Ford expects U.S. full year industry volume to be in the range of 13.5 million to 14.5 million vehicles.
Ford Motor Company [NYSE: F] today reported 2011 full year operating profit of $8.8 billion, an increase of $463 million from a year ago. Gains in North America and Ford Credit offset large losses in Europe -$190 million, and Asia -$83 million. South America remains profitable at $108 million, but it is under siege by stronger competitors with newer products including General Motors and Fiat. Ford for the moment is stuck with its old business model of trying to sell vehicles that are a generation or two behind the latest technology – the same problem that put Ford behind in Asia. As a result, South American sales declined by 15% for the year. Nevertheless, it was Ford’s third consecutive year of improving annual profits. However, results missed the optimistic guidance Ford provided analysts at the end of the third quarter.
Full year 2011 net income was $20.2 billion, or $4.94 per share, an increase of $13.7 billion, or $3.28 per share, from a year ago. Operating margins declined to 5.4%. However, these numbers include a hugely favorable one-time, non-cash special item of $12.4 billion for the release of almost all of company’s net deferred tax assets that was made in 2006 when Ford was losing billions. This accounting change means the company now expects to stay profitable.
Fourth quarter 2011 pre-tax operating profit was $1.1 billion, or 20 cents per share, a decrease of $189 million from fourth quarter 2010. Ford has now had 10 consecutive quarters of pre-tax operating profit, but it remains heavily dependent on the Americas, North America in particular where the F-Series pickup truck is the best selling vehicle, for the bulk of its profits. Automotive debt was $13.1 billion as of Dec. 31, 2011, a reduction of $6 billion for the year.
Ford Credit reported a pre-tax operating profit of $506 million for the fourth quarter and $2.4 billion for the full year, a decrease of $650 million from full year 2010 at $3.1 billion. The decrease in pre-tax earnings is resulted from fewer leases being terminated and the vehicles sold at a gain, and lower credit loss reserve reductions. That’s right the financial industry makes more money when people loose their cars and trucks, which unlike housing, can then be sold at a profit.
As a result of Ford’s 2011 financial performance, profit sharing payments will go to 41,600 eligible U.S. hourly employees. Under the UAW-Ford collective bargaining agreement, Ford’s North American pre-tax profits of $6.2 billion will generate approximately $6,200 on a full year basis. Based on first-half 2011 results, about $3,750 was paid per employee, which was distributed in December 2011. For the second half of 2011, about $2,450 per employee will be paid in March.
Worldwide Ford has $15.4 billion in underfunded pension liabilities; including $9.4 billion in the U.S. Ford is in the process of closing many of its plans to new entrants and looking at “other actions” to move this huge liability off its balance sheet. Ford says it will be years before its pension plans are fully funded, but had no comment on if it was considering changes in its U.S. hourly pension plan.
North America: In the fourth quarter, North America reported a pre-tax operating profit of $889 million, compared with a profit of $670 million a year ago. The pre-tax operating margin also improved to 4.5% from 3.9% a year ago. The increase in profits is explained by higher volume and mix and net pricing, offset partially by increased costs, including higher commodity and warranty and freight costs. Wholesales in the fourth quarter were 693,000 units, up 78,000 units from a year ago. Revenue in the fourth quarter was $19.6 billion, up $2.4 billion from a year ago.
For the full year, North America reported a pre-tax operating profit of $6.2 billion, compared with a profit of $5.4 billion a year ago.
South America: In the fourth quarter, South America reported a pre-tax operating profit of $108 million, compared with a profit of $281 million a year ago. The decrease is explained primarily by unfavorable exchange and higher costs, with essentially all of the total cost increase driven by higher commodity costs. Wholesales in the fourth quarter were 124,000 units, down 18,000 units from a year ago. Revenue in the fourth quarter was $2.8 billion, unchanged from a year ago.
For the full year, South America reported a pre-tax operating profit of $861 million, compared with a profit of $1 billion a year ago.
Europe: In the fourth quarter, Europe reported a pre-tax operating loss of $190 million, compared with a loss of $51 million a year ago. The decrease is primarily explained by higher material costs, about half of which are due to higher commodity costs, and lower subsidiary profits. This was offset partially by favorable volume and mix, structural cost improvements, and favorable net pricing. Wholesales in the fourth quarter were 391,000 units, down 6,000 units from a year ago. Revenue in the fourth quarter, which excludes sales at unconsolidated joint ventures, was $8.3 billion, up $200 million from a year ago.
For the full year, Europe reported a pre-tax operating loss of $27 million, compared with a profit of $182 million a year ago.
Asia Pacific Africa: In the fourth quarter, Asia Pacific Africa reported a pre-tax operating loss of $83 million, compared with a profit of $23 million a year ago. The decline reflects unfavorable volume and mix from the impact of the Thailand flooding, as well as higher costs associated with new products and investments for future growth. Ford has seven plants under construction in Asia-Pacific. These were offset partially by higher net pricing. Wholesales in the fourth quarter were 219,000 units, down 16,000 units from a year ago. The company estimates the production impact from Thailand flooding was approximately 34,000 units. Revenue in the fourth quarter, which excludes sales at unconsolidated joint ventures, was $1.9 billion, down $300 million from a year ago.
For the full year, Asia Pacific Africa reported a pre-tax operating loss of $92 million, compared with a profit of $189 million a year ago.
Other Automotive: In the fourth quarter, Other Automotive reported a loss of $138 million, compared with a loss of $182 million a year ago. The loss mainly reflects net interest expense.
