福特汽車 (F) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Ford fourth-quarter earnings conference call.

My name is Darcel and I will be your operator for today.

At this time, all participants are in listen-only mode.

Later, we will conduct a question-and-answer session.

(Operator Instructions).

I would now like to turn the conference over to your host for today, Mr. George Sharp, Executive Director of Investor Relations.

Please proceed.

Thank you very much, Darcel and good morning, ladies and gentlemen.

Welcome to all of you who are joining us today either by phone or webcast.

On behalf of the entire Ford management team, I would like to thank you for taking the time to be with us this morning so we can provide you with additional details of our fourth-quarter and full-year 2012 financial results.

Presenting today are Alan Mulally, President and CEO of Ford Motor and Bob Shanks, Chief Financial Officer.

Also participating are Mark Fields, Chief Operating Officer; Stephen Odell, President, Europe, Middle East and Africa; Stuart Rowley, Corporate Controller; Neil Schloss, Corporate Treasurer; Paul Andonian, Director of Accounting; and Mike Seneski, Ford Credit CFO.

Now before we begin, I need to cover a few things.

As you know, we are in the process of realigning our African operations with Europe and the Middle East under Stephen Odell to take advantage of profitable growth opportunities and efficiencies.

Changes to our business unit reporting to reflect the realigned organization will begin next year.

The data reviewed today and used by us throughout 2013 will be consistent with our reporting over the past several years.

Also, copies of this morning's press release and the presentation slides that we will be using have been posted on Ford's investor and media website for your reference.

The financial results discussed today are presented on a preliminary basis.

Final data will be included in our Form 10-K that will be filed next month.

The financial results presented are on a GAAP basis and in some cases on a non-GAAP basis.

The non-GAAP financial measures discussed in this call are reconciled to the US GAAP equivalent as part of the appendix to the slide deck.

Finally, today's presentation includes some forward-looking statements about our expectations for Ford's future performance.

Of course, actual results could differ materially from those suggested by our comments today.

The most significant factors that could affect future results are summarized at the end of this presentation.

These risk factors and other key information are detailed in our various SEC filings.

With that, I would now like to turn the presentation over to Ford's President and CEO, Alan Mulally.

Thank you, George and good morning to everyone.

We are pleased to have the opportunity today to review our fourth-quarter and full-year 2012 business performance and the progress we continue to make in delivering our plan.

We also will share with you today our major planning assumptions and key metrics for 2013.

Let's start by turning to slide 3 please.

The Company had a solid fourth quarter, achieving an operating profit for the 14th consecutive quarter and the highest fourth-quarter operating profit for the total Company and the Automotive sector since 1999 when trucks and SUVs were a more significant portion of our US product mix.

Automotive operating-related cash flow was positive and we ended the year with strong liquidity.

We delivered year-over-year increases in both wholesale volume and total Company revenue driven by gains in all regions except Europe.

Operating profit and margin in North America set fourth-quarter records since 2000 when we began reporting North America as a separate business unit.

Ford Credit once again delivered solid performance and results in South America and Asia Pacific Africa were positive.

Europe on the other hand incurred a substantial loss.

For the full year, total Company operating profit was strong with Automotive operating profit and margin about equal to a year ago.

In the Automotive results, North America delivered record operating profit and margin since 2000.

South America was profitable for the ninth consecutive year.

Europe incurred a substantial loss in line with guidance and Asia Pacific Africa achieved record full-year wholesale volume and revenue.

At Ford Credit, results were solid and Automotive operating-related cash flow was positive for the third year in a row.

For 2013, we expect total Company operating profit to be about equal to 2012, Automotive operating margin to be about equal to or lower than last year and Automotive operating-related cash flow to be higher as we implement our One Ford plan.

Let's look more closely now at the financial highlights of the quarter and full year.

Slide 4 summarizes our business results for the fourth quarter and full year compared with a year ago.

Fourth-quarter wholesale volume was 1.5 million units, up 107,000 units, or 7%, compared with a year ago.

And revenue at $36.5 billion was up $1.9 billion or 5%.

Pretax profit, which excludes special items, was $1.7 billion, $577 million higher than a year ago.

Earnings were $0.31 per share, $0.11 higher.

Net income attributable to Ford, including favorable pretax special items of $160 million, was $1.6 billion, or $0.40 per share.

Excluding the impact of 2011 changes in our valuation allowance against deferred tax assets, which we have highlighted last year, our fourth-quarter net income was $565 million higher than 2011, while our full-year net income was $307 million lower than a year ago.

We also showed a difference in net income, including valuation allowance on the line just below.

Automotive operating-related cash flow was $1 billion, the 11th consecutive quarter of positive performance.

Full-year pretax profit was $8 billion, $797 million lower than a year ago.

And net income was $5.7 billion.

Automotive operating-related cash flow was $3.4 billion and we ended 2012 with $24.3 billion of Automotive gross cash exceeding debt by $10 billion.

Overall, despite many challenges, including the tough environment in Europe, we had a solid fourth quarter and a strong full year thanks to our One Ford plan.

During 2012, we continued to execute the One Ford plan in providing customers with vehicles they want and value as we undertook one of the most aggressive launch schedules in several years and our customers responded.

Through the first nine months of the year, Focus was the world's best-selling nameplate and Fiesta, the world's top-selling B-car.

We also continue to invest for tomorrow by increasing capacity in North America by 400,000 units and opened two new plants in Asia with seven additional facilities under construction.

We got the Blue Oval back after achieving investment-grade ratings.

Consistent with our plan to deliver profitable growth for all, we resumed regular dividend payments to our shareholders and just over two weeks ago, we announced that we are doubling it.

And finally, we began to implement our plan to achieve profitable growth in Europe, focusing on all parts of the business, including product, brand and cost.

All in all, this has been a strong year for Ford, including actions we announced to ensure future success.

Now let's turn to Bob for a more detailed look at our financial results.

Thanks, Alan and good morning, everyone.

Let's start with slide 7, which walks our pretax operating results to net income.

As Alan mentioned, total Company pretax operating profit was $1.7 billion.

Pretax special items were a positive $160 million, reflecting a gain on restructuring of our passenger car joint venture in China, offset partially by costs associated with the US salary retiree pension lump sum payouts completed to date, along with personnel actions mainly in Europe.

Additional detail is shown on Appendix 3.

The provision for income taxes was $246 million and net income attributable to Ford was $1.6 billion.

Our operating effective tax rate, which isn't shown, was about 31% in the fourth quarter and 32% for the full year.

For 2013, we expect our operating tax rate to be similar to 2012.

Let's now turn to slide 8 and our pretax results by sector.

Total Company fourth-quarter pretax profit of $1.7 billion reflects positive contributions from our Automotive and Financial Services sectors.

As shown in the memo, total Company pretax profit increased by $577 million compared with last year, more than explained by a $676 million improvement in the Automotive sector.

Compared with third quarter 2012, total Company pretax profit declined explained by our Automotive sector.

Both sectors contributed to our strong full-year results.

Compared with last year, total Company full-year pretax profit declined, explained primarily by the expected reduction in Financial Services.

Slide 9 highlights the key market factors and financial metrics for our total Automotive business.

In the fourth quarter, wholesale volume and revenue were higher than a year ago with increases in all regions except Europe.

Pretax profit was $1.3 billion and operating margin was 3.8%, both higher than a year ago.

As shown in the memo below the chart, total Automotive full-year pretax profit was $6.3 billion with an operating margin of 5.3%, both about equal to a year ago.

Slide 10 summarizes the $700 million increase in total automotive fourth-quarter pretax profit from 2011 by causal factor.

The increase is explained primarily by higher net pricing and non-repeat of 2011 UAW ratification bonuses included in net interest other, offset partially by higher structural costs.

As shown in the memo, pretax profit was $0.5 billion lower than the third quarter, reflecting a higher contribution cost and a seasonal increase in structural cost.

Higher volume was a partial offset.

More details on the quarter-to-quarter change are included in Appendix 7.

Slide 11 shows fourth-quarter pretax results for each of our Automotive operations, as well as Other Automotive.

Automotive sector profit of $1.3 billion is more than explained by North America.

South America and Asia Pacific Africa were also profitable while Europe incurred a loss of $732 million.

The loss in Other Automotive mainly reflects net interest expense, offset partially by favorable fair market value adjustment on our Mazda investment.

For 2013, we expect net interest expense to be higher than our fourth-quarter run rate, reflecting the increase in Automotive debt associated with our recent issuance and lower interest income.

Slide 12 summarizes the total Automotive full-year pretax profit compared with 2011 by causal factor.

Profit was about equal to a year ago, reflecting primarily higher net pricing and lower compensation costs included in net interest other, offset by higher cost, mainly structural, and unfavorable volume.

The structural cost increase includes the effect of higher volume, new product launches, investments to support our future product capacity, brand-building plans and higher pension expense.

Slide 13 shows full-year pretax results for each of our Automotive operations, as well as Other Automotive.

Total Automotive pretax profit of $6.3 billion was led by North America.

South America was profitable and Asia Pacific Africa incurred a small loss.

Europe reported a loss of $1.8 billion.

The loss in Other Automotive reflects net interest expense and fair market valuation adjustments, including our investment in Mazda.

Let's turn now to slide 14 and our Automotive business in North America.

Fourth-quarter wholesale volume and revenue were up 9% and 13% respectively.

Pretax profit was $1.9 billion and operating margin was 8.4%.

US industry SAAR increased from 13.8 million to 15.4 million units while our US total share was 15.3%, 1 percentage point lower than a year ago.

As shown in the memo below the chart, North America full-year pretax profit was $8.3 billion with an operating margin of 10.4%.

Volume and revenue also were higher.

Slide 15 shows the $1 billion increase in North America fourth-quarter pretax results compared with 2011 by causal factor.

The increase primarily reflects favorable market factors and lower compensation costs reflected in Other.

As shown in the memo, pretax profit decreased by $400 million compared with third quarter, more than explained by higher costs, including a seasonal increase in structural costs.

Favorable market factors were a partial offset.

For 2013, we expect the strong North America performance to continue with pretax profits expected to be higher than 2012 and an operating margin of about 10%.

This reflects a growing industry, a strong Ford brand, an outstanding product lineup driven by industry-leading refresh rates, continued discipline in matching our production with demand and a lean cost structure.

Slide 16 shows our US marketshare in the fourth quarter and for the full year 2012.

Our fourth-quarter total marketshare of 15.3% was down a percentage point from the same period last year, while retail share of the US retail industry was down 9/10 of a percentage point.

The lower share performance in fourth quarter was the result of lower Fusion availability associated with the launch of the new 2013 model and the discontinuation of Ranger.

Fourth-quarter sequential share growth was largely the result of strong F-Series sales coming from improved full-size pickup segmentation and a fast start for our all-new C-MAX hybrids.

For the year, total marketshare was down 1.3 percentage points, while US retail share of the retail industry declined 7/10 of a percentage point.

The declines largely came from the discontinuation of Crown Victoria and Ranger, capacity constraints and reduced availability associated with our Fusion and Escape changeovers.

Let's turn now to South America on slide 17.

Fourth-quarter wholesale volume and revenue increased by 16% and 11% respectively.

Pretax profit was $145 million with an operating margin of 4.8%, both higher than a year ago.

South America industry SAAR and our marketshare were about the same as in 2011.

As shown in the memo below the chart, South America full-year pretax profit was $213 million, substantially lower than a year ago.

Volume and revenue also were lower than last year.

Slide 18 shows the $37 million increase in South America fourth-quarter pretax results compared with 2011 by causal factor.

The increase is more than explained by favorable market factors with higher cost and unfavorable exchange in Brazil being partial offsets.

As shown in the memo, pretax profit was $136 million higher than third quarter due to favorable market factors driven by our new products that were recently launched.

For 2013, we expect South America results to be about breakeven.

Although results will benefit from new products recently launched or to be launched during the year, the competitive environment and currency risks across the region, especially in Venezuela, are expected to impact our profits adversely.

In addition, government actions to incentivize local production and balanced trade are driving trade frictions between South American countries and also with Mexico resulting in business environment instability and new trade barriers.

Now let's turn to Europe beginning on slide 19.

Fourth-quarter wholesale volume and revenue declined 16% and 22% respectively, reflecting mainly lower industry sales and lower marketshare.

Unfavorable product mix and exchange also were contributing factors adversely affecting net revenue.

Pretax results were a $732 million loss.

Industry SAAR for the 19 markets we track in Europe decreased by 12% to 13.5 million units, the lowest quarterly SAAR since 1995.

Our marketshare at 7.6% was down 3/10 of a percentage point.

We estimate that while our retail marketshare was in line with last year, our share of the fleet segment was lower in part due to availability of large cars.

As shown in the memo below the chart, Europe full-year loss was $1.8 billion compared with about breakeven a year ago.

Volume and revenue both were lower than 2011.

Slide 20 shows the [$542 million] (corrected by company after the call) decline in fourth-quarter pretax results for Europe compared with 2011 by causal factor.

The decline is more than explained by unfavorable volume and mix.

As shown in the memo, pretax profit declined $264 million compared with third quarter due to higher costs.

Our results are consistent with prior guidance and our European transformation is proceeding according to plan.

In the quarter, we started recognizing accelerated depreciation for the plants we intend to close.

We also recognized the cost of salaries separations, which are included in special items.

We are on track to deliver our European transformation plan focused on product, brand and costs.

This year, compared with last year, we will benefit from the non-repeat of dealer stock reductions to the degree that we incurred in 2012.

However, consistent with our guidance, we will incur higher costs associated with restructuring, mainly investment in new products as outlined at our Amsterdam product event, as well as accelerated depreciation and costs to implement our revised manufacturing footprint.

Similar to the successful restructuring of North America, these are the investments we must make now in order to enable the transformation of our European business for profitable growth in the future.

While our restructuring-related investments this year are consistent with our October guidance, our outlook for industry volume this year has deteriorated.

It is now expected to be at the lower end of the range of 13 million to 14 million units.

In addition, we are being affected adversely by higher pension costs due to lower discount rates and a stronger euro.

As a result, we now expect a loss of about $2 billion for 2013 compared with the prior guidance of a loss that is about equal to 2012.

The business environment in Europe remains uncertain.

As is our practice, we will continue to monitor the situation and we will take further action as necessary to ensure that we remain on track to deliver our plan.

Now let's turn to Asia Pacific Africa on slide 21.

Fourth-quarter wholesale volume and revenue improved 41% and 47% respectively compared with a year ago.

Each were quarterly records.

Pretax profit was $39 million and operating margin was 1.4% compared with a loss a year ago.

Industry SAAR increased from 31.3 million to 33.7 million units.

Our share increased from 2.8% to 3.4% and set another quarterly record driven by a record share for China as we continue to benefit from increased capacity and new products.

Since the first quarter, our quarterly marketshare for the region and for China increased sequentially.

In fact, volume, marketshare and top-line revenue increasingly demonstrates the growth underway in Ford's business in Asia Pacific Africa.

For example, compared with just three years ago, Asia Pacific Africa's full-year wholesale volume has about doubled.

Marketshare has improved about half a percentage point and net revenue has increased by more than two-thirds even though our reported revenue does not include the impact of our unconsolidated joint ventures in China.

Asia Pacific Africa's full-year results are shown in the memo below the chart.

The pretax loss was $77 million, largely reflecting investments we are making for future growth while volume and revenue improved compared with last year.

Slide 22 shows the $122 million improvement in Asia Pacific Africa fourth-quarter pretax results compared with 2011 by causal factor.

The improvement is more than explained by favorable market factors, offset partially by higher costs associated with new products and investments to support higher volumes and future growth.

As shown in the memo, Asia Pacific Africa pretax results were about the same as the third quarter.

For 2013, we expect Asia Pacific Africa to be about breakeven.

We expect our volume and revenue growth in the region to accelerate supported by the launch of the all-new Kuga, EcoSport and refreshed Fiesta across the region, as well as the launch of Mondeo and Explorer in China.

This will be offset in large part by continued strong investment across the region to support our longer-range growth plans.

Slide 23 covers 2012 fourth-quarter and 2013 first-quarter production.

In the fourth quarter, total Company production was about 1.5 million units, 125,000 units higher than a year ago.

This is 13,000 units higher than our guidance.

We expect total Company first-quarter production to be about 1.6 million units, up 160,000 units from a year ago, reflecting higher volume in all regions except Europe.

Compared with the fourth quarter, first-quarter production is up 72,000 units.

Let's turn now to slide 24 and review our Automotive gross cash and operating-related cash flow.

We ended the quarter with $24.3 billion in Automotive gross cash, $200 million higher than the end of third quarter.

Automotive operating-related cash flow was $1 billion positive and our cash flow before financing-related charges and dividends was $1.3 billion.

During the quarter, we contributed $900 million to our worldwide funded pension plans, which included $0.5 billion of discretionary payments to our US funded plans in line with our previously disclosed long-term pension derisking strategy.

Dividends paid in the quarter totaled about $200 million and our full-year operating-related cash flow was $3.4 billion, gross cash improving $1.4 billion.

Slide 25 summarizes our Automotive sector cash and debt position at the end of fourth quarter.

Automotive debt at the end of the year was $14.3 billion and we ended the year with net cash of $10 billion, $200 million higher than a year ago and Automotive liquidity of $34.5 billion, $2.1 billion higher than a year ago.

Not included on the slide is the $2 billion 30-year Automotive debt issuance that we completed earlier this month.

This was our first US public debt issuance in about a decade and took advantage of favorable market conditions to issue low-cost, long-term debt.

The proceeds will be used to redeem about $600 million of 7.5% callable debt with the remainder being contributed to our funded pension plans during 2013 to support our derisking actions.

This action is consistent with our mid-decade target of Automotive debt levels of about $10 billion.

Slide 26 provides an update on our global pension plans.

Worldwide pension expense in 2012 excluding special items was $1.2 billion, $300 million higher than 2011.

Special item charges were $400 million including $250 million associated with our US salary voluntary lump sum payout program.

As we previously announced, this program started in 2012 and will continue through 2013.

To date we have settled about $1.2 billion of our pension obligations.

The 2012 special charge reflects the acceleration of previously unrecognized losses in the plan proportionate to the obligations settled to date.

In 2012, we made $3.4 billion in cash contributions to our worldwide funded pension plans, up $2.3 billion compared with a year ago.

This includes $2 billion of discretionary contributions consistent with our previously announced pension derisking strategy.

This year cash contributions to funded plans are expected to be about $5 billion globally including discretionary contributions of about $3.4 billion.

Worldwide our pension plans were underfunded by $18.7 billion at year-end 2012, a deterioration of $3.3 billion compared with a year ago, more than explained by lower discount rates.

Asset returns in 2012 for US plans were 14.2%, above our expected long-term return assumption.

Going forward, our expected long-term return assumption for the US is 7.38%, down 12 basis points from a year ago.

Turning now to Ford Credit, slide 27 shows the $92 million decrease in fourth-quarter pretax results compared with a year ago by causal factor.

The decline reflects mainly lower credit loss reserve reductions and lower financing margin as higher-yielding assets originated in prior years run off.

As shown in the memo, Ford Credit's pretax profit was $21 million higher than third quarter.

Slide 28 provides an explanation of the $707 million decrease in Ford Credit's full-year results compared with 2011 by causal factor.

In line with our expectation, the lower profit is more than explained by fewer leases being terminated which resulted in fewer vehicles sold at a gain and lower financing margin.

Although not shown, Ford Credit paid distributions of $600 million to its parent during 2012.

For full-year 2013, Ford Credit projects pretax profit about equal to 2012, managed receivables at year-end in the range of $95 billion to $105 billion, managed leverage to continue the range of 8 to 9 to 1 and distributions of about $200 million.

With that, Alan will cover our key metrics for 2012, the 2013 business environment and our key planning assumptions for this year.

Thank you, Bob.

Slide 30 summarizes our 2012 results for our planning assumptions and key metrics compared with the plan we shared at the beginning of the year.

We delivered strong results in 2012; although some of our metrics were mixed compared with our plan.

Despite a challenging environment, particularly in Europe and South America, we delivered our third consecutive year of total Company pretax profits of about $8 billion or more.

We aggressively responded to the deteriorating environment in Europe, defined and began to implement the steps that will return our business to profitability by mid-decade.

We are pleased with the proof points of growth in Asia Pacific Africa -- record volume, revenue and marketshare -- as we continue to invest heavily in the region to support profitable growth in the years ahead.

And importantly, we continue to generate positive Automotive operating-related cash flow even as we invest at an increased level of capital spending to grow our business.

Again, all in all, 2012 was a strong year for Ford.

Now let's turn to 2013 business environment on slide 31.

Summarized on slide 31 is our view of the business environment going forward.

Overall, we project 2013 global GDP growth to be in the 2% to 3% range.

Global industry sales are projected in the 80 million to 85 million unit range.

US economic growth is expected to be in the 2% to 2.5% range with industry sales supported by replacement demand given the older age of vehicles on the road.

In Brazil, easing fiscal and monetary policies, such as sales tax reductions and policy interest rate cuts to historic lows, are setting the stage for renewed economic growth.

But in Venezuela, risks to the economic outlook are rising given uncertainty with the government.

In Europe, we expect weak conditions to continue, especially in countries undergoing fiscal and austerity programs.

Recent policy moves are positive steps, but not yet enough to resolve the crisis and restore business and consumer confidence.

In Asia Pacific Africa, latest data suggests that the economic recovery is underway in China while the economic slowdown is bottoming out in India.

Although countries are at different stages of the economic cycle, better growth is expected in 2013 across the region.

Overall, despite challenges, we expect global growth, economic growth to continue in 2013.

Our planning assumptions and key metrics for 2013 are as follows.

We expect full-year industry volume to range from 15 million to 16 million units in the United States; Europe to range from 13 million to 14 million units; and China to range from 19.5 million to 21.5 million units.

We project full-year marketshare to increase compared with 2012 in the US and China and to be about equal to last year in Europe.

Our expected share improvements reflect our strong products and the Ford brand, as well as an expanded product portfolio covering more segments in some markets such as China.

We expect our quality to further improve from our best-ever results last year in South America, Europe and Asia Pacific Africa.

We also expect to improve in North America where we are making progress addressing the concerns of our customers.

We expect our 2013 financial performance to reflect the following -- pretax profit, excluding special items, for total Company to be about equal to 2012; Automotive operating-related margin to be about equal to or lower than last year, and Automotive operating-related cash flow to be higher than 2012, including capital spending of about $7 billion.

Overall, we expect 2013 to be another strong year for the Ford Motor Company as we continue to work towards our mid-decade outlook.

Finally, on slide 33, we summarize our One Ford plan, which is unchanged.

We will continue to aggressively restructure the business to operate profitably at current demand and changing model mix, accelerate development of new products our customers want and value, finance our plan and continue to improve our balance sheet and work together effectively as one team leveraging our global assets.

We delivered strong results in 2012 led by record performance in North America and solid performance at Ford Credit.

We also began the journey to transform our European business, investing now to return our European operations to profitability by mid-decade.

We see the results of our One Ford plan taking hold in Asia Pacific Africa with record volume, revenue and marketshare increasing as those investments in new facilities and products gain traction.

We also are executing our One Ford plan in South America, expanding our product portfolio with new global products while looking at all areas of our business to improve operating results.

Our plan will continue to guide us as we address head-on both challenges and opportunities.

In 2013, we are focused on working to sustain and grow our strong North American operation, improving results in South America, transforming our European business to return to profitability, accelerating growth in Asia Pacific Africa, further leveraging the value of Ford Credit and revitalizing the Lincoln brand.

We have made tremendous progress in recent years by executing the fundamentals of our One Ford plan and there are significant benefits ahead as we leverage our global assets and as we benefit more fully from today's investments for future profitable growth.

We continue to work toward our mid-decade guidance and remain confident in our plan and our ability to deliver profitable growth for all.

Now we would be happy to take your questions.

Thanks, Alan.

Now we will open the lines for about a 45-minute Q&A session.

We will begin with questions from the investment community, then take questions from the media.

In order to allow as many questions as possible within this timeframe, please keep your questions brief.

Darcel, can we have the first question, please?

Brian Johnson, Barclays.

Good morning, team.

I want to ask a half financial/half management strategy philosophy question.

And it really is around the North American margins, which are great, but I think there is always an expectation out there that, as revenue grows, we should see -- one might see incremental margins above current margins and hence margin expansion.

So if I look at your guidance for 2013, you are implying revenues are up, higher marketshare and a rising market.

You are implying profits are up, but you are implying margins flat.

So I guess a question for Bob is how do you -- just what is mechanically going on with incremental margins and then really for Mark and Alan, it is kind of how do you think about bringing incremental revenue to the bottom line versus reinvesting in a brand and the productline and future technologies?

Sure, Brian, let's start with Bob.

Okay, Brian, I think, first of all, let's all acknowledge 10% is a great margin.

And I think the consistency that the business has demonstrated through all four quarters of 2012 shows the strength of the business, which, as we have indicated in the guidance, will continue into '13.

Now we are expecting growth both from an industry perspective and from higher share.

So your premise is correct that you would expect then leverage to generate an even higher margin.

The main thing that is affecting North America, and I will say relatively capping the margin at about 10%, is what I touched on in the third quarter.

We have about $0.75 billion of non-cash structural cost increase around three areas.

Back in '05, we amended our healthcare plans and generated substantial cost savings.

We amortized that through 2012.

That ran off last year and this year, as a result, we pick up, if you will, or we lose the benefit of that amortization to the tune of about $275 million.

Secondly, in 2008, we impaired our assets in Europe.

That also was amortized, sorry, in North America, amortized also through 2012.

That ran off last year, so the effect of that going away is over $200 million.

And then lastly pensions.

We have increasing pensions of over $300 million related to record low discount rates since last year.

I would also mention that we are continuing to invest in even more growth in the future.

So as the year progresses, you will start to see higher engineering expense.

We also had the 400,000 units of additional capacity that we put onstream last year.

So that is several -- that is four different shifts that we added last year, which brings costs as well -- of course, it's bringing the revenue that you talked about.

So the results of all that is what essentially is keeping that margin at 10%.

And I just would remind you that all those things I just went through with the exception of the shift effects are non-cash, which is one of the reasons why, while the profits are guided to be about flat, we do expect our operating-related cash flow to be even stronger this year than it was last year.

Very good.

Thanks, Bob.

Mark, anything else?

Good, thanks, Brian.

John Murphy, Bank of America.

Good morning, guys.

I had a couple quick questions.

First, on Europe, if you could just run through the same kind of thought process you just went through for North America because you highlighted that accelerated D&A was a big hit in the fourth quarter and will be through 2013.

Just trying to get an idea of what that is and if there are any other costs that might be loaded into that $2 billion loss number for 2013 that you are looking for.

Okay, I think, and maybe Stephen can add some color and texture when I am finished just to give you a feel about what is going on there and how we are looking at it.

First of all, I think we have to remind ourselves that we are looking now at an industry that is probably in the lower half of the range that we have provided of 13 million to 14 million, so let's say 13 million to 13.5 million.

And we did 14 million last year.

So the industry is continuing to decline.

We think 13 million will be the trough.

Our expectation is that we will start to improve after 2013, but it is going down.

And so that clearly is -- and that is a bit new news to us versus what we said in October and one of the key issues behind the increase in the loss that we are guiding to for 2013.

In addition, we have got restructuring-related costs on a year-over-year basis of $400 million to $500 million in 2013 versus 2012, and we also are seeing higher pension expense of probably about $200 million related to the low discount rates, which were even lower than they were in the US.

So those are some of the big things that are happening.

The other thing that we probably have not mentioned and you may not be aware of, I mean these are all investments in the business to turn it around because we do believe that the industry will turn around and with the actions that we have outlined, we are going to get to a profitable growing Europe for Ford Motor Company.

As part of that and to reconfigure our plants, there is an opportunity cost that is sort of underlying the 2013 results in that we had to defer the launch of the Mondeo a year.

It would've launched in 2013; it is now not going to launch until 2014.

And that has the effect of -- I guess it is an opportunity cost of about several hundred million dollars.

So all these things are what is generating the loss that we are guiding to next year.

But, again, looking at all of this as investments and a stronger better business for Europe just in the same way that we looked at similar type of actions in North America.

Maybe just to ask a broader question because it sounds like there is a lot of incremental investment for future growth that is coming in in 2013 and we have seen this benefit actually come through in North America and you actually realized the margins you have been talking about.

As we think about these margins internationally, I think you guys had, in your sort of mid-decade targets, are looking around for about an 8% international margin.

Obviously you're going to be far off of that in 2013.

I mean do we hit a point in '14, '15 or '16 where all this investment starts to tail off relative to the size of the revenue base and we just get this real stepup because I think that is kind of what we are struggling with here?

We understand the pressures in the short term, but just trying to really understand when we might see that real benefit that -- you clearly have illustrated you can do it because you did in North America.

Just trying to understand when this kind of pressure, forget about market forces, but this pressure from investment and growth really kind of tails off.

Yes, that is a good point and I think you have made the point about North America.

Let's talk about Asia Pacific, which is sort of like along the path because we are seeing tremendous improvement in wholesale revenue and share in 2013; yet we are still looking at sort of breakeven-ish type results, a small loss and we are saying the same thing for -- I'm sorry -- for '12 and we are saying the same thing for 2013.

But you are seeing the top-line growth, but we have got seven plants under construction right now in Asia Pacific and we have 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 has yet to come.

Think of Asia Pacific as on the way and we are seeing the 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 and they certainly will be contributing to that guidance that we have given around the Company's operating margin.

You have got Europe that is starting.

You have got an economic environment on top of that, as I just mentioned, that is in recession, likely to be in recession for the full year and extremely low industry volumes.

So we are just starting that journey and as you know, and as we have said, these things don't happen in three months, six months or even a year, but we will get there and these costs that we are 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% or 9% margin in Europe?

No, we think that a 6% to 8% margin is further out, but we do think we will be above the zero line and starting to generate some profit back to the Company.

And then South America, a little bit different.

I think we are starting to see some stability, we think, for the moment, around the changing trade policies that we saw last year, but, this year, we are expecting very substantial adverse exchange effects from an expected significant devaluation in Venezuela and we are also thinking that we will see a substantial weakening of the currency in Argentina that is going to affect us.

So the story in South America is a little different.

We are starting to see some stability around some of the issues that affected us last year, but, this year, we are going to see big impacts from currency.

So each business unit kind of 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 that we have talked about in the years ahead.

(Operator Instructions).

Do we have any further questions at this time from the investment community?

Yes.

Can we put them through?

Yes, your next question comes from the line of Patrick Archambault, Goldman Sachs.

Thank you.

Good morning, guys.

I had maybe two here.

One on just -- following up on the South America comments that you just made.

So to understand it, is it that you have a run rate of profitability in South America that is kind of similar to what we saw in the fourth quarter, using things -- we are looking at things simplistically, but at some discrete time in 2013, there will be a big adjustment to be made because of the Venezuela devaluation that is going to kind of offset that?

Is sort of that the way we should sort of be thinking about how the pattern of profitability in that region is going to play out?

And then my second question is just on marketshare.

On slide 32, in the US, you have an expectation for an increased marketshare in the US and I know that it is a quieter launch period for you guys this year in 2013 than it was last year.

So maybe a little bit more color on sort of which segments you expect to see the tailwinds for that.

Okay.

In terms of exchange and South America, as I mentioned, I think we are starting to see some stability around the trade policy issues and we have responded to the extent that we can in the shorter term and we will do more longer term.

So I think we are seeing that effect in terms of what we are seeing when we look internally at Brazil, for example.

But in the case of Venezuela primarily, but secondarily Argentina, we are expecting very substantial devaluations.

In the case of Venezuela, it would be sort of a one-time nature for the most part because, as you know, the currency doesn't trade freely, controlled by the government.

So we are expecting a significant one-time effect, as well as then an operating impact once that occurs and we are reflecting that in our forecast for the full year.

In the case of Argentina, they are having issues as well and we expect to see devaluation there.

We will try to price for as much of that as we can, but sometimes when it is this significant, you can't recover it all within one year.

So that is kind of how we are seeing South America.

In the case of marketshare in the US, we did launch Escape and Fusion late last year.

Those are two of the largest segments in the industry and we expect to have significant gains from both those products in 2013 versus 2012 in terms of share contribution.

We also think there is the possibility that the full-size pickup segment could be somewhat stronger as we look at 2013 versus '12.

Housing construction, the impact of oil, number of rigs and so forth, all that is going to contribute potentially towards better contribution from that segment to the total industry and of course, you know our strength in that particular part of the business.

We also have the 400,000 units of added capacity that we put in progressively in 2012.

That is fully available now as we start the year and with an even stronger industry, that will also give us opportunities as we look at the year.

And then I guess the last thing I would mention is we are getting great contribution from C-MAX.

It has been extraordinarily well-received, flying off the showroom lots and we can bet that will also help us; although to a relatively lesser degree just because of the capacity that we have got for that product, but that has certainly been a very pleasant performer in the market for us since we introduced it.

And so I think all those things, Patrick, are what we see behind our share increase in the year.

Great, thank you very much.

Emmanuel Rosner, CLSA.

Hi, good morning, everybody.

Just two quick questions.

The first one is on your structural costs.

You have done a great job in 2012 maintaining the increase in check at only $1.5 billion.

What are you expecting for 2013 on the global basis in terms of the increase in structural costs?

And then my second one is on your expectation for your US performance.

How do you see the pricing environment shaping up this year and obviously, the volume growth continues for the industry and you guys are expecting also higher share.

But, at the same time, the pace of growth seems to be slowing down somewhat here in the US.

And then, obviously, some of your competitors are back with either some fresh product or just better availability in general.

So how does that play out in terms of your margin guidance for this year?

Well, as you just pointed out, we have provided margin guidance and that is why we elected not to provide specific guidance on structural cost because, obviously, it is included in the margin.

And I touched on one element of that in an earlier question on North America.

I guess, and again I don't want to provide terribly specific guidance because I would like us to kind of stick to the margin, if you will, but because lots of things that affect it, this is just one, but I guess I would expect the structural cost to be higher on a year-over-year basis, the increase to be higher in 2013 versus '12 and it is really around the types of issues that I just talked about in terms of those unique one-time impacts in North America, in terms of the runoff of some of the favorable amortization from some impairments and OPEB and so forth along with the pension increases.

All of the non-cash, I think all of that along with probably the restructuring elements that are in structural cost for Europe contributing to, in total, a greater increase than we saw in 2012.

But I wouldn't want to put a number on it.

In terms of pricing, globally, we expect to see favorable pricing for the Company in 2013 and we expect to see that come from all three regions with the -- all four regions with the exception of Europe.

I think Europe will still probably suffer some negative pricing in the year just given the overall economic environment.

But the team has done a really, really good job in '12 of containing that to the degree that they have and I would expect they would do the same next year.

And that will be driven largely around new products, new equipment and will be a contributing factor to us being able to maintain the margin at sort of about the same level in the aggregate as 2012 or just slightly lower.

But we do think it will be a positive contributor to the business.

All right, thank you very much.

Chris Ceraso, Credit Suisse.

Thank you, good morning.

A couple of items.

In the North America business, when you walk through the profit progression from last year to this year, I notice the $200 million favorable in volume and mix.

If I compare that to the 62,000 unit increase in wholesale, it suggests a relatively modest contribution on a per-unit basis.

Can you talk to why that is?

Is it a function of mix or is there something else in there?

Well, there is nothing funny going on in there I guess.

It is probably -- we did have adverse product mix driven largely by C-MAX, Fusion and also we had some fewer Expeditions, but we had a -- we still had a very strong margin per unit in North America; I think it was probably mostly around product mix.

Okay.

And then thinking about 2013, the gains that you have been booking on warranty throughout 2012, do those turn around in light of some of the recalls and other quality issues that you faced in 2012?

Will we start to see that become a headwind instead of a tailwind?

No, we don't see warranty having too much impact on North America in 2013 on a year-over-year basis.

Okay, thank you very much.

Ryan Brinkman, JPMorgan.

Hi, thanks for taking my call and thank you for all the color you have provided on Europe thus far.

Can you just help me understand the softer 2013 Automotive pretax guidance within the context of your seemingly pretty strong first-quarter production schedule in Europe?

I think 405,000, which is quite a bit higher than IHS expectations.

It is stronger than you did in -- the 331,000 you did in 4Q and not too far off the 418,000 you did in the first quarter of '12.

Does this mean that the year-over-year softness will be back-end loaded?

It just surprised me a little given that comps should improve as the year progresses and particularly against maybe 4Q, which was I think impacted by some inventory drawdown?

I mean the issue in 2013 versus '12 on the bottom line basis is really around the restructuring costs that we are incurring in the year versus 2012.

It is not so much coming from the type of things that you are referencing.

It is around the amount of costs that we are going to be investing in the business in order to restructure it.

Okay, that's helpful.

I'm sorry, go ahead.

Sorry, this is Stephen Odell.

Just to add a little color to that.

In the first quarter of this year, we are also ramping up because we are just now in the process of launching new Fiesta and new Kuga.

Even though we started building them in the fourth quarter of last year, we are starting to system fill and the fourth quarter of '12 versus the first quarter of '13 principally reflects building up stock for the very large March market in the UK.

Okay, I can appreciate that.

And then just last question, I know you have guided to a longer-term mix headwind in North America, but I am just curious how you see this playing out near term.

As your truck sales seem to have been tracking a bit stronger recently actually and perhaps you can just talk about your outlook for industry pickup sales in 2013 within the context of a seeming housing recovery.

And also just maybe talk directionally about penetration of EcoBoost or platinum trim levels, however high level you can, which could also be beneficial to mix.

Thank you.

Okay, thanks.

As I mentioned earlier, we are expecting at least the possibility of there being somewhat higher penetration of the industry from full-size pickups this year.

Again, it is around housing, which you mentioned, oil and construction and so forth.

So we agree that we probably will benefit from that and that was also one of the reasons why we are calling for a higher share in 2013 versus 2012.

We will probably see in 2013 adverse product mix and again, because even though we will have the potential for more pickups, we are going to have a lot more Fusions, a lot more Escapes, a lot more C-MAXes and so forth, which is really contributing towards the share.

But obviously, the margin that we get on those products isn't the same as the F-Series.

Okay, thanks.

Congratulations on the quarter.

And I forgot to answer your question on EcoBoost.

I mean we are seeing extremely favorable market reception from it.

I mean we have got over a 50% mix of V6s and I think 80% of that is EcoBoost and it is spreading across our lineup around the world.

So that is certainly an important part of our power, the power of choice that we are offering to consumers.

Another example on Escape, for example, over 91% are being sold right now with either the 1.6 or the 2 liter EcoBoost.

So customers love it, it provides great performance and fuel economy.

It is a win-win and you'll see it spread even further across our product lineup.

Great to hear.

Adam Jonas, Morgan Stanley.

Hey, thanks, everyone.

So Alan, Mark, Bob, what is Ford's assessment of the competitive threat, if any, from the recent sharp weakness of the Japanese yen versus the US dollar and is this important to you?

Adam, this is Alan.

Really an important question and clearly, we really do believe that the market should establish the exchange rates and as you know, so does the US government.

So we are really pleased that those conversations are taking place because it is just so important for the global free trade rules that we let the markets decide.

So what is your -- so how much of an issue is this then to date or do you expect it to be if -- assuming that this continues?

We can't specifically give you a quantitative answer to that, but clearly the right thing to do is to let the markets establish the currency and the exchange and that is what -- we have been pleased in the past that the leaders around the world have continued to work towards that end and we are confident that they will continue to do that going forward.

Okay, thanks.

And just a question for Stephen Odell.

On Europe, can you comment on inventory levels in the market, either in terms of stock or day supply either for you or for the market?

And can you also give us a guide on where you saw preregistration activity heading towards the end of the year and maybe how the year started there so we get a sense of the quality of the market?

Thank you.

A pleasure.

I can't give you a competitive inventory because that is not available in Europe.

You can guess.

As you know -- I would rather not.

As you know, our, part of our plan in the fourth quarter was to reduce inventory and to reduce stocks.

In fact, our dealers' stocks came down by 10 days from about 56 to about 47 days.

So a significant reduction in dealer inventory, which helps them actually finance their business and trade through the difficult times.

I think the mix of demo -- we still haven't got all the final data in for December for Germany in particular, but I think it is pretty clear that the demo mix went up in the fourth quarter, particularly in December and as Bob alluded to earlier on, we held our retail share.

We didn't participate fully in the low-margin demo business, which partially explains our lower share in December.

Thanks for the color.

Rod Lache, Deutsche Bank.

Thank you.

Just a clarification on that.

So on Europe, is the inventory destocking now behind you or is there more that you are intending to take out in 2013?

Stephen, do you want to cover it?

Yes, will do, Alan.

It is principally behind us.

We still have a little bit of an imbalance because, obviously, we didn't release any vehicles from our Genk plant.

We are starting to now, very good progress with the Genk unions.

So we will address that imbalance through the first quarter and we were a little bit lighter than we thought we would be in December.

So we will address that during the course of the year.

But the majority of -- the vast majority of the destocking is behind us.

Okay, thank you.

And just given the guidance that you have got for Europe and South America, it sounds like North America probably has to improve by $400 million to $500 million to get to your flat operating earnings, which you are saying is despite a $750 million increase in structural costs.

That is really $1.2 billion or so of underlying real earnings improvement.

It sounds like you are suggesting volume would be at least half of that and you are also including some pricing.

Is there anything that happens aside from those two factors that happened in 2012 that wouldn't recur in 2013?

Did you accrue for the UAW 2012 profit-sharing in 2012 or does that happen and is there a further inventory increase in North America in 2013?

Ron, I think you have hit the key points.

In fact, on your last point, we don't think that stock changes will actually contribute to the bottom line on a year-over-year basis.

So it is the factors you talked about.

It is volume growth, it is -- we do expect positive pricing.

We will have higher structural costs, may have some good news on material costs.

We will have to wait and see how that pans out and then, of course, there is going to be a deterioration from mix that I mentioned earlier.

But you are right.

I mean we are going to have to have a very strong performance from North America because we are essentially guiding to breakeven on two of the other three business units and we have been very specific about the loss we are expecting for Europe.

Now in terms of --.

The last thing -- you asked about the accrual.

We accrue profit-sharing all throughout the year.

Each quarter, we true up based on what we think the full-year result will be, but we accrue each quarter.

Okay.

Just one other clarification.

You had a $2 billion drag from working capital in 2012.

Any sort of broad thoughts on how we should be thinking about that going forward?

Yes, I mean some of that is just from growth.

We have got more plants and so forth, but we did end a bit heavy on inventory at the end of the year, finished vehicle inventory and we think that represents an opportunity for us, which is one of the reasons why we are guiding to the higher operating-related cash flow.

Thank you.

At this time, we would now like to take questions from the media.

(Operator Instructions).

Mike Ramsey, Wall Street Journal.

Good morning.

I am interested in the pension situation.

And Bob, I know I talked to you a little bit about it earlier, but it just seems like a very significant amount of your cash is going to the pension situation.

I was hoping you could explain when do you catch up.

You mentioned maybe by mid-decade you hoped to have this taken care of and could you kind of elaborate about how significant it is, not just for your business, but maybe across industries that the discount rates are so low?

Well, I'll just start with that point first.

Clearly, anyone that has got a defined benefit plan is suffering, if you will, from these record low discount rates because it inflates, if you will, in the current period what your future expectation is around your obligations because you're discounting it at a much smaller rate than what we did several years ago.

And we did go backwards in terms of the funded status from $15.4 billion to $18.7 billion and that was more than explained by those low discount rates.

In terms of contributions, we contributed $3.4 billion last year to our funded plans.

We are expecting essentially the same amount in 2013, plus the $1.6 billion from the -- $1.4 billion from the $2 billion debt issuance that we are going to put into the plan.

So we are continuing to work very deliberately our long-term pension derisking strategy.

We do expect discount rates to start to increase as we move forward and we are factoring that into our planning and that will be a contributor towards us getting these funded plans fully funded by probably around mid-decade or so.

But this is -- when you have got this much of a gap, and you are trying to get to a point where you can reduce the volatility, which you can clearly see in terms of what is happening from '11 to '12, the volatility exposure that we have, it is extremely important that we address this and that is what our derisking strategy will do.

In addition, you didn't mention it, but we did reduce obligations by $1.2 billion from the US lump sum payout program and that will continue into this year and that should help a bit as well and we will report on that each quarter.

And can I ask real quick, can you change your investment strategy at all?

I mean have you or are you pretty much stopped from doing that to invest in other things than treasuries or other government instruments?

We do.

We have a very well thought-out investment strategy.

In the past, we were more heavily weighted towards equities and growth assets than fixed income and our strategy is to progressively get to 80% fixed income and 20% other growth-related investments and kind of on the way to that and it is different by plan because each plan is in a different place in terms of its funded status.

But that is part of the strategy is to get to that 80/20 mix because then your obligations will be more or less matched in terms of characteristics with your assets and that reduces the volatility.

That's the golden grail that we are going after.

Okay, thanks much.

Sorry for so many questions.

Craig Trudell, Bloomberg News.

Good morning.

I wanted to follow up on the comment that Ford will keep monitoring the business environment in Europe and take further action as necessary.

How much more deterioration in the environment in Europe would we need to see to warrant more action beyond the plan that you laid out in October?

Well, I think, Craig, that depends as well on what we see for the future.

We don't think, for example, that extremely low industries that we are likely to see this year is what we are going to see year in and year out in the years ahead.

We think it will start to come back.

So as you do these restructuring plans, you have to make a call not just on the current year, but where are you going, where are you heading.

And so I think as long as we believe that the industry is likely to begin to recover and then to grow modestly, which is what our assumptions are, over the next several years, then I think that would be an important factor that would affect our thinking in terms of more or less actions than what we have already described.

But it is just how we do our business everywhere in the world; it's not just Europe.

We are always looking to understand what is happening in the external environment, good or bad.

Good, we want to take advantage of it and if there is a challenge, we will react to it and that is exactly what we will do in the case of Europe.

And just a quick follow-up to that.

I mean what would those actions possibly look like?

Is everything on the table in terms of taking out more capacity or pulling back on investment or is the latter option not necessarily one that you want to take given your expectation that the market will continue to be a substantial one in the global scheme of things?

Well, I wouldn't want to get into hypotheticals.

We know what it takes to run and have a good business model that generates appropriate returns to investors.

And so based on what we would call the external environment to be, as well as our own performance, we would take whatever the appropriate measures are.

But we are very, very satisfied with the progress that we have made to date and it is very, very early.

I mean we only announced in October, but we are making progress.

We are on track and we are just going to work that plan.

Craig, I might just add to what Bob just said that, to your question about the investment, I think it is really insightful to continue to look at the way we transform the business in North America when you think about Europe also because the most important thing is to continue to invest in the products that people really want and value and then have them made available in the quantities that they really want and not the economy.

So the neat thing about the Ford plan is that with our One Ford vehicles, we can bring -- continue to invest and bring the very best cars and trucks to Europe even through the current slowdown, but also be there with the complete family as the recovery starts to happen.

So the number one thing is to continue to invest also not only in the product, but also in the brand while we work the cost side too just like we did in the US.

Karl Henkel, Detroit News.

Good morning, gentlemen.

I have a question on Europe and Bob, you talked about the trough kind of being in 2013, but I am curious as to whether you guys think it is going to be kind of a 12 to 18-month trough or if it is going to be kind of similar to what happened this year where losses kind of escalated as the year went on or whether it is more of a matter of how long the trough is and not so much when we are going to get there?

I think I would just leave it at the year.

We are not going to get into quarterly calendarization of it, but we do think that this will be the trough not only for the industry, but our profitability, if you will, for Europe.

We would expect the industry to begin to recover in '14 and we would expect our losses to begin to reduce in '14 on the way to profit by mid-decade.

Thank you.

Veronique Dupont, AFP.

Hi, hello, good morning.

On Europe, I would like to know if you think -- you talked about the possibility to take further action.

Are you considering more capacity reduction or you think the profitability can come back with those you already announced?

And still on Europe, do you consider the possibility of an alliance with another carmaker?

Fiat was kind of looking for possible allies.

Would that be something of interest?

Thank you.

Sure, on your first question, we have no additional plans to announce today.

The new news, of course, is that we think the market is going to be a little bit softer than we thought a few months ago, but we have already announced the actions to deal with that.

And on the alliances, we have many technical alliances around the world on enabling technology, but the most important thing that we want to do is focus on building our One Ford plan around the world.

So no alliances at the Company or the vehicle level.

(Operator Instructions).

If we don't have any other media questions, we could take another analyst question.

All right.

Veronique Dupont, AFP.

Hi, since there were no more questions, I am going to do a follow-up.

I wanted to know if, in Europe still, the main issue is still on production capacity or you think there is still a weight issue and a cost of labor issue there?

Also could you a bit summarize what is the biggest difference in fixing Europe compared to what you did to fix the US four years ago when it was in crisis?

Thank you.

I think the approach that we have used around the world is absolutely the appropriate approach for Europe.

And that is the number one thing is to size our production to the real demand.

So we will continue to do that.

In addition, we will continue to invest and even accelerate the investment in the new products that people really do want and value because even with the slowdown, this is still a tremendous market for us and Ford, as you know, is the number two brand in Europe.

So a very similar plan around the world and we are going to continue to size our production to real demand and continue to invest in the new products that people really do want and value.

Colin Langan, UBS.

Okay, great.

Thanks for taking my question.

You mentioned before that you have taken some actions in the short term in South America, but what things can you do long term to address some of the trade barrier issues or if there is anything you can do around the FX issue?

Well, the most important thing that we are doing longer term is completely revamping our product portfolio from legacy products, 100% legacy products to 100% -- I will call them One Ford products.

We are also going to be in more segments than we are in today.

We are going from about, what, 67% or so up to over 80% in terms of market participation.

So the breadth of the market that we cover will be broader than today.

And then, of course, always working on the -- I will call it the operating efficiency side of the business, continuing to do what we can there to strengthen the business from an efficiency standpoint.

And do you need to relocate some facilities in terms of parts to certain regions based on some of the trade barriers over the next few years?

Well, we have had to reduce the number of units that we bring in from Mexico.

Remember, Mexico had a free-trade agreement with Argentina and with Brazil, Mercosul.

That was essentially suspended, if you will and replaced with quotas that -- we can import from Mexico, but at much lower volumes than we had the ability to do in the past, so that is one of the things that is constraining us, if you will, in the shorter term because we are just limited by what we can bring in.

Otherwise it incurs very high duty rates that would make the vehicles essentially uncompetitive in the marketplace.

But we will continue to optimize the footprint that we have and we will respond to this new environment in terms of limited imports from Mexico, but it will take time to do that.

Colin, I might just add that, over time, South America really has been committed to free trade and clearly, they are each dealing with their trade imbalances right now.

But I think, over time, we will continue to see them move back towards free trading for the benefit of everybody.

Okay.

And if I could just get one quick one in, a clarification from earlier.

You mentioned that Europe would incur about $400 to $500 million of restructuring.

Is that the same as the accelerated depreciation or is that -- and if not, why wouldn't it be just like a one-time item?

It is -- a lot of that is restructuring around, or rather accelerated depreciation, but it is also operating-related effects both in the UK and Belgium, but I wouldn't want to get into any details.

But those wouldn't be one-time in nature?

They wouldn't be pulled back?

No, they will be costs that we incur until the facilities are closed, but not afterwards.

Okay, all right, thank you very much.

Can we have one more question, please?

Itay Michaeli, Citigroup.

Thank you.

Good morning.

I just wanted to go back to some of the non-cash expenses for 2013 since a lot of investors do value the Company on EBITDA and EBITDAP.

Bob, I was hoping you can share just what the global auto pension and depreciation and amortization headwinds are 2013 versus 2012.

Yes, I mean all those types of things that I talked about earlier is probably about $1.2 billion on a year-over-year basis.

$400 million to $500 million of pension costs due to the discount rates and that will be North America and Europe.

Accelerated depreciation of $250 million to $300 million on a year-over-year basis in Europe.

The asset impairment in North America, that good news running off of over $200 million and the OPEB amortization good news running off, that is probably about $275 million.

Great.

So $1.2 billion globally --.

All that is non-cash.

Great.

That is helpful.

And then if I heard correctly, you are guiding for CapEx in 2013 of $7 billion.

That is a pretty substantial increase and I think actually $1 billion above the mid-decade goal.

A, did I hear that correctly and B, what is driving that?

You are right and what it is is it is our growth plans, product and also capacity.

Okay, is that sustainable?

Is that the new level going to mid-decade or does that come back down to $6 billion by mid-decade?

I think I would just leave it at the level that it is at and we will address mid-decade sometime later this year.

Okay, sounds great, guys.

Thanks.

Okay, well, thank you, everyone.

That concludes today's presentation and we are very glad that you were able to join us.

Ladies and gentlemen, that concludes today's conference.

Thank you for your participation.

You may now disconnect.

Have a great day.