Profits arrived from increased sales and margins in North America and Financial Services.
Wayne Gerdes - CleanMPG
- April 28, 2012
Alan Mulally, Ford president and CEO announced Ford’s first quarter results with the company reporting decreased revenues and profits for the first quarter of 2012 compared to a year ago. Pre-tax operating profits of $2.3 billion (39 cents per share) and net income of $1.4 billion (35 cents per share) were down 19.6% and 45.3% respectively compared to the first quarter of 2011.
Balance sheet declines were attributed to lower overall worldwide sale volumes reflecting weaker economic conditions in Europe and additional investment expenses in Asia. In addition, Ford’s first quarter was affected by higher tax expenses compared to a year ago, resulting from a tax valuation allowance in the fourth quarter of 2011. The increase in non-cash tax expense explains about half of the decrease in net income, with the balance reflecting lower operating results and increased special charges, primarily buyouts of hourly workers in the U.S. as part of the 2011 UAW agreement.
Salaried Pension Plan Changes
Ford announced that it will offer to about 90,000 eligible U.S. salaried retirees and U.S. salaried former employees the option to receive a voluntary lump-sum pension payment. If an individual elects to receive the lump-sum payment, the company’s pension obligation to the individual will be settled in full. This is the first time a program of this type and magnitude has been offered by a U.S. company for ongoing pension plans. Payouts will start later this year and will be funded from existing pension plan assets. This is in addition to the lump-sum pension payout option available to U.S. salaried future retirees as of July 1, 2012.
The company opened CFMA Chongqing Assembly, increasing Ford’s passenger car capacity in China by a third to 600,000 units and paid its first quarterly dividend since 2006.
Ford has now been profitable on a pre-tax operating basis for 11 consecutive quarters.
Worldwide, total vehicle sales in the first quarter were down approximately 45,000 units to 1.4 million units, 45,000 vehicles for the first quarter of 2011.
- In the first quarter, North America reported a pre-tax operating profit of $2.1 billion, compared with a profit of $1.8 billion a year ago. This was the highest quarterly profit for the region since at least 2000
, when the company started reflecting North America as a separate business unit. The increase in profits was directly attributed to higher U.S. volume, higher pricing, lower contribution costs, and lower compensation. North American sales in the first quarter were 651,000 units, up 36,000 units from a year ago.
- In the first quarter, South America reported a pre-tax operating profit of $54 million, compared with a profit of $210 million a year ago. South American sales in the first quarter were 118,000 units, up 4,000 units from a year ago. Revenue in the first quarter was $2.4 billion, up $100 million from a year ago.
- Europe reported a pre-tax operating loss of $149 million, compared with a profit of $293 million a year ago. The decrease was being attributed to lower sales and actions to reduce dealer inventory in an ever weakening sector. Vehicles sales reached 372,000 units, down 60,000 units from a year ago. Revenue in the first quarter was $7.2 billion, a decline of $1.5 billion from a year ago.
Asia Pacific Africa
- Asia Pacific Africa reported a pre-tax operating loss of $95 million, compared with a profit of $33 million a year ago. The decline was associated with continued investment for future growth. Sales in the first quarter were 217,000 units, down 25,000 units from a year ago. Revenue in the first quarter was $2.3 billion, up $200 million from a year ago.
Ford’s Financial Services
For the first quarter, the Financial Service sector reported a pre-tax operating profit of $456 million, compared with a profit of $706 million a year ago.
Ford’s One Ford plan continues to accelerate the development of new products while the company revised upwards its U.S. full year industry volume projection to be in the 14.5 million to 15 million vehicle range. Ford did not disclose its sales estimates for China where it has a long way to go to reach a significant market share presence.
Solid but decreasing results show that the new F-Series sales throughout all of last year appear to have run their course. With car sales being much less profitable, Ford will struggle to increase future quarters whereas profits are all but guaranteed if they continue to provide desirable new vehicles that meet both the wants and needs of the Ford faithful and beyond looking forward.