Ford chief executive Alan Mulally visiting the assembly line last month… (Jeff Kowalsky / Bloomberg )
Strong business in North America helped Ford Motor Co. post a big increase in fourth-quarter profit Tuesday, excluding a tax adjustment last year, but the automaker is still being hurt by Europe’s economic malaise.
The nation’s second-largest automaker earned $1.6 billion in the latest quarter, up 55% from a year earlier. For the year, earnings slipped 5% to $5.7 billion.
The results don’t include the effect of 2011 changes in valuation allowance against deferred tax assets, which greatly increased net income last year.
Still Ford’s North American pretax profit of $8.3 billion for the year was good enough generate profit-sharing payments averaging about $8,300 for about 45,800 eligible U.S. hourly employees.
“Overall despite many challenges including the tough environment in Europe we had a solid fourth quarter and a strong full year,” said Alan Mulally, Ford’s chief executive.
“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,” he said.
Revenue rose $1.9 billion, or 5%, to $36.5 billion from $34.6 billion in the fourth quarter. For the year, revenue fell by $2 billion, or 1%, to $134.3 billion.
Ford shares fell 51 cents, or 4%, to $13.27 in early morning trading. Analysts attributed the tepid response on Wall Street to the company’s forecast that 2013 earnings won’t grow significantly over 2012's level.
“We would not get too caught up in the very near term,” said Peter Nesvold, an analyst with Jefferies & Co. “One has to believe the shares have tremendous upside if Ford comes even close to replicating its North American restructuring success in Europe.”
Ford's profit in North America more than doubled in the fourth quarter to almost $1.9 billion. Ford said it expects the its North American earnings to grow again this year, with an operating margin of about 10%.
“North American auto operations are the primary profit driver for Ford and we expect the region to generate record margins and income over the next few years as the cycle continues to recover,” said Michael Ward, an analyst at Sterne Agee. “Ford’s new product cadence, the benefits of restructuring actions, positive pricing and favorable mix, in our view, will produce record financial results over the next few years.”
Europe remains a problem for Ford, whose factories there are running at about 70% of capacity. But the company has done a good job of whittling its inventory of unsold vehicles, Ward said.
Moreover, the automaker’s plan announced last year to let about 6,200 workers go as it closes assembly plants in Genk, Belgium, and Southampton, Britain, as well as a parts operation in Dagenham, Britain, will reduce Ford’s European factory capacity by about 17%, he said.
Ford suffered an operating loss of $732 million in Europe in the latest quarter, almost four times the size of its loss a year earlier. The company lost almost $1.8 billion in the region for the full year, compared to a slight loss of $27 million in 2011.
One issue is that in the 19 European markets where Ford operates, the pace of auto sales in the fourth quarter fell to its lowest level since 1995. Ford expects to lose about $2 billion in Europe this year. The company had previously indicated it would lose $1.7 billion there.
“We do believe that the industry will turn around … and that we will get to a profitable growing Europe for Ford Motor Co.,” Bob Shanks, Ford’s chief financial officer, said on a conference call Tuesday after the earnings were released.
In South America, Ford posted an operating profit of $145 million in the fourth quarter, up from $108 million a year earlier. For the year, South American profit fell sharply to $213 million from $861 million.
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