Writing about earnings should be one of the most straightforward business stories. But for larger multinational firms it can sometimes be a bit more difficult. Take for example Ford’s fourth-quarter results, which came out on Tuesday.
Here’s how the Wall Street Journal presented the earnings:
Ford Motor Co. posted fourth quarter net income of a $1.6 billion on another strong performance in North America, but the second-largest U.S. auto maker forecast a wider, $2 billion operating loss in Europe this year.
The Dearborn, Mich.-based company forecast that its total 2013 operating results will be about the same as 2012’s $7.96 billion. Ford said it would lean heavily on its home region to supply this year’s profits amid depending woes in Europe, investments in Asia and currency hits in South America.
“North America had spectacular results,” said Bob Shanks, the chief financial officer in an interview. But “clearly we have a lot of difficult times ahead of us” in Europe. “We do think it will probably bottom this year and start to go up.”
The New York Times had this to say about the full year results and the company’s recent performance.
For the full year, Ford said it earned $5.66 billion, a 5 percent drop from $5.97 billion in 2011, not including the tax-valuation changes that had increased the 2011 earnings to $20.2 billion.
Ford’s overall revenue in the fourth quarter was $36.5 billion, a 5 percent increase from $34.6 billion in the same period a year earlier. For all of 2012, revenue was $134.3 billion, a 1 percent decrease from $136.3 billion in 2011.
Despite the domestic results, the stock market appeared to focus on the European weakness, sending Ford’s stock down 4.2 percent.
The fourth-quarter results were a microcosm of Ford’s recent overall performance.
Healthy sales of new models in North America resulted in good profit margins in the region. The company introduced several new products, like the Ford Fusion midsize sedan, in the United States, where the overall industry grew by 13 percent last year.
That the overall auto market in the U.S. is expanding is interesting news, but not enough to keep Bloomberg from leading with the European recession news:
Ford Motor Co. (F), the second-largest U.S. automaker, said it expects to lose about $2 billion in Europe this year as a likely recession in the region continues to sap demand for cars.
Ford Europe lost $732 million in the fourth quarter and $1.75 billion for the full year, more than its previous forecast given in October of about $1.5 billion. The deficit will be worse in 2013 than Ford’s previous projection for a similar loss to a year earlier because a Europe-wide recession is likely this year, Chief Financial Officer Bob Shanks told reporters today.
“We’re seeing weakness in the industry; certainly it will be lower than last year,” Shanks said during a briefing at Ford’s headquarters in Dearborn, Michigan. “It’s just a very tough economic environment in Europe. We have a lot of difficult times in front of us.”
The entire top of the Bloomberg story talks about the results in Europe and the poor economic outlook. There’s no mention of the U.S. or of better sales there until much lower down in the story.
There was some other news in the WSJ story that could also give investors pause:
Ford ended 2012 with a world-wide underfunded pension obligation of $18.7 billion, compared with around $15 billion at the end of 2011, despite $3.4 billion in cash contributions to the pensions in 2012.
Mr. Shanks said the company is planning to increase its cash contributions to pensions and expects the pension obligation to be shored up by the middle of the decade. The widening pension disparity came because of the extremely low interest rates available on government bonds in the U.S. and Europe.
Ford soon will pay profit-sharing checks of about $8,300 to its 45,000 hourly workers in the U.S. represented by the United Auto Workers union. Ford pays the profit-sharing based on the pretax operating profit generated by the North American division.
That’s another way that cash will need to be allocated, giving Ford less to use for developing new products. No one would argue that funding the pension plan isn’t imperative, just that it will eat into resources that might otherwise be available.
Combined with weak outlook and drop in sales from a large region, Ford’s earnings will likely keep investors guessing as to where the auto market is heading.
