by Mira Oberman
CHICAGO, Jan 29, 2013 (AFP) – Ford posted sharply lower profits in both 2012 and the fourth quarter Tuesday but managed to beat expectations despite a worsening situation in the US automaker’s European unit.
Ford’s losses in Europe hit $1.8 billion in 2012 and it warned that it will lose another $2 billion this year as demand for vehicles continues to fall, the euro strengthens against the dollar and Ford faces heavy restructuring costs.
“The business environment in Europe remains uncertain,” chief financial officer Bob Shanks said. “We will continue to monitor the situation and we will take further action as necessary to ensure that we remain on track to deliver our plan.”
Ford’s results were also affected by accounting changes which boosted 2011 profits.
After-tax profits were $5.7 billion in 2012, sharply down the from $20.2 billion posted a year earlier.
Excluding special items and accounting changes, the results were down just five percent at $1.41 per share, which beat average analyst expectations of $1.34.
“Despite many challenges, including the tough environment in Europe, we had a solid fourth quarter and a strong full year,” Alan Mulally, Ford president and CEO, said in a conference call.
“We are well positioned for another strong year in 2013.”
The automaker forecast that its 2013 pre-tax profits would come in “about equal” to the $8 billion posted in 2012 while its cash flow from automotive operations would come in higher than the $3.4 billion achieved.
Ford’s 2012 revenues fell 1.4 percent to $134.3 billion, largely as a result of the crisis in Europe, but were higher than the $125 billion expected by analysts.
Fourth quarter net earnings fell 88 percent to $1.6 billion. However, they rose by about 50 percent excluding special charges and accounting changes and at 31 cents a share came in higher than the 25 cents expected by Wall Street.
Ford’s shares were nonetheless down 5.7 percent at $12.99 in afternoon trade.
The automaker’s once-troubled North American unit was once again a bright spot with record profits of $8.3 billion in 2012, a $2 billion improvement over 2011, and $1.9 billion in the fourth quarter, a $1 billion gain. The unit’s operating margin for the year rose two points to 10.4 percent.
It forecast the region’s profits will climb even higher in 2013 as a result of increasing market share amid growing overall demand along with “continued discipline in matching our production with demand and a lean cost structure.”
Ford’s South American division saw profits fall to $213 million, about a quarter of what they were a year earlier, and it warned that it would likely merely break even in 2013 as a result of “the competitive environment and currency risks across the region.”
“In addition, government actions to incentivize local production and balanced trade are driving trade frictions between South American countries and also with Mexico resulting in business environment instability and new trade barriers,” Shanks said.
Ford’s results in Asia were impacted by high costs associated with new products and the construction of two new plants and came in at a loss of $77 million in 2012, a slight improvement from the $92 million loss in 2011.
It forecast the region would break even in 2013 even as it builds seven more plants there thanks in part to an expected expansion of its share of the booming Chinese market.
Europe will continue to be a trouble spot and Ford does not expect to return to profitability there until “mid-decade.”
“In Europe, we expect weak conditions to continue, especially in countries undergoing fiscal and austerity programs,” Shanks said. “Recent policy moves are positive steps, but not yet enough to resolve the crisis and restore business and consumer confidence.”
But that does not mean it will stop investing there even as it slashes production and restructures operations amid a deep downturn, Mulally said.
“The number one thing is to continue to invest also not only in the product, but also in the brand while we work the cost side too, just like we did in the US,” he said in a conference call.
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