8-KOther Events

FORD MOTOR CO 8-K Report, Corporate Update (Jun 28, 2012)

Filed June 28, 2012For Securities:FF-PCF-PDF-PB

Summary

This 8-K filing from Ford Motor Company, filed on June 28, 2012, provides an update on the company's expected second-quarter 2012 performance and full-year outlook, based on remarks made by CFO Bob Shanks to The New York Times. While Ford anticipates profitability and positive Automotive operating cash flow for Q2 2012, driven by strong performance in North America and Ford Credit, pre-tax operating profits are expected to be substantially lower year-over-year. This is attributed to significant costs associated with new product launches and capacity expansions, the benefits of which are expected in the latter half of the year. The company highlighted increasing pressure on operations outside of North America. Ford South America is contending with competitive and pricing pressures, currency weakening, and adverse government policies. Europe's economic crisis and intensified competition are impacting margins, with the situation having deteriorated significantly since the beginning of the year. While Ford Asia Pacific Africa is experiencing volume growth, investment and growth costs are currently outpacing revenue realization. The combined Q2 loss from South America, Europe, and Asia Pacific Africa is projected to be roughly three times the Q1 loss of $190 million.

Key Highlights

  • 1Ford expects to be profitable in Q2 2012 with positive Automotive operating cash flow, primarily due to strong performance in North America and Ford Credit.
  • 2Pre-tax operating profits excluding special items for Q2 2012 are expected to be substantially lower than the same period last year.
  • 3Significant costs related to new product launches and increased production capacity in North America and Asia Pacific Africa are impacting Q2 profitability, with benefits anticipated in the second half of 2012.
  • 4Operations outside of North America (South America, Europe, Asia Pacific Africa) are facing increasing pressure and are expected to incur a combined pre-tax loss in Q2 2012 roughly triple the Q1 loss of $190 million.
  • 5Specific challenges include competitive and pricing pressures, currency weakness, adverse government policies in South America; a deteriorating economic crisis and intense competition in Europe; and higher investment/growth costs outpacing revenue in Asia Pacific Africa.
  • 6Despite regional challenges, Ford reiterates its expectation for solid full-year profitability and positive Automotive operating cash flow.
  • 7The company is evaluating the impact of international pressures on its full-year guidance and will provide a comprehensive update in its upcoming quarterly earnings announcement.

Frequently Asked Questions

Ford expects to be profitable in the second quarter of 2012, with positive Automotive operating-related cash flow. However, pre-tax operating profits, excluding special items, are anticipated to be substantially lower compared to the same period in the previous year.

The lower profits are primarily due to significant costs incurred in the second quarter for new product launches and increased production capacity in Ford North America and Ford Asia Pacific Africa. The associated volume and revenue benefits from these investments are not expected to be fully realized until the second half of 2012.

Ford's operations outside of North America are facing increasing pressure. The combined pre-tax loss from Ford South America, Ford Europe, and Ford Asia Pacific Africa is expected to be approximately three times the $190 million pre-tax loss experienced in the first quarter. Specific issues include competitive and pricing pressures, currency weakening, and adverse government policies in South America; the economic crisis and competition in Europe; and higher investment costs outpacing revenue in Asia Pacific Africa.

Yes, Ford continues to expect to be solidly profitable for the full year 2012 and to generate positive Automotive operating cash flow, driven by the continued strong performance of Ford North America and Ford Credit. However, the company is evaluating the impact of the challenges faced in its international operations on the full-year guidance and will provide an update.