DEARBORN - Ford Motor Company posted its highest fourth quarter pre-tax operating profit in more than a decade, led by a very strong performance in North America.
“Ford North America posted a $1.9 billion pre-tax operating profit – almost a billion dollars better than the fourth quarter of last year,” said Joe Hinrichs, president of The Americas, addressing company leaders who gathered Tuesday at Ford WHQ for The Americas’ quarterly Business Review. “That’s just a phenomenal result. All of you should be proud of that, and it just shows what we can do when we start to grow the business with a cost structure that’s competitive.”
Ford’s operating margin for 2012 was a record 10.4 percent, up 2.1 percentage points over last year.
“We have the product lineup and now the capacity to be able to grow share this year, and we need to show the world that we can do that and keep that margin,” said Hinrichs.
Ford South America had a fourth quarter pre-tax profit of $145 million, marking 36 straight quarters of profitability.
“That’s a strong result given the situation in South America, but we have a lot of work to do,” said Hinrichs. “The bottom line is that we need to address our cost structure in South America, and we need to grow the business.”
Ford of Canada remained a market share leader for the third consecutive year, which Hinrichs described as “a great accomplishment.”
“Canada is our second most profitable market in the world,” he said.
There was also positive news to report about Ford of Mexico, Hinrichs added.
Ellen Hughes-Cromwick, director and chief economist, was a guest speaker at the meeting. She shared her thoughts on the U.S. economic outlook for 2013.
“We do expect the U.S. economy to grow around 2 to 2.5 percent this year. We have a good housing recovery, and we do have central banks being very supportive of our economy and financial markets,” she said. “But there are still some challenges on the fiscal front. A plan has to get in place and that has got to be resolved in order to keep the economy on track.”
Also presenting at Tuesday’s meeting was K.R. Kent, executive director, controller, The Americas, who discussed Ford’s priorities and opportunities for 2013.
“2013 is about delivering our production and our sales,” he said. “We need to regain momentum on quality and then continued discipline on cost control and making sure we’re really getting value for every dollar that we spend.”
Ken Czubay, vice president, U.S. Marketing, Sales & Service, emphasized the importance of improving market share.
“We improved our car sales, our utility sales and our truck sales for a little over 100,000 more vehicle sales last year than in 2011 – a 5 percent gain,” he said. “But the industry outgrew us relative to market demand so we lost 1.3 percentage points of share. This year our task, and we have full confidence, will be to improve our sales and the resulting industry segmentation.”
Czubay says many factors contribute to volume and share growth, such as improving truck segmentation, increased annual manufacturing capacity, improving favorable opinion and further investment in the Lincoln brand.
The final speaker at Tuesday’s meeting was Frank Davis, executive director, North America Engineering, who outlined how the company will deliver great products with quality.
“Quality underpins everything we do,” he said. “It’s so important to the brand.”
Davis said Ford has been focusing on three major areas for improvement: infotainment, DPS6 transmissions as well as interior usability and access. He said the company is making progress on all three fronts as evidenced by reducing the number of Things Gone Wrong (TGWs).
He said a special task force has been established to ensure quality product launches.
“The team meets daily … and is focused on how we get big gains in quality as soon as we can,” he said.
Davis also reviewed the major 2012 product launches, including the Escape, Fusion and C-MAX and highlighted products coming in 2013 such as the Fiesta, Fiesta ST, EcoSport (South America), Transit and Transit Connect.
“2012 was an impressive product year, and we’ve reloaded again for 2013,” he said. “And our recently unveiled concepts (the Ford Atlas truck and Lincoln MKC utility vehicle) clearly demonstrate our commitment to the Ford and Lincoln brands.”
In closing Tuesday’s meeting, Hinrichs reiterated what needs to be done in 2013.
“Our biggest goal in North America is to improve our profits, maintain the margins and grow share while improving quality,” he said.