Congratulations! The outstanding quarterly results we are announcing today are further evidence that our One Ford plan continues to deliver and build momentum.
As a result of our commitment to serving customers around the world and delivering profitable growth, we are announcing a record third quarter pre-tax profit. We also are improving our expectations and guidance for full year pre-tax profit and Automotive operating margin.
Our third quarter earnings are driven by volume and revenue growth across our business, with market share increases in all regions. We reported continued strong results in North America, record third quarter profit for Asia Pacific Africa, profit in South America and continued solid performance by Ford Credit. We also are celebrating the first combined profit for regions outside North America since the second quarter of 2011.
Our results also are proof that our transformation plan in Europe is on track to return to profitability by mid-decade, as Europe substantially reduced its loss compared with a year ago and the second quarter.
We will continue our laser focus on serving customers with vehicles delivering the very best quality, fuel efficiency, safety, smart design and value through our One Ford plan, which remains unchanged:
• Aggressively restructure to operate profitably at the current demand and changing model mix
• Accelerate the development of new products that customers want and value
• Finance the plan and improve the balance sheet
• Work together effectively as one team, leveraging Ford’s global assets
It is important for all of us to read the news release below and to understand the progress we are making against our plan and our outlook for the future. We will meet with financial analysts and representatives of the news media throughout the day to discuss this information and answer questions.
We also will discuss our results, accomplishments, challenges and opportunities during today’s Global Town Hall meeting, conducted outside of Dearborn for the first time ever in Shanghai. The video of the Global Town Hall will be available to view by 10 a.m. in Dearborn, 11 a.m. in São Paulo, 4 p.m. in Cologne and 10 p.m. in Shanghai.
One Team. One Plan. One Goal. One Ford.
Congratulations again, and thank you!
Ford Delivers Record Third Quarter Pre-Tax Profit of $2.6 Billion; Improves Full Year Guidance
• Record third quarter pre-tax profit of $2.6 billion, an increase of $426 million compared with a year ago; 17th consecutive quarter of profitability; third quarter earnings per share of 45 cents, an improvement of 5 cents per share compared with a year ago
• Net income of $1.3 billion, or 31 cents per share, down $359 million, or 10 cents per share, compared with a year ago due to pre-tax special item charges of $498 million. Special item charges included $250 million for separation-related actions, primarily in Europe to support the company’s transformation plan, and $145 million associated with Ford’s U.S. salaried retiree voluntary lump sum payout program as part of its pension de-risking strategy
• Top-line growth with wholesale volume and total company revenue up 16 percent and 12 percent, respectively, compared with a year ago; growth supported by year-over-year market share gains in all regions; fourth consecutive quarter of top-line growth
• Record third quarter pre-tax profit for Automotive sector; continued strong results in North America and a combined profit for regions outside North America for first time since second quarter 2011; record third quarter profit for Asia Pacific Africa; profitable in South America; loss in Europe, but improved substantially from second quarter and a year ago. Ford Credit remained solidly profitable
• Record third quarter Automotive operating-related cash flow of $1.6 billion; 14th consecutive quarter of positive operating-related cash flow; strong liquidity of $37.5 billion, an increase of $400 million from the end of the second quarter
• First nine months pre-tax profit of $7.3 billion, an improvement of $1 billion compared with a year ago; first nine months net income of $4.1 billion
• Improved full year company financial guidance: Ford now expects total company pre-tax profit to be higher than 2012, improved from prior guidance of equal to or higher than 2012. Ford also now expects Automotive operating margin to be higher than last year rather than about equal. Ford continues to expect Automotive operating-related cash flow to be substantially higher than 2012
DEARBORN, Mich., Oct. 24, 2013 — Ford Motor Company [NYSE: F] delivered record third quarter 2013 pre-tax profit of $2.6 billion, reflecting continued strong performance in North America and a combined profit from the regions outside North America. In addition, Ford Credit remained solidly profitable.
Total company third quarter pre-tax profit of $2.6 billion was $426 million higher than a year ago. Third quarter earnings per share of 45 cents was 5 cents per share higher than a year ago.
Net income for the third quarter of $1.3 billion, or 31 cents per share, was down $359 million, or 10 cents per share, compared with a year ago due to pre-tax special item charges of $498 million. Special item charges included $250 million for separation-related actions, primarily in Europe to support the company’s transformation plan, and $145 million associated with Ford’s U.S. salaried retiree voluntary lump sum payout program as part of the company’s pension de-risking strategy.
Automotive operating-related cash flow was $1.6 billion, a third quarter record, marking the 14th consecutive quarter of positive performance. The company ended the third quarter with strong liquidity of $37.5 billion, an increase of $400 million compared with the end of the second quarter of 2013.
“Ford’s record results in the third quarter show the strength of our One Ford plan around the world,” said Alan Mulally, Ford president and CEO. “Working together, we remain committed to serving customers in all markets with a full family of vehicles, offering the very best quality, fuel efficiency, safety, smart design and value.”
During the quarter, Ford contributed $1.1 billion to its global funded pension plans, which included about $700 million of discretionary payments to its U.S. funded plans as part of the company’s pension de-risking strategy.
In the third quarter, the company settled about $700 million of pension obligations related to its U.S. salaried retiree voluntary lump sum program, and has settled $3.4 billion since the program began in August 2012. The lump sum program is about 80 percent complete and concludes at the end of the year.
Dividends paid in the third quarter totaled about $400 million.
Total Automotive third quarter wholesale volume and revenue were up strongly from a year ago. The higher volume reflects higher market share in all regions, improved industry volumes in all regions except South America and favorable changes in dealer stocks in all regions. The growth in revenue primarily reflects higher volume, as well as net pricing gains in all regions.
Third quarter operating margin, at 7 percent, was seven-tenths of a percentage point better than a year ago.
First nine months volume and revenue were higher than a year ago by 14 percent and 13 percent, respectively.
“North America continues to achieve strong profits and we saw significantly improved results outside North America,” said Bob Shanks, executive vice president and chief financial officer. “We substantially reduced our losses in Europe, set a record third quarter profit in Asia Pacific Africa and saw a $150 million improvement in South America.”
For the sixth time in the last seven quarters, North America achieved a pre-tax profit of $2 billion or more and an operating margin of 10 percent or more. Third quarter pre-tax profit was about equal to last year’s record profit. Favorable market factors — volume and mix and net pricing — were offset, for the most part, by higher costs, including investment in new products.
Third quarter results were driven by a strong industry and a robust full-size pickup segment, along with Ford’s strong product lineup, U.S. market share growth, continued discipline in matching production to real demand and a lean cost structure — even as the company invests more in product and capacity for future growth.
Wholesale volume and revenue increased 13 percent and 12 percent, respectively, from a year ago. The volume improvement mainly reflects higher U.S. industry sales, favorable changes in dealer stocks and higher U.S. market share. Higher volume drove the revenue increase.
In the first nine months of the year, North America’s operating margin was 10.7 percent, five-tenths of a percentage point lower than a year ago, while pre-tax profit was about $7 billion, up about $600 million. Wholesale volume and revenue both improved 15 percent compared with 2012.
For full year 2013, Ford’s guidance for North America remains unchanged. The company continues to expect higher pre-tax profit compared with 2012 and operating margin of about 10 percent.
South America continues to execute the company’s strategy of expanding its product lineup, while progressively replacing legacy products with global One Ford offerings. The company’s new products continue to perform well. Customer response to the Ranger pickup and refreshed Fiesta remains strong, and EcoSport and Fusion continue to be segment leaders.
South America’s pre-tax profit of $159 million in the third quarter was $150 million higher compared with the prior year. Market factors more than explain the improvement.
Wholesale volume and revenue increased strongly from a year ago, both up 22 percent. The higher volume reflects increased market share and favorable changes in dealer stocks. The growth in revenue was driven by the higher volume and net pricing gains, offset partially by unfavorable exchange.
South America’s first nine months volume, revenue, operating margin and profit all improved from a year ago.
The overall environment in South America remains uncertain, but given the company’s performance in the first nine months, Ford now expects South America to be about breakeven to profitable for the full year. This is an improvement from prior guidance of about breakeven.
In the third quarter 2013, Europe remained on track in executing its transformation plan.
Europe’s third quarter pre-tax loss of $228 million was $240 million better than a year ago, with all factors favorable, except costs associated with restructuring. Europe’s results have improved sequentially in each quarter this year.
In the third quarter, wholesale volume and revenue improved from a year ago by 5 percent and 12 percent, respectively, the second consecutive quarter of year-over-year top-line improvement. The volume increase reflects higher industry sales, lower dealer stock reductions than a year ago and higher market share. The increase in Europe’s revenue mainly reflects the higher volume.
Europe’s operating margin for the first nine months was negative 5 percent and the pre-tax loss was $1 billion, both about equal to a year ago, despite about $400 million of restructuring costs incurred this year and lower industry volume. Volume and revenue were up slightly from a year ago.
The company now expects its full year loss in Europe to be less than 2012. This is an improvement from prior guidance of a loss about the same as a year ago, reflecting the progress the company is making on its Europe transformation plan.
Asia Pacific Africa
Ford’s strategy in Asia Pacific Africa is to grow aggressively with an expanding portfolio of global One Ford products tailored for the region and with manufacturing hubs in China, India and ASEAN. Implementation of this strategy continues to gain momentum.
In the third quarter, Asia Pacific Africa reported its fifth consecutive quarterly profit with pre-tax results of $126 million, an improvement of $81 million compared with a year ago. Third quarter results reflect favorable top-line factors, offset partially by higher costs, as the company continues to invest for further growth.
In the third quarter, wholesale volume was up 35 percent from a year ago, and revenue, which excludes the company’s China joint ventures, grew 7 percent. The higher volume reflects mainly improved market share, with higher industry volume and favorable changes in dealer stock also contributing. Higher revenue primarily reflects favorable volume and mix.
Asia Pacific Africa’s third quarter market share was 3.7 percent, six-tenths of a percentage point higher than a year ago and a quarterly record. The improvement was driven by China, where Ford’s market share improved eight-tenths of a percentage point to equal last quarter’s record of 4.3 percent, reflecting mainly strong sales of the Kuga, EcoSport and Focus.
For the first nine months, volume, revenue, operating margin and profit all improved from a year ago.
Ford’s guidance for Asia Pacific Africa is unchanged. The region is expected to be profitable for the full year.
The third quarter loss of $139 million in Other Automotive reflects net interest expense, offset partially by a favorable fair market value adjustment on the company’s investment in Mazda.
For the full year, Ford now expects net interest expense to be at the lower end of its prior guidance of $800 million to $850 million.
In the third quarter, Ford produced about 1.5 million units, or 187,000 higher than in the third quarter of 2012, reflecting higher volumes in all regions.
In the fourth quarter, Ford expects total company production will be about 1.6 million units, 102,000 units higher than a year ago. This includes a reduction of 15,000 units from the company’s prior guidance for North America.
FINANCIAL SERVICES SECTOR
Ford Motor Credit Company
Ford Credit’s third quarter profit of $427 million improved $34 million from a year ago, more than explained by higher volume in North America. The drivers of higher volume were an increase in leasing, reflecting changes in Ford’s marketing programs, as well as higher non-consumer finance receivables due to higher dealer stocks.
Ford Credit remains key to Ford’s global growth strategy, providing world-class dealer and customer financial services, maintaining a strong balance sheet, and producing solid profits and distributions.
For full year 2013, Ford Credit continues to expect pre-tax profit to be about equal to 2012. Ford Credit now expects year-end managed receivables of about $100 billion, which is within the prior range of $97 billion to $102 billion, and distributions of about $400 million, up from $200 million previously planned, reflecting a fourth quarter reduction in Ford Credit’s tax liability.
Other Financial Services
The third quarter loss of $64 million for Other Financial Services primarily reflects charges related to the sale of a portfolio of finance receivables that was not included in the company’s sale of the Volvo auto business in 2010.
Ford’s planning assumptions and key metrics include the following:
The company’s third quarter operating effective tax rate was about 33 percent. The company now expects its full year operating effective tax rate to be less than 30 percent, compared with 32 percent last year. This reflects a year-to-date tax rate of about 31 percent and a fourth quarter reduction in Ford Credit’s tax liability.
Ford remains focused on delivering the key aspects of its One Ford plan, which are unchanged:
• Aggressively restructuring to operate profitably at the current demand and changing model mix
• Accelerating the development of new products that customers want and value
• Financing the plan and improving the balance sheet
• Working together effectively as one team, leveraging Ford’s global assets
“We are on track for another strong year in 2013,” Mulally said. “Our One Ford plan continues to deliver profitable growth for all of our stakeholders.”
+ The financial results discussed herein are presented on a preliminary basis; final data will be included in Ford’s Quarterly Report on Form 10-Q for the period ended September 30, 2013. The following informationapplies to the information throughout this release:
• Pre-tax results exclude special items unless otherwise noted.
• All references to records by Automotive business units are for the period 2001 through the present, as comparative business unit results for Ford North America, Ford South America, Ford Europe and Ford Asia Pacific Africa are not available prior to such period.
• See tables at the end of this release for the nature and amount of special items, and reconciliation of items designated as “excluding special items” to U.S. generally accepted accounting principles (“GAAP”). Also see the tables for reconciliation to GAAP of Automotive gross cash, operating-related cash flow and net interest.
• Discussion of overall Automotive cost changes is measured primarily at present-year exchange and excludes special items and discontinued operations; in addition, costs that vary directly with production volume, such as material, freight and warranty costs, are measured at present-year volume and mix.
• Wholesale unit sales and production volumes include the sale or production of Ford-brand and JMCbrand vehicles by unconsolidated affiliates. JMC refers to our Chinese joint venture, Jiangling Motors Corporation. See materials supporting the October 24, 2013, conference calls at www.shareholder.ford.com for further discussion of wholesale unit volumes.
++ Excludes special items and “Income/(Loss) attributable to non-controlling interests.” See tables at the end of this release for the nature and amount of these special items and reconciliation to GAAP.
Statements included or incorporated by reference herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations, forecasts, and assumptions by our management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation:
• Decline in industry sales volume, particularly in the United States or Europe, due to financial crisis, recession, geopolitical events, or other factors;
• Decline in Ford’s market share or failure to achieve growth;
• Lower-than-anticipated market acceptance of Ford’s new or existing products;
• Market shift away from sales of larger, more profitable vehicles beyond Ford’s current planning assumption, particularly in the United States;
• An increase in or continued volatility of fuel prices, or reduced availability of fuel;
• Continued or increased price competition resulting from industry excess capacity, currency fluctuations, or other factors;
• Fluctuations in foreign currency exchange rates, commodity prices, and interest rates;
• Adverse effects resulting from economic, geopolitical, or other events;
• Economic distress of suppliers that may require Ford to provide substantial financial support or take other measures to ensure supplies of components or materials and could increase costs, affect liquidity, or cause production constraints or disruptions;
• Work stoppages at Ford or supplier facilities or other limitations on production (whether as a result of labor disputes, natural or man-made disasters, tight credit markets or other financial distress, production constraints or difficulties, or other factors);
• Single-source supply of components or materials;
• Labor or other constraints on Ford’s ability to maintain competitive cost structure;
• Substantial pension and postretirement health care and life insurance liabilities impairing our liquidity or financial condition;
• Worse-than-assumed economic and demographic experience for postretirement benefit plans (e.g., discount rates or investment returns);
• Restriction on use of tax attributes from tax law “ownership change;”
• The discovery of defects in vehicles resulting in delays in new model launches, recall campaigns, or increased warranty costs;
• Increased safety, emissions, fuel economy, or other regulations resulting in higher costs, cash expenditures, and/or sales restrictions;
• Unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in products, perceived environmental impacts, or otherwise;
• A change in requirements under long-term supply arrangements committing Ford to purchase minimum or fixed quantities of certain parts, or to pay a minimum amount to the seller (“take-or-pay” contracts);
• Adverse effects on results from a decrease in or cessation or clawback of government incentives related to investments;
• Inherent limitations of internal controls impacting financial statements and safeguarding of assets;
• Cybersecurity risks to operational systems, security systems, or infrastructure owned by Ford, Ford Credit, or a third-party vendor or supplier;
• Failure of financial institutions to fulfill commitments under committed credit and liquidity facilities;
• Inability of Ford Credit to access debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts, due to credit rating downgrades, market volatility, market disruption, regulatory requirements, or other factors;
• Higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles;
• Increased competition from banks or other financial institutions seeking to increase their share of financing Ford vehicles; and
• New or increased credit, consumer, or data protection or other regulations resulting in higher costs and/or additional financing restrictions.
We cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will prove accurate, or that any projection will be realized. It is to be expected that there may be differences between projected and actual results. Our forward-looking statements speak only as of the date of their initial issuance, and we do not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events, or otherwise. For additional discussion, see “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012, as updated by our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.