Annual Report 2011 - Ford Motor Company

Management’s Discussion and Analysis of Financial Condition and Results of Operations
We see both challenges and opportunities in the current environment. While the uncertainty surrounding the European
debt crisis and its impact on the global economy presents a challenge for all, our strong product portfolio and the prospect
of global economic growth offer opportunities for our business going forward.
Although we will monitor closely the economic environment throughout the year, we have established the key planning
assumptions and metrics listed in the table above. As indicated, we expect full-year industry volume to range from
13.5 million to 14.5 million units in the United States, and 14 million to 15 million units for the 19 markets we track in
Europe. We project full-year market share in the United States and Europe will be about equal compared with 2011. For
quality, we expect to deliver year-over-year improvement.
Compared with 2011, we expect the following 2012 financial performance, excluding special items:
• Automotive pre-tax operating profit to improve
• Ford Credit to be solidly profitable, although at a lower level
• Total Company pre-tax operating profit to be about equal
• Automotive structural costs to increase by less than $2 billion as we support higher volumes, new product
launches, and growth plans
• Automotive operating margin to improve
We expect capital spending to be in a range of $5.5 billion to $6 billion as we continue to invest in our business, and
we expect a non-material increase in our commodity costs in 2012 compared with 2011. We expect net interest in 2012 to
be about equal to 2011; while interest expense will be reduced reflecting lower debt levels, lower interest rates result in
reduced interest income.
As discussed in "Results of Operations" above, we expect Ford North America to continue as the core of our
Automotive operations, with improved profitability for full-year 2012 compared with 2011. Looking ahead for Ford South
America, competition in the region is intensifying with a number of manufacturers substantially increasing capacity and
also importing new products into the region. Against this background, we expect Ford South America to continue to
generate solid profitability for 2012, although somewhat lower than 2011. We are continuing to work on actions to
strengthen our competitiveness in the region's changing environment; these actions include fully leveraging our One Ford
plan, including the introduction of an all-new lineup of global products over the next two years starting in the second half of
2012. In Europe, the external environment is uncertain, and likely to remain so for some time. Given the challenges in
Europe, we will continue to review, take and accelerate actions to strengthen and improve our Ford Europe business.
This will include fully leveraging our One Ford plan and our global resources. We expect Ford Asia Pacific Africa to grow
volume and be profitable for 2012, even as we continue to invest in additional capacity and in our product line-up for an
even stronger future in line with our One Ford plan.
As indicated, we expect Ford Credit to be solidly profitable for full-year 2012 but at a lower level than 2011, primarily
reflecting fewer leases being terminated and the related vehicles sold at a gain, and lower credit loss reserve reductions.
Of Ford Credit's $2.4 billion pre-tax profit for full-year 2011, the contribution related to these two factors was about
$800 million favorable; these factors are expected to be minimal in 2012. Ford Credit also anticipates lower financing
margin in 2012. As disclosed in "Liquidity and Capital Resources" above, Ford Credit anticipates year-end 2012 managed
receivables to be in the range of $85 billion to $95 billion. Ford Credit also is projecting distributions of between
$500 million and $1 billion during 2012, subject to available liquidity and managed leverage objectives.
Overall, we expect 2012 to be a solid year, with improved Automotive pre-tax operating profit, strong Automotive
operating-related cash flow, and solid Ford Credit profitability. We recognize that we have both challenges and
opportunities ahead, and chief among our tasks is accelerating the realization of the full potential of the global scale and
operating margin benefits inherent in our One Ford plan. This task includes: working to improve even further our very
strong North American operations; working to strengthen and grow our profitable South American operations in the face of
increasing competition in the region; working to ensure that Ford Europe is on track to deliver sustainable and appropriate
returns in an uncertain environment; working to achieve strong growth and profit contribution from Ford Asia Pacific Africa;
and continuing the strong performance of our strategic asset Ford Credit.
Building on our strong performance in 2011, we will continue to leverage our One Ford plan as we go further on our
path to achieving our mid-decade outlook.
70 Ford Motor Company | 2011 Annual Report