Ford 2013 Annual Report Download - page 52

50 Ford Motor Company | 2013 Annual Report
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
OUTLOOK
Business Environment
We project global economic growth to be in the range of 2.5% to 3%, with global industry sales in the 85 million to
90 million unit range. We expect U.S. economic growth to be in the range of 2.5% to 3%, with industry sales supported by
continued improvement in the housing sector and replacement demand as a result of the older age of vehicles on the
road. Policy uncertainty now is reduced, with the federal budget agreement and the Federal Reserve policy
announcement in December 2013. In South America, Brazil’s economy is relatively weak with below trend growth, while
in Argentina and Venezuela, there are escalating risks as both economies are weak with unclear economic policy
direction. In Europe, on the other hand, economic indicators are stabilizing. For 2014, we expect gross domestic product
growth of 1% in the Euro Area and 2% in the United Kingdom. The European Central Bank cut its policy interest rate to
0.25% in November 2013 and has indicated that it will keep rates low for an extended period. The Bank of England also
indicated that it will keep rates low until the unemployment rate has declined. In Asia Pacific, stable economic growth in
the 7.5% range is expected this year in China as it carries out structural reform and transitions to a consumption-led
economy. Modest improvement is expected in India with growth in the 5% range as the country moves beyond election
uncertainty and the new government ushers in more pro-growth economic policies. Recently, a number of emerging
markets have experienced depreciating currencies due to global capital flows and domestic issues unique to each market;
this could represent an additional challenge to the global outlook. Overall, despite challenges, we expect global economic
growth to continue in 2014.
Total Company
In 2014, we are continuing to invest to create innovative products such as the all-new F-150 to ensure we have the
freshest and most attractive product line-up in the industry. At the same time, we are investing to expand our portfolio into
new markets, as well as adding capacity, where appropriate, to satisfy increasing demand. As a result, we expect 2014 to
be another solid year and a critical next step forward in implementing our One Ford plan to continue delivering profitable
growth for all. Our 2014 profit outlook by segment is as follows:
2013 Full Year 2014 Full Year
Results Compared with 2013
(Mils.)
Automotive (a)
North America $ 8,781 Lower
South America (34) About Equal
Europe (1,609) Better
Middle East & Africa N/A About Breakeven
Asia Pacific 415 About Equal
Net Interest Expense (801) About Equal
Ford Credit $1,756 About Equal
__________
(a) Excludes special items
North America
We expect North America to be strongly profitable in 2014, but at a lower level than in 2013, with an operating margin
ranging from 8% to 9%. This outlook reflects the impact of launching 16 all-new or significantly refreshed products. As a
result, we expect production downtime for model change-overs to result in lower wholesale volume than in 2013. For the
all-new F-150, we are scheduling this year 11 weeks of production downtime, including the summer shutdown, at our
Dearborn plant and two weeks, including the summer shutdown, at our Kansas City plant.
We expect net pricing in 2014 to be slightly unfavorable as we run out the outgoing models and we assume a
continuation of a more competitive pricing environment for small and medium cars and utilities due to the weaker yen. We
also expect higher manufacturing, engineering, and spending-related costs to support the launches, as well as for
products and capacity actions that will be launched in later periods. Finally, we will not benefit this year from dealer stock
increases as we did in 2013.