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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
--------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 1-3950
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FORD MOTOR COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 38-0549190
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
One American Road, Dearborn, Michigan 48126
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(Address of principal executive offices) (Zip Code)
(313) 322-3000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). [X] Yes [ ] No
As of April 29, 2005, the registrant had outstanding 1,769,500,797 shares of
Common Stock and 70,852,076 shares of Class B Stock.
Exhibit index located on page number 28
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
FORD MOTOR COMPANY AND SUBSIDIARIES
SECTOR STATEMENT OF INCOME
For the Periods Ended March 31, 2005 and 2004
(in millions, except per share amounts)
First Quarter
---------------------------
2005 2004
------------- -----------
(unaudited)
AUTOMOTIVE
Sales................................................................................................. $ 39,332 $ 38,800
Costs and expenses
Cost of sales......................................................................................... 35,553 34,054
Selling, administrative and other expenses............................................................ 3,114 2,742
------------- -----------
Total costs and expenses........................................................................... 38,667 36,796
------------- -----------
Operating income/(loss)............................................................................... 665 2,004
Interest expense...................................................................................... 402 385
Interest income and other non-operating income/(expense), net......................................... 153 145
Equity in net income/(loss) of affiliated companies................................................... 57 56
------------- -----------
Income/(loss) before income taxes -- Automotive....................................................... 473 1,820
FINANCIAL SERVICES
Revenues.............................................................................................. 5,804 5,923
Costs and expenses
Interest expense...................................................................................... 1,562 1,450
Depreciation.......................................................................................... 1,514 1,729
Operating and other expenses.......................................................................... 1,467 1,348
Provision for credit and insurance losses............................................................. 185 353
------------- -----------
Total costs and expenses........................................................................... 4,728 4,880
------------- -----------
Income/(loss) before income taxes -- Financial Services............................................... 1,076 1,043
------------- -----------
TOTAL COMPANY
Income/(loss) before income taxes..................................................................... 1,549 2,863
Provision for/(benefit from) income taxes............................................................. 314 819
------------- -----------
Income/(loss) before minority interests............................................................... 1,235 2,044
Minority interests in net income/(loss) of subsidiaries............................................... 58 85
------------- -----------
Income/(loss) from continuing operations.............................................................. 1,177 1,959
Income/(loss) from discontinued operations............................................................ 35 (7)
------------- -----------
Net income/(loss)..................................................................................... $ 1,212 $ 1,952
============= ===========
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
Basic income/(loss)
Income/(loss) from continuing operations............................................................ $ 0.64 $ 1.07
Income/(loss) from discontinued operations.......................................................... 0.02 --
------------ ------------
Net income/(loss)................................................................................... $ 0.66 $ 1.07
============ ===========
Diluted
Income/(loss)
Income/(loss) from continuing operations............................................................ $ 0.58 $ 0.95
Income/(loss) from discontinued operations.......................................................... 0.02 (0.01)
------------ -----------
Net income/(loss)................................................................................... $ 0.60 $ 0.94
============ ===========
Cash dividends........................................................................................ $ 0.10 $ 0.10
The accompanying notes are part of the financial statements.
2
ITEM 1. Financial Statements (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
For the Periods Ended March 31, 2005 and 2004
(in millions, except per share amounts)
First Quarter
-------------------------
2005 2004
------------ ----------
(unaudited)
Sales and revenues
Automotive sales...................................................................................... $ 39,332 $ 38,800
Financial Services revenues........................................................................... 5,804 5,923
----------- -----------
Total sales and revenues........................................................................... 45,136 44,723
Costs and expenses
Cost of sales......................................................................................... 35,553 34,054
Selling, administrative and other expenses............................................................ 6,095 5,819
Interest expense...................................................................................... 1,964 1,835
Provision for credit and insurance losses............................................................. 185 353
----------- -----------
Total costs and expenses........................................................................... 43,797 42,061
Automotive interest income and other non-operating income/(expense), net.............................. 153 145
Automotive equity in net income/(loss) of affiliated companies........................................ 57 56
----------- -----------
Income/(loss) before income taxes..................................................................... 1,549 2,863
Provision for/(benefit from) income taxes............................................................. 314 819
----------- -----------
Income/(loss) before minority interests............................................................... 1,235 2,044
Minority interests in net income/(loss) of subsidiaries............................................... 58 85
----------- -----------
Income/(loss) from continuing operations.............................................................. 1,177 1,959
Income/(loss) from discontinued operations............................................................ 35 (7)
----------- -----------
Net income/(loss)..................................................................................... $ 1,212 $ 1,952
=========== ===========
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
Basic income/(loss)
Income/(loss) from continuing operations............................................................ $ 0.64 $ 1.07
Income/(loss) from discontinued operations.......................................................... 0.02 --
----------- ------------
Net income/(loss)................................................................................... $ 0.66 $ 1.07
=========== ===========
Diluted income/(loss)
Income/(loss) from continuing operations............................................................ $ 0.58 $ 0.95
Income/(loss) from discontinued operations.......................................................... 0.02 (0.01)
----------- -----------
Net income/(loss)................................................................................... $ 0.60 $ 0.94
=========== ===========
Cash dividends........................................................................................ $ 0.10 $ 0.10
The accompanying notes are part of the financial statements.
3
ITEM 1. Financial Statements (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
SECTOR BALANCE SHEET
(in millions)
March 31, December 31,
2005 2004
----------- -----------
(unaudited)
ASSETS
Automotive
Cash and cash equivalents........................................................................ $ 9,532 $ 10,142
Marketable securities............................................................................ 9,210 8,291
Loaned securities................................................................................ 839 1,058
----------- -----------
Total cash, marketable and loaned securities.................................................. 19,581 19,491
Receivables, net................................................................................. 3,034 2,894
Inventories...................................................................................... 11,482 10,766
Deferred income taxes............................................................................ 3,734 3,837
Other current assets............................................................................. 8,229 8,916
----------- -----------
Total current assets.......................................................................... 46,060 45,904
Equity in net assets of affiliated companies..................................................... 1,962 1,907
Net property..................................................................................... 41,759 42,904
Deferred income taxes............................................................................ 10,095 10,894
Goodwill and other intangible assets............................................................. 6,111 6,374
Assets of discontinued/held-for-sale operations.................................................. 159 188
Other assets..................................................................................... 9,837 9,455
----------- -----------
Total Automotive assets....................................................................... 115,983 117,626
Financial Services
Cash and cash equivalents........................................................................ 13,813 13,368
Investments in securities........................................................................ 929 1,216
Finance receivables, net......................................................................... 106,048 113,824
Net investment in operating leases............................................................... 32,475 31,763
Retained interest in sold receivables............................................................ 8,028 9,166
Goodwill and other intangible assets............................................................. 900 897
Assets of discontinued/held-for-sale operations.................................................. 2,456 2,186
Other assets..................................................................................... 10,963 13,746
Receivable from Automotive....................................................................... 1,633 2,753
----------- -----------
Total Financial Services assets............................................................... 177,245 188,919
----------- -----------
Total assets.................................................................................. $ 293,228 $ 306,545
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive
Trade payables................................................................................... $ 17,389 $ 16,026
Other payables................................................................................... 4,182 4,269
Accrued liabilities.............................................................................. 33,729 33,573
Debt payable within one year..................................................................... 947 977
Current payable to Financial Services............................................................ 672 1,382
----------- -----------
Total current liabilities..................................................................... 56,919 56,227
Long-term debt................................................................................... 17,101 17,458
Other liabilities................................................................................ 35,807 35,699
Deferred income taxes............................................................................ 1,897 3,042
Liabilities of discontinued/held-for-sale operations............................................. 47 46
Payable to Financial Services.................................................................... 961 1,371
----------- -----------
Total Automotive liabilities.................................................................. 112,732 113,843
Financial Services
Payables......................................................................................... 2,598 2,394
Debt............................................................................................. 143,214 154,538
Deferred income taxes............................................................................ 10,496 10,549
Other liabilities and deferred income............................................................ 7,560 8,206
Liabilities of discontinued/held-for-sale operations............................................. 112 93
----------- -----------
Total Financial Services liabilities.......................................................... 163,980 175,780
Minority interests............................................................................... 846 877
Stockholders' equity
Capital stock
Common Stock, par value $0.01 per share (1,837 million shares issued).......................... 18 18
Class B Stock, par value $0.01 per share (71 million shares issued)............................ 1 1
Capital in excess of par value of stock.......................................................... 5,224 5,321
Accumulated other comprehensive income/(loss).................................................... (150) 1,258
Treasury stock................................................................................... (1,628) (1,728)
Earnings retained for use in business............................................................ 12,205 11,175
----------- -----------
Total stockholders' equity.................................................................... 15,670 16,045
----------- -----------
Total liabilities and stockholders' equity.................................................... $ 293,228 $ 306,545
=========== ===========
The accompanying notes are part of the financial statements.
4
ITEM 1. Financial Statements (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
March 31, December 31,
2005 2004
---------- ----------
(unaudited)
ASSETS
Cash and cash equivalents............................................................................. $ 23,345 $ 23,510
Marketable securities................................................................................. 10,139 9,507
Loaned securities..................................................................................... 839 1,058
Finance receivables, net.............................................................................. 102,552 110,749
Other receivables, net................................................................................ 6,530 5,969
Net investment in operating leases.................................................................... 32,475 31,763
Retained interest in sold receivables................................................................. 8,028 9,166
Inventories........................................................................................... 11,482 10,766
Equity in net assets of affiliated companies.......................................................... 2,872 2,835
Net property.......................................................................................... 43,395 44,549
Deferred income taxes................................................................................. 2,926 4,830
Goodwill and other intangible assets.................................................................. 7,011 7,271
Assets of discontinued/held-for-sale operations....................................................... 2,615 2,374
Other assets.......................................................................................... 26,379 29,511
---------- ----------
Total assets....................................................................................... $ 280,588 $ 293,858
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Payables.............................................................................................. $ 24,169 $ 22,689
Accrued liabilities................................................................................... 31,392 31,187
Debt.................................................................................................. 161,262 172,973
Other liabilities and deferred income................................................................. 43,226 43,777
Deferred income taxes................................................................................. 3,864 6,171
Liabilities of discontinued/held-for-sale operations.................................................. 159 139
---------- ----------
Total liabilities.................................................................................. 264,072 276,936
Minority interests.................................................................................... 846 877
Stockholders' equity
Capital stock
Common Stock, par value $0.01 per share (1,837 million shares issued)............................... 18 18
Class B Stock, par value $0.01 per share (71 million shares issued)................................. 1 1
Capital in excess of par value of stock............................................................... 5,224 5,321
Accumulated other comprehensive income/(loss)......................................................... (150) 1,258
Treasury stock........................................................................................ (1,628) (1,728)
Earnings retained for use in business................................................................. 12,205 11,175
---------- ----------
Total stockholders' equity......................................................................... 15,670 16,045
---------- ----------
Total liabilities and stockholders' equity......................................................... $ 280,588 $ 293,858
========== ===========
The accompanying notes are part of the financial statements.
5
ITEM 1. Financial Statements (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
CONDENSED SECTOR STATEMENT OF CASH FLOWS
For the Periods Ended March 31, 2005 and 2004
(in millions)
First Quarter 2005 First Quarter 2004
--------------------------- ------------------------
Financial Financial
Automotive Services Automotive Services
---------- --------- ---------- ---------
(unaudited) (unaudited)
Cash and cash equivalents at January 1................................ $ 10,142 $ 13,368 $ 6,856 $ 16,352
Cash flows from operating activities before securities trading........ 2,449 3,453 2,556 5,569
Net sales/(purchases) of trading securities........................... (599) 8 (2,267) (8)
--------- --------- --------- ---------
Net cash flows from operating activities............................ 1,850 3,461 289 5,561
Cash flows from investing activities
Capital expenditures................................................ (1,436) (125) (1,199) (76)
Acquisitions of retail and other finance receivables and operating
leases............................................................. -- (14,035) -- (13,586)
Collections of retail and other finance receivables and operating
leases............................................................. -- 12,762 -- 12,191
Net (acquisitions)/collections of wholesale receivables............. -- (1,463) -- (1,920)
Net acquisitions of daily rental vehicles........................... -- (1,283) -- (1,041)
Purchases of securities............................................. (1,808) (114) (1,342) (2)
Sales and maturities of securities.................................. 1,540 391 1,380 196
Proceeds from sales of retail and other finance receivables and
operating leases................................................... -- 8,373 -- 1,680
Proceeds from sales of wholesale receivables........................ -- 1,443 -- 964
Proceeds from sale of businesses.................................... 39 -- 100 --
Net investing activity with Financial Services...................... 415 -- 851 --
Other............................................................... (42) (153) 4 299
--------- --------- --------- ---------
Net cash (used in)/provided by investing activities................ (1,292) 5,796 (206) (1,295)
Cash flows from financing activities
Cash dividends...................................................... (183) -- (183) --
Net sales/(purchases) of Common Stock............................... (14) -- (60) --
Changes in short-term debt.......................................... (17) (403) (156) 4,881
Proceeds from issuance of other debt................................ 76 5,446 148 4,343
Principal payments on other debt.................................... (373) (13,939) (1,377) (15,491)
Net financing activity with Automotive.............................. -- (415) -- (851)
Other............................................................... (3) (18) (10) (2)
--------- --------- --------- ---------
Net cash (used in)/provided by financing activities................ (514) (9,329) (1,638) (7,120)
Effect of exchange rate changes on cash............................... 56 (193) (12) (61)
Net transactions with Automotive/Financial Services................... (710) 710 (95) 95
--------- --------- --------- ---------
Net increase/(decrease) in cash and cash equivalents............... (610) 445 (1,662) (2,820)
--------- --------- --------- ---------
Cash and cash equivalents at March 31................................. $ 9,532 $ 13,813 $ 5,194 $ 13,532
========= ========= ========= =========
The accompanying notes are part of the financial statements.
6
ITEM 1. Financial Statements (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Periods Ended March 31, 2005 and 2004
(in millions)
First Quarter
--------------------------
2005 2004
----------- -----------
(unaudited)
Cash and cash equivalents at January 1............................................................... $ 23,510 $ 23,208
Cash flows from operating activities before securities trading....................................... 5,767 7,143
Net sales/(purchases) of trading securities.......................................................... (591) (2,275)
----------- -----------
Net cash flows from operating activities.......................................................... 5,176 4,868
Cash flows from investing activities
Capital expenditures............................................................................... (1,561) (1,275)
Acquisitions of retail and other finance receivables and operating leases.......................... (14,035) (13,586)
Collections of retail and other finance receivables and operating leases........................... 12,877 12,217
Net acquisitions of daily rental vehicles.......................................................... (1,283) (1,041)
Purchases of securities............................................................................ (1,922) (1,344)
Sales and maturities of securities................................................................. 1,931 1,576
Proceeds from sales of retail and other finance receivables and operating leases................... 8,373 1,680
Proceeds from sale of businesses................................................................... 39 100
Other.............................................................................................. (195) 303
---------- -----------
Net cash (used in)/provided by investing activities............................................... 4,224 (1,370)
Cash flows from financing activities
Cash dividends..................................................................................... (183) (183)
Net sales/(purchases) of Common Stock.............................................................. (14) (60)
Changes in short-term debt......................................................................... (420) 4,725
Proceeds from issuance of other debt............................................................... 5,522 4,491
Principal payments on other debt................................................................... (14,312) (16,868)
Other.............................................................................................. (21) (12)
----------- -----------
Net cash (used in)/provided by financing activities............................................... (9,428) (7,907)
Effect of exchange rate changes on cash.............................................................. (137) (73)
----------- -----------
Net increase/(decrease) in cash and cash equivalents.............................................. (165) (4,482)
----------- -----------
Cash and cash equivalents at March 31................................................................ $ 23,345 $ 18,726
=========== ===========
The accompanying notes are part of the financial statements.
7
Item 1. Financial Statements (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. FINANCIAL STATEMENTS
The financial data presented herein are unaudited, but in the opinion of
management reflect those adjustments necessary for a fair presentation of the
results of operations and financial condition of Ford Motor Company and its
consolidated subsidiaries and consolidated Variable Interest Entities ("VIEs")
of which we are the primary beneficiary for the periods and at the dates
presented. Results for interim periods should not be considered indicative of
results for a full year. Reference should be made to the financial statements
contained in our Annual Report on Form 10-K for the year ended December 31, 2004
(the "10-K Report"). For purposes of this report, "Ford", the "Company", "we",
"our", "us" or similar references mean Ford Motor Company and our consolidated
subsidiaries and our consolidated VIEs of which we are the primary beneficiary,
unless the context requires otherwise. Certain prior period amounts have been
reclassified to conform to current period presentation.
NOTE 2. INCOME TAXES
On October 22, 2004, President Bush signed into law The American Jobs
Creation Act of 2004 (the "Act"). The Act provides for a one-year period to
repatriate certain foreign earnings at a special tax rate. We continue to
evaluate the application of the repatriation provisions and are considering
repatriating up to a maximum of $860 million of foreign earnings, subject to
further regulatory clarification of the Act. The impact of any repatriation of
these earnings pursuant to the Act cannot reasonably be estimated at this time.
We expect to make a determination about the applicability of the repatriation
provision in the last quarter of 2005.
NOTE 3. DISPOSITIONS, HELD-FOR-SALE AND DISCONTINUED OPERATIONS
Automotive Sector
Dispositions. In March 2005, we completed the sale of our interest
(approximately 5%) in Mahindra & Mahindra Ltd. As a result of the disposition,
we recognized a pre-tax gain of approximately $22 million.
On April 1, 2005, we completed the sale of our interest (approximately 19%)
in Vastera, Inc. for $24 million. A gain of approximately $10 million will be
recognized in the second quarter of 2005.
Held-for-sale Operations. In 2004, we committed to sell certain
consolidated dealerships in the Asia Pacific and Africa/Mazda segment and
reported them as held for sale. The sales were completed in early April 2005.
In March 2005, we reached an agreement to acquire the remaining minority
interest in a majority-owned subsidiary that licenses trademarks. We also
committed to the sale of this entity's operations once it becomes wholly owned,
as its operations are not consistent with our objectives to build on the basics
of the Automotive business and focus on our core businesses. We expect to sell
these operations during the next twelve months and have reported them as held
for sale. We recorded a pre-tax charge of approximately $6 million reflected in
Income/(loss) before income taxes related to the difference between the
anticipated selling price of the net assets, less costs to sell them, and their
recorded book values. We also recorded a pre-tax goodwill and intangible asset
impairment of approximately $53 million in Income/(loss) before income taxes
related to the disposal of these operations.
At March 31, 2005, the assets of the held-for-sale operations associated
with the licensing of trademarks consisted primarily of cash and cash
equivalents of approximately $45 million.
Financial Services Sector
Discontinued Operations. During 2004, we committed to a plan to sell Triad
Financial Corporation, Ford Motor Credit Company's ("Ford Credit") operation in
the United States that specializes in automobile retail installment sales
contracts with borrowers who generally would not be expected to qualify, based
on their creditworthiness, for traditional financing sources such as those
provided by commercial banks or automobile manufacturers' affiliated finance
companies. We completed the sale of this business during April 2005 for an
amount approximately equal to book value.
8
Item 1. Financial Statements (Continued)
NOTE 3. DISPOSITIONS, HELD-FOR-SALE AND DISCONTINUED OPERATIONS (Continued)
Total Company
The results of all discontinued operations are as follows (in millions):
First Quarter
-------------------------
2005 2004
--------- --------
Sales and revenues.................................................................................. $ 135 $ 203
Operating income/(loss) from discontinued operations................................................ $ 57 $ 7
Gain/(loss) on discontinued operations.............................................................. (1) (9)
(Provision for)/benefit from income taxes........................................................... (21) (5)
-------- --------
Income/(loss) from discontinued operations.......................................................... $ 35 $ (7)
======== ========
NOTE 4. AUTOMOTIVE INVENTORIES
Inventories are summarized as follows (in millions):
March 31, December 31,
2005 2004
----------- ------------
Raw materials, work-in-process and supplies......................................................... $ 4,132 $ 3,968
Finished products................................................................................... 8,353 7,799
---------- --------
Total inventories at FIFO......................................................................... 12,485 11,767
Less: LIFO adjustment............................................................................... (1,003) (1,001)
---------- --------
Total inventories................................................................................. $ 11,482 $ 10,766
========== ========
NOTE 5. GOODWILL AND OTHER INTANGIBLES
During the first quarter of 2005, we impaired $34 million of goodwill and
$19 million of net intangibles in The Americas segment related to our
held-for-sale subsidiary that licenses trademarks. In measuring the impairment,
the carrying value of these operations, including goodwill, was compared to a
third party valuation.
Changes in the carrying amount of goodwill are as follows (in millions):
Financial Services
Automotive Sector Sector
------------------------------------------ -------------------
Ford Asia
Pacific
The Ford Europe and Ford
Americas and PAG Africa/Mazda Credit Hertz
-------- ----------- ------------ ------- -------
Beginning balance, December 31, 2004......................... $ 188 $ 5,248 $ -- $ 20 $ 648
Goodwill acquired.......................................... 18 -- -- -- --
Goodwill impairment........................................ (34) -- -- -- --
Exchange translation/other................................. -- (198) -- (1) (3)
----- ------- ------ ----- -----
Ending balance, March 31, 2005............................... $ 172 $ 5,050 $ -- $ 19 $ 645
===== ======= ====== ===== =====
In connection with the acquisition of several dealerships, we acquired $18
million of goodwill. In addition, included within Equity in net assets of
affiliated companies was goodwill of $137 million at March 31, 2005. During the
first quarter of 2005, we impaired $29 million of goodwill related to
other-than-temporary loss in value for one of our equity investments.
The components of identifiable intangible assets are as follows as of
March 31, 2005 (in millions):
Financial Services
Automotive Sector Sector
-------------------------------- --------------------------------
Amortizable Non-amortizable Amortizable Non-amortizable
----------- --------------- ----------- ---------------
Gross carrying amount.................................... $ 543 $ 471 $ 97 $ 189
Less: accumulated amortization........................... (125) -- (50) --
------ ------ ------ ------
Net intangible assets.................................... $ 418 $ 471 $ 47 $ 189
====== ====== ====== ======
Pre-tax amortization expense related to these intangible assets for the
three months ended March 31, 2005 was $25 million, including $19 million for the
impairment of the net intangibles in our held-for-sale subsidiary that licenses
trademarks. Intangible asset amortization is forecasted to range from $30
million to $40 million per year for the next five years.
9
Item 1. Financial Statements (Continued)
NOTE 5. GOODWILL AND OTHER INTANGIBLES (Continued)
We perform our annual goodwill and intangible asset impairment test in the
second quarter. The goodwill test is conducted on a reporting unit level that is
aligned with our current senior management structure. To test for impairment,
the carrying value of each reporting unit, including goodwill, is compared with
its fair value. Fair value is estimated using the present value of free cash
flows method.
NOTE 6. VARIABLE INTEREST ENTITIES
We consolidate VIEs of which we are the primary beneficiary. The
liabilities recognized as a result of consolidating the VIEs do not represent
additional claims on our general assets; rather, they represent claims against
the specific assets of the consolidated VIEs. Conversely, assets recognized as a
result of consolidating these VIEs do not represent additional assets that could
be used to satisfy claims against our general assets. Reflected in our March 31,
2005 balance sheet are $3.9 billion of VIE assets related to VIEs that were
consolidated. During the first quarter of 2005, there were no significant
changes to VIEs of which we are the primary beneficiary. For further discussions
regarding VIEs, please see Note 16 of the Notes to the Financial Statements in
the 10-K Report.
VIEs of which we are not the primary beneficiary:
Automotive Sector
We have several investments in other joint ventures deemed to be VIEs of
which we are not the primary beneficiary. The risks and rewards associated with
our interests in these entities are based primarily on ownership percentages.
Our maximum exposure (approximately $6 million at March 31, 2005) to any
potential losses, should they occur, associated with these VIEs is limited to
our equity investments and, where applicable, receivables due from the VIEs. For
further discussions regarding VIEs of which we are not the primary beneficiary,
please see Note 16 of the Notes to the Financial Statements in the 10-K Report.
Financial Services Sector
Ford Credit has investments in certain joint ventures deemed to be VIEs of
which it is not the primary beneficiary. The risks and rewards associated with
Ford Credit's interests in these entities are based primarily on ownership
percentages. Ford Credit's maximum exposure (approximately $180 million at March
31, 2005) to any potential losses, should they occur, associated with these VIEs
is limited to its equity investments and, where applicable, receivables due from
the VIEs.
Ford Credit also sells, in contractually committed agreements, finance
receivables and notes (backed by interests in vehicles subject to operating
leases) to bank-sponsored asset-backed commercial paper issuers that are SPEs of
the sponsor bank; these SPEs are not consolidated by us. At March 31, 2005,
approximately $6.4 billion of finance receivables and notes have been sold.
NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standard "SFAS" No. 133, Accounting for
Derivative Instruments and Hedging Activities, establishes accounting and
reporting standards for derivative instruments and requires that all derivatives
be recorded at fair value on our balance sheet, including embedded derivatives.
Income statement impact: The ineffective portion of designated hedges,
amortization of mark-to-market adjustments associated with hedging relationships
that have been terminated, and mark-to-market adjustments that reflect changes
in interest rates for non-designated hedging activity are recognized in Cost of
sales for the Automotive sector and in Revenues for the Financial Services
sector and are shown in the table below (in millions):
First Quarter 2005 First Quarter 2004
---------------------------------------- --------------------------------------
Financial Financial
Automotive Services Total Automotive Services Total
---------- ----------- --------- ---------- ----------- ----------
Income/(loss) before income taxes............... $ 44 $ (50) $ (6) $ 198 $ 47 $ 245
10
Item 1. Financial Statements (Continued)
NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
Fair Value of Derivative Instruments: The fair value of derivatives
reflects the price that a third party would be willing to pay or receive in
arm's length transactions and includes mark-to-market adjustments to reflect the
effects of changes in the related index. The following tables summarize the
estimated fair value of our derivative financial instruments, taking into
consideration the effects of legally enforceable netting agreements, (in
millions):
March 31, 2005 December 31, 2004
----------------------- ------------------------
Fair Fair Fair Fair
Value Value Value Value
Assets Liabilities Assets Liabilities
-------- ----------- --------- ------------
Automotive
Total derivative financial instruments........................................ $2,186 $ 789 $3,128 $ 913
====== ====== ====== ======
Financial Services
Foreign currency swaps, forwards and options.................................. $2,492 $ 808 $4,201 $1,076
Interest rate swaps........................................................... 2,144 148 3,074 180
Impact of netting agreements.................................................. (93) (93) (345) (345)
------ ------ ------ ------
Total derivative financial instruments...................................... $4,543 $ 863 $6,930 $ 911
====== ====== ====== ======
NOTE 8. AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
The calculation of diluted income per share of Common and Class B Stock
takes into account the effect of obligations, such as stock options and
convertible securities, considered to be potentially dilutive. Basic and diluted
income/(loss) per share were calculated using the following number of shares (in
millions):
First Quarter
---------------------
2005 2004
--------- ---------
Basic and Diluted Income/(Loss)
Income/(loss) from continuing operations......................................................... $ 1,177 $ 1,959
Effect of dilutive convertible preferred securities.............................................. 53 49
--------- ---------
Diluted income/(loss) from continuing operations attributable to Common and Class B Stock...... $ 1,230 $ 2,008
========= =========
Diluted Shares
Average shares outstanding....................................................................... 1,830 1,832
Restricted and uncommitted-ESOP shares........................................................... (3) (4)
--------- ---------
Basic shares................................................................................... 1,827 1,828
Net dilutive options and restricted and uncommitted-ESOP shares.................................. 13 14
Dilutive convertible preferred securities........................................................ 282 282
--------- ---------
Diluted shares................................................................................. 2,122 2,124
========= =========
NOTE 9. COMPREHENSIVE INCOME
Other comprehensive income/(loss) primarily reflected adjustments for
foreign currency translation, SFAS No. 133, and minimum pension liability. Total
comprehensive income/(loss) is summarized as follows (in millions):
First Quarter
----------------------
2005 2004
--------- ----------
Net income/(loss)............................................................................... $ 1,212 $ 1,952
Other comprehensive income/(loss)............................................................... (1,408)* (499)
--------- ---------
Total comprehensive income/(loss)............................................................. $ (196) $ 1,453
========= =========
- ----------
* Other comprehensive loss included a loss of $1,141 million from adjustments
for foreign currency translation attributable to the weakening of certain
foreign currency against the U.S. dollar.
11
Item 1. Financial Statements (Continued)
NOTE 10. RETIREMENT BENEFITS
Pension, postretirement health care and life insurance benefit expense is
summarized as follows (in millions):
First Quarter
-------------------------------------------------------------
Pension Benefits
-------------------------------------
Health Care and
U.S. Plans Non-U.S. Plans Life Insurance
---------------- ----------------- ------------------
2005 2004 2005 2004 2005 2004
------ ------ ------ ------ ------ ------
Service cost.................................. $ 184 $ 159 $ 166 $ 138 $ 178 $ 137
Interest cost................................. 598 610 368 334 551 496
Expected return on assets..................... (823) (803) (419) (400) (122) (56)
Amortization of:
Prior service costs.......................... 126 125 61 26 (54) (55)
(Gains)/losses and other.................... 12 6 92 43 224 153
Separation programs........................... -- -- 1 21 -- --
Allocated costs to Visteon.................... (28) (26) -- -- (81) (63)
------ ------ ------ ------ ------ ------
Net expense/(income)........................ $ 69 $ 71 $ 269 $ 162 $ 696 $ 612
====== ====== ====== ====== ====== ======
Company Contributions
Our policy for funded plans is to contribute annually, at a minimum,
amounts required by applicable laws, regulations, and union agreements. We do
from time to time make contributions beyond those legally required.
Pension: As of April 2005, we contributed $2.4 billion to our worldwide
pension plans, including benefit payments paid directly by the Company for
unfunded plans. We expect to contribute an additional $400 million in 2005 for a
total of $2.8 billion. Based on current assumptions and regulations, we do not
expect to have a legal requirement to fund our major U.S. pension plans in 2005.
We also do not expect to be required to pay any variable-rate premiums for our
major plans to the Pension Benefit Guaranty Corporation in 2005.
Health Care and Life Insurance: In April 2005, we contributed $200 million
to our previously established Voluntary Employee Beneficiary Association trust
("VEBA") for U.S. hourly retiree health care and life insurance benefits.
NOTE 11. GUARANTEES
The fair values of guarantees and indemnifications issued since December
31, 2002 are recorded in the financial statements and are de minimis.
At March 31, 2005, the following guarantees were issued and outstanding:
Guarantees related to affiliates and third parties: We guarantee debt and
lease obligations of certain joint ventures as well as certain financial
obligations of outside third parties to support business and economic growth.
Expiration dates vary, and guarantees will terminate on payment and/or
cancellation of the obligation. A payment would be triggered by failure of the
guaranteed party to fulfill its obligation covered by the guarantee. In some
circumstances, we are entitled to recover from the third party amounts paid by
us under the guarantee. However, our ability to enforce these rights is
sometimes stayed until the guaranteed party is paid in full. The maximum
potential payments under these guarantees total approximately $346 million, the
majority of which relates to the Automotive sector.
In 1992, we issued $500 million of 7.25% Notes due October 1, 2008
("Notes"). In 1999, the bondholders agreed to relieve us as the primary obligor
with respect to the principal of these Notes. As part of this transaction, we
placed certain financial assets into an escrow trust for the benefit of the
bondholders, and the trust became the primary obligor with respect to the
principal (we became secondarily liable for the entire principal amount).
We also have guarantees outstanding associated with Ford Motor Company
Capital Trust II, a subsidiary trust ("Trust II"). For further discussions of
Trust II, refer to Notes 15 and 17 of the Notes to the Financial Statements in
the 10-K report.
Indemnifications: We regularly evaluate the probability of having to incur
costs associated with indemnifications contained in contracts that we are a
party to and have accrued for expected losses that are probable and for which a
loss can be estimated. During the first quarter there were no significant
changes to our indemnifications.
12
Item 1. Financial Statements (Continued)
NOTE 11. GUARANTEES (Continued)
Product Performance
Warranty: Estimated warranty costs and additional service actions are
accrued for at the time the vehicle is sold to a dealer. Included in the
warranty cost accruals are costs for basic warranty coverages on vehicles sold.
Additional service actions such as product recalls and other customer service
actions are not included in the warranty reconciliation below, but are also
accrued for at the time of sale. Estimates for warranty costs are made based
primarily on historical warranty claim experience. The following is a tabular
reconciliation of the product warranty accrual (in millions):
First Quarter
----------------------
2005 2004
--------- --------
Beginning balance..................................................................................... $ 5,751 $ 5,443
Payments made during the quarter.................................................................... (993) (871)
Changes in accrual related to warranties issued during the quarter.................................. 981 898
Changes in accrual related to pre-existing warranties............................................... 25 (28)
Foreign currency translation and other.............................................................. (73) 20
--------- ---------
Ending balance........................................................................................ $ 5,691 $ 5,462
========= =========
Extended Service Plans: Fees or premiums for the issuance of extended service
plans are recognized in income over the contract period in proportion to the
costs expected to be incurred in performing services under the contract.
NOTE 12. VISTEON DISCUSSIONS
We have been engaged in ongoing discussions with Visteon Corporation
("Visteon"), our largest supplier, regarding a concept that we jointly believe
would allow both companies to imporve their efficiency and effectiveness.
Resolution of certain employee-related receivables is being discussed as part of
a wider range of terms. At March 31, 2005, the gross amount of these receivables
was about $800 million; less valuation allowances, the net amount was about $260
million. In addition to these amounts, at March 31, 2005, Visteon owed us, net
of valuation allowances, about $300 million for obligations outside of trade
terms related to the purchase of components from Visteon.
13
Item 1. Financial Statements (Continued)
NOTE 13. SEGMENT INFORMATION
Automotive Sector Financial Services Sector (a) Total Company
--------------------------------------------- -------------------------------------------- ------------------
Ford Asia
Ford Pacific &
The Europe Africa/ Ford
Americas and PAG Mazda Other Total Credit Hertz Other Elims Total Elims (b) Total
-------- ------- ---------- ----- ------- ------- ------- ------ ----- ------- -------- -------
(in millions)
FIRST QUARTER 2005
Revenues
External
customer $21,962 $15,335 $ 2,035 $ - $39,332 $ 4,099 $ 1,644 $ 61 $ - $ 5,804 $ - $45,136
Intersegment 1,095 838 17 - 1,950 146 4 2 (3) 149 (2,099) -
Income
Income/(loss)
before
income taxes 634 4 97 (262) 473 1,061 33 (18) - 1,076 - 1,549
Total assets at
March 31 115,983 161,553 14,833 859 - 177,245 - 293,228
FIRST QUARTER 2004
Revenues
External
customer $23,901 $13,260 $ 1,639 $ - $38,800 $ 4,391 $ 1,456 $ 76 $ - $ 5,923 $ - $44,723
Intersegment 872 760 13 - 1,645 128 5 2 (3) 132 (1,777) -
Income
Income/(loss)
before
income taxes 1,978 9 82 (249) 1,820 1,047 (7) 3 - 1,043 - 2,863
Total assets at
March 31 120,082 171,505 13,466 2,659 - 187,630 - 307,712
- - - - - -
(a) Financial Services sector's interest income is recorded as Revenues.
(b) Includes intersector transactions occurring in the ordinary course of
business.
14
Report of Independent Registered Public Accounting Firm
To Board of Directors and Shareholders
Ford Motor Company:
We have reviewed the accompanying consolidated balance sheet of Ford Motor
Company and its subsidiaries as of March 31, 2005 and the related consolidated
statements of income and of cash flows for each of the three-month periods ended
March 31, 2005 and 2004. In addition, we have reviewed the accompanying interim
sector balance sheet and the related sector statements of income and of cash
flows, presented for purposes of additional analysis. These interim consolidated
and sector financial statements (collectively, the "interim financial
statements") are the responsibility of the Company's management.
We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying interim financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.
We previously audited in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated and sector balance
sheet as of December 31, 2004, and the related consolidated and sector
statements of income and of cash flows, and consolidated statement of
stockholders' equity for the year then ended, management's assessment of the
effectiveness of the Company's internal control over financial reporting as of
December 31, 2004 and the effectiveness of the Company's internal control over
financial reporting as of December 31, 2004, and in our report dated March 9,
2005 we expressed unqualified opinions thereon. The consolidated and sector
financial statements and management's assessment of the effectiveness of
internal control over financial reporting referred to above are not presented
herein. In our opinion, the information set forth in the accompanying
consolidated and sector balance sheet information as of December 31, 2004, is
fairly stated in all material respects in relation to the consolidated and
sector balance sheets from which it has been derived.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Detroit, Michigan
May 9, 2005
15
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Certain prior-year amounts have been reclassified to conform to current
period presentation.
FIRST QUARTER RESULTS OF OPERATIONS
Our worldwide net income was $1.2 billion or $0.60 per share of Common and
Class B stock in the first quarter of 2005, down from a profit of $2.0 billion
or $0.94 per share in the first quarter 2004.
Results by business sector for the first quarter 2005 and 2004 are shown
below (in millions):
First Quarter
Net Income/(Loss)
----------------------------------
2005
Over/
(Under)
2005 2004 2004
--------- ---------- ----------
Income/(loss) before income taxes
Automotive sector............................................................. $ 473 $ 1,820 $ (1,347)
Financial Services sector..................................................... 1,076 1,043 33
--------- ---------- ----------
Total Company................................................................ 1,549 2,863 (1,314)
Provision for/(benefit from) income taxes....................................... 314 819 (505)
Minority interests in net income/(loss) of subsidiaries *....................... 58 85 (27)
--------- ---------- ----------
Income/(loss) from continuing operations........................................ 1,177 1,959 (782)
Income/(loss) from discontinued operations...................................... 35 (7) 42
--------- ---------- ----------
Net income/(loss)............................................................... $ 1,212 $ 1,952 $ (740)
========= ========== ==========
- ----------
* Primarily related to Ford Europe's consolidated less-than-100%-owned
affiliates.
Included in Income/(loss) before income taxes are items we do not consider
indicative of our ongoing operating activities ("special items"). The following
table details the first quarter 2005 and 2004 special items by business unit (in
millions):
First Quarter
-------------------
2005 2004
------- -------
Automotive sector
Ford North America
Fuel-cell technology charges.................................................................... $ (39) $ --
Visteon charges - primarily allowance for Visteon OPEB receivable............................... (9) --
Non-core business held for sale................................................................. (59) --
Ford Europe
Ford Europe Improvement Plan.................................................................... -- (29)
Other Automotive
Prior divestiture of non-core business.......................................................... -- 17
------- -------
Total......................................................................................... $ (107) $ (12)
======= =======
AUTOMOTIVE SECTOR
Details by Automotive business unit of Income/(loss) before income taxes for
the first quarter of 2005 and 2004 are shown below (in millions):
First Quarter
Income/(Loss) Before
Income Taxes
--------------------------------
2005
Over/
(Under)
2005 2004 2004
-------- -------- ---------
The Americas
Ford North America................................................................ $ 557 $ 1,963 $ (1,406)
Ford South America................................................................ 77 15 62
-------- -------- ---------
Total The Americas.............................................................. 634 1,978 (1,344)
Ford Europe and PAG
Ford Europe....................................................................... 59 (24) 83
PAG............................................................................... (55) 33 (88)
-------- -------- ---------
Total Ford Europe and PAG....................................................... 4 9 (5)
Ford Asia Pacific and Africa/Mazda
Ford Asia Pacific and Africa...................................................... 43 28 15
Mazda and Associated Operations................................................... 54 54 --
-------- -------- ---------
Total Ford Asia Pacific and Africa/Mazda........................................ 97 82 15
Other Automotive..................................................................... (262) (249) (13)
-------- -------- ---------
Total Automotive............................................................. $ 473 $ 1,820 $ (1,347)
======== ======== =========
16
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Details of Automotive sector sales and vehicle unit sales by Automotive
business unit for the first quarter 2005 and 2004 are shown below:
First Quarter
---------------------------------------------------------------------------
Sales Vehicle Unit Sales*
(in billions) (in thousands)
----------------------------------- ------------------------------------
2005 2005
Over/(Under) Over/(Under)
2005 2004 2004 2005 2004 2004
------- ------- --------------- ------- ------- ----------------
The Americas
Ford North America................................ $ 21.1 $ 23.2 $ (2.1) (9)% 898 1,011 (113) (11)%
Ford South America................................ 0.9 0.7 0.2 29 73 66 7 11
------- ------- ------- ------ ------ ------
Total The Americas.............................. 22.0 23.9 (1.9) (8) 971 1,077 (106) (10)
Ford Europe and PAG
Ford Europe....................................... 7.7 6.5 1.2 18 445 426 19 4
PAG............................................... 7.6 6.8 0.8 12 188 189 (1) 0
------- ------- ------- ------ ------ ------
Total Ford Europe and PAG....................... 15.3 13.3 2.0 15 633 615 18 3
Ford Asia Pacific and Africa........................ 2.0 1.6 0.4 25 112 96 16 17
------- ------- ------- ------ ------ ------
Total Automotive................................ $ 39.3 $ 38.8 $ 0.5 1% 1,716 1,788 (72) (4)%
======= ======= ======= ====== ====== ======
- ----------
* Included in vehicle unit sales of Ford Asia Pacific and Africa are
Ford-badged vehicles sold in China and Malaysia by certain unconsolidated
affiliates totaling 14,379 and 12,856 units in 2005 and 2004, respectively.
"Sales" above does not include revenue from these units.
Details of Automotive sector market share for selected markets for the first
quarter 2005 and 2004 along with the level of dealer stocks as of March 31, 2005
and March 31, 2004 are shown below:
First Quarter Dealer-Owned Stocks (a)
Market Share (in thousands)
------------------------------------- -----------------------------------------
2005 2005
Over/(Under) March 31, March 31, Over/(Under)
Market 2005 2004 2004 2005 2004 2004
- -------------------------------- --------- --------- ------------ ----------- ----------- --------------
U.S. (b)........................ 17.8% 18.7% (0.9) pts. 877 928 (51)
Brazil (b)...................... 13.4 11.4 2.0 17 15 2
Europe (b) (c).................. 9.0 9.2 (0.2) 367 370 (3)
PAG - U.S./Europe (c) (d)....... 1.2/2.4 1.3/2.3 (0.1)/0.1 129 127 2
Australia (b)................... 13.6 13.4 0.2 19 18 1
- ----------
(a) Dealer-owned stocks represent our estimate of vehicles shipped to our
customers (dealers) and not yet sold by the dealers to their retail
customers, including some vehicles reflected in our inventory.
(b) Excludes our PAG-brand vehicles (i.e., Volvo, Jaguar, Land Rover and Aston
Martin).
(c) European market share is based, in part, on estimated 2005 vehicle
registrations for our 19 major European markets.
(d) PAG dealer-owned stocks include all markets.
Overall Automotive Sector
The decline in Income/(loss) before income taxes primarily reflected lower
unit sales volume and unfavorable product mix (about $600 million), unfavorable
cost performance (about $300 million) and unfavorable changes in exchange rates
(about $300 million).
The table below details our first quarter 2005 cost performance (in
billions):
First Quarter
----------------
2005 Costs*
Better/(Worse)
Than 2004 Explanation of Cost Performance
---------------- ------------------------------------------------------------------
Manufacturing and engineering............. $ 0.4 -- Ongoing improvements in our plants. Product development costs
were about flat.
Quality-related........................... (0.1) -- Lower release of reserves for additional service actions
outside of base warranty coverage.
Depreciation and amortization............. (0.1) -- Related to investments for new vehicles.
Pension and healthcare.................... (0.2) -- Effect of lower discount rates for North America and Europe
and lower return rate assumptions for our U.K. pension plans.
Net product costs......................... (0.3) -- Higher product content and the impact of higher commodity
------ prices.
Total................................... $ (0.3)
======
- ----------
* At constant volume, mix and exchange and excluding special items and
discontinued operations.
17
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
The Americas Segment
Ford North America. The decline in earnings primarily reflected lower
vehicle unit sales volume, unfavorable cost performance and unfavorable currency
exchange.
The lower vehicle unit sales volume reflected a lower dealer stock build in
the first quarter of 2005 compared to the first quarter of 2004 and lower market
share. The decline in market share primarily reflected an industry market shift
away from traditional SUV segments where we have a higher-than-average share of
the market.
Ford South America. The improvements in earnings primarily reflected higher
vehicle unit sales volume, favorable currency exchange and favorable net pricing
in excess of higher commodity costs.
Higher unit sales volume primarily reflected higher industry volume in all
markets and higher market share in Brazil.
Ford Europe and PAG Segment
Ford Europe. The improvement in earnings primarily reflected higher vehicle
unit sales volume and the non-recurrence of first quarter 2004 Ford Europe
Improvement Plan charges, offset partially by unfavorable net pricing and lower
profits at Ford Otosan, our consolidated joint venture in Turkey.
The higher vehicle unit sales volume primarily reflected the non-recurrence
of a first quarter 2004 dealer stock reduction, offset partially by lower
industry volume and market share.
PAG. The decline in results are more than explained by unfavorable changes
in currency exchange rates and also reflect unfavorable product mix, offset
partially by favorable cost performance and favorable net pricing.
Ford Asia Pacific and Africa/Mazda Segment
Ford Asia Pacific and Africa. The improvement in earnings primarily
reflected a gain (about $22 million) from the sale of our investment in Mahindra
& Mahindra Ltd. in India, higher vehicle unit sales volume and favorable changes
in currency exchange rates, offset partially by unfavorable cost performance.
FINANCIAL SERVICES SECTOR RESULTS OF OPERATIONS
Our Financial Services Sector includes two primary segments, Ford Credit
and The Hertz Corporation ("Hertz"). Details of Financial Services sector
Income/(loss) before income taxes for the first quarter 2005 and 2004 are shown
below (in millions):
First Quarter
Income/(Loss)
Before Income Taxes
----------------------------------
2005
Over/(Under)
2005 2004 2004
--------- --------- ------------
Ford Credit................................................................................. $1,061 $1,047 $ 14
Hertz*...................................................................................... 33 (7) 40
Other Financial Services.................................................................... (18) 3 (21)
------ ------ -------
Total Financial Services sector........................................................... $1,076 $1,043 $ 33
====== ====== =======
- ----------
* Includes amortization expense related to intangibles recognized upon
consolidation of Hertz.
Ford Credit
The increase in income before income taxes of $14 million primarily
reflected improved credit loss performance, offset partially by the impact of
lower receivable levels and higher borrowing costs.
18
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
The following table shows actual credit losses net of recoveries, which are
referred to as charge-offs, and loss-to-receivables ratios, which equal
annualized charge-offs divided by the average amount of receivables outstanding
for the period, for the first quarter of 2005 and 2004.
First Quarter
-----------------------------------------
2005
Over/(Under)
2005 2004 2004
----------- ----------- --------------
Charge-offs (in millions)
On-Balance Sheet................................................................ $ 181 $ 315 $ (134)
Managed......................................................................... 229 429 (200)
Loss-to-Receivables Ratios
On-Balance Sheet................................................................ 0.56% 0.97% (0.41) pts.
Managed......................................................................... 0.55% 0.98% (0.43) pts.
The decrease in charge-offs for the on-balance sheet and managed portfolios
primarily reflected fewer repossessions and a lower average loss per
repossession in the U.S. retail installment and operating lease portfolio.
Ford Credit's net finance receivables and net investment in operating
leases for on-balance sheet, securitized off-balance sheet, managed and serviced
portfolios are shown below (in billions):
2005
March 31, December 31, Over/(Under)
2005 2004 2004
----------- ------------ -------------
On-balance sheet (including on-balance sheet securitizations)........ $ 125.2 $ 132.7 $ (7.5)
Securitized off-balance sheet........................................ 39.3 35.6 3.7
-------- -------- --------
Managed............................................................ $ 164.5 $ 168.3 $ (3.8)
======== ======== ========
Serviced........................................................... $ 169.3 $ 172.3 $ (3.0)
The decrease in managed receivables primarily reflected the portfolio effect
of lower retail and operating lease contract placement volumes and the impact of
a whole-loan sale transaction during the first quarter of 2005.
Shown below is Ford Credit's allowance for credit losses related to finance
receivables and operating leases for the periods specified:
2005
March 31, December 31, Over/(Under)
2005 2004 2004
----------- ------------- ----------------
Allowance for credit losses (in billions)............................ $ 2.2 $ 2.4 $ (0.2)
Allowance as a percentage of end-of-period receivables............... 1.74% 1.80% (0.06) pts.
The decrease in the allowance for credit losses primarily reflected the
improved charge-off performance in the United States and the impact of lower
receivables.
Hertz
The improvement in earnings primarily reflected higher vehicle and
equipment rental volumes, lower fleet costs and higher proceeds received in
excess of book value on the disposal of used vehicles and equipment, offset
partially by lower pricing.
LIQUIDITY AND CAPITAL RESOURCES
Automotive Sector
For the Automotive sector, liquidity and capital resources include gross
cash balances, cash generated by operations, funds raised in capital markets and
committed credit lines.
19
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Gross Cash. Automotive gross cash includes cash and cash equivalents,
marketable and loaned securities and assets contained in a short-term Voluntary
Employee Beneficiary Association trust ("VEBA") as detailed below (in billions):
2005 2004
----------------------- -----------------------
March 31 January 1 March 31 January 1
-------- --------- -------- ---------
Cash and cash equivalents................................................... $ 9.5 $ 10.1 $ 5.2 $ 6.9
Marketable securities....................................................... 9.2 8.3 7.9 9.3
Loaned securities........................................................... 0.9 1.1 9.3 5.7
-------- -------- -------- --------
Total cash, marketable securities and loaned securities..................... 19.6 19.5 22.4 21.9
Short-term VEBA assets...................................................... 3.3 4.1 4.1 4.0
-------- -------- -------- --------
Gross cash................................................................ $ 22.9 $ 23.6 $ 26.5 $ 25.9
======== ======== ======== ========
In managing our business, we now classify changes in Automotive gross cash
into two categories: operating-related, and all other (which includes pension
and long-term VEBA contributions, tax refunds, capital transactions with the
Financial Services sector, acquisitions and divestitures and other (primarily
financing related)). Our key metric is operating-related cash flow, which best
represents the ability of our Automotive operations to generate cash. We believe
the cash flow analysis reflected in the table below, which differs from a cash
flow statement presented in accordance with generally accepted accounting
principles in the United States ("GAAP"), is useful to investors because it
includes cash flow elements that we consider to be related to our operating
activities (e.g., capital spending) that are not included in Cash flows from
operating activities before securities trading, the most directly comparable
GAAP financial measure.
Changes in Automotive gross cash for the first quarter of 2005 and 2004 are
summarized below (in billions):
First Quarter
-------------------
2005 2004
------- --------
Gross cash at end of period.......................................................................... $ 22.9 $ 26.5
Gross cash at beginning of period.................................................................... 23.6 25.9
------- --------
Total change in gross cash......................................................................... $ (0.7) $ 0.6
======= ========
Operating-related cash flows
Automotive income/(loss) before income taxes....................................................... $ 0.5 $ 1.8
Capital expenditures............................................................................... (1.4) (1.2)
Depreciation and special tools amortization........................................................ 1.7 1.6
Changes in receivables, inventory and trade payables............................................... 0.5 0.4
All other.......................................................................................... (0.5) (0.2)
------- --------
Total operating-related cash flows................................................................ 0.8 2.4
Other changes in cash
Contributions to funded pension plans/long-term VEBA............................................... (1.4) (1.2)
Tax refunds........................................................................................ -- --
Capital transactions with Financial Services sector *.............................................. 0.4 0.9
Acquisitions and divestitures...................................................................... -- 0.2
Dividends paid to shareholders..................................................................... (0.2) (0.2)
Changes in total Automotive sector debt............................................................ (0.3) (1.4)
Other -- primarily net issuance/(purchase) of stock................................................ -- (0.1)
------- --------
Total change in gross cash........................................................................ $ (0.7) $ 0.6
======= ========
- ----------
* Primarily dividends, loans, and loan repayments.
Shown in the table below is a reconciliation between financial statement
Cash flows from operating activities before securities trading and
operating-related cash flows (calculated as shown in the table above), for the
first quarter of 2005 and 2004 (in billions):
First Quarter
-------------------
2005 2004
------- --------
Cash flows from operating activities before securities trading (a).................................... $ 2.4 $ 2.6
Items included in operating-related cash flows
Capital expenditures................................................................................ (1.4) (1.2)
Net transactions between Automotive and Financial Services sectors (b).............................. (0.7) (0.1)
Other -- primarily exclusion of cash flow from short-term VEBA contribution/(draw-down)............. (0.9) (0.1)
Items not included in operating-related cash flows
Pension Contributions............................................................................... 1.4 1.2
------- -------
Operating-related cash flows.......................................................................... $ 0.8 $ 2.4
======= =======
- ----------
(a) As shown in our Condensed Sector Statement of Cash Flows for the Automotive
sector.
(b) Primarily payables and receivables between the sectors in the normal course
of business, as shown in our Condensed Sector Statement of Cash Flows for
the Automotive sector.
20
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Automotive operating-related cash flows were about $800 million positive
for the first quarter of 2005. This reflected Automotive profit before tax
(about $500 million), capital spending net of depreciation and amortization
(about $300 million) and changes in receivables, inventory and trades payables
(about $500 million), offset partially by other operating-related changes. The
other operating-related changes were an outflow of about $500 million in the
first quarter of 2005 due primarily to timing differences between expense or
revenue recognition and the corresponding cash payments for items such as
warranty, marketing, pension and health care.
In the first quarter of 2005, we contributed $1.4 billion to our worldwide
funded pension plans. Capital transactions with the Financial Services sector,
primarily dividends received from Ford Credit, totaled about $400 million in the
first quarter of 2005.
Cash flows related to changes in Automotive sector debt in the first
quarter of 2005 were an outflow of about $300 million, representing primarily
the repurchase of senior debt in the open market (the majority of our purchases
have been among four large issues, which have maturities between 2028 and 2031).
Debt. At March 31, 2005, our Automotive sector had total debt of $18.0
billion, compared with $18.4 billion at December 31, 2004. Total senior debt at
March 31, 2005 was $12.9 billion, compared with $13.3 billion at December 31,
2004. The decrease in senior debt primarily reflected the senior debt repurchase
described above. Ford Motor Company Capital Trust II had outstanding $5.0
billion of trust preferred securities at March 31, 2005.
Seasonal Working Capital Funding. Short-term seasonal working capital
funding reduces the annual cash volatility that results from our semi-annual
shutdown periods. In January 2005, we raised $1.9 billion of short-term bank
loans to finance the impact of our annual holiday plant shutdown. These loans
were repaid prior to March 31, 2005.
Financial Services Sector
Ford Credit
Debt and Cash. Ford Credit's total debt was $132.7 billion at March 31,
2005, down $11.6 billion compared with year-end 2004, primarily reflecting
repayment of maturing debt and lower funding requirements due to lower asset
levels. Ford Credit's outstanding unsecured commercial paper was $8.2 billion at
March 31, 2005. As of April 30, 2005, Ford Credit's outstanding unsecured
commercial paper was $5.6 billion, reflecting decreased investor demand. For
additional discussion, see the "Credit Ratings" discussion below.
At March 31, 2005, Ford Credit had cash and cash equivalents of $13.1
billion. In the normal course of its funding activities, Ford Credit may
generate more proceeds than are necessary for its immediate funding needs. These
excess amounts are maintained primarily as highly liquid investments, which
provide liquidity for Ford Credit's short-term funding obligations and give Ford
Credit flexibility in the use of its other funding programs.
Funding. During the first quarter of 2005, Ford Credit issued $5.2 billion
of long-term debt with maturities of one to ten years, including about $4.1
billion of unsecured institutional funding and about $1.1 billion of unsecured
retail bonds. In addition, Ford Credit realized proceeds of $9.7 billion from
sales of receivables in off-balance sheet securitizations.
Leverage. Ford Credit uses leverage, or the debt-to-equity ratio, to make
various business decisions, including establishing pricing for retail, wholesale
and lease financing, and assessing its capital structure. Ford Credit calculates
leverage on a financial statement basis and on a managed basis.
The following table illustrates the calculation of Ford Credit's financial
statement leverage (in billions, except for ratios):
March 31, December 31,
2005 2004
---------- -------------
Total debt.......................................................................................... $ 132.7 $ 144.3
Total stockholder's equity.......................................................................... 11.6 11.5
Debt-to-equity ratio (to 1)......................................................................... 11.4 12.6
21
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
The following table illustrates the calculation of Ford Credit's managed
leverage (in billions, except for ratios):
March 31, December 31,
2004 2004
---------- -------------
Total debt....................................................................................... $ 132.7 $ 144.3
Securitized off-balance sheet receivables outstanding (a)........................................ 41.1 37.7
Retained interest in securitized off-balance sheet receivables (b)............................... (8.3) (9.5)
Adjustments for cash and cash equivalents........................................................ (13.1) (12.7)
Adjustments for SFAS No. 133..................................................................... (2.2) (3.2)
--------- ---------
Total adjusted debt............................................................................ $ 150.2 $ 156.6
========= =========
Total stockholder's equity (including minority interest)......................................... $ 11.6 $ 11.5
Adjustments for SFAS No. 133..................................................................... (0.1) (0.1)
--------- ---------
Total adjusted equity.......................................................................... $ 11.5 $ 11.4
========= =========
Managed debt-to-equity ratio (to 1).............................................................. 13.0 13.7
__________
(a) Includes securitized funding from discontinued operations.
(b) Includes retained interest in securitized receivables from discontinued
operations.
Ford Credit's dividend policy is based, in part, on its strategy to
maintain managed leverage at about 13 to 1. Based on Ford Credit's profitability
and managed receivable levels, it paid cash dividends of $450 million in the
first quarter of 2005.
Credit Facilities. For additional funding and to maintain liquidity, Ford
Credit and its majority-owned subsidiaries including FCE Bank plc ("FCE") have
contractually committed credit facilities with financial institutions that
totaled approximately $7.6 billion at March 31, 2005. This includes $4.5 billion
of Ford Credit facilities ($3.9 billion global and approximately $600 million
non-global) and $3.1 billion of FCE facilities ($2.9 billion global and
approximately $200 million non-global). Approximately $800 million of the total
facilities were in use at March 31, 2005. The facilities have various maturity
dates. Of the $7.6 billion, about 38% of these facilities are committed through
June 30, 2009. Ford Credit's global credit facilities may be used, at its
option, by any of its direct or indirect majority-owned subsidiaries. FCE's
global credit facilities may be used at its option by any of its direct or
indirect majority-owned subsidiaries. Ford Credit or FCE, as the case may be,
will guarantee any such borrowings. All of the global credit facilities have
substantially identical contract terms (other than commitment amounts) and are
free of material adverse change clauses and restrictive financial covenants (for
example, debt-to-equity limitations, minimum net worth requirements and credit
rating triggers) that would limit Ford Credit's ability to borrow.
Additionally, at March 31, 2005, banks provided $18.0 billion of
contractually committed liquidity facilities supporting two asset-backed
commercial paper programs; $17.5 billion supported Ford Credit's FCAR program
and $500 million supported its off-balance sheet wholesale securitization
program. Unlike Ford Credit's credit facilities described above, these
facilities provide liquidity exclusively to each individual asset-backed
commercial paper program. Utilization of these facilities is subject to
conditions specific to each program. At March 31, 2005, about $17.3 billion of
FCAR's bank credit facilities were available to support FCAR's asset-backed
commercial paper or subordinated debt. The remaining $200 million of available
credit lines could be accessed for additional funding if FCAR issued additional
subordinated debt.
In addition, Ford Credit has entered into agreements with a number of
bank-sponsored, commercial paper issuers ("conduits") under which such conduits
are contractually committed to purchase from Ford Credit, at Ford Credit's
option, up to an aggregate of approximately $15.6 billion of retail receivables.
The agreements have varying maturity dates between June 23, 2005 and October 27,
2005. As of March 31, 2005, approximately $5.9 billion of these conduit
commitments were in use.
Hertz
Debt and Cash. At March 31, 2005, Hertz had total debt of $8.5 billion, up
$0.1 billion from December 31, 2004. At March 31, 2005 and at December 31, 2004,
commercial paper outstanding was $1.9 billion ($630 million asset-backed
securitization, and the remainder unsecured). At March 31, 2005, Hertz had cash
and cash equivalents of $695 million, up from $681 million at December 31, 2004.
In the last several weeks, Hertz has experienced decreased market demand
for its unsecured commercial paper. In light of higher seasonal funding
requirements in the second quarter, on May 2, 2005, Hertz borrowed $250 million
under its $500 million line of credit with Ford, which would automatically
terminate at any time if we ceased to own, directly or indirectly, capital stock
of Hertz having more than 50% of the total voting power of all outstanding
capital stock.
22
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Hertz has an asset-backed securitization ("ABS") program for its domestic
car rental fleet to reduce its borrowing costs and enhance its financing
flexibility. As of March 31, 2005, $1.23 billion was outstanding under the ABS
program, consisting of $630 million of commercial paper and $600 million of
medium-term notes.
Total Company
Stockholders' Equity. Our stockholders' equity was $15.7 billion at March
31, 2005, down $375 million compared with December 31, 2004. The decrease
primarily reflected net income of $1.2 billion less dividends of $183 million
and other comprehensive loss of $1.4 billion. See Note 9 of the Notes to the
Financial Statements for further discussion of other comprehensive
income/(loss).
Credit Ratings. In April 2005, the following rating actions occurred: DBRS
downgraded Ford's long-term rating to BBB from BBB(high), downgraded Ford's
short-term rating to R-2(middle) from R-1(low), and changed Ford's trend to
Negative from Stable. DBRS confirmed both Ford Credit's and Hertz' long-term
ratings, downgraded both Ford Credit's and Hertz' short-term ratings to
R-2(high) from R-1(low), revised Ford Credit's trend to Negative from Stable,
and revised Hertz' trend to Negative with developing implications from Stable.
Fitch revised our rating outlook, as well as Ford Credit's and Hertz', to
Negative from Stable. Moody's placed our long-term rating and Ford Credit's
long-term rating under review for possible downgrade, affirmed Ford Credit's
short-term rating, and placed Hertz' long-term and short-term ratings under
review for possible downgrade. S&P revised our rating outlook, as well as Ford
Credit's and Hertz', to Negative from Stable, and placed Hertz on CreditWatch
with developing implications. On May 5, 2005, S&P lowered Ford and Ford Credit's
long- and short-term ratings to BB+ and B-1 from BBB- and A-3, respectively, and
maintained the outlook for each at Negative. Further rating actions could occur
at any time. The following chart summarizes our present credit ratings and the
outlook assigned by the nationally recognized statistical rating organizations:
- -------------------------------------------------------------------------------------------------------------------------------
DBRS Fitch Moody's S&P
- ------- -------------------------- ---------------------------- ----------------------------- -----------------------------
Long- Short- Long Short- Long- Short- Long- Short-
Term Term Trend Term Term Outlook Term Term Outlook Term Term Outlook
- ------- ------- -------- -------- ------- -------- --------- ------- -------- ---------- ------- -------- ---------
Ford BBB R-2 Negative BBB+ F2 Negative Baa1* P-2 Negative BB+ B-1 Negative
(middle)
- ------- ------- -------- -------- ------- -------- --------- ------- -------- ---------- ------- -------- ---------
Ford BBB R-2 Negative BBB+ F2 Negative A3* P-2 Negative BB+ B-1 Negative
Credit (high) (high)
- ------- ------- -------- -------- ------- -------- --------- ------- -------- ---------- ------- -------- ---------
Hertz BBB R-2 Negative BBB+ F2 Negative Baa2* P-2* Negative BBB- A-3 Negative
(high) (high)
- -------------------------------------------------------------------------------------------------------------------------------
__________
* Rating under credit review for possible downgrade.
As a result of S&P downgrading the long-term credit rating for Ford and
Ford Credit to BB+ (non-investment grade) on May 5, 2005, we anticipate
increased borrowing costs. We also anticipate that Ford Credit will experience
restricted access to unsecured debt markets, which would cause its outstanding
unsecured commercial paper and unsecured term debt balances to decline. In
response, Ford Credit plans to increase its use of securitization and other
asset-related sources of liquidity. Over time, Ford Credit also may need to
reduce further the amount of receivables it purchases. A significant reduction
in the amount of purchased receivables would significantly reduce Ford Credit's
ongoing profits, and could adversely affect its ability to support the sale of
Ford vehicles.
OFF-BALANCE SHEET ARRANGEMENTS
Special Purpose Entities. At March 31, 2005, the total outstanding
principal amount of receivables sold by Ford Credit and held by off-balance
sheet securitization entities was $39.3 billion, up $3.7 billion from December
31, 2004. Ford Credit's retained interests in such sold receivables at March 31,
2005 were $8.0 billion, down $1.1 billion from December 31, 2004.
23
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
OUTLOOK
Shown below are our 2005 planning assumptions and operation metrics
established and announced in January 2005 and our present full-year outlook for
them:
Industry Volume (SAAR incl. heavy trucks) Planning Assumptions Full-Year Outlook
- ---------------------------------------- -------------------- -----------------
U.S (million units)................................................ 17.2 17.2
Europe (million units)............................................. 17.3 17.1
Operation Metrics 2005 Milestones
- ----------------- ----------------------
Quality............................................................ Improve in all regions (a)
Market share....................................................... Improve in all regions Mixed
Automotive cost performance (b).................................... Hold costs flat On-Track
Capital spending................................................... $7 billion or lower On-Track
__________
(a) External data used to track our progress on quality will be available
during the second quarter.
(b) At constant volume, mix and exchange; excluding special items and
discontinued operations.
Our projection of second quarter 2005 production is as follows:
Second Quarter 2005
Second Quarter 2005 Over/(Under)
Business Unit Vehicle Unit Production Second Quarter 2004
- ------------- ------------------------ -------------------
Ford North America.............................................................. 905,000 (46,000)
Ford Europe..................................................................... 460,000 (24,000)
PAG............................................................................. 200,000 4,000
We continue to face increasingly challenging conditions in the intensely
competitive automotive industry. We expect that we will continue to experience
commodity cost pressures, unfavorable currency exchange rates, the effects of
low discount rates and high health care costs, and the effects of industry
overcapacity, such as increasingly aggressive marketing incentives by our
competitors. We also anticipate that gasoline prices in the near term will
remain high, contributing to a shift away from more profitable traditional SUVs
and toward crossover and smaller vehicles.
In this environment, we no longer expect to reach the target we established
in 2002 of achieving $7 billion in pre-tax profit in 2006. Our full-year 2005
earnings per share guidance and outlook for pre-tax profits excluding special
items by business unit, sector and total company, as well as our outlook for
Automotive operating-related cash flow, remain unchanged from that disclosed in
our Current Report on Form 8-K dated April 20, 2005. Our full-year 2005 earnings
per share guidance assumed the benefit of an accrual in the fourth quarter of a
significant amount of tax-related interest on refund claims, which we now
anticipate will occur in the second quarter of 2005. We now expect second
quarter 2005 earnings per share to be in a range of breakeven to 15 cents,
excluding special items.
The first quarter 2005 effective tax rate on continuing operations was
about 21%, reflecting a greater impact of ongoing tax credits based on a
projected lower level of pre-tax profits. We anticipate our full-year tax rate
to be about 21%, excluding any impact of the repatriation of foreign earnings
pursuant to the American Jobs Creation Act of 2004. See also Note 2 of the Notes
to the Financial Statements.
As indicated in our Annual Report on Form 10-K for the year ended December
31, 2004 (the "10-K Report"), we and Visteon Corporation, our largest supplier,
have been discussing a concept that we jointly believe would allow both
companies to improve their efficiency and effectiveness. Recent discussions have
been constructive and are progressing. Any agreement would be conditioned upon
any necessary approval by the UAW. An agreement likely would result in a
significant charge to earnings. Until discussions have been completed, there can
be no assurance that the parties will be successful in reaching a final
agreement covering the matters under discussion. If we are unable to reach
agreement and Visteon's operating performance and financial condition were to
deteriorate, it is possible that Visteon may be unable to fulfill its
commitments to Ford to supply parts and to reimburse us for obligations relating
to Ford employees assigned to Visteon.
In light of strong performance by Hertz and our continuing strategy to
de-emphasize vehicle sales to daily rental car companies, we are evaluating
long-term strategic options for our investment in Hertz.
Risk Factors
Statements included or incorporated by reference herein may constitute
"forward looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements involve a number of risks,
uncertainties, and other factors that could cause actual results to differ
materially from those stated, including, without limitation:
24
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued
o greater price competition resulting from currency fluctuations,
industry overcapacity or other factors;
o a significant decline in industry sales, particularly in the U.S. or
Europe, resulting from slowing economic growth, geo-political events
or other factors;
o lower-than-anticipated market acceptance of new or existing products;
o economic distress of suppliers that may require us to provide
financial support or take other measures to ensure supplies of
materials;
o work stoppages at Ford or supplier facilities or other interruptions
of supplies;
o the discovery of defects in vehicles resulting in delays in new model
launches, recall campaigns or increased warranty costs;
o increased safety, emissions, fuel economy or other regulation
resulting in higher costs and/or sales restrictions;
o unusual or significant litigation or governmental investigations
arising out of alleged defects in our products or otherwise;
o worse-than-assumed economic and demographic experience for our
postretirement benefit plans (e.g., investment returns, interest
rates, health care cost trends, benefit improvements);
o currency or commodity price fluctuations, including rising steel
prices;
o changes in interest rates;
o a market shift from truck sales or from sales of other more profitable
vehicles in the U.S.;
o economic difficulties in any significant market;
o higher prices for or reduced availability of fuel;
o labor or other constraints on our ability to restructure our business;
o a change in our requirements or obligations under long-term supply
arrangements pursuant to which we are obligated to purchase minimum
quantities or a fixed percentage of output or pay minimum amounts;
o credit rating downgrades;
o inability to access debt or securitization markets around the world at
competitive rates or in sufficient amounts;
o higher-than-expected credit losses;
o lower-than-anticipated residual values for leased vehicles and higher-
than-expected lease return rates; and
o increased price competition in the rental car industry and/or a
general decline in business or leisure travel due to terrorist
attacks, acts of war, epidemic disease or measures taken by
governments in response thereto that negatively affect the travel
industry.
OTHER FINANCIAL INFORMATION
The interim financial information included in this Quarterly Report on Form
10-Q for the quarter ended March 31, 2005 has not been audited by
PricewaterhouseCoopers LLP ("PwC"). In reviewing such information, PwC has
applied limited procedures in accordance with professional standards for reviews
of interim financial information. Accordingly, you should restrict your reliance
on their reports on such information. PwC is not subject to the liability
provisions of Section 11 of the Securities Act of 1933 for their reports on the
interim financial information because such reports do not constitute "reports"
or "parts" of the registration statements prepared or certified by PwC within
the meaning of Sections 7 and 11 of the Securities Act of 1933. DRAFT
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
There is no material change in the information reported under Part II, Item
7A of our 10-K Report.
ITEM 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. William Clay Ford, Jr.,
our Chief Executive Officer, and Donat R. Leclair, our Chief Financial Officer,
have performed an evaluation of the Company's disclosure controls and
procedures, as that term is defined in Rule 13a-15(e) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as of March 31, 2005 and each has
concluded that such disclosure controls and procedures are effective to ensure
that information required to be disclosed in our periodic reports filed under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified by the Securities and Exchange Commission's rules and forms.
Changes in Internal Controls over Financial Reporting. During the first
quarter of 2005, we upgraded the initial application of a new fixed asset system
in a few U.S. locations. We plan in 2005 and 2006 to progressively launch the
new, upgraded system at all U.S. locations and selected locations outside of the
United States. We also began the process of changing our non-production order
procurement system for U.S. facilities and select non-U.S. locations. As part of
an ongoing roll-out in North America and Europe, Ford Credit replaced its
primary receivables system in the United Kingdom.
25
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
Product Liability Matters
Hydroboost Truck Brake Class Action. (Previously reported on page 28 of our
Annual Report on Form 10-K for the year ended December 31, 2004.) On April 7,
2005, the Oklahoma Supreme Court denied our application for review of the state
trial court's class certification order.
Environmental Matters
Woodhaven Stamping Plant Letter of Violation. On March 7, 2005, the
Michigan Department of Environmental Quality ("DEQ") issued a letter of
violation to Ford's Woodhaven Stamping Plant alleging that the facility had
failed to properly report emissions from boilers and space heaters, and that the
facility had failed to apply for a Title V permit as required by Michigan law.
Ford is fully cooperating with the DEQ to resolve this matter.
Proceeding with the New York Environmental Enforcement Division. Ford and
the New York Environmental Enforcement Division are discussing resolution of an
alleged violation of New York law relating to vehicles delivered to dealers in
New York that were certified to federal rather than California emissions
standards. Ford denies any violation, and the parties are in discussions to
resolve this matter.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the first quarter of 2005, we purchased shares of our Common Stock
as follows:
Total Number of Maximum Number (or
Shares Purchased as Approximate Dollar Value) of
Total Number of Average Part of Publicly Shares that May Yet Be
Shares Price Paid Announced Plans or Purchased Under the Plans or
Period Purchased a/ per Share Programs Programs
- --------------------------- ------------------ ------------ ----------------------- -------------------------------
January 1, 2005 No publicly announced
2,556,436 $14.13 0 repurchase program in place
through
January 31, 2005
February 1, 2005
through No publicly announced
February 28, 2005 2,187,473 $13.07 0 repurchase program in place
March 1, 2005
through No publicly announced
March 31, 2005 2,503,376 $12.00 0 repurchase program in place
--------- -
No publicly announced
Total 7,247,285 $13.07 0 repurchase program in place
__________ ========= =
a/ We currently do not have a publicly announced repurchase program in place.
Of the 7,247,285 shares purchased, 6,944,213 shares were purchased from the
Ford Motor Company Savings and Stock Investment Plan for Salaried Employees
("SSIP") and the Tax Efficient Savings Plan for Hourly Employees
("TESPHE"). Shares are generally purchased from the SSIP and TESPHE when
participants in those plans elect to sell units in the Ford Stock Fund upon
retirement, upon termination of employment with the Company, related to an
in-service distribution, or to fund a loan against an existing account
balance in the Ford Stock Fund. Shares are not purchased from these plans
when a participant transfers account balances out of the Ford Stock Fund
and into another investment option under the plans. The remaining shares
were acquired from our employees or directors in accordance with our
various compensation plans as a result of share withholdings to pay income
taxes with respect to: (i) the lapse of restrictions on restricted stock,
(ii) the issuance of unrestricted stock, including issuances as a result of
the conversion of restricted stock equivalents or (iii) to pay the exercise
price and related income taxes with respect to certain exercises of stock
options.
ITEM 6. Exhibits.
Please see Exhibit Index below.
26
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FORD MOTOR COMPANY
-----------------------------
(Registrant)
Date: May 10, 2005 By: /s/James C. Gouin
------------ --------------------------
James C. Gouin
Vice President and Controller
27
EXHIBIT INDEX
-------------
Designation Description Method of Filing
--------------- --------------------------------------------------------- -------------------------------
Exhibit 12 Ford Motor Company and Subsidiaries Calculation Filed with this Report
of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
Exhibit 15 Letter of PricewaterhouseCoopers LLP, Independent Filed with this Report
Registered Public Accounting Firm, dated May 10,
2005, relating to Financial Information
Exhibit 31.1 Rule 15d-14(a) Certification of CEO Filed with this Report
Exhibit 31.2 Rule 15d-14(a) Certification of CFO Filed with this Report
Exhibit 32.1 Section 1350 Certification of CEO Furnished with this Report
Exhibit 32.2 Section 1350 Certification of CFO Furnished with this Report
28