an earlier low at $11.54.
(Reporting by Bernie Woodall and Ben Klayman, writing by Kevin Krolicki; editing by John Wallace and Matthew Lewis)