A Message from the President and CEO
Ford Motor Company continued on our path to deliver profitable growth in 2012 by following our proven One Ford plan, despite the ongoing challenges in the global market.
Along the way, we achieved several important milestones, including restoring Ford’s investment grade status and reclaiming the Ford Blue Oval, resuming regular dividend payments to our shareholders and achieving 14 straight quarters of operating profit.
In a strong North America market, we set full year records for pre-tax profit and operating margins. In South America, we are in the middle of launching a new global product lineup. In Europe, we responded to challenging economic conditions by beginning a transformation plan to aggressively accelerate our new product rollouts, strengthen our brand and restructure our manufacturing operations. In Asia Pacific Africa, we are undertaking an unprecedented investment program to grow our business in what is now the world’s largest automotive market.
The success of our One Ford plan to date gives us confidence that it will continue to create profitable growth for us in the future. We remain laser focused on the key aspects of our plan, which remain unchanged:
- Aggressively restructure to operate profitably at the current demand and changing model mix.
- Accelerate development of new products our customers want and value.
- Finance our plan and improve our balance sheet.
- Work together effectively as one team, leveraging our global assets.
By following this plan, we will continue to build great products, a strong business and a better world.
The great products that we build at Ford drive our success. We launched 25 vehicles and 31 powertrains globally in 2012, a testament to our ongoing commitment to product development. We also announced plans to revitalize our Lincoln brand as the Lincoln Motor Company, which will introduce an exciting new lineup of great luxury vehicles.
Our plan is centered on serving customers in all markets around the world with a full family of vehicles – small, medium and large; cars, utilities and trucks – that offer the very best quality, fuel efficiency, safety, smart design and value.
The best way to measure the success of our products is sales, and 2012 was a strong year. We sold 2.3 million vehicles in the United States in 2012, which marked our second straight year achieving sales greater than 2 million. Ford is the only brand to top the 2 million mark in the United States since 2007. In Asia Pacific Africa, we sold more than 1 million vehicles for the first time, including record sales in China.
Our strong global performance was led by Focus, which was the best-selling nameplate in the world in 2012, and Fiesta, which was the best-selling B-Car in the world based on the latest global data. Ford also was the only brand to have three vehicles among the top 10 best-sellers worldwide, with the F-Series truck coming in as the fourth best-selling global nameplate.
Leveraging key new technologies across multiple regions and on global platforms helps drive tremendous scale and efficiency savings that can be reinvested, enabling us to have one of the freshest showrooms in the industry. Our outstanding product lineup, which we are continually transforming and improving, is the foundation on which we have built our strong business.
Our 2012 full year pre-tax operating profit, excluding special items, was $8 billion, or $1.41 per share. We delivered record results of $8.3 billion in North America, continued solid performance from Ford Credit of $1.7 billion, positive results in South America, continued investment in Asia Pacific Africa and began a challenging transition in Europe.
We remain committed to strengthening our balance sheet. We ended 2012 with Automotive gross cash of $24.3 billion, exceeding debt by $10 billion. We also have a strong liquidity position of $34.5 billion, an increase of $2.1 billion over 2011.
We also worked to de-risk our pension obligations, contributing $3.4 billion in cash contributions to our worldwide funded plans.
With an eye to the future, we continued our largest and fastest manufacturing expansion in more than 50 years, adding capacity to support growth plans in North America and Asia Pacific Africa.
In 2012, we added more than 8,100 hourly and salaried jobs in the U.S. as we increased production capacity and expanded other areas to meet the growing demand for our fuel-efficient, high-tech vehicles.
In Europe, we are moving quickly to carry out our transformation plan. As we did in North America, we are making tough choices and intelligent investments now to transform our European business for profitable growth in the future.
Additionally, we further strengthened and developed our leadership team by announcing the appointment of our chief operating officer, a new chief financial officer, a new Global Product Development leader and senior leadership changes for the Americas, Europe, Asia Pacific, Ford Credit and our Lincoln Brand
Even as we strive to improve our products and enhance our business, we recognize that doing our part to contribute to a better world is at the core of our business. In addition to economic goals, we also pursue environmental and social objectives.
Ford is going further than our competitors by offering an industry-best seven Ford-brand vehicles in the U.S. that deliver 40 or more miles per gallon.
We reached this milestone by developing the best conventional and alternative powertrains. In 2012, we produced our 500,000th fuel-saving EcoBoost engine just three years after its launch. We also introduced six new electrified vehicles, including hybrids, plug-in hybrids and a pure battery electric vehicle.
We are giving customers the power of choice among a range of powertrains that generate fewer emissions and consume less gasoline.
Serving in our communities is another important part of building a better world. In 2012, 25,000 Ford employees and retirees volunteered more than 115,000 hours at 1,350 projects to help people in their local communities. As part of that effort, our seventh annual Global Week of Caring featured 12,000 employees, retirees and dealers working on more than 300 community projects on six continents.
In the coming year, we expect global growth to continue, despite ongoing challenges in the external environment. We anticipate global economic growth in the 2 to 3 percent range, and global industry sales of 80 million to 85 million units.
In North America, we expect our strong performance to continue, and we anticipate higher pre-tax profits than 2012, due to our strong Ford brand and products, the growing industry, a lean cost structure and our continued success in matching production with demand.
Conditions in South America will be uneven, with some countries experiencing growth while others face increasing economic and political risks. We expect results in the region to be about breakeven in 2013, as the benefits of new global products will be tempered by the competitive environment and currency risks across the region that are expected to affect our profits adversely.
Asia Pacific Africa also is expected to be about breakeven in 2013, as growing volume and revenue are offset by continued strong investment across the region. This investment will pay off as we look even further forward, and our goal is to have a full third of our global sales in Asia Pacific Africa by 2020.
In Europe, we are working to deliver our European transformation plan, but we expect weak economic conditions in several markets to extend into 2013 and industry volume to be lower in 2013 than 2012. As a result, we expect to incur another substantial loss in Europe in 2013. We believe that 2013 is likely the trough for European industry sales volume, and we expect industry sales volume and our results to begin to improve in 2014.
Overall, we expect 2013 will be another strong year for the Ford Motor Company with pre-tax operating profit about equal to 2012, Automotive operating-related cash flow to be higher than 2012, and pre-tax profit for Ford Credit to be about the same as 2012.
Our proven One Ford plan put us on the path to profitable growth, and we are confident it will keep us on that path going forward.
As always, we thank you for your support of our efforts.
Alan R. Mulally
President and Chief Executive Officer
March 14, 2013