Ford Motor Company NYSE: F today reported 2012 full year pre-tax profit of $8 billion

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Ford Posts Highest Fourth Quarter Pre-Tax Profit in More Than a Decade; Full Year Pre-Tax Profit of $8 Billion and Net Income of $5.7 Billion+

  • Strong full year pre-tax profit was $8 billion, or $1.41 per share, a decrease of $797 million from a year ago
  • Full year net income was $5.7 billion, or $1.42 per share; excluding impact of 2011 changes in valuation allowance against deferred tax assets, full year 2012 net income was $307 million lower than 2011
  • Positive Automotive operating-related cash flow was $3.4 billion for the full year and $1 billion for the fourth quarter — the 11th consecutive quarter of positive performance. Ford ended 2012 with Automotive gross cash of $24.3 billion, exceeding debt by $10 billion, and a strong liquidity position of $34.5 billion, an increase of $2.1 billion over 2011

  • Ford had its highest fourth quarter pre-tax profit in more than a decade — when trucks and SUVs were a more significant portion of the U.S. product mix — at $1.7 billion, or $0.31 per share, an increase of $577 million from fourth quarter 2011. Ford has now posted a pre-tax operating profit for 14 consecutive quarters
  • Total company fourth quarter net income was $1.6 billion, or $0.40 per share; excluding impact of 2011 changes in valuation allowance against deferred tax assets, fourth quarter net income was $565 million higher than 2011
  • Total Automotive full-year pre-tax profit of $6.3 billion was driven by Ford North America results, which set fourth quarter and full year records for pre-tax profit and operating margin since Ford began reflecting the region as a separate business unit in 2000. For the full year, Ford North America's pre-tax profit was $8.3 billion with an operating margin of 10.4 percent
  • Ford Credit reported continued solid performance with a full year pre-tax profit of $1.7 billion
  • For 2013 outlook, Ford expects another strong year, with Total Company operating profit to be about equal to 2012, Automotive operating margin to be about equal to or lower than 2012, and Automotive operating-related cash flow to be higher than 2012
Financial Results Summary +
Fourth Quarter
Full Year
2011
2012
B/(W) 2011
2011
2012
B/(W) 2011
Wholesales (000)
1,427
1,534
107
5,695
5,668
(27)
Revenue (Bils.)
$
34.6
$
36.5
$
1.9
$
136.3
$
134.3
$
(2.0)
Operating Results
Pre-tax results (Mils.)++
$
1,104
$
1,681
$
577
$
8,763
$
7,966
$
(797)
After-tax results (Mils.)+++
797
1,241
444
6,119
5,596
(523)
Earnings per share+++
0.20
0.31
0.11
1.51
1.41
(0.10)
Special items pre-tax (Mils.)
$
349
$
160
$
(189)
$
(82)
$
(246)
$
(164)
Net income attributable to Ford -- excl. 2011 changes in val. allow. against deferred tax assets
After-tax results (Mils.)
$
1,033
$
1,598
$
565
$
5,972
$
5,665
$
(307)
Net income attributable to Ford
After-tax results (Mils.)
$
13,615
$
1,598
$
(12,017)
$
20,213
$
5,665
$
(14,548)
Earnings per share
3.40
0.40
(3.00)
4.94
1.42
(3.52)
Automotive
Operating-related cash flow (Bils.)
$
0.7
$
1.0
$
0.3
$
5.6
$
3.4
$
(2.2)
Gross cash (Bils.)
$
22.9
$
24.3
$
1.4
$
22.9
$
24.3
$
1.4
Debt (Bils.)
(13.1)
(14.3)
(1.2)
(13.1)
(14.3)
(1.2)
  Net cash (Bils.)
$
9.8
$
10.0
$
0.2
$
9.8
$
10.0
$
0.2

See end notes on page 7.

DEARBORN, Mich., Jan. 29, 2013 - Ford Motor Company [NYSE: F] today reported 2012 full year pre-tax profit of $8 billion on the strength of record results from North America and continued solid performance from Ford Credit.

Full year pre-tax profit of $8 billion, or $1.41 per share, and net income of $5.7 billion, or $1.42 per share, were each lower than a year ago.  Excluding the impact of 2011 changes in the valuation allowance against deferred tax assets, Ford fourth quarter net income was $565 million higher than 2011, while full year was $307 million lower than a year ago.

Fourth quarter pre-tax profit was $1.7 billion, or $0.31 per share, an increase of $577 million from 2011. Ford now has posted a pre-tax profit for 14 consecutive quarters. Fourth quarter net income was $1.6 billion, or $0.40 per share.

Ford generated positive Automotive operating-related cash flow of $1 billion in the fourth quarter - the 11th consecutive quarter of positive performance - and positive Automotive operating-related cash flow of $3.4 billion for the full year. Ford ended 2012 with Automotive gross cash of $24.3 billion, exceeding debt by $10 billion, and a strong liquidity position of $34.5 billion, an increase of $2.1 billion over 2011.

“The Ford team delivered strong results once again, underscoring that our One Ford plan is working,” said Alan Mulally, Ford president and CEO. “We are well positioned for another strong year in 2013, as we continue our plan to serve customers in all markets around the world with a full family of vehicles — small, medium and large; cars, utilities and trucks — with the very best quality, fuel efficiency, safety, smart design and value.”

As a result of Ford's 2012 financial performance, the company will make profit sharing payments to approximately 45,800 eligible U.S. hourly employees on March 14, 2013. As part of the UAW-Ford collective bargaining agreement, Ford North America pre-tax profits of $8.3 billion will generate approximately $8,300 per eligible employee on a full year basis. Individual profit sharing payments may be higher or lower based on employee compensated hours.

As part of Ford's previously announced strategy to de-risk its pension obligations, the company made $3.4 billion in cash contributions in 2012 to its worldwide funded plans, $2.3 billion higher than 2011. This included $2 billion of discretionary contributions. In 2012, Ford settled $1.2 billion of its pension obligations as part of the voluntary lump sum payout program for salaried retirees, which began in the second half of 2012 and will continue through 2013. For 2013, cash contributions to funded plans are expected to be about $5 billion globally, including discretionary contributions of about $3.4 billion.

AUTOMOTIVE SECTOR
Fourth Quarter
Full Year
2011
2012
B/(W) 2011
2011
2012
B/(W) 2011
Wholesales (000)
1,427
1,534
107
5,695
5,668
(27)
Revenue (Bils.)
$
32.6
$
34.5
$
1.9
$
128.2
$
126.6
$
(1.6)
Pre-tax results (Mils.)
$
586
$
1,262
$
676
$
6,332
$
6,256
$
(76)
Operating Margin (Pct.)
2.2
%
3.8
%
1.6 pts.
5.4
%
5.3
%
(0.1) pts.

The increase in total Automotive pre-tax profit and operating margin in the fourth quarter is more than explained by the record quarter in North America. South America and Asia Pacific Africa were also improved.

For the full year, Total Automotive pre-tax profit was about equal to a year ago, reflecting primarily higher net pricing and the non-repeat of 2011 UAW ratification bonuses, offset by higher costs, mainly structural, and unfavorable volume.

Ford North America
Fourth Quarter
Full Year
2011
2012
B/(W) 2011
2011
2012
B/(W) 2011
Wholesales (000)
693
755
62
2,686
2,784
98
Revenue (Bils.)
$
19.6
$
22.1
$
2.5
$
75.0
$
79.9
$
4.9
Pre-tax results (Mils.)
$
889
$
1,872
$
983
$
6,191
$
8,343
$
2,152
Operating Margin (Pct.)
4.5
%
8.4
%
3.9 pts.
8.3
%
10.4
%
2.1 pts.

The increase of $1 billion in pre-tax profit for the fourth quarter compared with a year ago and the substantial increase in operating margin primarily reflected favorable market factors and the non-repeat of ratification bonuses.

For the full year, North America pre-tax profit and operating margin were both records. Volume and revenue were also higher.

For 2013, Ford expects the strong North America performance to continue with pre-tax profits expected to be higher than 2012, with an operating margin of about 10 percent. This reflects a growing industry, a strong Ford brand, an outstanding product line-up driven by industry-leading refresh rates, continued discipline in matching production with demand, and a lean cost structure.

Ford South America
Fourth Quarter
Full Year
2011
2012
B/(W) 2011
2011
2012
B/(W) 2011
Wholesales (000)
124
144
20
506
498
(8)
Revenue (Bils.)
$
2.8
$
3.1
$
0.3
$
11.0
$
10.1
$
(0.9)
Pre-tax results (Mils.)
$
108
$
145
$
37
$
861
$
213
$
(648)
Operating Margin (Pct.)
3.9
%
4.8
%
0.9 pts.
7.8
%
2.1
%
(5.7) pts.

Pre-tax profit and operating margin in the fourth quarter were both higher than a year ago, more than explained by favorable market factors driven by several new products recently launched; higher costs and unfavorable exchange in Brazil were partial offsets.                 For the full year, South America pre-tax profit was $213 million, substantially lower than a year ago.

For 2013, Ford expects its South America results to be about breakeven.  Although results will benefit from new products recently launched or to be launched during the year, the competitive environment and currency risks across the region, especially in Venezuela, are expected to impact company profits adversely. In addition, government actions to incentivize local production and balance trade are driving trade frictions between South American countries and also with Mexico, resulting in business environment instability and new trade barriers.

Ford Europe
Fourth Quarter
Full Year
2011
2012
B/(W) 2011
2011
2012
B/(W) 2011
Wholesales (000)
391
327
(64)
1,602
1,353
(249)
Revenue (Bils.)
$
8.3
$
6.5
$
(1.8)
$
33.8
$
26.6
$
(7.2)
Pre-tax results (Mils.)
$
(190)
$
(732)
$
(542)
$
(27)
$
(1,753)
$
(1,726)
Operating Margin (Pct.)
(2.3)
%
(11.4)
%
(9.1) pts.
(0.1)
%
(6.6)
%
(6.5) pts.

The decline in Ford Europe's fourth quarter pre-tax results was more than explained by unfavorable volume and mix. The industry for the 19 markets Ford tracks in Europe was 13.5 million units, the lowest quarterly SAAR since 1995.

For the full year, Ford Europe continued to be negatively impacted by the challenging economic conditions in the region.

Ford's European results are consistent with prior guidance. The company's announced European transformation is proceeding according to plan. In the fourth quarter, the company started recognizing accelerated depreciation for the plants it intends to close, subject to employee consultation. Ford also recognized the cost of salaried separations, which are included in special items.

Ford is on track to deliver its European transformation plan, focused on product, brand, and cost. In 2013, compared with last year, Ford will benefit from the non-repeat to the same degree of dealer stock reductions. However, consistent with its guidance, Ford will incur higher costs associated with its restructuring actions, mainly investment in new products — as outlined at its Amsterdam product event, accelerated depreciation, and costs to implement its revised manufacturing footprint. As Ford did in North America, these are investments the company is making now to transform its European business for profitable growth in the future.

Since providing guidance in October, Ford's outlook for industry volume has deteriorated. Ford now expects industry volume to be in the lower end of the range of 13 million to 14 million units. In addition, Ford is being adversely impacted by higher pension costs due to lower discount rates, and a stronger euro. As a result, Ford now expects full year 2013 results for Ford Europe to be a loss of about $2 billion, compared to prior guidance of a loss about equal to 2012. The business environment remains uncertain, and Ford will continue to monitor the situation in Europe and take further action as necessary.

Ford Asia Pacific Africa
Fourth Quarter
Full Year
2011
2012
B/(W) 2011
2011
2012
B/(W) 2011
Wholesales (000)
219
308
89
901
1,033
132
Revenue (Bils.)
$
1.9
$
2.8
$
0.9
$
8.4
$
10.0
$
1.6
Pre-tax results (Mils.)
$
(83)
$
39
$
122
$
(92)
$
(77)
$
15
Operating Margin (Pct.)
(4.4)
%
1.4
%
5.8 pts.
(1.1)
%
(0.8)
%
0.3 pts.

The improvement in both fourth quarter pre-tax profits and operating margin was more than explained by favorable market factors, offset partially by higher costs associated with new products and investments to support higher volumes and future growth.  Ford recorded a 41 percent increase in sales in the fourth quarter and increased its market share from 2.8 percent to 3.4 percent, both quarterly records for the company in the region.

While Ford Asia Pacific Africa posted a full year loss, it sold more than 1 million vehicles for the first time, and recorded $10 billion in revenue, also a record.

For 2013, Ford expects Asia Pacific Africa to be about breakeven. The company also expects its volume and revenue growth in the region to accelerate, supported by the launch of the all-new Kuga, Mondeo, EcoSport, and refreshed Fiesta across the region, as well as the launch of Mondeo and Explorer in China. This will be offset in large part by continued strong investment across the region to support Ford's longer-range growth plans.

Other Automotive

The fourth quarter loss of $62 million in Other Automotive mainly reflected net interest expense of $147 million, offset partially by a favorable fair market value adjustment on the company's investment in Mazda.

For the full year, the loss in Other Automotive of $470 million was more than explained by $489 million of net interest expense.

For 2013, Ford expects net interest expense to be higher than the fourth quarter 2012 run rate, reflecting the increase in Automotive debt associated with the company's recent issuance and lower interest income.

FINANCIAL SERVICES SECTOR
Fourth Quarter
Full Year
2011
2012
B/(W) 2011
2011
2012
B/(W) 2011
Revenue (Bils.)
$
2.0
$
2.0
$
$
8.1
$
7.7
$
(0.4)
Ford Credit pre-tax results (Mils.)
$
506
$
414
$
(92)
$
2,404
$
1,697
$
(707)
Other Financial Services pre-tax results (Mils.)
12
5
(7)
27
13
(14)
  Financial Services pre-tax results (Mils.)
$
518
$
419
$
(99)
$
2,431
$
1,710
$
(721)

Ford Motor Credit Company In line with expectations, lower fourth quarter pre-tax results compared with a year ago reflected mainly lower credit loss reserve reductions and lower financing margin as higher-yielding assets originated in prior years run off.

The decline in full year pre-tax profit is more than explained by fewer lease terminations, resulting in fewer vehicles sold at a gain, and lower financing margin.

For 2013, Ford Credit projects full year pre-tax profit about equal to 2012; managed receivables at year end in the range of $95 billion to $105 billion; managed leverage to continue in the range of 8:1 to 9:1; and planned distributions of about $200 million.

PRODUCTION VOLUMES*
2012 Actual
2013
Fourth Quarter
Full Year
First Quarter Forecast
Units
O/(U) 2011
Units
O/(U) 2011
Units
O/(U) 2012
(000)
(000)
(000)
(000)
(000)
(000)
North America
735
60
2,822
124
770
93
South America
116
16
417
(44)
115
18
Europe
340
(62)
1,446
(188)
405
(13)
Asia Pacific Africa
302
111
1,023
162
275
62
  Total
1,493
125
5,708
54
1,565
160
*Includes production of Ford brand and JMC brand vehicles to be sold by unconsolidated affiliates.

Fourth Quarter, Full Year 2012 and First Quarter 2013 Production Volumes

In the fourth quarter, total company production was about 1.5 million units, 125,000 units higher than a year ago. This is 13,000 units higher than Ford's most recent guidance.

For the full year, Ford produced 5.7 million units, up 54,000 from a year ago.

The company expects first quarter production to be about 1.6 million units, up 160,000 units from a year ago, reflecting higher volume in all regions except Europe. Compared with the fourth quarter, first quarter production is up 72,000 units.

 

OUTLOOK

Ford's planning assumptions and key metrics include the following:

2011 Full Year
2012 Full Year
2012 Full Year
Results
Plan
Results
Planning Assumptions
Industry Volume* -- U.S. (Mils.)
13.0
13.5 - 14.5
14.8
Industry Volume* -- Europe (Mils.)**
15.3
14.0 - 15.0
14.0
Operational Metrics
Compared with Prior Year:
- U.S. Market Share
16.5%
About Equal
15.2%
- Europe Market Share**
8.3%
About Equal
7.9%
- Quality
Mixed
Improve
Mixed
Financial Metrics
Compared with Prior Year:
- Automotive Pre-Tax Operating Profit (Bils.)***
$6.3
Higher
$6.3
- Ford Motor Credit Pre-Tax Operating Profit (Bils.)
$2.4
Lower
$1.7
- Total Company Pre-Tax Operating Profit (Bils.)***
$8.8
About Equal
$8.0
- Automotive Structural Costs Increase (Bils.)****
$1.4
Less than $2.0
$1.5
- Automotive Operating Margin***
5.4%
Improve
5.3%
Absolute Amount:
- Capital Spending (Bils.)
$4.3
$5.5 - $6.0
$5.5
*
Includes medium and heavy trucks
**
The 19 markets we track
***
Excludes special items; Automotive operating margin is defined as Automotive pre-tax results, excluding special items and Other Automotive, divided by Automotive revenue
****
Structural cost changes are measured primarily at present-year exchange, and exclude special items and discontinued operations
2012
2013 Full Year
Results
Plan
Planning Assumptions
Industry Volume* -- U.S. (Mils.)
14.8
15.0 - 16.0
                            -- Europe (Mils.)**
14.0
13.0 - 14.0
                            -- China (Mils.)
19.0
19.5 - 21.5
Operational Metrics
Compared with Prior Year:
Market Share -- U.S.
15.2%
Higher
                       -- Europe**
7.9
About Equal
                       -- China***
3.2
Higher
Quality
Mixed
Improve
Financial Metrics
Compared with Prior Year:
- Total Company Pre-Tax Profit (Bils.)****
$8.0
About Equal
- Automotive Operating Margin****
5.3%
About Equal / Lower
- Automotive Operating-Related Cash Flow (Bils.)
$3.4
Higher
*
Includes medium and heavy trucks
**
The 19 markets we track
***
Includes Ford and JMC brand vehicles sold in China by unconsolidated affiliates
****
Excludes special items; Automotive operating margin is defined as Automotive pre-tax results, excluding special items and Other Automotive, divided by automotive revenue

Ford remains focused on delivering the key aspects of the One Ford plan, which are unchanged:

  1. Aggressively restructuring to operate profitably at the current demand and changing model mix
  2. Accelerating the development of new products that customers want and value
  3. Financing the plan and improving the balance sheet
  4. Working together effectively as one team, leveraging Ford's global assets

ford-logo

“Our focus this year will be to continue our strong performance in North America and at Ford Credit,  while at the same time, addressing challenges and opportunities in other parts of our business,” said Bob Shanks, Ford chief financial officer. “In Europe this means executing our transformation plan, while in South America we will continue to refresh our entire product line-up, and in Asia Pacific we will continue to invest for even stronger, profitable growth in the future.”

Overall, the company expects 2013 to be another strong year, as it continues to work toward its mid-decade outlook.

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