Ford Motor Company F announced today that 2013 is expected to be one of the best
years in its history and projects 2014 to be another solid year for the
company with 23 global product launches and continued investments around the
world as the next step in its One Ford plan for profitable growth.
"We are celebrating what we expect to be an outstanding 2013, one that is
likely to be among the best in our history," said Bob Shanks, Ford executive
vice president and chief financial officer. "Once the year is finished, we
expect it will show that we grew the business, delivered strong financial
results, progressed the restructuring of our operations in Europe and
Australia, strengthened our balance sheet and provided attractive returns to
our investors."
2013 An Outstanding Year
2013 is expected to be among the best years in Ford's history. Full-year
Automotive revenue is projected to grow about 10 percent, with market share
increases in all regions other than Europe, where Ford expects higher retail
share of the retail passenger car industry, as well as improved share of the
commercial vehicle market. In Asia Pacific Africa and China, the company
expects record market shares.
Ford is making good progress in implementing its Europe transformation plan
and also announced earlier in the year a plan to restructure operations in
Australia.
The company continued to strengthen its Automotive balance sheet. It estimates
that it nearly cut in half the underfunded status of its global pension plans
compared with the end of 2012. Ford also shared a comprehensive capital
strategy with investors, one that is targeted to deliver high levels of
shareholder value. Early in the year, Ford doubled its dividend and also
implemented an anti-dilutive share repurchase program to offset
compensation-related issuances. Based on performance and an improving balance
sheet, the company now is rated investment grade by four of the major rating
agencies.
Ford now projects that total company full-year pre-tax profit, excluding
special items, to be about $8.5 billion, better than 2012 and in line with its
most recent outlook. The company also is reconfirming its outlook that
Automotive operating margin will be higher than a year ago and that Automotive
operating-related cash flow will be substantially higher than 2012,
potentially a record.
Ford expects North America full-year 2013 pre-tax profit to be the highest in
more than a decade, with an operating margin of 9.5 percent to 10 percent;
this compares to prior guidance of about 10 percent. The difference reflects
mainly higher warranty expense of $250 million to $300 million associated
primarily with the Escape 1.6 liter recall announced last month.
In South America, the company now expects results to be about breakeven as
recent government actions in Venezuela have affected adversely the business
and overall results in the region. This compares to prior guidance of about
breakeven to profitable results for 2013.
The 2013 outlook for all other Automotive business units, Automotive net
interest expense and Ford Credit is unchanged from prior guidance.
Finally, the company expects its full year operating effective tax rate to be
about 27 percent. This compares to prior guidance of less than 30 percent.
Pension Update
In addition to an expectation of a much improved funded status for Ford's
global pension plans at year-end 2013, substantial progress has been made in
two other areas.
First is the company's U.S. salaried retiree voluntary lump sum program that
began in 2012 and is now complete. For the total program, the company made
payments to about 35,000 people, or about 37 percent of those eligible,
settling $4.2 billion in obligations or about 25 percent of the related
liability. In total, Ford will recognize special item charges of about $850
million, of which $600 million will be in 2013 with about $150 million
projected to occur in the fourth quarter.
The second area of progress is reduced cash requirements during the next three
years to fully fund Ford's global funded pension plans. The company now
expects average annual contributions required over the next three years to be
about $1 billion to $2 billion per year, down from the prior outlook of $2
billion to $3 billion per year.
2014 The Next Step in Ford's Plan to Deliver Profitable Growth
2014 is expected to be another solid year for Ford and a critical building
block in the One Ford Plan as Ford moves forward in building stronger global
brands, a growing business based on outstanding products and a better balanced
business in terms of source of sales and profitability. This is supported by a
strengthening balance sheet that will continue to enable the company to reward
shareholders with attractive returns.
In 2014, Ford will embark on its most aggressive product launch schedule in
its history. The company will launch 23 all-new or significantly refreshed
vehicles around the world — more than double the 11 global vehicle launches in
2013.
"This is our most ambitious launch plan ever, as we continue to implement our
One Ford plan," said Shanks. "In 2014, we are investing across the world to
support next year's launches, but also to drive profitable growth beyond 2014
as we serve more customers in more markets and in more segments."
Overall, 2014 represents the next step in delivering profitable growth for
all, with total company pre-tax profit, excluding special items, projected at
$7 billion to $8 billion.
North America
Ford will have 16 launches in North America in 2014. This is triple the number
of vehicles launched in Ford's largest region in 2013. The 2014 launches in
North America will cover a significant percentage of the region's volume. As a
result, Ford expects wholesale volume next year in North America to be lower
than in 2013 and net pricing to be slightly unfavorable as it runs out prior
models and assumes a continuation of a more competitive pricing environment
for small and medium cars and utilities due to the weaker yen. Costs
associated with this product growth will increase next year as well.
"The payoff for North America from the 2014 launches and investments we incur
for future periods will be a stronger product lineup and volume and revenue
opportunities into 2015 and beyond," said Shanks.
As a result, Ford expects North America 2014 pre-tax profit to be lower than
in 2013, with an operating margin ranging from 8 percent to 9 percent,
consistent with the company's targeted ongoing range of 8 percent to 10
percent.
South America
The One Ford plan is expected to improve profitability in Brazil and Argentina
in 2014, particularly as customers continue to respond well to the company's
new products, but the company expects these improvements to be offset by
deterioration in the external environment in Venezuela. This includes a
planning assumption of a major devaluation in the bolivar — from 6.3 to 12
bolivars to the U.S. dollar — with an unfavorable profit effect of about $350
million.
As a consequence, results in 2014 for South America are expected to be about
the same as in 2013 or about breakeven. There are risks to this outlook,
however, given the volatility of the situation in Venezuela and increasing
risks in the environment in Argentina.
Europe
Ford's Europe transformation plan is on track. Ford's Genk, Belgium, facility
will close at year-end 2014 as planned, significantly contributing to an 18
percent reduction in Ford's capacity in Europe, excluding Russia, and
generating savings in 2015 and beyond. During the year, however, the company
expects to incur restructuring costs of about $400 million related primarily
to accelerated depreciation of plant assets and production relocations. These
costs will be reported in Europe's operating results as they have been in
2013. In addition, the company will incur higher launch and engineering costs
in 2014 consistent with its plan to add at least 25 new vehicles in five
years.
The company also expects special item charges in Europe in 2014 of $400
million to $500 million, mainly related to personnel separations; these
charges will not be reported in operating results.
For 2014, the company expects results in Europe to improve compared to 2013 as
it continues the successful implementation of its transformation plan to
achieve profitability in the region in 2015.
Asia Pacific
Ford's operations in Asia Pacific have been undergoing a positive
transformation during the last several years as it invested consistently for
growth. The results of this investment have been strong growth, including
record market share in 2013 and a profitable business, including what is
expected to be a record full-year result this year.
The company will continue to execute its growth strategy for the region in
2014. It currently has six major facilities under construction across the
region, with two facilities in China starting production next year and two
more in 2015. In India, the two facilities now being built also will start
production in 2015.
For 2014, the company expects pre-tax profit in Asia Pacific to be about the
same as 2013 due to costs associated with its growth, a slower rate of
top-line growth due to production constraints and a more competitive pricing
environment, and unfavorable results in Australia as Ford restructures the
business and reflects the effects of a weakening Australian dollar.
Ford Credit
Ford Credit is expected to perform well next year with profit about equal to
this year. Growth should offset the continued normalization of credit losses,
the continued run off of higher-yielding assets and the impact of Ford
Credit's strategy to unencumber its balance sheet to build a stronger
investment-grade company.
Mid-decade Outlook
Beyond 2014, Ford generally remains on track to achieve its mid-decade
outlook, but its targeted global Automotive operating margin of 8 percent to 9
percent is at risk. This is due to the severe European downturn and conditions
in South America, especially in Venezuela, that were not anticipated at the
time the guidance was provided in mid-2011. The company expects its results
over the mid-decade period to be strong and improving.
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