Ford doubles profits in best-ever quarter

The combination of low gasoline prices and record auto sales in the United States is making for good times in the auto industry, and nowhere is that more evident than at Ford Motor.

Ford, the No. 2 American carmaker, on Thursday reported a record $2.5 billion in net income for the first three months of the year, an increase of 113 percent and more profit than in any other quarter in its 112-year history.

In North America, Ford's operating profit doubled to $3.1 billion. It produced fewer vehicles on the continent than General Motors, but made about $800 million more in profit than its crosstown rival.

"The first quarter was an absolutely terrific start to the year for us," Ford's chief executive, Mark Fields, said in a conference call.

Leading the way for Ford was the recently redesigned, aluminum-bodied F-150 pickup, which had strong sales, like those of other trucks and sport utility vehicles, as gas sold for less than $2 a gallon in many parts of the country. A year ago, Ford was just starting production of the aluminum model, working out hitches in the new manufacturing process. But now its F-150 lines are humming.

"They can't make enough of them," said David Kudla, chief executive of the investment firm Mainstay Capital Management. Also helping Ford is a turnaround in Europe, where it made more money in the first three months of 2016 than it did in all of last year.

In recent weeks, the auto business's six-year expansion streak has shown signs of losing momentum since hitting a high of 17.4 million cars and light trucks sold in 2015. To keep growth going, automakers have offered more incentives, pushed leasing to record levels and sold more cars into rental fleets.

Ford said it sold 1.7 million vehicles in the first quarter, an increase of about 10 per cent.

And Fields said Ford was in a good position even if the market is at its peak and sales plateau or tail off slightly.

Besides the F-150, Ford has recently released updated versions of its Explorer and Edge SUVs, and is working on four more new models, as people increasingly favour light trucks over sedans and compacts.

"We have reached an inflection point," Fields said of the shift. In the first three months of this year, trucks and SUVs made up 70 per cent of Ford's sales in the US, up from 64 per cent in the same period four years ago.

Because they tend to be higher-priced than cars, trucks and SUVs usually generate more revenue and profit.

"The bottom line is we expect 2106 to be another strong year," Fields said, forecasting "continued strength into 2017."

Like Ford, GM and Fiat Chrysler are also gaining from rising truck sales. GM and Fiat Chrysler each recently reported strong earnings increases for the first quarter. But not all automakers are benefiting as much. Luxury carmakers like BMW and Mercedes-Benz typically sell more cars than SUVs, so the shift away from cars is not helping them.

In the US, they have maintained sales but have had to offer more incentives.

Trucks are not the only bright spot for Ford. The company also benefited from an improving economy and the increased sales of more expensive models.

It did not hurt that Volkswagen, a major competitor, has been hobbled by its emissions-cheating scandal. In the first quarter, European profits leapt to $434 million. In the same period a year ago, Ford lost $42 million.

China, despite concerns about its economy, is also generating significant returns. Ford was once a laggard there but it has built a series of plants and is now building up market share. Its share of profits from its Chinese joint ventures in the first quarter was $443 million - $83 million more than a year ago

Over all, Ford reported first-quarter revenue of $37.7 billion, $3.8 billion more than in the same period in 2015.

Shares of Ford closed up more than 3 percent.