On the Call: Ford CFO Bob Shanks
Ford lost money in Europe and Asia in 2012, in part because it's making changes in those regions to allow future growth. Ford is closing plants and introducing new products to Europe to spur sales in that depressed region, while it's building plants and developing new cars for Asia to take advantage of tremendous growth opportunities.
On a call with media and analysts Tuesday, Ford Chief Financial Officer Bob Shanks responded to a question about how long investors will have to wait to see benefits from Ford's expensive investments.
QUESTION: It sounds like there's a lot of incremental investment for future growth that's coming in 2013. I mean, do we hit a point in 2014, 2015, or 2016 where all this investment starts to tail off relative to the size of the revenue base?
ANSWER: That's a good point. Let's talk about Asia Pacific, because we're seeing tremendous improvement in wholesale, revenue, and share in 2013, and yet we're still looking at breakeven-ish type results, a small loss. And we're saying the same thing for 2013. But we've got seven plants under construction right now in Asia Pacific, and we've got a lot of new products that will be new to the market that we are in the process of developing that clearly are affecting us in terms of cost, but the revenue is yet to come. So think of Asia Pacific as on the way. We're seeing top line results, and we do expect to have meaningful contribution in terms of profitability to the company by the time we get to mid-decade.
You've got Europe that's starting. You've got an economic environment on top of that, that's likely to be in recession for the full year, and extremely low industry volumes. So we're just starting that journey, as you know. And as we said, these things don't happen in three months, six months, or even a year, but we will get there. And these costs we're incurring — we think of them as investments — will give us the ability to be profitable. Now, by mid-decade, are we going to be getting an 8 percent or 9 percent margin in Europe? No, we think a 6 percent to 8 percent margin is further out, but we do think we'll be above the zero line and starting to generate some profit back to the company.
And in South America, a little bit different. I think we're starting to see some stability, we think, for the moment, around the changing trade policies that we saw last year. But this year, we're expecting very substantial adverse exchange effects from an expected significant devaluation in Venezuela, and we're also thinking that we'll see a substantial weakening of the currency in Argentina that's going to affect us.
So each business unit is in a different place. But I think things are starting to come together, and we certainly see the ability to generate the types of margins we've talked about in the years ahead.