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Ford's Profits Take Off in First Quarter : Autos: Company earns $572 million in period, surprising analysts. Gain comes mostly from its financial services group.


Ford Motor Co. zoomed into high gear in this year's first quarter, earning a higher than anticipated $572 million.

Increased sales of cars and trucks contributed to the generally upbeat financial picture, but most of the improvement came from the company's financial services group.

Ford lost $6.7 billion in the first quarter of last year, largely because of a one-time accounting charge for retiree health care benefits. Without the special accounting adjustments, the company would have earned $223 million.

The auto maker's quarterly revenue rose to $26.8 billion, up 9% from $24.6 billion in the same period in 1992.

Ford's profit amounted to $1.02 a share, versus a loss of $13.85 a share a year earlier.

Wall Street analysts--who generally predicted a first-quarter profit of less than $400 million--were pleasantly surprised and predicted further improvement in future quarters.

"The source of the strength was more skewed toward financial services than expected, but you'd have to say it was a good quarter," said Maryann Keller, an industry analyst with the investment firm Furman Selz Inc. in New York.

In trading on the New York Stock Exchange, Ford leaped $1.875 to close at $54.50. The news also buoyed Chrysler, whose stock climbed $1.625 to close at $41, and General Motors, which shot up $2 to $42.375.

Still, analysts' optimism was tempered by a lack of improvement in Ford's profit margins from automotive operations. Keller attributed the flat performance to Ford's heavy spending to develop new cars--a move that she considers necessary, despite the expense.

But Michael Bowyer, an analyst with the Duff & Phelps investment firm in Chicago, warned that Ford seems to have lagged behind Chrysler in cutting costs. Bowyer also said Ford--despite reducing its sales incentives to consumers over the last year--still appears to be increasing its market share at the expense of profit.

At the Terry York Ford dealership in Huntington Beach, sales manager John W. Baker agreed with Bowyer that Ford still is discounting heavily.

"We're doing littler deals," he said. "We're just moving merchandise now."

But Baker said the dealership is also benefiting from an influx of customers "who would rather buy American cars and American products." And, Baker said, the dealership's financing business is up because interest rates have gotten more attractive.

Keller noted too that declining interest rates have improved Ford's profit by widening the spread between the company's cost of funds and its loan rates for car buyers. All told, Ford's financial services group posted earnings of $396 million, with both its Ford Credit and the Associates units reporting record profits.

Profit also improved from auto sales in the United States and foreign markets, despite declining business in Europe.

Ford's U.S. sales have been bolstered by the strong Japanese yen, which has boosted the price of imports, and by the weakened performance of General Motors. Led by the Ford Taurus--which surpassed Honda's Accord last year to regain its status as America's best-selling car--Ford's share of the U.S. auto and truck market rose to 25.7% in the first quarter from 24.1% a year earlier.

The company sold 75,000 more vehicles worldwide in the first quarter than it did a year ago, a 5% increase.

"Around the world, we still are grappling with weak economies, intense competition and excess industry capacity, all of which make achievement of improved financial results more difficult," Ford Chairman Harold A. Poling said in a news release. "Despite these circumstances, the company's successful new products and cost-reduction efforts should lead to better operating results in 1993 compared with 1992."

Resurgent Chrysler last week reported first-quarter operating profit of $530 million--although after a retiree health care write-off of $4.7 billion, the company showed a $4.15-billion loss.

GM, due to report its earnings today, is expected to show a small profit.

Better Quarter for Ford

Exceeding analysts' expectations, Ford Motor Co. reversed its record losses and posted a $572-million profit for the first quarter, crediting its financial operations and sharp gains in U.S. car and truck sales. First quarter, 1993: $572 million Source: Bloomberg Business News; Ford Motor Co; Researched by C.A. WEDLAN / Los Angeles Times

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