DEARBORN, Mich., July 25, 2012 – Near-record profits in North America and continued strong performance from Ford Credit helped the Ford Motor Company [NYSE: F] deliver its 12th consecutive quarterly pre-tax operating profit as it reports second quarter 2012 results today.
The company reported a pre-tax operating profit of $1.8 billion, or 30 cents per share, and net income of $1 billion, or 26 cents per share. The company also continued to generate positive Automotive operating-related cash flow, and ended the period with a strong liquidity position of $33.9 billion, an increase of $1 billion during the quarter.
“The Ford team delivered another solid quarter driven by the strength of Ford North America and Ford Credit,” said Alan Mulally, Ford president and chief executive officer. “We remain absolutely committed to continuing to make progress on our One Ford plan, including dealing decisively with near-term challenges, investing for future growth, and developing outstanding products with segment-leading quality, fuel efficiency, safety, smart design and value.”
Second quarter 2012 net income was affected by lower operating results and the impact of higher tax expense compared to a year ago that resulted from the release of the tax valuation allowance in the fourth quarter of 2011.
Ford finished the second quarter with Automotive gross cash of $23.7 billion, an increase of $700 million during the quarter. Automotive debt of $14.2 billion at the end of the second quarter was up from $13.7 billion at the end of the first quarter, primarily reflecting additional drawdowns of low-cost loans for the development of advanced vehicle technologies. The company will make its last draw on these loans by August 2012, and repayment of the loans begins in September 2012.
Ford also made payments of $800 million to its worldwide funded pension plans, of which $500 million were discretionary payments to U.S. funded plans, in line with the company’s previously-disclosed long-term strategy to de-risk its funded pension plans. Dividends paid in the quarter totaled nearly $200 million. Automotive gross cash exceeded debt by $9.5 billion at the end of the second quarter, a net cash increase of $200 million during the quarter.
The decrease in total Automotive pre-tax operating profit and operating margin was more than explained by lower results at Ford Europe, Ford South America, and Ford Asia Pacific Africa.
Ford North America
For the second straight quarter, Ford North America pre-tax operating profit exceeded $2 billion, and operating margin exceeded 10 percent. The increase in pre-tax results compared with strong performance in 2011 reflected higher net pricing, improved contribution costs, and other factors, offset partially by higher structural costs for growth, and unfavorable volume and mix including an adverse change in U.S. dealer stocks.
The company’s outlook for full year North America 2012 profits remains unchanged. Ford expects significantly higher pre-tax operating profit and margin compared with 2011, as consumers continue to respond to the company’s strong product line-up, including the recently-launched all-new Escape and the all-new Fusion launching in the second half of this year. Ford also remains committed to maintaining its competitive cost structure in North America.
Ford South America
Pre-tax operating profit and operating margin, while slightly positive, declined substantially compared with a year ago due to lower volume, higher costs, and unfavorable exchange. Although net pricing was higher compared with a year ago, it was constrained compared with recent periods by a more intense competitive environment.
Although the company continues to expect that Ford South America will be profitable for the full year, it now expects the level to be substantially lower than 2011, reflecting increased competitive pressures, weakening currencies, and changes in government policies affecting areas such as trade and access to foreign currency.
Ford continues to work on actions to strengthen competitiveness in this changing environment, looking at all areas of the business to improve operating results. These actions include fully leveraging the One Ford plan, including the introduction of an all-new lineup of global products over the next two years, starting with the launch of the all-new Ranger, EcoSport, and Fusion in the second half of this year.
Ford Europe’s results compared with a year ago largely reflected unfavorable market factors. Volume was unfavorable due to lower industry, share and associated production adjustments to maintain dealer stocks at appropriate levels. Net pricing was lower as the industry responded to excess capacity with higher incentives. Higher contribution costs also contributed to the profit decline.
Given the deteriorating external environment in Europe, Ford now expects its full year loss in Europe to exceed $1 billion. The magnitude of this loss will be affected by a number of factors, including the overall economic environment, competitive actions, and Ford’s response to these developments.
The company recognizes the seriousness of the situation in Europe, and views the challenges the industry faces as more structural than cyclical in nature. While Ford is affected significantly because of its strong presence in the region, the company understands what is needed to achieve profitability and to generate an appropriate return on investments.
“We have faced challenging situations in other parts of the business before, and successfully addressed them through our One Ford plan,” said Bob Shanks, Ford executive vice president and chief financial officer. “We will continue to use our plan as the guide to address challenges and opportunities in our valued European operations.
“We are reviewing all areas of our business to address the near-term challenges, while ensuring we build a strong foundation for our future,” said Shanks. “It is premature to discuss details of what our plans may be in response to the situation in Europe, but we will continue to communicate our plans at the appropriate times with all of our stakeholders.”
Ford Asia Pacific Africa
In Asia Pacific Africa, market factors were strongly positive compared with a year ago, but more than offset by higher costs associated with new products and investments to support higher volumes and future growth, as well as other factors.
Ford expects results to improve in the second half of 2012, due mainly to favorable volume and mix as Ford benefits from added capacity in China and Thailand and the all-new Focus and Ranger.
In the second quarter of 2012, Other Automotive reported a loss of $163 million, compared with a loss of $76 million a year ago. The loss mainly reflects net interest expense and an unfavorable fair market value adjustment, primarily from the company’s investment in Mazda.
FINANCIAL SERVICES SECTOR
Ford Motor Credit Company
The decrease in Ford Credit’s pre-tax results was in line with expectations and is primarily explained by fewer lease terminations, which resulted in fewer vehicles sold at a gain, and lower financing margin.
Ford Credit continues to expect full year pre-tax profit of about $1.5 billion, and total distributions to its parent of between $500 million and $1 billion. Ford Credit now projects managed receivables at year end to be in the range of $85 billion to $90 billion, and managed leverage of 8-9:1 for the foreseeable future, which is a decrease from the prior target of 10-11:1 and is consistent with its goal of achieving and maintaining a strong investment grade balance sheet.
Ford Credit remains a strategic asset for Ford, delivering high levels of quality and customer satisfaction with operating efficiencies that are among the best.
SECOND AND THIRD QUARTER PRODUCTION VOLUMES
The increase in the company’s anticipated production volume for the third quarter, compared with a year ago, is more than explained by higher volumes for Ford North America and Ford Asia Pacific Africa. Compared with second quarter 2012, the company anticipates that third quarter 2012 production will be down 45,000 units, primarily reflecting seasonal summer shutdowns in North America and Europe.
Going forward, Ford remains committed to all aspects of its One Ford plan, which is unchanged:
Ford’s planning assumptions and key metrics include the following:
Ford also continues to work towards its mid-decade outlook by implementing its One Ford plan.
“We have made tremendous progress in recent years by executing the fundamentals of our One Ford plan,” said Mulally. “Our One Ford plan led the way through the successful restructuring of our North American business and the recent economic recession. It remains our guide as we work to sustain our strong Ford North America operations and grow our important Ford Credit business, while addressing the diverse challenges and opportunities we have in other parts of the world.”
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+ The financial results discussed herein are presented on a preliminary basis; final data will be included in Ford’s Quarterly Report on Form 10-Q for the period ended June 30, 2012. The following information applies to the information throughout this release:
++ Excludes special items and “Income/(Loss) attributable to non-controlling interests.” See tables following “Safe Harbor/Risk Factors” for the nature and amount of these special items and reconciliation to GAAP.
CONFERENCE CALL DETAILS
Ford Motor Company [NYSE:F] releases its preliminary second quarter 2012 financial results at 7 a.m. EDT today. The following briefings will be conducted after the announcement:
Listen-only presentations and supporting materials will be available on the internet at www.shareholder.ford.com. Representatives of the news media and the investment community participating by teleconference will have the opportunity to ask questions following the presentations.
Access Information – Wednesday, July 25
Earnings Call: 9 a.m. EDT
Toll Free: 866.515.2912
Earnings Passcode: “Ford Earnings”
Fixed Income: 11 a.m. EDT
Toll Free: 866.318.8616
Fixed Income Passcode: “Ford Fixed Income”
Replays – Available after 2 p.m. the day of the event through Wednesday, Aug. 1
Toll Free: 888.286.8010
Fixed Income: 54835985
About Ford Motor Company
Ford Motor Company, a global automotive industry leader based in Dearborn, Mich., manufactures or distributes automobiles across six continents. With about 168,000 employees and about 65 plants worldwide, the company’s automotive brands include Ford and Lincoln. The company provides financial services through Ford Motor Credit Company. For more information regarding Ford’s products, please visit www.ford.com.
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Safe Harbor/Risk Factors
Statements included herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations, forecasts, and assumptions by our management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation:
Ford cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will prove accurate, or that any projection will be realized. It is to be expected that there may be differences between projected and actual results. Ford's forward-looking statements speak only as of the date of initial issuance, and Ford does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise. For additional discussion of these risks, see “Item 1A . Risk Factors” of Ford's Annual Report on Form 10-K for the year ended December 31, 2011.