Ford Posts Big Profits but Misses Wall Street

January 27, 2012 - 9:25 AM
Earns Ford

FILE - In this Sept. 28, 2010 file photo, Ford vehicles are reflected in the bumper of a Ford F-350 truck, at Fremont Ford in Newark, Calif. Ford said Friday Jan. 27, 2012 it made $13.4 billion in the fourth quarter, largely due to an accounting change. (AP Photo/Ben Margot, File)

DEARBORN, Mich. (AP) — An accounting change boosted Ford's fourth-quarter net income, but without the gain the company fell short of Wall Street's expectations.

Weak sales in Europe and lower production in Thailand eroded Ford's profits.

Investors punished the stock in pre-market trading, where shares fell nearly 5 percent to $12.14.

Ford earned $13.6 billion in the fourth quarter, due to a decision to move deferred tax assets back onto its books. Without that change, the company's pre-tax operating profit totaled $1.1 billion, or 20 cents per share, missing analysts' forecasts of 25 cents.

The company lost money in Europe and Asia in the fourth quarter. But its North American operating profit rose 33 percent to $889 million.

"The quarter was really driven by North America," Chief Financial Officer Lewis Booth said.

Booth also said November flooding in Thailand, which affected its parts suppliers, had a greater impact than the company expected. Ford lost 34,000 units of production in Thailand and in South Africa, which relies on Thai-made parts. He said the company also saw higher costs for steel and other commodities. Ford spent $2.3 billion more on commodities in 2011 than the prior year, or $100 million more than it had forecast.

Europe's debt crisis weighed on car sales in that region.

For the full year, the Dearborn-based company made $20.2 billion, or $4.94 per share. Without the accounting gain, it earned $8.76 billion, or $1.51 per share, its highest operating profit since 1999. Full year revenue rose 13 percent to $136.3 billion.

Analysts had forecast full-year earnings of $1.86 per share on revenue of $127.31 billion.

Based on its full-year North American results, Ford said it will make profit-sharing payments of around $6,200 each to its 41,600 U.S. hourly employees. Employees will get their checks in March.

Ford moved $15.7 billion worth of tax credits and other assets off its books starting in 2006 because it wasn't making money so it couldn't take advantage of them. The company moved most of them back onto its books in the fourth quarter because it anticipates using them now that it's profitable.

The change will affect Ford's tax rates going forward. Ford's tax rate was 9 percent in 2010 because of the assets that were being held in the valuation allowance account. Ford's new rate will be closer to 30 percent.

Booth said the change is a strong indication that the company expects to remain profitable. Another is Ford's decision last month to reinstate a 5-cent quarterly dividend starting in March.

But Booth said the international climate remains turbulent. Ford is trying to hold the line on incentive spending in Europe, but that could cost some sales. He doesn't expect Asia to be a solid contributor to profits for several more years, as the company tries to expand there. The South American market is also getting more competitive, he said, and Ford's products there are older than some new entries.

Ford is cutting European production in the first quarter by 36,000 vehicles because of weak sales. It's also making smaller production cuts in Asia and South America, but is increasing production in North America by 18,000 vehicles.