Ford Motor Co. said its first-quarter net income fell 39 percent from the same period a year ago to $989 million on weaker pricing in the United States and higher warranty expenses.
It was Ford’s 19th consecutive profitable quarter.
Profit margins in North America declined 35 percent, due to higher incentives and a $410 million increase in warranty reserves related to previously announced recalls and other service campaigns involving vehicles from past model years. Ford also said “weather-related costs” cut North American earnings by about $100 million.
Revenue edged up less than 1 percent to $35.9 billion, Ford said in a statement.
Ford CFO Bob Shanks characterized the quarter as “solid” despite the big year-over-year drop in net income.
“The underlying run rate for the business was much stronger than what was indicated by the bottom line,” Shanks told reporters at Ford’s headquarters. “It’s setting us up for stronger growth, stronger profitability in 2015 and beyond.”
Ford’s pretax operating profit dropped 36 percent to $1.4 billion. After taxes, its operating profit was equal to 25 cents a share, down from 41 cents a year ago and below the 31 cents that Wall Street had projected.
Meanwhile, at General Motors, surging transaction prices on trucks helped General Motors offset heavy costs from safety recalls and eke out a small profit in the first quarter.
GM posted net income of $125 million in the first three months of the year, down 86 percent from a year earlier. The bottom line reflected $1.3 billion in recall-related expenses as well as about $200 million in restructuring costs in GM’s European business.
The result for the January-March period was GM’s worst showing since the six-month period after its emergence from bankruptcy in 2009. Record-high transaction prices in North America helped it avoid the loss that many analysts had predicted and notch its 17th straight quarterly profit.
GM also recorded a nonrecurring pretax charge of $427 million, almost entirely for currency fluctuations in Venezuela. GM’s pretax income, including recall outlays but excluding the one-time items — the figure the company points to as most reflective of its underlying performance — dropped 74 percent to $466 million.
Revenue rose 1 percent to $37.41 billion.
“Sure, there have been setbacks. That’s part of our business,” GM CEO Mary Barra told analysts during a conference call today to review the first quarterly results since she took over Jan. 15. “Nevertheless, our overall progress has been sure and steady.
CFO Chuck Stevens reiterated GM’s goal of gaining market share in North America this year, despite the threat the recalls may dampen demand. GM’s share fell in the first quarter to 17.3 percent, from 18 percent a year earlier, according to the Automotive News Data Center.
“Although it is early, it appears we have not experienced a meaningful impact on sales” from the recalls, Barra said.
GM recalled 7 million vehicles during the quarter, equal to its total of the last four years. About 2.6 million are cars being recalled for a faulty ignition lock cylinder and ignition switch, which GM has linked to 13 deaths.
As a result of the recalls, GM said in a quarterly filing with the Securities and Exchange Commission that it is “the subject of various inquiries, investigations, subpoenas and requests for information” from several government agencies, including the SEC.
It is unclear if the SEC has opened a formal investigation. A GM spokesman declined to elaborate on the filing. An SEC spokeswoman said the commission “can neither confirm nor deny” whether it is investigating GM.