By Deepa Seetharaman
DETROIT (Reuters) - Ford Motor Co
The No. 2 U.S. automaker reported first-quarter net income of $1.40 billion, or 35 cents per share, down from the $2.55 billion, or 61 cents a share, a year earlier.
As China growth has slowed and European auto sales are at their lowest levels since the mid-1990s, the company has said it is relying on North America to boost earnings this year.
Ford lost money in Europe and China, and earnings were weaker than a year ago in South America.
Several analysts said Ford's shares should rise slightly on Friday as the company had signaled to investors that Europe and China would be weak.
Ford shares rose 0.8 percent to $11.97 in premarket trading after its profit from continuing operations beat expectations.
Excluding one-time items, the company reported a profit of 39 cents per share compared with analyst expectations of 35 cents, according to Thomson Reuters I/B/E/S.
"Our sense coming into the quarter was that investor expectations were low and anxieties were high," said Itay Michaeli, analyst with Citi. "Ford delivered a solid quarter led by North America operating leverage, less severe results in Europe and solid operating cash flow."
Joseph Spak, analyst with RBC Capital Markets, said that Ford's loss in Europe "wasn't as bad as feared" but losses in China were greater than expected.
Ford reported an operating loss of $95 million in China, compared with a profit of $33 million a year ago.
North American pretax earnings were $2.1 billion, up $289 million from a year ago. That quarterly profit was the best since at least 2000, when the company began breaking out regional results.
Still, Ford says that its earnings in the second half of 2012 will be "a little bit higher" than the first half.
"We lost in total $190 million outside of North America," in the quarter, Chief Financial Officer Bob Shanks told reporters. "There's a lot of interest in terms of how much that would affect the overall profitability. I think we're able to keep it in a box for the most part."
About half the quarterly net income fall to $1.40 billion from $2.55 billion a year ago was due to a higher tax rate after Ford made an accounting change late last year, it said.
Revenue fell to $32.4 billion from $33.1 billion. Analysts had expected $31.27 billion, according to Thomson Reuters I/B/E/S.
For Europe, Ford reported a pretax loss of $149 million, hurt by dwindling auto demand as many countries there experienced recession-like conditions.
RETURN OF THE BLUE OVAL
Shanks said that not since 1995 have European auto sales been as low as they were in the first quarter.
The earnings came days after Fitch Ratings upgraded Ford out of junk bond status, the first of the three major ratings agencies to do so. Once one of the other major agencies boosts Ford to investment grade, the company will get back the rights to its iconic company Blue Oval logo.
The Blue Oval was mortgaged along with most of the company's assets in 2006 as it borrowed $23 billion to fund a turnaround from near-collapse. This enabled Ford to be the only major U.S. automaker to avoid bankruptcy and U.S. government bailout in 2009.
Ford also announced a plan to offer lump-sum pension buyouts to salaried retirees and former employees who are vested in its pension plan, starting in the third quarter.
The buyout program, which Ford described as unprecedented in its magnitude, will take a year and help the company lower its pension obligations, which credit rating agencies typically see as debt.
In the first quarter, Ford recorded $255 million in special charges, largely due to buyouts of workers represented by the United Auto Workers union. About 1,700 of Ford's 41,000 UAW-represented workers took the buyout package.
(Additional reporting By Bernie Woodall; Editing by Gerald E. McCormick, Lisa Von Ahn, Dave Zimmerman)