If there’s one recent event that symbolizes our renewed financial strength, it is this: the return of the iconic Ford Blue Oval. In the spring of 2012, we earned back our investment-grade rating from the second of three major ratings agencies. This significant milestone allowed us not only to lower our borrowing costs, but also to reclaim the Ford Blue Oval, which we had put up as collateral for the original $18.5 billion secured loan we took out in 2006 to save our Company. When we leveraged the Oval as part of that loan package, we were not just pledging an asset; we were pledging our heritage.
Regaining the Ford Blue Oval, one of the most recognized brand symbols in the world, was a great source of pride for our Company and a testament to the years of hard work and steadfast progress since we stood alone as the sole major U.S. automaker to avoid filing for bankruptcy at the height of the economic crisis. But reclaiming the Ford Blue Oval is just the start, and it serves as a huge motivator for our Company to push ourselves even further and faster.
We pulled ourselves out of “junk” investment status by radically overhauling our production strateg,transforming ourselves into a fully globalized business while continuing to invest in new vehicles and technology. Through a difficult process of layoffs and plant closures, we focused on minimizing overcapacity and reducing inefficiencies to become a leaner – and stronger – Ford Motor Company. Couple that with a more flexible manufacturing operation that is saving us money while enabling faster product development and more efficient delivery of new technologies in our core markets. Our performance in North America, along with our valuable Ford Credit business, is powering our investment in global products for South America, our restructuring in Europe, and our significant investments in new capacity that will allow us to participate fully in fast-growing markets in Asia Pacific and Africa.
As part of our transformation, we have reduced the number of global vehicle nameplates, dropping from 97 in 2006 to 32 in 2012.
Ford sees five key global platforms with sales volume opportunities as depicted here.
For the second year in a row, the Ford brand surpassed the 2 million mark for U.S. vehicle sales, making it the best-selling brand in America. In 2007 – before the recession – 2 million sales was a fairly commonplace achievement for many of the larger brands. Ford is the only brand to make it back up above the 2 million mark.
Our U.S. sales grew across the board in 2012, with cars up 5 percent, utilities up 7 percent and trucks up 2 percent for the year. Our sales of small cars were up a strong 29 percent for 2012, with Focus sales gaining an impressive 40 percent. In California, which is the biggest market in the U.S. for small cars, Focus retail sales were up 83 percent in 2012 versus 2011.
For the full year, North American pre-tax profit and operating margin were both records since 2000 when we began reflecting the region as a separate business unit, and volume and revenue were also higher. Other regions, however, did not fare as well. Europe continued to be negatively impacted by the challenging economic conditions in that region. (Read more on our European transformation plan.) In South America, pre-tax profits were substantially lower than a year ago, in part due to higher costs and unfavorable exchange in Brazil. In Asia Pacific and Africa, we posted a full-year loss as we continued to invest heavily for future growth. We are beginning to see the results of our investments, however, as we sold more than 1 million vehicles in the region in 2012 for the first time and recorded $10 billion in revenue – also a record.
We continue to sell the world’s top-selling truck – the F-Series, which has seen significant improvements in fuel efficiency. In early 2013, we unveiled our new Ford Atlas Concept to showcase the design capability, fuel efficiency and smart technologies that will define future pickup trucks. The Ford Atlas Concept features a next-generation EcoBoost® powertrain, which introduces truck-enhanced Auto Start-Stop engine-shutoff technology. Auto Start-Stop shuts off the engine when stopped in traffic to save fuel – and smartly suspends the feature when the truck knows it is towing.
Importantly, we are equally as well known today for our competitive products in all segments of the market, including small and midsize cars as well as sport utility vehicles and our top-selling pickup trucks. Case in point: According to R L Polk data,1 the Focus was the No. 1- selling vehicle nameplate in the world in 2012, thanks to its continued strength in Europe and a rapidly expanding Asian market. In Canada, our sales performance in the market earned Ford Canada the sales leadership title for the third year in a row.
We offer customers products with best-in-class fuel economy. Equally important, we’re offering customers choices of the fuel-efficient systems that work best for them – from EcoBoost®-powered gasoline vehicles to hybrids to electrified vehicles. By year-end 2013, more than 90 percent of Ford’s North American lineup will be available with an EcoBoost engine. At the end of 2012, Ford offered EcoBoost engines in 11 North American nameplates, with four more expected in 2013. We are planning to triple our electrified vehicle production by 2013, compared to 2011.
In another sign of our financial progress, we announced in early 2013 that we would double our quarterly stock dividend to 10 cents per share. We had reinstated the dividend – at 5 cents – a year earlier, having suspended it in September 2006 when we were in significant economic difficulty. Our ability to double the dividend within one year is a testament to our ONE Ford plan, which has enabled us to maintain a solid balance sheet while growing our business to provide our shareholders with more return on their investments.
Our dividend yield, which measures how much a company pays out in dividends relative to its share price, increased to 3.2 percent2 – higher than the average 2.2 percent among companies in the S&P 500 Index. The dividend is an important component of our vision of profitable growth for all – customers, suppliers, employees, dealers and investors.
As a result of our 2012 financial performance, employees across the Company were recognized for their contributions through various reward and recognition actions according to local plans and practices, as applicable. In the U.S., for example, profit-sharing payments were made to approximately 46,000 eligible U.S. hourly employees. In accordance with the UAW3-Ford collective bargaining agreement, Ford North America pre-tax profits of $8.3 billion generated approximately $8,300 per eligible employee, which we paid in March 2013. Individual profit-sharing payments were higher or lower based on actual employee-compensated hours.
In addition, in 2012 we made cash contributions to our funded pension plans of $3.4 billion globally, including $2 billion of discretionary contributions to our U.S. plans. In 2013, cash contributions to funded plans are expected to be about $5 billion globally, including discretionary contributions to our U.S. plans of about $3.4 billion.
Signs of our improved financial health were also evident in our hiring in the U.S. In early 2013, we announced plans to hire 2,200 engineers, computer programmers and other product-development specialists – the largest increase in salaried workers in more than a decade. The new positions are in addition to the more than 8,100 combined hourly and salaried U.S. jobs that we added in 2012. Approximately 1,000 of those positions were hourly jobs brought back to Ford plants in the U.S. from other locations.
In late February 2013, we also pledged to add 450 new jobs at our Cleveland (Ohio) Engine Plant, where we plan to invest nearly $200 million to increase production of our 2.0-liter EcoBoost engine. This hiring brings us more than halfway to the 12,000 new U.S. jobs we forecasted to deliver by 2015 during 2011 contract discussions with the UAW.
As we expand our product lineup of fuel-efficient vehicles, we need more people in critical areas, such as engineering, vehicle production, computer software and other information technology functions. The hiring will also help support our global product momentum and our commitment to serve customers in all markets with a full family of vehicles offering best-in-class quality, fuel efficiency, safety, smart design and value. To attract new team members, we are expanding our use of social media to reach new, technology-savvy workers, and we’re stepping up our efforts to reach military veterans. See the People section for more on employment at Ford.
Globally, we’re continuing to add new jobs in Asia Pacific and Africa (see “Focus on Asia”), where we completed construction of two new plants, announced significant expansions of existing facilities, and currently are building seven additional plants (five in China and two in India) to keep pace with product demand. However, depressed sales in Europe have forced us to make the difficult decision to shutter plants, affecting approximately 6,200 positions in the region.
A critical component of our recent business strategy has been our focus on realigning production with demand. This has meant retooling some facilities as flexible manufacturing sites, allowing for multiple types of products to be built on the same line. In some cases, this has also meant retooling facilities that previously built large trucks and SUVs to instead manufacture smaller and/or more energy-efficient vehicles. To these ends, and in conjunction with our 2011 bargaining agreement with the UAW, we estimate we will invest $6.2 billion in U.S. plants by 2015.
For example, we invested $550 million to overhaul our Michigan Assembly Plant (MAP), which formerly built two full-size sport utility vehicles. Today, it is the only manufacturing site in the world to build vehicles with five different fuel-efficient powertrains on the same line, and the only one to build four vehicles that deliver an EPA-estimated 40 mpg. The plant is setting a new global standard for flexible manufacturing. More than 80 percent of the tooling in the plant’s body shop can be programmed to produce a variety of body styles, allowing us to quickly adjust the mix between models as customer preferences change.
According to a recent analysis from the Center for Automotive Research (CAR), the plant supports 24,000 jobs in Michigan and pumps an annual $1.8 billion into the state’s economy. CAR said MAP sets “the new global standard for flexible manufacturing.”
The Michigan Assembly Plant (MAP) uses a flexible manufacturing system that produces five vehicles from one platform. It is the only plant in the world to build gasoline-powered, electric, hybrid and plug-in hybrid vehicles on the same production line.
4,943 hourly workers
227 salaried workers
We are spending more than $773 million on new equipment and capacity expansions across six manufacturing facilities in southeast Michigan. These investments will create 2,350 new hourly jobs and allow us to retain an additional 3,240 hourly jobs. The 2,350 new positions are part of the 12,000 hourly jobs that we forecasted to add across the U.S. by 2015.
At our Kansas City (Missouri) Assembly Plant, we are investing $1.1 billion in a new body shop, a new tooling area, an upgraded paint shop and an all-new integrated stamping plant. These investments support the 2013 North American product debut of the full-size Ford Transit van family, which will achieve gas mileage that’s an average 25 percent better than the E-Series cargo and passenger vans that Transit will replace when it starts production in 2014.
We’re committed to growth in other parts of the world, too. To meet increasing demand in the Asia Pacific and Africa region, for example, we are building seven new plants – five in China and two in India. We also recently opened a new plant in Chongqing, China, and another in Rayong, Thailand, to produce the global Focus.
We recently reclaimed the iconic Ford Blue Oval, which we had put up as collateral in 2006.
For the second year in a row, the Ford brand surpassed the 2 million mark for U.S. vehicle sales, making it the best-selling brand in America.