Business

Ford reported a surge in profits Friday as a strong performance by the US automaker's once-troubled North American unit and a massive one-time tax gain offset losses in Europe and Asia.

Investors were disappointed, however, that profit margins came in lower than expected, and Ford shares were down four per cent at $12.28 in afternoon trade.

"Europe is to be expected. Ford should not be lagging in the hot markets in Asia," wrote 24/7 Wall Street analyst Douglas McIntyre.

Fourth quarter earnings jumped to $13.6 billion from 200 million a year earlier, fueled by a $12.4 billion tax gain and $401 million from the sale of Ford's Russian operations to the newly created FordSollers joint venture.

Ford called the tax adjustment "a significant milestone in our restructuring, underscoring the steady and sustained progress in our turnaround, and said it was "a strong vote of confidence in our future results."

It helped push net income for the year to $20.2 billion, compared with $6.6 billion in 2010 and $2.7 billion in 2009.

The results represent a remarkable recovery for Ford, the only major US automaker that did not seek a government bailout during the 2008-2009 financial crisis.

"2011 marked a milestone year in our work to strengthen our balance sheet," said chief financial officer Lewis Booth.

"We increased automotive cash, reduced debt and improved liquidity, clearing the way for us to resume paying a quarterly dividend."

Yet adjusted earnings per share of $1.66 for the full year were well below market expectations of $1.84.

While challenges in Europe are expected to continue to drag on results this year, Ford forecast that its profits will nonetheless grow as it reaps the rewards of intensive restructuring and rising demand in the United States.

"For 2012 we expect to continue improving our business, delivering solid and strong automotive operating-related cash flow while working to strengthen operations in Europe and South America and continue to grow," Ford president and chief executive Alan Mulally said.

Ford is also on track to meet its goal of expanding global sales to eight million vehicles and boosting profit margins to 8-10 per cent by 2015, Mulally said in a conference call.

North America will be the engine of Ford's growth, he said, as millions of consumers who put off buying a new car during the downturn are driven back into showrooms by their ageing vehicles.

"With the average age of the vehicles getting close to 11 years, consumers really want to obtain the value and fuel efficiency of new vehicles," Mulally said.

It also has the company's widest product portfolio, which supports Ford's plan to slash costs by consolidating its vehicle platforms.

Ford declined to forecast when the European unit -- which reported a pre-tax operating loss of $27 million last year compared with a $182 million gain in 2010 -- will return to profitability.

The ongoing debt crisis and austerity measures are weighing on consumer confidence and a "tremendous amount of excess capacity" among European automakers has led to a run-up in incentive costs, Booth said.

Ford nonetheless managed to increase transaction prices on vehicles despite the discounts and, unlike its competitors, has restructured its European operations to the point where plants there are operating at 93 per cent capacity.

"I think we'll be in very competitive shape going forward," Mulally said.

Ford's Asian unit -- which posted a pre-tax operating loss of $92 million compared with a profit of $189 million in 2010 largely due to the impact of flooding in Thailand -- is expected to be profitable again this year, he said.

South America is expected to be "strongly profitable" in 2012, "although perhaps less than" in 2011, Mulally said, noting that the Brazilian market is quite competitive.

The unit saw 2011 pre-tax operating profits slipped to $861 million from $1 billion a year ago.