Ford posts $732 million quarterly loss in Europe, predicts worse 2013
N. America gains lead to 4th straight full-year profit
DETROIT -- Ford posted a fourth-quarter pretax loss of $732 million in Europe and expects 2013 to be even more difficult.
Despite the troubles in Europe, Ford had a fourth-quarter net income of $1.6 billion, carrying the company to its fourth straight full-year profit.
Excluding a large year-earlier extraordinary gain, net profit in the latest quarter rose 55 percent, powered by strong results in North America.
Bigger 2013 loss
Ford said that it will incur higher costs in Europe due to restructuring actions and investments in new vehicles. It predicted a European loss in 2013 of about $2 billion, versus its earlier forecast of a loss roughly equal to 2012's, which came in at $1.75 billion.
"We think Europe will be perhaps even lower than we thought," Ford Chief Financial Officer Bob Shanks said, due in part to continuing high unemployment in some regions, particularly in southern Europe. "We're likely to see a recession in the first half," with possibly a weak recovery in the second half, he said.
Regarding its revised forecast which now sees a wider loss in Europe, Ford said it now expects industry volume to be in the lower end of the range of 13 million to 14 million units. In addition, Ford said it is being hurt by higher pension costs due to lower interest rates, and a stronger euro.
In Europe, Ford's fourth-quarter pretax operating loss of $732 million widened sharply from a loss of $190 million a year earlier.
For all of 2012, Ford's pretax loss of $1.75 billion in Europe compared to a loss of $27 million a year earlier, as the region's economy remained mired in the ongoing debt crisis. European revenues dropped 22 percent in the quarter to $6.5 billion, and 21 percent to $26.6 billion in 2012.
Ford is employing the same strategy to dig out of its European hole that it used in North America: closing factories to trim capacity while at the same time investing in a new generation of products.
Ford said last year that it would close three European plants: two in England and one in Genk, Belgium.
In an interview with Bloomberg during the Detroit auto show in early January, Shanks predicted that Ford's European losses will begin to disappear in about two years.
"Even with a no-change bottom line in Europe in '13 versus '12, we're well on our way in terms of a transformation that will get that part of the business back on track," Shanks said. "We didn't fix North America in six months. It took years. The same thing will happen in Europe."
At the Automotive News World Congress this month, Ford CEO Alan Mulally said of Europe: "We think we can be profitable, with the restructuring actions that we've taken and all the new products that we're introducing, by mid-decade."
Strong gains overall
Overall revenues rose 5 percent to $36.5 billion in the fourth quarter. Pretax profits, excluding the year-earlier special gains, rose 52 percent to $1.68 billion.
For the full year, net fell 72 percent to $5.67 billion. But it fell just 5 percent if the extraordinary gain of the fourth quarter of 2011 was excluded. Annual revenues slipped 1 percent to $134.3 billion. Pretax profits fell 9 percent to $7.97 billion.
"The Ford team delivered strong results once again, underscoring that our One Ford plan is working," Mulally said in a statement. "We are well positioned for another strong year in 2013."
Including the extraordinary gain in the year-earlier quarter, net earnings in the fourth quarter tumbled 88 percent.
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