Ford sustains solid profits as North American market rebounds
Company looks to NA and Asia markets for future growth
Source: LMC Automotive, Global Automotive
Production Forecast, June 2013
The North American automobile industry continues its strong recovery as consumers replace their ageing vehicles and better household finances allow car buyers to take advantage of low-cost loans. Ford has benefitted greatly from this recovery, where sales in North America were chiefly responsible for overall profits in 2012 of USD 8.0 billion before taxes. However, growth has flattened out as global unit sales of 5.7 million units decreased slightly, or (0.5) percent from 2011. However this is still up over 2010 results of 5.3 million units.
Going forward, Ford sees its greatest potential for growth in North America and Asia. The company is increasing global production capacity to meet the anticipated demand. LMC Automotive is forecasting an increase in Ford's global light vehicle production through 2016. The increase for the period 2011-2016 is expected to average 4.6% annually with most of this capacity coming from new investments in North America and in Asia Pacific Africa, particularly China, India, and Thailand.
"ONE Ford" plan and Lincoln brand revival central to overall strategy
"ONE Ford" Product Development System continues to realize efficiencies
The ONE Ford global product development system utilizes global platforms by adopting a "hub and satellite" approach. A "hub", or lead product development engineering center, is assigned for each global vehicle. This ensures efficiency on a global scale through communization of parts, designs, suppliers and manufacturing processes. The hubs are supported by regional engineering centers, or "satellites", which tune products to local preferences.
As part of the effort to gain further efficiencies, the company is making progress on platform consolidation. In 2007, the company had 27 different vehicle platforms. By 2014, it will have 14 total platforms. It is on track to meet its target of nine core platforms globally. Ford states that the global C-platform, which includes the Focus, will have more platform volume than any other automaker, indicating its commitment to small cars.
Ford works to revive the Lincoln Brand
Deficient investment during the recession period and an aged owner base led to sliding sales for Lincoln. In response to this decline and in order to take advantage of the expanding North American market, Ford decided to overhaul the product lineup, starting with the MKZ that launched in 2012. This is the first of four new Lincolns to be introduced over a four-year period. Quality problems and part supply shortages during the launch caused a lack of available product for dealers. Consequently, sales were down in the first quarter of 2013 but gained momentum in the second quarter.
Ford is believed to be considering a future entry into the small-car luxury segment for the first time. If a model is approved, the likely markets will be the US and China where this segment is growing rapidly.
The company also showed the MKC concept at the North American International Auto Show 2013. Expected to be released next year, this vehicle targets the fastest growing luxury vehicle segment: compact crossovers. According to forecasting firm LMC Automotive, Lincoln's US market share is expected to climb from 0.6% this year to 0.9% in 2014 due to the introduction of new and refreshed models.
Over the long-term, Ford sales may be hampered because of the lack of a global luxury brand after it sold off Volvo, Jaguar, Land Rover and Aston Martin. LMC Automotive states, "Ford continues to apply lessons learned from incorporating design, technology and safety features, but will need significant time, resources and money rebuilding the Lincoln brand into a competitive global luxury brand."
|Lincoln MKC Concept||Lincoln MKC Concept - Rear View|
Supply base consolidation on track
Ford has been reducing the global number of production suppliers from 3,300 in 2004 to about 1,260 at year-end 2012. It has further plans to take them to a target of about 750 suppliers. This consolidation is intended to lead to a stronger and healthier supply base. The company also continues to work with suppliers on near-term capacity constraints as the company ramps up production. In addition, consolidating global vehicle platforms increases the ability to source to common suppliers for the total global volume of vehicle components. This results in a smaller number of suppliers producing greater volumes, thus resulting in greater economies of scale.
Emphasis on commercial vehicles for 2013
In 2013, the company has focused its efforts around the development of commercial vehicles, particularly the Transit series of vehicles displayed at the North American International Auto Show in January. In 2012, the global commercial vehicle industry represented approximately 17 million units. It is forecasted to grow by 4.8 million units, or 28% through 2017. Ford has been the best-selling brand of commercial vehicles in North America for 28 years. In Europe, Transit vans are the best-selling medium commercial brand. The company plans to leverage its common global family of commercial vehicles across all applicable markets.
|2014 Ford Transit Connect Wagon||2014 Ford Transit full-size van|
Alliances and joint venture announcements
* Ford, Daimler, and Renault-Nissan signed a three-way agreement in January 2013 to accelerate the commercialization of fuel-cell electric vehicles. Each company will contribute equally to the project. The strategy is to maximize design commonality and reduce investment costs toward the goal of launching the first mass-market fuel cell vehicle as early as 2017.
* On April 15, 2013, Ford and GM announced plans to jointly develop nine- and ten-speed automatic transmissions. This collaboration is intended to lower design and development costs while bringing these transmissions to market faster. This move is in response to Chrysler that had previously announced that it will be adding eight- and nine- speed transmissions to future products.
* Ford and Toyota mutually agreed to end their collaboration on gasoline-electric hybrid systems in an announcement made on July 23, 2013. The automakers first made the collaboration public in August 2011. Ford has decided to move forward on its own with development of a rear-wheel-drive hybrid system for pickups and SUVs. The new hybrid system should be available by the end of this decade. Ford felt that it had developed enough in-house expertise to develop the system on its own.
Europe: the focus for vehicle refreshes
|2015 Ford Atlas Concept|
The company is committed to refreshing the European product portfolio with a target of 15 global vehicles within five years. In North America the company focused its 2013 efforts around commercial vehicles, particularly the Transit series of vehicles. Overall, the company is committed to offering smaller, more fuel efficient vehicles in every market in which it sells.
Highlights of major recent and upcoming vehicle releases
|2012||Ford C-MAX Hybrid and C-MAX Energi plug-in hybrid||This Focus-based compact MPV was introduced in fall 2012 as a 2013 model.|
|Ford Escape/Kuga||This popular compact crossover SUV was redesigned and consolidated with the Kuga in Europe.|
|Ford Focus ST||The sporty version of the Focus went on sale in Europe in summer 2012.|
|Ford Fusion and Fusion Hybrid||The Fusion mid-size sedan was redesigned in fall 2012 for MY 2013. The hybrid version was redesigned with this model change.|
|2013||Ford Fusion Energi plug-in hybrid||A plug-in hybrid version of the Fusion was released in January 2013.|
|Lincoln MKZ||The MKZ mid-size car is the first of four redesigned or all-new Lincoln vehicles in the next four years.|
|2014||Ford EcoSport||The European version of the small SUV made its debut at the Geneva Auto Show and will be launched by spring 2014. It is also sold in urban environments in South America, India, Thailand and China.|
|Ford Edge||This mid-size SUV is due for a redesign in the second half of 2014. The next generation will also be sold in Europe.|
|Ford Escort||Introduced as a concept at Shanghai Motor Show in 2013 for the China market. This C-segment sedan revives the Escort name.|
|Ford F-150||The next generation pickup is scheduled to be released as a 2015 model in mid-2014. Design cues are expected to come from the Ford Atlas Concept shown at NAIAS 2013.|
|Ford Mondeo||The Mondeo, known as the Fusion in North America, will debut a new look in Europe. Hybrid and plug-in hybrid versions will also be offered.|
|Ford Mustang||The 50th anniversary of the Mustang sports car will likely arrive in spring 2014 as a 2015 model.|
|Ford Tourneo Courier||This five-seat small people mover made its debut at the Geneva motor show and will launch in mid-2014 in Europe.|
|Ford Grand Tourneo Connect and Tourneo Connect||The seven-seat Grand Tourneo Connect made its debut at the Geneva Auto Show 2013 alongside the five-seat Tourneo Connect.|
|Ford Transit||Full-size commercial van that replaces the Ford E series. It will go on sale summer 2014 and sold in markets around the world.|
|Ford Transit Connect||Connect Compact commercial wagon with 2 and 3 row configurations that seat 5 or 7 people respectively. It will go on sale in early 2014.|
|Lincoln MKC||This compact crossover vehicle made its debut as a concept at the Detroit Auto Show. It should appear in the second quarter of 2014.|
|2015||Ford Taurus||This large sedan is expected to get a redesign in the first half of 2015.|
|Lincoln MKX||The MKX mid-size crossover should get a redesign in the first half of 2015 as a 2016 model.|
Source: Ford Media Releases, MarkLines, INOVEV
Ford gains hybrid and electric vehicle market share
In the second quarter of 2013, Ford set a record for its best hybrid sales quarter ever. Demand continues to grow in markets across the US with more than 60 percent of customers trading in non-Ford brands, particularly vehicles from Toyota and Honda. Ford's share of the US electrified market had grown 12 points from last year to 16 percent in the first half of 2013.
The company is slowly chipping away at Toyota who dominates hybrid sales (excluding plug-in hybrids) with 66.7 percent of the market through the first five months of 2013. This is down from 72.4 percent of the market the year before. However, in August 2013, Ford lowered the fuel economy rating on the C-Max hybrid from 47 combined mpg to 43 mpg. C-Max buyers will also receive USD 550. This was in response to complaints from irritated customers and regulators that the rating was overstated. Although Ford didn't do anything illegal, this incident could hurt Ford's image as a fuel economy leader, which in turn could affect future hybrid sales. In the mean time, the company's first European built Focus electric vehicle rolled off the assembly line in Saarlouis, Germany in June 2013.
The company now has six green vehicle options:
* Hybrids: Ford Fusion Hybrid, Ford C-MAX Hybrid, Lincoln MKZ Hybrid * Plug-in Hybrids: Ford Fusion Energi, Ford C-Max Energi * Electrics: Ford Focus Electric
|2013 Ford Fusion Hybrid||2013 Ford Focus Electric|
Global unit sales flat in 2012 despite growth in NA and Asia; Strong growth predicted going forward
Ford reported total wholesale sales of 5.67 million units in 2012, slightly down from 5.70 million in 2011. The North America and Asia Pacific Africa regions showed positive increases while South America showed a small decrease. Europe showed the large decrease due to difficult market conditions in the region. Despite the positive gains in North America, Ford's market share declined in 2012 due to strong competition, particularly from Toyota and Honda who had big market gains. However, Ford rebounded a bit in the first half of 2013 as all regions showed increased or flat market share. The Asia Pacific Africa region, where Ford has made significant investment, is the only region that is showing consistent market share growth.
Ford Wholesale Sales by Region (thousands of units)
Ford Market Share by Region
Source: Ford Annual Reports. Note: *1) Wholesale sales are reported for all of NA while market share is reported for the US. 2) Data does not include Volvo
According to LMC Automotive, global Ford passenger car and light truck sales increased 0.7% YoY in 2012 to just over 5.2 million units. Growth in North America, Asia, and Africa offset declines in Europe and South America. In 2013, sales are expected to continue the upward trend to 5.5 million units, a 6.1% YoY increase over 2012 levels as the company concentrates on building smaller, fuel-efficient vehicles with a global focus. As LMC Automotive explains, "Ford is forecast to experience strong growth in emerging markets in Asia and South America, with solid but more measured growth in mature markets like North America and Europe."
Ford profit strong in 2012; Expects continued strength in 2013
|Source: Ford Motor Company 2012 Annual Report|
The combination of strong demand in the US and execution of the company's "ONE Ford" product development system has led to continued strong profits for the company. The result is pre-tax profits (before special items) of USD 8.0 billion in 2012. However, this is down from 2011 levels of USD 8.8 billion primarily due to an expected reduction in net income from financial services. In the automotive sector, profits were about equal for 2012. Higher net pricing and lower compensation costs positively impacted pre-tax profit. This was offset by higher costs, mainly structural, and unfavorable volume and mix. As of Q2 2013, Ford has experienced 16 consecutive profitable quarters and expects pre-tax profit to be equal to or higher than 2012 levels.
Automotive sector driven by North American profits
In the automotive sector, the North American region continued to drive results with USD 8.3 billion in pre-tax profits in 2012 (excluding special items). South America also posted a profit for the year. These profits were offset by moderate losses in Asia and a significant loss in Europe due to restructuring expenses. Other automotive expenses were mostly attributable to net interest expense.
|Source: Ford Motor Company 2012 Annual Report||Source: Ford Motor Company 2013 2nd Qtr. Earnings Review|
Note: Numbers in brackets "( )" represent negative value. In the first half of 2013, the North American automotive sector continued to dominate overall performance by setting an earnings record with a pre-tax profit (excl. special items) of USD 4.8 billion. This is an increase of USD 628 million compared with the same period a year ago. South America's loss of is primarily due to the devaluation of the Venezuelan bolivar in the first quarter. Europe's first half loss was worse than a year ago and includes USD 291 million of restructuring costs. The Asia Pacific Africa region turned a first half profit as sales gain momentum due to the company's aggressive investment strategy in the region. Other Automotive losses mainly reflect net interest expense.
Total company income down in 2012; First half 2013 profits jump over previous year
For FY 2012, total company income before tax (including special items) for Ford was USD 7.7 billion, a decrease of (USD 961) million over FY 2011. Full year after tax net income was USD 5.7 billion (attributable to Ford Motor Company) or USD 1.42 per share. Net income in 2012 was lower than a year ago, primarily reflecting the non-repeat of the 2011 release of the tax valuation allowance against deferred tax assets. Excluding the impact of the 2011 valuation allowance, net income was (USD 307) million lower than in 2011. As a sign of its continued financial growth, Ford doubled its quarterly dividend payout to USD 0.10 per share in 2013.
North America set first-half records for pre-tax profits in 2013. Ford had a first-half profit before income taxes of USD 3.9 billion, an improvement of USD 309 million compared with a year ago. Ford's first-half net income (attributable to Ford Motor Company) was USD 2.8 billion, an improvement of USD 408 million compared with a year ago.
Due to its first-half results, Ford revised its outlook in July 2013. It now expects total company pre-tax profit to be equal to or higher than 2012, automotive operating margin to be about equal to 2012 and automotive operating-related cash flow to be substantially higher than 2012.
|SUMMARY OF INCOME (in millions of USD)||2008||2009||2010||2011||2012||1st Half 2012||1st Half 2013|
|Income/(Loss) before income taxes||(14,895)||2,599||7,149||8,681||7,720||3,633||3,942|
|Provision for/(Benefit from) income taxes||(62)||(113)||592||(11,541)||2,056||1,197||1,096|
|Income/(Loss) from continuing operations||(14,833)||2,712||6,557||20,222||5,664||2,436||2,846|
|Income/(Loss) from discontinued operations||9||5||-||-||-||-||-|
|Less Income/(Loss) attributable to noncontrolling interests||(58)||-||(4)||9||(1)||-||2|
|Net income/(loss) attributable to Ford Motor Company||(14,766)||2,717||6,561||20,213||5,665||2,436||2,844|
|Income/(Loss) before income taxes||(12,314)||785||4,146||6,250||6,010||2,730||2,988|
|Financial Services Sector|
|Income/(Loss) before income taxes||(2,581)||1,814||3,003||2,431||1,710||903||954|
|Amounts Per Share Attributable to Ford Motor Company Common and Class B Stock|
Source: Ford 10-K, Ford Year End Financial Results; Ford 10-Q, Ford Mid-Year 2013 Financial Results Note: Numbers in brackets "( )" represent negative value.
Strong demand for new products encourage plant investments
The company has committed an investment of USD 6.2 billion in US plants through 2015 to keep up with its growth plan for North America. It will add 200,000 units of annual straight line capacity in 2013 after increasing capacity by 400,000 last year, including 40,000 units of increased production from shortening the traditional two-week summer shutdown to one week.
Also targeting its other growth market, Ford is increasing production capacity with new, flexible manufacturing plants in China, India, and Thailand. In conjunction with its unconsolidated affiliates in Asia Pacific Africa, the company launched two new plants in 2012 and plans to complete seven more plants in the region by mid-decade.
Major plant expansions announced by Ford
|Cleveland Engine, OH||USD 200 million||Investment to produce 2.0-liter EcoBoost engines. (450 jobs). Production is scheduled to begin in late 2014.|
|Dearborn Stamping, MI||USD 305 million||Upgrades to modernize the plant by summer 2013.|
|Flat Rock Assembly, MI||USD 555 million||Added 3-Wet paint process and Ford Fusion assembly. (1400 jobs). Scheduled to be done in summer or fall 2013.|
|Kansas City Assembly, MO||USD 1.1 billion||New stamping facility and upgraded paint shop for F-150 pickup and for new Transit Van. (2,000 jobs). The stamping facility was completed in 2012. Transit production is expected by summer 2014.|
|Livonia Transmission, MI||USD 74.7 million||Announced in Dec. 2012, new machinery and equipment for transmissions and testing.|
|Michigan Assembly, MI||USD 59.4 million||Stamping press expansion due to be completed by summer 2013.|
|Sterling Axle, MI||USD 86 million||Machinery and equipment to make axles. Expansion started in 2012.|
|Van Dyke Transmission, MI||USD 87.7 million||Announced in Dec. 2012, added capacity for 6F35 and 6F50 transmissions.|
|Ford Sollers Yelabuga Plant, Russia||N/A||Full-production of the Explorer SUV began April 2013. Previously, only knock-down versions were assembled here. This is the first time the Explorer is produced outside the US.|
|New Engine Plant, Tatarstan, Russia||USD 274 million||Announced in May 2013, Ford Motor Co.'s Russian joint venture will invest USD 274 million to build a new powertrain plant in Tatarstan. The factory will be located in the Russian republic's town of Yelabuga where the Ford Sollers joint venture already produces vehicles.|
|Bordeaux Automatic Transmission Plant, France||EUR 137.5 million||Announced in May 2013, Ford will invest 125 million euros and local authorities will invest 12.5 million euros to produce a next-generation transmission for compact cars in Europe.|
|Yenikoy Plant, Turkey||USD 1 billion over three years||Ford Otosan started construction of a third plant in March 2012. The new plant is scheduled to complete in 2013 and produce new light commercial vehicles. Its annual production capacity will be 110,000 units with a combined total production capacity at three Ford plants in Turkey expanding to 400,000 units.|
|Changan Ford Engine Plant Chongquing, China||USD 500 million||New plant to build 1.0-liter three-cylinder EcoBoost and 1.5-liter four-cylinder engines. Opened June 2013 with initial capacity of 400,000 units.|
|JMC Xiaolan Plant, Nanchang, China||USD 200 million (by JMC)||Ford's strategic partner, Jiangling Motors Corp. (JMC) opened a new plant in June 2013 that will build Ford and JMC branded commercial vehicles. Capacity is 300,000 vehicles.|
|New Engine Plant, Xiaolan, China||N/A||In June 2013, Jiangling Motors and Ford also announced an engine plant in its Xiaolan manufacturing base with capacity of 200,000 units.|
|Sanand Plant, India||USD 1 billion||Ford India laid foundation for Sanand Plant in March 2012. The amount of investment is USD 1 billion. The plant will be operational in 2014.|
Source: Ford Media Releases, Automotive News, General news sources, Press releases
Ford to cease manufacturing operations in Australia
Ford announced its intention to cease its Australian manufacturing operations in October 2016. The decision was driven by highly competitive market conditions including considerable market fragmentation and high manufacturing costs. Ford losses in Australia in the last five years have totaled approximately AUD 600 million. Approximately 1,200 jobs in Ford's Broadmeadows and Geelong manufacturing plants will be affected. Ford has manufactured in Australia since 1925.
European restructuring leads to closure of three plants
Ford recorded a roughly USD 1.8 billion loss in Europe in 2012 and expects to lose another USD 2 billion in the region this year. To stem its losses, Ford plans to close an assembly plant in Genk, Belgium in 2014. This plant, which builds the Mondeo sedan, and the S-Max and Galaxy minivans will have production transferred the plant in Valencia, Spain. The company is also closing a plant in Southampton, England that makes chassis cabs for the Transit van and a stamping plant in Dagenham, on the outskirts of London. In all, Ford plans to cut 18 percent of its capacity in Europe. CEO Alan Mulally has said that Ford will not rule out further capacity cuts and other actions if the situation worsens in Europe.
Production Forecast by LMC Automotive: strong light-vehicle production for Ford through 2016
|(LMC Automotive、June 2013)|
|Source: LMC Automotive, Global Automotive Production Forecast, June 2013|
LMC Automotive is forecasting strong results for Ford through 2016 as the company continues to experience growth in worldwide markets. Global production is expected to increase 7.0% in 2013, then increase an average of 4.2% per year from 2014-2016.
Regions with the largest rate of increase for 2013 production are South America with 18.3%, Asia Pacific with 12.6% and North America with 8.0%. The only region expected to decline from 2012 levels is Western Europe, which is projected to decrease by -4.6%.
As a percentage of global production, the North American region is expected to fall from a high of 50.8% in 2013 to 43.8% in 2016. Europe's share of production is expected decline by 10% during 2010-2016, while the Asia Pacific Africa region will nearly double its share over the same period.
Ford light vehicle production by country
|North America Total||2,364,907||2,662,547||2,782,812||3,006,506||3,044,916||2,996,646||2,933,226|
|South America Total||439,072||412,085||386,721||457,552||470,531||486,958||509,699|
|West Europe Total||1,216,640||1,167,347||978,449||933,785||946,398||965,798||924,399|
|East Europe Total||420,069||460,169||476,777||490,995||565,561||609,070||634,806|
|Asia Pacific Total||640,250||672,273||860,985||969,715||1,137,512||1,440,045||1,628,329|
|Source: LMC Automotive, Global Automotive Production Forecast, June 2013|
|(Note) 1.||Data indicate figures of only small-size vehicles, including passenger cars and light commercial vehicles with a gross vehicle weight of under 6 tons.|
|2.||All rights reserved. Reproduction of any data will require permission of LMC Automotive.|
|3.||For more detailed information or inquiries of forecast data, please contact LMC Automotive.|
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