North America boosts Ford in 4Q

DEARBORN, Mich. (AP) - For Ford, there's no place like home.

Strong sales and profits in the U.S. bolstered the automaker in the fourth quarter but the European debt crisis and flooding in Thailand hurt results elsewhere. Ford Motor Co.'s shares took a hit after the results fell short of Wall Street's expectations, but they recovered some lost ground once the company promised better - if still bumpy - results in 2012.

Ford reported $13.62 billion in net income, but investors brushed off the result because most of that came from an accounting change. Excluding that change, earnings totaled $1.1 billion, or 20 cents a share, missing Wall Street expectations by 5 cents.

Ford's stock price fell as much as 6 percent in premarket trading. The stock price was down 3.8 percent to $12.26 in afternoon trading.

Chief Financial Officer Lewis Booth said Thai flooding and the rising cost of steel and other commodities hurt Ford more than analysts expected.

The November floods, which affected Thai parts suppliers, cost 34,000 units of production in Thailand and in South Africa, which relies on Thai-made parts. Ford also spent $2.3 billion more on commodities in 2011 than the prior year, or $100 million more than it forecast.

Bill Selesky, an auto analyst with Argus Research, said investors became more comfortable after Ford explained its accounting change and reassured investors that it expects its operating margin to increase this year. Ford's operating margin - a measure of how much the company earned after all the costs of doing business - fell to 2.2 percent from 3 percent in 2011, largely because of commodity costs.

"The company said, "Listen, we can manage through this, and North America is very, very strong,"' Selesky said.

Ford lost money in Europe and Asia in the fourth quarter, and profits fell in South America. But its North American operating profit rose 33 percent to $889 million.

For the full year, North American profits rose 15 percent to $6.2 billion. Ford's U.S. market share was up for the year, and the company got higher prices for new vehicles like the Ford Explorer and Ford Focus. U.S. buyers paid an average of $29,524 for Ford cars and trucks last year, up 6 percent from two years ago, according to automotive pricing site TrueCar.com.

But in Europe, Ford's second-most important region by sales, fourth-quarter operating losses more than doubled to $190 million and sales fell 1 percent.

Booth said the company isn't sure how much impact the debt crisis will have on European sales this year. But CEO Alan Mulally said he's optimistic, since Ford has 10 new or revamped vehicles going on sale in Europe. In the meantime, Ford is cutting European production by 36,000 vehicles in the first quarter.

Ford's rival General Motors Co. is also expected to be hurt by weak results in Europe when it reports its earnings Feb. 16. Chrysler Group, which has little international exposure, will be buoyed by its U.S. sales when it releases earnings Feb. 1.

In Asia, Ford's sales fell 7 percent in the fourth quarter, largely because the pace in China slowed. Ford's Asia Pacific region lost $83 million in the quarter after posting a profit in 2010.

Booth said things will be bumpy in Asia for the next several years as Ford embarks on a major expansion that includes the construction of seven plants. The company aims to triple the cars in its Chinese lineup to 15 over the next three years.

The South American market was another disappointment, with sales and market share down. Booth said South America is getting more competitive, and Ford's products there are older than other brands'.

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 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's accounting change resulted in big gains on paper. The move dates to 2006, when Ford moved $15.7 billion worth of tax credits and other assets off its books because it wasn't making money so it couldn't take advantage of them. Now that it's profitable, the company moved most of those assets back onto its books.

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 under the valuation allowance. Ford's new rate will be closer to 30 percent.

Booth called the change a "significant milestone" and said it's a strong indication that the company expects to stay profitable. Another is Ford's decision last month to reinstate a 5-cent quarterly dividend starting in March.

Ford also said Friday that it plans to contribute $3.5 billion to its global pension funds this year. Underfunded pensions have been another area of concern for investors and for ratings agencies, which recently raised Ford's credit rating to one notch below investment grade. Ford has been below investment grade since 2005.

Standard and Poor's analyst Efraim Levy, who maintains a "buy" rating on Ford shares, said he wasn't concerned that Ford missed analysts' expectations.

"I don't think they have to fully meet their goals to be successful," he said. "Directionally, they are moving where they have to be."

But Levy said Ford will have to watch its back in the U.S., where Toyota and Honda are finally recovering from earthquake-related shortages and smaller players like Volkswagen and Kia are making inroads.

"Right now, I tend to give Ford the benefit of the doubt, but I do think the easy gains are over for them," Levy said.

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