North America was the only region where Ford Motor Co. saw profits rise in the fourth quarter and in all of 2011. Everywhere else the automaker lost money or saw profits fall, hurt by nervous consumers in Europe, flooding in Asia and aging products in South America. Costs rose faster than expected, too.
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 totalled $1.1 billion, or 20 cents a share, down 15 per cent from the fourth quarter of 2010. Ford missed Wall Street's expectations by 5 cents.
The stock price took an early hit but recovered once the company promised better — if still bumpy — results in 2012. Shares fell 4 per cent to close at $12.21.
Chief Financial Officer Lewis Booth said the 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 relaxed after Ford explained its accounting change and reassured them that it expects 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 per cent from 3 per cent in 2010, largely because of commodity costs.
"The company said, 'Listen, we can manage through this, and North America is very, very strong,'" Selesky said.
North American operating profits rose 33 per cent to $889 million in the fourth quarter. For the full year, North American profits rose 15 per cent 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 per cent from 2009, 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 per cent.
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 the region. In the meantime, Ford is cutting European production by 36,000 vehicles in the first quarter.
Rival General Motors Co. is also expected to be hurt by weak results in Europe. It reports quarterly results 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 per cent in the fourth quarter, largely because sales in China have 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. Both sales and market share fell. Booth said South America is getting more competitive, and Ford's products there are older than other brands. Ford aims to turn that around when it introduces new products there next year.
For the full year, the Dearborn-based company reported net income of $20.2 billion, or $4.94 per share.
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 per cent in 2010 because of the assets that were being held under the valuation allowance. Ford's new rate will be closer to 30 per cent.
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.
Without the big accounting gain, Ford earned $8.76 billion, or $1.51 per share, its highest operating profit since 1999. Revenue rose 13 per cent 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 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.
"I tend to give Ford the benefit of the doubt, but I do think the easy gains are over for them," he said.