Behind the Wheel with Phil Lebeau

Ford Earnings Disappoint, Causing New Concerns and Questions for Investors

Gene J. Puskar

This should have been a day to celebrate at Ford headquarters. It announced a pre-tax operating profit of $8.8 billion for 2011, its most profitable year since 1999.

Instead, the company missed earningsestimates by a nickel and investors are focusing on the company's conservative outlook for 2012. (Track Ford Stock Here)

As a result, investors are looking at Ford and wondering if the automaker has plateaued.

This is the new world Ford is facing. Its struggles with Europe (lost $190 million in '11), rising commodity costs (up $2.3 billion in '11) and a so-so profit margin (5.4% in '11 vs. 6.1% in '10) are the issues nipping at its heels. They are also some of the reasons investors look at Ford and say, "Where's the next leg of growth."

The answer is that growth will come incrementally.

  • To fix Europe, Ford is lowering costs by right-sizing production and shifting more to low-cost operations in Turkey, Romania and Russia.
  • Commodity costs are expected to ease in 2012.
  • Profit margins should improve with higher sales volumes and pricing power, especially in North America.

There's one more issue weighing on Ford.

Auto stocks are out of favor right now. Investors are questioning if the automakers will continue to have pricing power and if companies like Ford can truly fix their European operations.


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