Europe woes won't derail Ford's momentum: execs
The second-largest U.S. automaker, which has been led by Chief Executive Alan Mulally since 2006, doubled its dividend last week based on the financial strength of its first three quarters of 2012. The company will report fourth-quarter results later this month.
"Not every part of the business is where we ultimately want it to be, but overall, the company is performing very well," the automaker's chairman, Bill Ford, told reporters on the sidelines of the Detroit auto show.
"It's a signal of confidence in the company in where we've been but more importantly where we're going," he said, referring to Ford's decision last Thursday to raise the dividend.
Overhauling its Europe operations is one of Ford's chief challenges in the upcoming year. The company is also growing in China and investing in its upscale Lincoln brand to attract younger, more affluent buyers.
Meanwhile, the U.S. auto market is set to grow more competitive as companies seek refuge from Europe, which is expected in 2013 to post its sixth straight year of sales declines. Last year, U.S. auto sales reached their highest level since 2007 last year and industry analysts and executives expect the region to make further gains in 2013. "A lot of competitors are looking at this market as a healthy one and directing more of their resources and potentially more of their production here," Ford's chief operating officer, Mark Fields, told reporters on Monday.
"So we have to guard against that."
Ford has spent the last six years revamping the business, lowering its break-even point and cutting fixed costs, which made the company less responsive to changes in the economy.
Ford analyzed a variety of scenarios before doubling the dividend, including running financial tests that factored in a much more serious downturn in Europe, Chief Financial Officer Bob Shanks told reporters.
"Even based on doing some severe downturn scenarios, we felt we could sustain this dividend," Shanks said.
Mulally is credited with turning around Ford while avoiding the federal bailouts needed to save its crosstown rivals General Motors Co and Chrysler Group LLC in 2009. Under his "One Ford" strategy, Ford has adopted global platforms that allow the company to achieve economies of scale.
"The structure of the business, particularly here in North America, has improved so dramatically that we could make money on just about everything in the lineup," Shanks said.
Ford is now adopting a similar turnaround strategy in Europe, where Ford expects to lose at least $3 billion in 2012 and 2013 combined, hurt by the economic slowdown and underused factories in the region.
Over the next three years, Ford will also expand its footprint in Asia in an attempt to avoid a possible over-reliance on North American operations, where its F-150 pickup truck has long been the top-selling vehicle.
The changes to the company are also reflected in the way it conducts business, executives said. As COO, Fields now runs Ford's weekly business review meetings that were once the purview of Mulally, who now sits to the right of Fields.
"Most of the leadership team was deeply involved in what happened in North America," Joe Hinrichs, who leads Ford's North and South American operations, said. "So we have a strong motivation to not allow that type of thing to repeat itself." Analysts, on average, project the automaker to post an annual profit of $1.34 per share in 2012, with earnings rising in 2013, according to Thomson Reuters I/B/E/S. On Monday, Ford showcased a concept version of its Lincoln MKC compact crossover designed to attract a younger buyer to the brand, whose buyers tend to be around 65 years old. The MKC targets one of the fastest-growing auto segments in both the U.S. and Chinese auto markets.
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