Ford made record profit in North America and Asia in 2013, beating full-year estimates despite a slide in fourth-quarter profitability, but now faces a crucial year filled with costly new product launches.
The second-largest US carmaker by global sales rode strong demand for its F-series trucks in the US and a surge in Chinese demand to post full-year pre-tax profit of $8.6bn and its highest automotive profits for more than a decade.
“We had an outstanding year in 2013,” said Alan Mulally, chief executive “We are well positioned for another solid year in 2014,” he added, as the carmaker confirmed 2014 forecasts for similar revenue but lower operating margin.
This year will be transformative for Ford as it launches almost two dozen new vehicles – including a revamp of its most profitable model, the F-150 pick-up – and grapples with headwinds in South America and battles to stem losses in Europe.
The 7.6 per cent rise in pre-tax profit in 2013 came despite a slide in profitability in North America in the fourth quarter because of higher competition and softer pricing, and a swing to losses in South America after currency movements and a sharp fall in profit from Brazil and Venezuela.
Ford reported pre-tax profit for the fourth quarter of $1.3bn, 24 per cent lower than the same period in 2012, but above Wall Street estimates. Net income in the quarter almost doubled to $3bn, mainly because of $2.1bn worth of favourable tax special items.
This month Ford responded to pressure to return more capital to shareholders by increasing its quarterly dividend by 25 per cent.
Ford, along with its American rivals Chrysler and General Motors, has been one of the biggest beneficiaries of a US car market that swelled by 8 per cent last year, as its F-series pick-ups benefited from a renewed penchant for big, chunky SUVs and trucks.
Sales grew 11 per cent in North America last year, and 50 per cent in China, thanks to strong demand for its compact EcoSport and Kuga SUVs. Overall global deliveries rose 12 per cent in 2013.
But in the fourth quarter North America pre-tax profit fell 9 per cent compared with the same period in 2012, as increased incentives caused the company to report negative net pricing in the region for the first time since 2008, in response to higher competition and more dated products.
That would not continue into 2014, said Bob Shanks, chief financial officer, but the company would take a hit from the cost of launching and marketing more than 20 new vehicles this year, including a new aluminium version of its F-150 truck.
“We’ll have lower profits in North America [in 2014] but that’s really around the effect of the launches. We’ve got three times the number of product launches in North America in 2014 than we had in 2013,” said Mr Shanks.
In Europe, where Ford is in the middle of a painful three-year restructuring that includes factory closures, the company reported narrowed losses in the fourth quarter of $571m. Ford has stressed that it will be profitable in Europe – where a six-year slump in sales is expected to end in 2014 – by the middle of the decade.
Ford, the first of the big global carmakers to release its full-year results, said that it had not adjusted its 2014 outlook, reaffirming expectations of pre-tax profit between $7bn and $8bn. However, the company has warned of lower margins next year that could endanger its ability to hit a targeted 8 per cent to 9 per cent automotive operating margin in 2015.
South America will be key to that target. Ford reported a pre-tax loss in the region in 2013, dragged down by a fourth quarter where revenue fell and operating margin turned negative.
“You’re seeing a much more competitive Brazil … and the growth rate is actually well below where it should be,” said Mr Shanks. “We’ve taken production way, way down [in Venezuela] because of a lack of dollars. We cannot get our money out. That market is basically on ice at the moment.”