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Ford Motor (F), the nation's second-largest automobile manufacturer, finished what was a strong year overall on a rather disappointing note. Indeed, the company recorded earnings of $0.30 a share in the fourth quarter, a 30% drop from the year-earlier tally and well short of the $0.48 we had anticipated in the term. We had thought the auto maker's European business was close to getting back on track and had indicated that profitability was right around the corner. However, this was not the case in the December period, as Ford's market share receded there somewhat, and the group suffered an operating loss of over $50 million. At the same time, the domestic business also underperformed our expectations a little. The company continues to experience improving volume and pricing, while picking up market share here. But elevated costs related to new vehicle launches took a bite out of profits, as did rising commodity costs.

For the year, Ford notched its best bottom-line showing in over a decade, while taking greater aim at its highly leveraged balance sheet. It trimmed nearly $15 billion off its debt burden in 2010, which should shave off about $1 billion in annual interest expenses. In all, the company's cash position looked to be vastly improved at the end of the year.

The problem is that investors' expectations have grown since the company was the only of Detroit's Big Three to avoid the bankruptcy route. After all, the stock price appreciated around 65% in 2010. So, despite what appears to be a solid year in the midst of a company and industrywide recovery, Ford shares traded lower following the earnings release.

For 2011, we look for operational momentum to pick up as the year progresses. Ford has raised its forecast for auto sales in the U.S. to a range of 13 million to 13.5 million, about 500,000 units up from the bottom end of its previous call. Already, the company has lifted production in the current quarter by 2%, to 650,000 vehicles. Ford is armed with a bevy of new vehicle launches on tap this year, which should drive volume increases and further market share gains. In addition, we anticipate further debt reduction and lower interest expenses.

The company still has its work cut out for it in Europe, and commodity costs will likely remain on the rise. Still, we look for Ford to sustain growth in 2011.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.