By Ben Klayman and Bernie Woodall
DEARBORN, Mich. Jan 28 Ford Motor Co
reported higher-than-expected quarterly results on Tuesday as
earnings in its core North American market fell less steeply
than Wall Street expected, but declining vehicle prices there
raised concerns about 2014.
The No. 2 U.S. automaker also affirmed the 2014 profit
outlook it presented to investors last month.
Ford has described 2014 as a transition period that will
test the strength of Chief Executive Officer Alan Mulally's team
and the company's restructuring since he took over in 2006. This
year will also bring the critical introduction of the redesigned
F-150 full-size pickup truck in the fall.
Guggenheim Securities analyst Matthew Stover said Ford's
first quarterly drop in North American vehicle pricing in five
years was ominous.
"It sort of foreshadows what we will see in 2014," he
said. "North America is going through a churn, and international
operations are not going to be strong enough to offset that."
Ford said last month that vehicle pricing in the U.S. market
would be "slightly unfavorable" in 2014. That combined with the
cost of introducing 23 new vehicles and a deteriorating
Venezuelan economy would dent its profit this year, the company
On Tuesday, shares of Ford were up 0.2 percent at $15.74 in
Ford's net income in the fourth quarter rose to $3 billion,
or 74 cents a share, from almost $1.6 billion, or 40 cents a
share, a year earlier.
The results included a $2.1 billion gain from the addition
of deferred tax assets to the balance sheet, as well as charges
of $311 million for last year's pension buyouts and plant
closures in Europe.
Excluding one-time items, Ford earned 31 cents a share, 3
cents more than analysts polled by Thomson Reuters I/B/E/S had
expected. Analysts also attributed some of the outperformance to
a lower-than-expected tax rate.
Revenue rose 4 percent to $37.6 billion, above analysts'
estimates of $35.17 billion.
In North America, Ford's pretax earnings were $1.7 billion,
a decline of $200 million, as vehicle pricing fell for the first
time in five years due to increased competition. However, the
profit was higher than expectations of $1.5 billion by RBC
Capital Markets and $1.43 billion by Barclays.
Citi analyst Itay Michaeli said the pricing declines for the
industry tended to hit small and mid-size cars and small
crossover vehicles. However, pricing remains strong for larger
SUVs and pickup trucks for now, he added.
The lower pricing for Ford led South Texas Money Management
to sell some of its stake in the company, said Leah Bennett, the
San Antonio firm's co-chief investment officer.
"I think they're going to be more vulnerable to
opportunistic pricing from the Japanese automakers," she said.
In fact, Buckingham Research Group analyst Joseph Amaturo in
a research note urged investors to sell Ford shares, saying
increased downtime for the F-150 launch could reduce North
American pretax profit by $800 million this year.
Ford Chief Financial Officer Bob Shanks declined to discuss
the financial impact of the truck changeover, but added the
launch was largely the reason for the operating profit decline
the company has forecast in North America. He added 2014 would
be an "atypical year" for Ford due to the product introductions
and uncertain South American economies.
For the fourth quarter, Ford reported a wider-than-expected
loss of $126 million for South America, compared with a
year-earlier profit. Its $571 million loss in Europe, though
smaller than in the previous year, was still wider than analysts
had expected. Earnings in Asia Pacific Africa surged more than
170 percent to $106 million.
Ford's 2013 pretax profit of $8.57 billion was the
second-highest in the last decade, trailing only 2011's $8.76
On Tuesday, Ford said it still expected global pretax
earnings of between $7 billion and $8 billion this year, with
lower auto operating margins.
The company has said 2014 will be the busiest launch year in
its 111-year history. Of the 16 new vehicles slated for North
America, its most-watched will be the next version of the F-150
truck, which is the best-selling pickup in North America and a
big profit center for the company.
Ford has reduced the weight of the new truck by using more
aluminum than in the current models.
F-150 production will be down this year for 11 weeks at
Ford's truck plant in Dearborn and two weeks at a Kansas City,
Missouri, factory to prepare for the new version, Shanks said.
Three of those shutdown weeks in Dearborn will occur in the
Last year, the F-150 assembly plants had five weeks of
downtime, four of which occurred during the normal summer
Guggenheim's Stover said Ford was more likely taking the
downtime in the first quarter to reduce inventory of the truck
and not for the changeover to the new model.
Ford said its global pension plans were underfunded by $9
billion at the end of 2013, an improvement of $10 billion from
the end of 2012 and $1 billion better than it had previously
Of the $9 billion pension shortfall, $6 billion was for
plans the company does not have to contribute to in advance.
Shanks said that meant Ford would have more cash to invest
because it only had to fund $3 billion upfront.
Ford also said that because of its 2013 earnings, it would
make record profit-sharing payments of about $8,800 per person
to about 47,000 U.S. hourly employees.