Ford CFO: Business Is Great Beneath the Headlines

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Despite what seemed to be a solid quarter underneath the guise of some one-off charges that put a hefty dent in Ford’s (NYSE:F) earnings, investors took Ford to task on Friday in the New York Stock Exchange after its quarterly earnings missed expectations due to warranty costs, weather-related expenses, and other one-time expenses. Throughout trading, the stock remained about 3.3 percent, or $0.53, below Thursday’s closing price.

A big question whether the was the sell-off warranted. This, naturally, depends on who you ask — many investors apparently felt that, since they didn’t see the numbers they expected, it wasn’t worth sticking around. Closer examinations, however, reveal that beneath the nearly $1 billion erosion in Ford’s quarterly expense report (which on the surface admittedly looks alarming), the company’s underlying operations seem to be perfectly healthy. To gain some more insight into the company’s quarter, we spoke with Ford’s chief financial officer, Bob Shanks, after the report was released.

“It was a solid quarter, and the thing we were trying to convey today is that you put aside for the moment the things that we highlighted around the warranty reserves, the weather, the balance sheet [foreign] exchange effects, you know we had a very strong run rate of the business,” Shanks said in a telephone interview with The Wall St. Cheat Sheet. “North America has an operating margin of 7.3 with everything, and when you take out the warranty reserves — which isn’t something that happens day in and day out — we were up at about 10 percent, which is a really fantastic run-rate.”

North America wasn’t the only bright spot for Ford’s quarter, too. Asia Pacific is operating at record levels, having “reported a first quarter pre-tax profit of $291 million, an improvement of $319 million compared with a year ago, and a record for any quarter,” Ford said in its statement. “The improvement is more than explained by favorable volume and mix and higher royalties from joint ventures. Higher costs, including investment for future growth, were a partial offset.”

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