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 Ford Posts 2011 Pre-Tax Operating Profit of $8.8 Billion; One-Time Special Items Contribute to $20.2 Billion Net Income

DATE: Will be calculated from "Release Start Date" field.

We announced our 10th consecutive quarterly pre-tax operating profit.  It reflects a solid performance despite the challenging environment. Our track record for making continued progress in delivering great products, investing for global growth, building a strong business and providing profitable growth for all Ford stakeholders is evident in these results. 

Congratulations to everyone for continuing to focus on our plan and taking the decisive action that will increase our competitiveness and allow for long-term growth.

It is clear that we have both challenges and opportunities ahead. It also is so exciting to think of what lies ahead, as we have only just begun to realize the benefits of our plan – especially the full potential of the global scale and operating margin benefits inherent in the One Ford plan, which is 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 and 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.
 
One Team. One Plan. One Goal. One Ford.
 
Congratulations and thank you!
 
 -Alan Mulally  

DEARBORN – Ford Motor Company [NYSE: F] reported 2011 full year pre-tax operating profit of $8.8 billion, an increase of $463 million from a year ago, as strong performance in North America and Ford Credit offset challenges in other parts of the world. This marks the company’s third year in a row of improving annual operating profits.

“We delivered strong results for the full year as we continued to serve our customers around the world with best-in-class vehicles and make progress toward our mid-decade goals,” said Alan Mulally, Ford president and CEO.

“Despite the continued uncertainty in the external environment, the strength of our North American and Ford Credit operations allows us to continue to invest for future growth and develop outstanding products with segment-leading quality, fuel efficiency, safety, smart design and value.”

Full year 2011 net income was $20.2 billion, or $4.94 per share, an increase of $13.7 billion, or $3.28 per share, from a year ago. The results include a favorable one-time, non-cash special item of $12.4 billion for the release of almost all of the valuation allowance against the company’s net deferred tax assets.

Fourth quarter 2011 pre-tax operating profit was $1.1 billion, or 20 cents per share, a decrease of $189 million from fourth quarter 2010. Ford has now posted 10 consecutive quarters of pre-tax operating profit, as the company benefited from strong volume and revenue across its global product line.

Ford reported fourth quarter net income of $13.6 billion, or $3.40 per share, an increase of $13.4 billion, or $3.35 per share, from the fourth quarter of 2010. This includes the favorable impact related to releasing $12.4 billion of the valuation allowance. Ford began to record a valuation allowance against net deferred tax assets in the third quarter of 2006, reflecting large cumulative losses incurred, as well as its financial outlook at the time. Consistent delivery over the past few years of strong improvement in the company’s  business results now supports the release of almost all of the valuation allowance.

Fourth quarter net income also was affected by a favorable special item of $401 million related to the sale of Ford’s Russian operations to the newly created FordSollers joint venture, which began operations on Oct. 1, 2011.

As a result of Ford’s 2011 financial performance, Ford will make profit sharing payments to approximately 41,600 eligible U.S. hourly employees. In accordance with the formula in the UAW-Ford collective bargaining agreement, Ford’s North American pre-tax profits of $6.2 billion will generate approximately $6,200 per eligible employee on a full year basis. Based on first-half 2011 results, the formula generated approximately $3,750 per employee, which was distributed in December 2011. For the second half of 2011, the formula generated approximately $2,450 per employee, which is planned to be distributed in March. Individual profit sharing payments will be higher or lower based on employee compensated hours.

Ford generated positive Automotive operating-related cash flow of $700 million in the fourth quarter and $5.6 billion in the full year, an improvement of $1.2 billion from full year 2010.

Ford finished the year with Automotive gross cash of $22.9 billion, compared with Automotive gross cash of $20.8 billion as of Sept. 30, 2011, and $20.5 billion as of Dec. 31, 2010. Ford had total Automotive debt of $13.1 billion as of Dec. 31, 2011, compared with total Automotive debt of $12.7 billion as of Sept. 30, 2011, and $19.1 billion as of Dec. 31, 2010. Total Automotive liquidity at year end 2011 was $32.4 billion, including all available credit lines. 

As part of Ford’s long-term strategy to reduce risk in its funded pension plans, the company expects to make cash contributions to its funded pension plans in 2012 of about $3.5 billion globally, including discretionary contributions to its U.S. plans of about $2 billion.

“2011 marked a milestone year in our work to strengthen our balance sheet. We increased Automotive cash, reduced debt and improved liquidity, clearing the way for us to resume paying a quarterly dividend,” said Lewis Booth, Ford executive vice president and chief financial officer. “We are building on this strong foundation in 2012 and taking actions when appropriate to strengthen further our balance sheet.”

FOURTH QUARTER AND FULL YEAR 2011 HIGHLIGHTS
• Continued product momentum -- launched all-new global Ranger; launched 1.0-liter, 3-cylinder EcoBoost engine; and debuted all-new Escape
• Third consecutive year of higher U.S. market share and three-point share gain over the period for Ford brand; higher share in Asia Pacific Africa; three consecutive quarters of year-over-year share gains in Europe
• Improved U.S. competitiveness with four-year agreement with UAW
• Announced 2011 profit sharing and resumption of quarterly dividends
• Two consecutive years of more than $8 billion in pre-tax operating profits and third consecutive year of improved annual profits
• Automotive debt reduced by $6 billion; year end Automotive cash net of debt increased by $8.4 billion to $9.8 billion
• Broke ground on four new assembly and powertrain plants in Asia Pacific Africa region, and launched FordSollers joint venture in Russia



 
 
 
 
 
 
Total Automotive pre-tax operating profit in the fourth quarter was $586 million, a decrease of $155 million from fourth quarter 2010. The decrease is explained by higher costs, including higher commodity costs, higher compensation costs in North America related to the new UAW agreement (including the one-time ratification bonus), and unfavorable exchange rates. This was offset partially by favorable net pricing and volume and mix.
 
Full year pre-tax operating profit was $6.3 billion, an improvement of $1 billion. Strong performance in North America and a solid profit in South America offset performance in Asia Pacific Africa and Europe.
 
Total vehicle wholesales in the fourth quarter were 1.4 million units, up 38,000 units from fourth quarter 2010. Higher wholesales in North America were offset by lower wholesales in South America, Europe and Asia Pacific Africa. Full year wholesales were 5.7 million units, an increase of 382,000 units.
 
Total Automotive revenue in the fourth quarter was $32.6 billion, up $2.3 billion from fourth quarter 2010. Full year Automotive revenue was $128.2 billion, up $17 billion from a year ago.
 
North America: In the fourth quarter, North America reported a pre-tax operating profit of $889 million, compared with a profit of $670 million a year ago. The pre-tax operating margin also improved to 4.5 percent from 3.9 percent a year ago. The increase in profits is explained by higher volume and mix and net pricing, offset partially by increased costs, including higher commodity and warranty and freight costs. Wholesales in the fourth quarter were 693,000 units, up 78,000 units from a year ago. Revenue in the fourth quarter was $19.6 billion, up $2.4 billion from a year ago.
 
For the full year, North America reported a pre-tax operating profit of $6.2 billion, compared with a profit of $5.4 billion a year ago.
 
South America: In the fourth quarter, South America reported a pre-tax operating profit of $108 million, compared with a profit of $281 million a year ago. The decrease is explained primarily by unfavorable exchange and higher costs, with essentially all of the total cost increase driven by higher commodity costs. Wholesales in the fourth quarter were 124,000 units, down 18,000 units from a year ago. Revenue in the fourth quarter was $2.8 billion, unchanged from a year ago. 
 
For the full year, South America reported a pre-tax operating profit of $861 million, compared with a profit of $1 billion a year ago.
 
Europe: In the fourth quarter, Europe reported a pre-tax operating loss of $190 million, compared with a loss of $51 million a year ago. The decrease is primarily explained by higher material costs, about half of which are due to higher commodity costs, and lower subsidiary profits. This was offset partially by favorable volume and mix, structural cost improvements, and favorable net pricing. Wholesales in the fourth quarter were 391,000 units, down 6,000 units from a year ago. Revenue in the fourth quarter, which excludes sales at unconsolidated joint ventures, was $8.3 billion, up $200 million from a year ago.
 
For the full year, Europe reported a pre-tax operating loss of $27 million, compared with a profit of $182 million a year ago.
 
Asia Pacific Africa: In the fourth quarter, Asia Pacific Africa reported a pre-tax operating loss of $83 million, compared with a profit of $23 million a year ago. The decline reflects unfavorable volume and mix from the impact of the Thailand flooding, as well as higher costs associated with new products and investments for future growth. These were offset partially by higher net pricing. Wholesales in the fourth quarter were 219,000 units, down 16,000 units from a year ago. The company estimates the production impact from Thailand flooding was approximately 34,000 units. Revenue in the fourth quarter, which excludes sales at unconsolidated joint ventures, was $1.9 billion, down $300 million from a year ago. 
 
For the full year, Asia Pacific Africa reported a pre-tax operating loss of $92 million, compared with a profit of $189 million a year ago.
 
Other Automotive: In the fourth quarter, Other Automotive reported a loss of $138 million, compared with a loss of $182 million a year ago. The loss mainly reflects net interest expense.
 
For the full year, Other Automotive reported a loss of $601 million, compared with a loss of $1.5 billion a year ago.


 
 
 
 
 
 
For the fourth quarter, the Financial Services sector reported a pre-tax operating profit of $518 million, compared with a profit of $552 million a year ago. 
 
Ford Motor Credit Company: In the fourth quarter, Ford Credit reported a pre-tax operating profit of $506 million, compared with a profit of $572 million a year ago. The decrease, which is in line with expectations, is more than explained by fewer leases being terminated and the related vehicles sold at a gain.
For the full year, Ford Credit reported a pre-tax operating profit of $2.4 billion, compared with a profit of $3.1 billion a year ago.
 
OUTLOOK 2012
Ford remains focused on delivering the key aspects of the 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
 
Ford made major progress under the One Ford plan in 2011 and is well on track to achieve the goals in its mid-decade outlook. The company launched new global vehicles, including the Focus and Ranger, and continued to expand its production facilities in global growth markets such as China, India and Russia.
 
Product momentum will continue in 2012 with the global introduction of the new Fusion and Lincoln MKZ – the first vehicles from the company’s new global CD platform. In the C-segment, Ford continues to roll out the Focus and will launch the new Escape and Kuga. The B-segment portfolio also is expanding with the B-MAX in Europe and the EcoSport in global markets. Ranger will be launched in additional global markets throughout the year. Ford also is continuing the global expansion of its fuel-efficient EcoBoost™ engines. This includes North America, where the company is tripling the production capacity of EcoBoost-equipped Ford vehicles.
 
Ford expects U.S. full year industry volume to be in the range of 13.5 million to 14.5 million vehicles. The company expects European full year industry sales in the 19 markets Ford tracks to be in the range of 14 million to 15 million. Both estimates include medium and heavy trucks.
The company expects its full year market share in the U.S. and Europe to be about equal compared to 2011. Ford’s market share in 2011 was 16.5 percent in the U.S. and 8.3 percent in Europe.
 
Ford expects to deliver year-over-year improvements in quality.
 
The company also is releasing its key metrics for financial performance in 2012. Ford expects Automotive pre-tax operating profit to improve from 2011. Ford Credit is expected to be solidly profitable, although at a lower level than 2011. Total company pre-tax operating profit is expected to be about equal to 2011. Automotive structural costs are expected to increase by less than $2 billion to support higher volumes, new product launches and global growth plans. Although the company expects an increase in commodity costs, the increase is not expected to be material. Automotive operating margin is expected to improve from 2011.
 
Ford expects capital expenditures in 2012 to be $5.5 billion to $6 billion as it continues to invest in product and growth plans. 
 
“We are making consistent progress on our commitment to deliver great products, invest for global growth, build a strong business and provide profitable growth for all,” said Mulally. “We recognize we have challenges and opportunities ahead. We are excited about realizing the full potential of the global scale and operating margin benefits inherent in our One Ford plan. We also are excited about what leveraging our global assets ultimately will deliver for everyone associated with our business.”
 
Ford’s planning assumptions and key metrics, and near-term production volumes are shown below:


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

  

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1/27/2012 7:00 AM