Higher expenses due to a safety recall and a drop in pretax profit in North America contributed to the automaker's earnings decline. Fred Katayama reports.
Ford's quarterly profit plummeted by more than a third. Pressuring the second largest U.S. automaker: higher expenses due to a safety recall, rising commodity costs, and a 35 percent drop in pretax profit in North America. Plus, it had a tough comparison with the year before when the redesigned Ford F-150 pickup powered Ford to its best quarter ever. Ford's CFO said the first three months were its "toughest quarter" for the year due to the higher costs incurred, but he projected results for the rest of the year would be "flat to a little bit better." Ford's lower profit beat analysts' expectations. Buckingham Research Group analyst Joseph Amaturo said, "Despite the appearance of a beat, key operating metrics were down significantly year-on-year, which reiterates our view that Ford has reached "peak" earnings. Analysts have been expecting a slight decline in industry vehicle sales this year. Millions of leased vehicles are due to flood the market over the next few years, and that could further dent used-car values. Plus, ratings agencies have warned of worsening credit, although Ford says credit scores remained high. Ford shares added to their nearly 5 percent decline this year at the start of trading.