Profits comeback at Ford is far stronger than expected: Cost-cutting measures and weakened Japanese competition help to combat effect of ailing economies

FORD, the US car giant, surprised the markets yesterday by reporting first-quarter profits far ahead of expectations, thanks largely to weakened Japanese competition in its domestic market and effective cost-cutting.

While continuing 'to grapple with weak economies around the world', Ford earned dollars 572m, or dollars 1.02 a share, in the first three months of the year, increasing turnover by dollars 2.2bn to dollars 26.8bn. It earned dollars 223m in the first quarter of 1992. The improvement was most dramatic in the US, where the car maker transformed a dollars 59m loss a year ago into a profit of dollars 113m. Harold Poling, chief executive, predicted much stronger gains for the balance of the year.

In the second quarter, production in North America is expected to expand for the first time in a year, rising 19 per cent over both current levels and those of a year ago, Mr Poling said.

In North America, the rising value of the yen and protectionist warnings have hurt Ford's Japanese competitors, forcing them to raise prices five times as fast as Ford.

The price advantage - which analysts estimate at more than dollars 2,500 a car - allowed Ford to gain 1.6 percentage points of market share during the quarter, giving it more than a quarter of the North American market for cars and trucks.

Elsewhere, Ford's automotive operations doubled their earnings over the first quarter of 1992 to dollars 63m, thanks to cost-cutting that more than offset declining European sales.

In Europe, Ford - excluding Jaguar - managed a narrow dollars 20m profit compared with a profit of dollars 250m a year ago. Jaguar continued to run up substantial losses, although these were reduced to dollars 55m from dollars 100m in the first three months of 1992.

Mr Poling was encouraged by the reception of Ford's new Mondeo in Europe in the past month. Dealers have ordered 150,000 of the 'world car', helping to increase Ford's market share by 0.7 of a percentage point from 1992 levels. 'The improvement in market share is good news as we enter the spring selling season,' he said.

While the car maker's results, particularly in the US, are a big improvement over last year, they represent a return on sales of only 1 per cent, the company conceded in a briefing for analysts in Detroit after the results were released. Recession in Europe and the slow pace of economic recovery in the US were the main reasons, Ford's finance director, David McCammon, told the analysts.

The company should be delivering a return of 4 to 5 per cent, he said, adding that the first-quarter results were below what investors should expect for 1993 as a whole.