Ford projects Australia to be a sore spot in 2014

FORD Motor Company has forecast continuing financial pain for its Australian subsidiary as it bears the cost of closing its Victorian car plants by 2016.

Reporting a global $US8.6 billion ($A10.03b) profit for 2013 – up $600 million on the previous year – the giant American company singled out the Australian operation as one of its sore spots, saying it expected unfavourable results in Australia in 2014 as Ford restructured its business.

It also said the weakening Australian dollar would also be reflected in the Australian performance.

Ford Australia plans to shut its Broadmeadows and Geelong manufacturing plants with three years, with the loss of 1200 jobs.

While Ford’s Australian workers face a gloomy future, the company’s American workers can look forward to a $US8800 ($A10,030) cash bonus under Ford’s North American profit sharing agreement. Ford North America’s pre-tax profit was a record $8.8b.

The profit-sharing payments are part of a collective-bargaining agreement between Ford and the United Auto Workers union. The Blue Oval paid 45,800 US workers $8300 in 2012 under the plan.

The strong result in North America drove the company’s global operations to its highest annual pre-tax profit in more than 10 years, alongside a record profit of $415 million in the Asia Pacific and Africa region (which includes Australia) where volume and revenue increased 30 per cent and 17 per cent respectively.

However, continued losses in Europe and an abrupt slide into the red in South America added a sour note.

The total global pre-tax profit of $8.6b was an increase of $603 million over 2012. Ford ended 2013 with automotive (excluding its credit division) gross cash of $24.8b, exceeding its total debt levels by $9.1b. Ford produced 6.4 million cars in 2013, up 646,000 units from 2012.

Of concern will be a continued downward trend in Ford’s South American region, headquartered in Brazil. The company lost $34 million before tax in 2013, compared with a $213 million profit in 2012 and an $861 million profit in 2011.

Ford said this was due to higher costs, unfavourable volume and mix, and unfavourable exchange rates. This was offset by higher pricing on its model range, which is continually being modernised and brought into line with global One Ford offerings.

Ford of Europe again made a sizeable loss, albeit a smaller one that 2012. The pre-tax loss was $1.6b, compared to $1.75b last year, which belied its increased “restructuring costs” and lower total industry volume.

Ford had one highlight in Europe, managing to be the fastest-growing commercial vehicle brand on the continent, while the Transit was a top-seller. Commercial vehicles as a whole increased 0.7 per cent in 2013.

Looking to 2014, Ford expects a reduced – but still strong – pre-tax take of between $7b and $8b, with much of this drop to come from North America.

The launch of 16 new or refreshed models, including the vital all-new F-150, will impact operating margins, while net pricing will be less favourable as it discounts run-out stock to a higher degree than in 2013.

Ford also expects an unfavourable result in Australia, reflecting the weakening dollar and the cost of “restructuring the business”, or in other words, the cost of shutting down its local factories.

The global operations will be restructured from this year, with responsibility for Africa to be moved into a new Middle East and Africa region, rather than being lumped in with the Asia and Pacific (and Australian) operations.