The company, which is the second largest US carmaker, said it now expects to lose $2bn (£1.25bn) in Europe, up 25% from a loss predicted a few months ago.
The loss comes as the company reported better-than-expected fourth-quarter profit in the US of $1.6bn (£1bn), for a full-year US pre-tax profit of $8.3bn (£5.3bn).
The company now plans to give out record profit-sharing bonuses of $8,300 (£5,300) to 45,800 workers based on its North American results.
It predicted a 2013 operating profit about equal to its performance last year, but the improving position of the company in the US comes as losses continue to deepen in Europe.
The European sales outlook has continued to deteriorate and Ford said it expected its 2013 loss in the region to be equal to last year's levels.
But chief financial officer Bob Shanks predicted Ford's losses in Europe will bottom out later this year.
He said the company is on track with a plan to close plants and introduce new vehicles in the region - where its sales fell by 15.5% last year.
The car company said it expected to improve its position in both the US and China.
Worldwide, Ford's sales rose 7.5% to 1.5 million in 2012 and some of its biggest gains were in Asia, where it is building seven new plants.
Sales in Ford's Asia Pacific and Africa region were up 41% over 2011.
Fourth-quarter global revenue totalled $36.5 billion (£23bn), with the lion's share coming from its North American operations, its most profitable business unit.
During what is typically its weakest quarter of the year, Ford reported an operating margin of 8.4% in North America.
Ford said the European business environment remains uncertain and the company would take further action as necessary.
The company has consolidated its operations in Britain and mainland Europe, as European car registrations fell by over 8% in 2012.
Last October Ford confirmed it would make 1,400 employees redundant in the UK following the closure of two British factories.
Its Southampton plant in Swaythling, which has made Transit vans since 1972, is scheduled to close this summer with a loss of more than 500 jobs.
Meanwhile its stamping plant in Dagenham, which presses sheets of metal used to make the vans in Southampton, will be shut down at the same time.
It marks the end of more than a century of vehicle production in the UK by Ford, which will make only engines and other car parts in Britain from mid-2013.