The financial crisis in Europe is becoming a huge obstacle for the growth of most US companies that carry on business operations in Europe. There are even companies that are failing to retain its investor confidence despite showing decent performances. One such company is Ford Motor Company (NYSE:F) . In spite of the company’s strong fourth quarter earnings beating the Street’s expectations, Ford couldn’t impress its investors and the stock dropped more than 5%. Thanks to Europe, the only factor behind the company’s unwelcoming guidance for 2013.
A quick look at the quarter:
Ford reported a 54% jump in its fourth-quarter profit from a year ago, which is definitely far better than the Street expected. The wholesale volume surged 7%, as a result of which the total revenue for the quarter went up by 5%. The company has managed to achieve an operating profit for the 14th consecutive quarter, which is indeed a remarkable achievement.
The company performed astonishingly well, reporting automotive sector profit of $1.3 billion from North America, South America, and Asia Pacific. In the Asia-Pacific-Africa region, surging sales in China triggered the 41% increase in wholesale unit volume sales during the quarter. At present, Japanese automakers are facing a tough time in China as Chinese consumers have almost stopped buying Japanese cars due to the territorial dispute between Asia’s two largest economies. In the last quarter Honda Motor Co Ltd (ADR) (NYSE:HMC) reported a 41% drop in their sales in China and Toyota Motor Corporation (ADR) (NYSE:TM) suspended parts of its production in China after their September sales tumbled 49%. Thus while Japanese automakers like Honda and Toyota, who held over 20% of the Chinese automobile market, are suffering due to the recent disturbance between the two countries, Ford cashed in on this opportunity and rapidly captured market share.
During 2012 the company continued to follow the One Ford plan, which focuses on providing customized vehicles to the customers. The company launched Escape and Fusion, which were widely accepted by customers and provided significant gains to the company.
You must be thinking that if Ford has shown such a bright performance, why are investors losing their confidence in the company? Well, along with the above good news there was also a bad news for the investors, and it seems they gave more emphasis to the latter.
What went wrong?
Despite the strong performance across all regions, Ford suffered as the company continued to post big losses in Europe. For the fourth quarter Ford’s European losses plunged to $732 million, which is almost four times the loss the company reported a year ago. For the full year, Ford reported a loss of $1.75 billion.