* Ford fourth-quarter profit surpasses analyst estimates
* Outlook weaker than some analysts expect
* Euro zone likely in recession for the full year-CFO
* Stock tumbles, removes $3 bln in market value
By Deepa Seetharaman and Paul Lienert
DETROIT, Jan 29 Ford Motor Co forecast a
$2 billion loss in Europe this year, pointing to a punishing
recession that could drive down industry sales in the region to
a 20-year low.
By contrast, Ford expects to make more money this year in
North America, its most profitable region. But the No. 2 U.S.
automaker also predicted 10-percent operating margins in North
America, smaller than the 10.4 percent reported last year.
The weak outlook overshadowed Ford's better-than-expected
fourth-quarter results, and sent the company's shares tumbling
as much as 6.5 percent. At the stock's low point, the declines
wiped away more than $3 billion in market value.
The forecast "undercuts the popular investor thesis that
Ford offers significant earnings expansion from a booming U.S.
auto market while having 'Europe-proofed' its guidance,"
Barclays Capital analyst Brian Johnson said in a research note.
It was the fourth time in 12 months Ford ratcheted down
expectations in Europe, illustrating how difficult it has been
for automakers to predict and manage the rapid deterioration of
sales in the region.
Ford expects the industry to sell between 13 million and
13.5 million vehicles in Europe this year. At the bottom of that
range, sales in Europe would sink to their lowest level since
1993, according to automotive consultancy IHS Automotive.
"We're likely to see, in the euro zone, a recession for the
full year," Chief Financial Officer Bob Shanks told reporters.
"Clearly, we still have some difficult times in front of
us," Shanks said of Europe. "But we do think it will probably
bottom this year."
While Ford draws the lion's share of its revenue and profits
from North America, Europe is Ford's second-biggest source of
revenue. It now expects to lose more in Europe this year than
the nearly $1.8 billion loss it recorded in 2012.
Ford shares were down 5.6 percent to $13 on the New York
Stock Exchange by early afternoon, the stock's biggest one-day
decline since August 2011.
STRENGTH IN NORTH AMERICA
Some investors had been hoping that Ford would forecast
North American margins of at least 11 percent for the year,
Johnson said. He had predicted Ford would target a 10.6 percent
margin, while Morgan Stanley estimated a 10.2 percent.
Still, Ford expects to earn more money in North America this
year and gain market share in the United States.
Overall, Ford looks for total operating profit this year to
match 2012 levels. In South America and Asia Pacific and Africa
regions, Ford expects to break even.
So far, weakness in Europe has been balanced by Ford's
strength in North America, which is reaping the benefits of
Chief Executive Alan Mulally's "One Ford" turnaround strategy.
Jefferies analyst Peter Nesvold estimated Ford cut capacity
in North America by a little more than one-fifth from 2006 to
2009. Higher vehicle prices commanded an additional $10 billion
in revenues from 2006 to 2010, Nesvold said.
As a result, Ford avoided government bailouts needed by
rivals General Motors Co and Chrysler Group LLC
in 2009. The North American restructuring serves as the
blueprint for Europe's overhaul.
"One has to believe the shares have tremendous upside if
Ford comes even close to replicating its North American
restructuring success in Europe," Nesvold wrote on Tuesday in a
'TAKING ITS MEDICINE'
Ford reported a per-share pretax operating profit of 31
cents in the fourth quarter, better than the average analyst
estimate of 25 cents per share, according to Thomson Reuters
I/B/E/S. Fourth-quarter revenue totaled $36.5 billion.
Ford spent $1.2 billion on lump-sum pension buyouts last
year, but did not say how many salaried retirees took the offer.
Ford earned nearly $1.9 billion in North America in the
quarter, almost $1 billion better than the fourth quarter of
2011. It lost $732 million in Europe, much worse than the $190
million loss it reported a year earlier.
But Europe remains unpredictable, Ford and other automakers
have said, adding it would take more action if necessary. Ford
plans to close three factories and reduce capacity in Europe by
18 percent to save as much as $500 million a year.
In early 2012, Ford estimated it would lose $600 million in
Europe and increased that forecast to "at least" $1.5 billion by
October. Ford also said late last year that its 2013 losses in
Europe would match 2012 levels.
Of the $2 billion in losses Ford now expects in Europe,
about $500 million are restructuring costs, CFO Shanks said.
"Ford continues to take its medicine in Europe, while Asia
Pacific and South America feel upfront costs as they position
for longer-term growth," Morgan Stanley analyst Adam Jonas said.