Ford Finishes 2013 Strong, But Faces a Tough Year

Ford Motor Co. enjoyed one of the best years in its history in 2013, but the celebration won’t last long.

The Dearborn-based automaker posted a pretax profit of $8.56 billion — the second-highest in the past decade — and worldwide sales were up 12 percent, to 6.3 million cars and trucks. That was a faster pace than Toyota, the industry leader, whose sales rose 2 percent to 9.98 million.

But Ford has already warned of leaner results this year, as it launches a record 23 vehicles and builds seven plants around the world. It’s anticipating 13 weeks of expensive down time — up from five in 2013 — at its two U.S. pickup truck plants, to prepare for the launch of a new aluminum-clad F-150. And instability in South America and price competition in the U.S. are constant threats.

Ford expects pretax profit of between $7 billion and $8 billion, and says its operating margin and cash flow will also fall, because of the vehicle-introduction costs. Chief Financial Officer Bob Shanks said capital expenditures will total $7.5 billion this year and in the next two to three years, up from $6.6 billion in 2013 and more than twice what it spent four years ago.

Ford’s fourth-quarter net income totaled $3 billion, or 74 cents per share. Excluding a big tax gain, net income was 31 cents per share, 4 cents better than analyst estimates, according to FactSet.

Investors initially reacted favorably to the news. Ford’s stock rose 2 percent in morning trading, but was flat at $15.71 by late afternoon.

Buckingham Research analyst Joseph Amaturo urged investors to sell Ford stock and set a $12 one-year price target. He noted that Ford’s fourth-quarter pretax earnings fell 24 percent, even though the company reported a 3.5 percent revenue increase. He also estimated that the downtime at Ford’s truck plants this year could cut North American pretax profits by $800 million.

But others told investors to stick it out.

“We think Ford will reap benefits from the truck transition and growth in Asia Pacific, in 2015,” said Standard and Poor’s Capital IQ analyst Efraim Levy, who has a “Buy” rating on the stock.

Here are Ford’s results by region:

• North America: Ford posted a record pretax profit of $8.8 billion in North America, thanks to big demand for pickup trucks as the economy improved. Ford sales in the U.S. rose 11.7 percent, the only automaker with a double-digit gain. Profit-sharing payments to Ford’s 47,000 U.S. hourly workers will be about $8,800, a record.
• Asia Pacific and Africa: Ford earned a record $415 million in Asia and Africa last year. Its sales jumped 49 percent, to more than 935,000 in China, where it introduced new vehicles like the EcoSport and Kuga SUVs.
• Europe: Ford narrowed its losses in Europe to $1.6 billion. Sales and revenue were up slightly in the struggling region, but the company incurred $856 million in charges for two plant closures.
• South America: Ford swung to a $34 million loss, as it halted production in Brazil to prepare for new products, and slowed production in Venezuela because of a shortage of hard currency.

“In Argentina and Venezuela, there are escalating risks as both the economies are weak, with unclear economic policy direction,” Ford CEO Alan Mulally told analysts and media during a conference call.