Ford Earnings: F-Series Pickups Drive Profits for the Blue Oval

Super Duty Power Stroke Diesel pickup truck
Super Duty Power Stroke Diesel pickup truck

Ford (F) reported its fourth-quarter and full-year 2012 earnings on Tuesday, and the overall numbers were good ones -- in fact, they were the best fourth-quarter results for the company in more than a decade.

For the quarter, Ford earned $1.7 billion before taxes, or $0.31 a share, well above the $0.26 per share that analysts expected. For the full year, the company earned $8 billion.

What helped the Blue Oval make this such a blockbuster quarter was not, as one might assume, the fuel-efficient small cars the company has recently emphasized. No, the biggest driver of Ford's profit was an old friend: Ford's F-Series pickup truck.

Why Pickups Haul Ford's Profits

The F-Series is arguably Ford's most important product, even though -- unlike many of Ford's products -- most of its sales happen here in the U.S.

The reasons for that are pretty easy to understand. First, thanks to Ford's manufacturing efficiency and the nature of the pickup-truck market, it's a very profitable vehicle: Ford makes several thousand dollars on each truck sold.

Second, Ford sells a lot of them, more than 68,000 in December alone.

With the economy picking up, sales of full-size pickups -- which tend to follow the housing market to some extent, because so many trucks are bought by builders and tradesmen -- have been picking up strength.

And while General Motors' (GM) pickups sell in similar numbers when you add its Chevy and GMC lines together, Ford's F-Series is the top-selling vehicle line in the category. In fact, it's the best-selling vehicle line in America, period.

That leads to the third reason that pickups are such a big driver of Ford's profits. Because the F-Series is an up-to-date model that competes well with rivals, Ford can sell plenty without having to resort to big discounts.

That's a big part of why Ford's profit margin in its North American region is one of the best in the auto business – and that is why Ford has been able to post solid profits quarter after quarter, despite facing some big challenges in its overseas branches.

Europe Is Stuck in Reverse

Nowhere are those challenges bigger than in Europe. Brutal recessions in many European countries have driven auto sales down to levels not seen in almost 20 years. Some automakers, like Volkswagen (VLKAY) and Fiat (FIATY), have resorted to steep discounts to try to keep sales going or gain market share. But Ford has mostly resisted that path.

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That has cost Ford some market share in the region, though the company has managed to keep its longtime second-place ranking (behind VW). But losses have been steep: Ford's European operation lost $732 million in the fourth quarter alone, and $1.75 billion for the year.

That was somewhat worse than analysts had expected. But the real bad news was Ford's outlook for 2013.

Back in October, Ford said that its losses in 2013 would be about equal to 2012's. But as the market has continued to deteriorate, Ford has revised that downward. It now says that it expects to lose $2 billion in Europe in 2013.

A Long Wait for Euro Losses to Fade

Those losses are likely to continue for a couple more years. Ford has a plan under way to restructure its European division, but the company doesn't expect to show a profit there until 2015 or so.

In the meantime, as long as the U.S. economy continues to grow stronger, Ford should continue to post decent profits. As Europe returns to health -- and as the factories Ford is currently building across Asia start working -- Ford's profits could even grow substantially from here over the next couple of years.

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Motley Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of General Motors and Ford.

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Originally published