With a 54 percent increase between 2011 and 2012 fourth quarters, Ford Motor Company is showing strong gains, despite the dismal European market. The fourth quarter net income of $1.6 billion is the highest the company has seen in a decade.
The jump in last quarter income is a promising development for Ford, showing an American recovery that could hold new profit potential in 2013. The news is especially good for analysts and investors, since the 2012 numbers for the auto corporation are more honest than the often-inflated 2011 figures. Tax-valuation allowances in 2011 increased the company’s fourth quarter net income to $13.6 billion, but numbers tied to actual performance lowered the income to only $1.03 billion.
Allowances aside, the company earned $5.97 billion in 2011 and $5.67 billion in 2012, around a 5 percent decrease (the fourth quarter boost could not fully negate the losses of the first three quarters). The $307 million drop was due in large part to the Euro crisis. In previous years Ford had invested in European auto sales, hoping to catch more of the market share and become a strong mover in the Eastern European emerging economies.
Plans fell through as 2012 saw a disastrous year for auto sales in Europe due to the financial crisis, which made car purchasing impossible for many European consumers. It is a mark of how much the American market improved in a similar period of time that fourth quarter profits came in so strong for the automaker.
Predictions hold that the European market will continue to drop into 2013 until it hits rock bottom and starts to slowly climb back up, at which point the automaker may start to benefit, especially in the newer mass markets of the eastern nations. The New York Times reports that southern Europe auto giants such as Fiat, Peugeot and Renault have suffered even more, potentially opening the door for Ford to seize some of their market share in the coming years.
“For 2013 outlook, Ford expects another strong year, with Total Company operating profit to be about equal to 2012, Automotive operating margin to be about equal to or lower than 2012, and Automotive operating-related cash flow to be higher than 2012,” reported the company in its financial news release.
In other international regions, the corporation’s expansion has been hit-or-miss. The unstable South American market has made it difficult for the U.S. manufacturer to turn a profit. The Asia Pacific Africa sector has seen a steady increase in sales but high expansion costs have thus far negated any positive cash flows from these regions. Ford hopes to improve these markets and start profiting from them in 2014 and beyond.
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