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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
For the fiscal year ended December 31, 1993 OR
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the transition period from to
Commission file number 1-3950
FORD MOTOR COMPANY
(Exact name of registrant as specified in its charter)
Delaware 38-0549190
(State of incorporation) (I.R.S. Employer
Identification No.)
The American Road, Dearborn, Michigan 48121
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 313-322-3000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered (a)
Common Stock,
par value $1.00 per share Boston Stock Exchange
Midwest Stock Exchange
New York Stock Exchange
Pacific Coast Stock Exchange
Philadelphia Stock Exchange
Depositary Shares, each representing New York Stock Exchange
1/1,000 of a share of Series A
Cumulative Convertible Preferred Stock,
as described below
Depositary Shares, each representing New York Stock Exchange
New York Stock 1/2,000 of a share of
Series B Cumulative Preferred Stock,
as described below
________________
(a) In addition, shares of Common Stock of the Registrant are
listed on the Montreal Stock Exchange and the Toronto Stock
Exchange in Canada, the Tokyo Stock Exchange in Japan and on
certain stock exchanges in the United Kingdom and Continental
Europe.
[Cover page 1 of 2 pages]
Securities registered pursuant to Section 12(g) of the Act:
Series A Cumulative Convertible Preferred Stock, par value $1.00
per share, with an annual dividend rate of $4,200 per share and a
liquidation preference of $50,000 per share.
Series B Cumulative Preferred Stock, par value $1.00 per share,
with an annual dividend rate of $4,125 per share and a
liquidation preference of $50,000 per share.
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.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of February 1, 1994, the Registrant had outstanding
464,296,060 shares of Common Stock and 35,426,038 shares of Class
B Stock. Based on the New York Stock Exchange Composite
Transaction closing price of the Common Stock on that date ($66
3/4 a share), the aggregate market value of such Common Stock was
$30,991,762,005. Although there is no quoted market for the
Registrant's Class B Stock, shares of Class B Stock may be
converted at any time into an equal number of shares of Common
Stock for the purpose of effecting the sale or other disposition
of such shares of Common Stock. The shares of Common Stock and
Class B Stock outstanding at February 1, 1994 included shares
owned by persons who may be deemed to be "affiliates" of the
Registrant. The Registrant does not believe, however, that any
such person should be considered to be an affiliate. For
information concerning ownership of outstanding Common Stock and
Class B Stock, see the Proxy Statement for the Registrant's
Annual Meeting of Stockholders to be held on May 12, 1994 (the
"Proxy Statement"), which is incorporated by reference under
various Items of this Report.
Documents Incorporated by Reference*
Document Where Incorporated
1. Proxy Statement. Part III (Items
10, 11, 12 and 13)
* As stated under various Items of this Report, only certain
specified portions of such document are incorporated by reference
herein.
[Cover page 2 of 2 pages]
PART I
Item 1. Business
Ford Motor Company (referred to herein as "Ford", the
"Company" or the "Registrant") was incorporated in Delaware in
1919 and acquired the business of a Michigan company, also known
as Ford Motor Company, incorporated in 1903 to produce
automobiles designed and engineered by Henry Ford. Ford is the
second-largest producer of cars and trucks in the world, and
ranks among the largest providers of financial services in the
United States.
General
The Company's two principal business segments are Automotive
and Financial Services. The activities of the Automotive segment
consist of the manufacture, assembly and sale of cars and trucks
and related parts and accessories. Substantially all of Ford's
automotive products are marketed through retail dealerships, most
of which are privately owned and financed.
The Financial Services segment is comprised of the following
subsidiaries: Ford Motor Credit Company ("Ford Credit"), Ford
Credit Europe plc ("Ford Credit Europe"), First Nationwide
Financial Corporation ("First Nationwide"), The Hertz Corporation
("Hertz"), Ford Holdings, Inc. ("Ford Holdings"), Associates
First Capital Corporation ("The Associates"), The American Road
Insurance Company ("American Road") and USL Capital Corporation
(formerly United States Leasing International, Inc.) ("USL
Capital"). The activities of these subsidiaries include
financing operations, insurance operations, savings and loan
operations and vehicle and equipment leasing.
See Note 16 of Notes to Financial Statements and Item 6.
"Selected Financial Data" relating to revenue, operating income
or loss and assets attributable to Ford's industry segments.
Also see Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for information
with respect to revenue, net income and other matters.
Automotive Operations
The worldwide automotive industry is affected significantly
by a number of factors over which the industry has little
control, including general economic conditions.
In the United States, the automotive industry is a highly-
competitive, cyclical business characterized by a wide variety of
product offerings. The level of industry demand (retail
deliveries of cars and trucks) can vary substantially from year
to year and, in any year, is dependent to a large extent on
general economic conditions, the cost of purchasing and operating
cars and trucks and the availability and cost of credit and of
fuel, and reflects the fact that cars and trucks are durable
items, the replacement of which can be postponed.
Item 1. Business (Continued)
The automotive industry outside of the United States
consists of many producers, with no single dominant producer.
Certain manufacturers, however, account for the major percentage
of total sales within particular countries, especially their
respective countries of origin. Most of the factors that affect
the U.S. automotive industry and its sales volumes and
profitability are equally relevant outside the United States.
The worldwide automotive industry also is affected
significantly by a substantial amount of government regulation.
In the United States and Europe, for example, government
regulation has arisen primarily out of concern for the
environment, for greater vehicle safety and for improved fuel
economy. Many governments also regulate local content and/or
impose import requirements as a means of creating jobs,
protecting domestic producers or influencing their balance of
payments.
Unit sales of Ford vehicles vary with the level of total
industry demand and Ford's share of industry sales. Ford's share
is influenced by the quality, price, design, driveability,
safety, reliability, economy and utility of its products compared
with those offered by other manufacturers. Ford's ability to
satisfy changing consumer preferences with respect to type or
size of vehicle and its design and performance characteristics
can affect Ford's sales and earnings significantly.
The profitability of vehicle sales is affected by many
factors, including unit sales volume, the mix of vehicles and
options sold, the level of "incentives" (price discounts) and
other marketing costs, the costs for customer warranty claims and
other customer satisfaction actions, the costs for government-
mandated safety, emission and fuel economy technology and
equipment, the ability to control costs and the ability to
recover cost increases through higher prices. Further, because
the automotive industry is capital intensive, it operates with a
relatively high percentage of fixed costs which can result in
large changes in earnings with relatively small changes in unit
volume.
In recent years, due to competitive pressures, vehicle
manufacturers have both expanded the coverages and extended the
terms of warranties on vehicles sold in the U.S. Ford presently
provides warranty coverage on most vehicles sold by it in the U.S
that extends for 36 months or 36,000 miles (whichever occurs
first) and covers nearly all components of the vehicle.
Different warranty coverages are provided on vehicles sold
outside the U.S. In addition, as discussed below under
"Governmental Standards - Mobile Source Emissions Control",
amendments to the Federal Clean Air Act extend the required
useful life for emissions equipment on vehicles sold in the U.S.
to 10 years or 100,000 miles (whichever occurs first). As a
result of these coverages and the increased concern for customer
satisfaction, costs for warranty repairs, emissions equipment
repairs and customer satisfaction actions ("warranty costs") can
be substantial. Estimated warranty costs for each vehicle sold
by Ford are accrued at the time of sale. Such accruals, however,
are subject to adjustment from time to time depending on actual
experience.
-2-
Item 1. Business (Continued)
United States
Sales Data. The following table shows U.S. industry demand
for the years indicated:
U.S. Industry Retail Deliveries
(millions of units)
Years Ended December 31
--------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Cars........................................ 8.5 8.2 8.2 9.3 9.8
Trucks...................................... 5.7 4.9 4.3 4.8 5.1
---- ---- ---- ---- ----
Total....................................... 14.2 13.1 12.5 14.1 14.9
Ford classifies cars by small, middle, large and luxury
segments and trucks by compact pickup, compact van/utility, full-
size pickup, full-size van/utility and medium/heavy segments.
The large and luxury car segments and the compact van/utility,
full-size pickup and full-size van/utility truck segments include
the industry's most profitable vehicle lines. The following
tables show the proportion of retail car and truck sales by
segment for the industry (including Japanese and other
foreign-based manufacturers) and Ford for the years indicated:
U.S. Industry Car Sales by Segment
Years Ended December 31
----------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Small........................... 28.9% 29.3% 29.0% 28.9% 31.4%
Middle.......................... 52.5 51.7 51.4 51.8 50.4
Large........................... 8.5 9.2 9.6 9.1 9.2
Luxury.......................... 10.1 9.8 10.0 10.2 9.0
------ ------ ------ ------ ------
Total U.S. Industry Car Sales... 100.0% 100.0% 100.0% 100.0% 100.0%
Ford Car Sales by Segment in U.S.*
Years Ended December 31
-------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Small........................... 28.8% 26.6% 31.2% 31.1% 34.7%
Middle.......................... 51.4 53.4 47.3 44.8 45.6
Large........................... 9.9 10.5 10.1 11.2 10.1
Luxury.......................... 9.9 9.5 11.4 12.9 9.6
------ ------ ------ ------ ------
Total Ford U.S. Car Sales....... 100.0% 100.0% 100.0% 100.0% 100.0%
* Includes Jaguar sales since 1990.
As shown in the first table above, the percentages of
industry sales in the various car segments have remained
relatively stable since 1989. As shown in the second table
above, Ford's proportion of sales in 1992 and 1993 has increased
in the middle segment and decreased in the small and luxury
segments, reflecting higher sales of Thunderbird, Cougar, Taurus,
Sable, Tempo and Topaz models and lower sales of Escort, Festiva,
Mark and Continental models.
-3-
Item 1. Business (Continued)
U.S. Industry Truck Sales by Segment
Years Ended December 31
-----------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Compact pickup........ 18.9% 20.8% 22.4% 22.9% 23.7%
Compact van/utility... 41.1 40.1 38.8 34.7 31.2
Full-Size pickup...... 24.8 24.2 25.1 26.0 26.4
Full-Size van/utility.. 10.6 10.6 9.4 11.4 13.2
Medium/Heavy........... 4.6 4.3 4.3 5.0 5.5
---- ----- ---- ---- ----
Total U.S. Industry
Truck Sales.......... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
Ford Truck Sales by Segment in U.S.
Years Ended December 31
-------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
Compact pickup............ 19.7% 17.0% 18.5% 19.8% 19.5%
Compact van/utility........ 32.6 33.5 31.5 25.3 20.4
Full-Size pickup........... 32.6 33.6 35.8 36.8 38.9
Full-Size van/utility..... 12.4 13.1 11.7 14.9 17.4
Medium/Heavy.............. 2.7 2.8 2.5 3.2 3.8
---- ---- ---- ---- ----
Total Ford U.S.
Truck Sales.............. 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
As shown in the tables above, for both the industry and
Ford, the compact van/utility segment has grown significantly
since 1989, while the full-size segments (pickups and
van/utility) have declined as a percentage of total truck sales.
Market Share Data. The following tables show changes in
car and truck market shares of United States and foreign-based
manufacturers for the years indicated:
U.S. Car Market Shares*
Years Ended December 31
-----------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
U.S. Manufacturers
(Including Imports)
Ford**............................... 22.3% 21.8% 20.1% 21.1% 22.3%
General Motors....................... 34.1 34.6 35.6 35.6 35.1
Chrysler............................. 9.8 8.3 8.6 9.2 10.4
---- ---- ---- ---- ----
Total U.S. Manufacturers........... 66.2 64.7 64.3 65.9 67.8
Foreign-Based Manufacturers***
Japanese............................. 29.1 30.1 30.2 27.9 25.4
All Other............................ 4.7 5.2 5.5 6.2 6.8
---- ---- ---- ---- ----
Total Foreign-Based Manufacturer.. 33.8 35.3 35.7 34.1 32.2
----- ----- ----- ----- -----
Total U.S. Car Retail Deliveries.. 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
____________________
* All U.S. retail sales data are based on publicly available
information from the American Automobile Manufacturers
Association, the media and trade publications.
** Includes Jaguar sales since 1990.
*** Share data include cars and trucks assembled and sold in the
U.S. by Japanese-based manufacturers selling through their
own dealers as well as vehicles imported by them into the
U.S. "All Other" includes primarily companies based in
various European countries and in Korea and Taiwan.
-4-
Item 1. Business (Continued)
U.S. Truck Market Shares*
Years Ended December 31
------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
U.S. Manufacturers (Including Imports)
Ford................................. 30.5% 29.7% 28.9% 29.3% 28.8%
General Motors....................... 31.4 32.2 32.9 34.3 33.7
Chrysler............................. 21.4 21.1 18.5 17.3 19.4
Navistar International............... 1.3 1.3 1.4 1.5 1.5
All Other............................ 1.7 1.4 1.3 1.4 1.7
---- ---- ---- ---- ----
Total U.S. Manufacturers........... 86.3 85.7 83.0 83.8 85.1
Foreign-Based Manufacturers***
Japanese............................. 13.2 13.8 16.5 15.6 14.3
All Other............................ 0.5 0.5 0.5 0.6 0.6
---- ---- ---- ---- ----
Total Foreign-Based Manufacturers.. 13.7 14.3 17.0 16.2 14.9
---- ---- ---- ---- ----
Total U.S. Truck Retail Deliveries. 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
U.S. Combined Car and Truck Market Shares*
Years Ended December 31
--------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
U.S. Manufacturers (Including Imports)
Ford**............................... 25.5% 24.7% 23.2% 23.9% 24.5%
General Motors....................... 33.1 33.7 34.6 35.2 34.7
Chrysler............................. 14.4 13.1 12.0 12.0 13.5
Navistar International............... 0.5 0.5 0.5 0.5 0.5
---- ---- ---- ---- ----
Total U.S. Manufacturers........... 73.5 72.0 70.3 71.6 73.2
Foreign-Based Manufacturers***
Japanese............................. 22.8 24.0 25.5 23.7 21.6
All Other............................ 3.7 4.0 4.2 4.7 5.2
---- ---- ---- ---- ----
Total Foreign-Based Manufacturers.. 26.5 28.0 29.7 28.4 26.8
Total U.S. Car and Truck Retail
----- ----- ----- ----- -----
Deliveries......................... 100.0% 100.0% 100.0% 100.0% 100.0%
___________________
* All U.S. retail sales data are based on publicly available
information from the American Automobile Manufacturers
Association, the media and trade publications.
** Includes Jaguar sales since 1990.
*** Share data include cars and trucks assembled and sold in the
U.S. by Japanese-based manufacturers selling through their
own dealers as well as vehicles imported by them into the
U.S. "All Other" includes primarily companies based in
various European countries and in Korea and Taiwan.
Japanese Competition. The market share of Ford and other
domestic manufacturers in the U.S. is affected by sales from
Japanese manufacturers. As shown in the table above, the share
of the U.S. combined car and truck industry held by the Japanese
manufacturers increased from 21.6% in 1989 to 25.5% in 1991, but
declined to 22.8% in 1993, reflecting in part the effects of the
strengthening of the Japanese yen on the prices of vehicles
produced by the Japanese manufacturers.
-5-
Item 1. Business (Continued)
In the 1980s and continuing in the 1990s, Japanese
manufacturers added assembly capacity in North America
(frequently referred to as "transplants") in response to a
variety of factors, including export restraints, the significant
growth of Japanese car sales in the U.S. and international trade
considerations. Production in the U.S. by Japanese transplants
reached 1.6 million units in 1993 and is expected to reach about
2.5 million units a year when additional Japanese transplant
capacity becomes fully operational.
Excess Capacity In North America. In 1993, automotive
capacity in North America, including Japanese transplants,
exceeded industry sales by over 5.2 million units. This excess
capacity (which includes overtime capacity) reflected the effect
of productivity gains made by manufacturers, added capacity of
Japanese transplants and lower-than-normal industry-wide sales
resulting from modest economic growth.
Marketing Incentives and Fleet Sales. As a result of
intense competition from new product offerings (from both
domestic and foreign manufacturers), excess industry capacity as
discussed above and the desire to maintain economic production
levels, automotive manufacturers that sell vehicles in the U.S.
have provided marketing incentives (price discounts) to retail
and fleet customers (i.e., daily rental companies, commercial
fleets, leasing companies and governments).
Ford's U.S. marketing costs as a percentage of net sales
revenue for each of 1993, 1992 and 1991 were: 10.9%, 12% and
16%, respectively. During the 1983-1988 period, such costs as a
percentage of sales revenue were in the 4% to 7% range.
"Marketing costs" include (i) marketing incentives such as retail
rebates and special financing rates, (ii) reserves for residual
guaranties on retail vehicle leases; (iii) reserves for costs
and/or losses associated with obligatory repurchases of certain
vehicles sold to daily rental companies and (iv) costs for
advertising and sales promotions.
Sales by Ford to fleet customers were as follows for the
years indicated:
Ford Fleet Sales
Years Ended December 31
--------------------------------------------------
1993 1992 1991 1990
---- ---- ---- ----
Units Sold.................... 881,000 882,000 782,000 821,000
Percent of Ford's
Total Car and Truck Sales.... 25% 28% 27% 24%
Fleet sales generally are less profitable than retail sales.
Within total fleet sales, the mix between sales to daily rental
companies and sales to other fleet purchasers improved in 1992
and 1993; sales to daily rental companies declined, while other
fleet sales (which tend to be more profitable) increased.
Europe
Europe is the largest market for the sale of Ford cars and
trucks outside the United States. The automotive industry in
Europe is intensely competitive; for the past 12 years, the top
six manufacturers have each achieved a car market share in about
the 10% to 16% range. (Manufacturers' shares, however, vary
considerably by country.) This competitive environment is
expected to intensify
-6-
Item 1. Business (Continued)
further as Japanese manufacturers, which together had a European car market
share of 11.6% for 1993, increase their production capacity in Europe and
import restrictions on Japanese built-up vehicles gradually are removed.
In 1993, European car industry sales were 10.8 million
cars, down 16% from 1992 levels. Truck sales were 1.7 million
units, down 17% from 1992 levels. Ford's European car share for
1993 was 11.8%, compared with 11.5% for 1992, and its European
truck share for 1993 was 12.6%, compared with 11.7% for 1992.
For Ford, Great Britain and Germany are the most important
markets within Europe, although the Southern European countries
are becoming increasingly significant. Great Britain
traditionally has been Ford's major source of European automotive
profits, and any adverse change in this market has a strong
effect on total automotive profits. For 1993 compared with 1992,
total industry sales were up 10% in Great Britain and down 19% in
Germany.
Other Foreign Markets
Mexico and Canada. Mexico and Canada also are important
markets for Ford. Generally, industry conditions in Canada
closely follow conditions in the U.S. market; however, Canada
continues to be in a recessionary period. In 1993, industry
sales of cars and trucks in Canada were down 3% from 1992 levels,
while the U.S. experienced an 8% increase in industry sales.
Mexico has been a growing market; however, in 1993, industry
sales were down 15% to 603,000 units.
The North American Free Trade Agreement ("NAFTA") became
effective January 1, 1994. NAFTA unites Canada, Mexico and the
United States into the world's largest trading region by phasing
out regulations which restricted trade between Mexico and the
U.S. and Canada. The Company believes that NAFTA will benefit
the economies of the three countries and the North American
automobile industry in particular.
Latin America. Brazil, Argentina and Venezuela are the
principal markets for Ford in South America. The economic
environment in those countries has been volatile in recent years,
leading to large variations in profitability. Results also have
been influenced by government actions to reduce inflation and
public deficits, and improve the balance of payments. In 1993,
Ford's profitability in the region improved significantly
compared with 1992, primarily reflecting strong results in
Brazil. Autolatina (Ford's joint venture with Volkswagen in
Brazil and Argentina) remained the market leader in Brazil. In
Brazil, a new economic plan aimed at stabilizing the Brazilian
economy and reducing inflation was unveiled in late 1993. It is
presently unclear to what extent the new plan will affect overall
economic conditions. In addition, duties on vehicles imported
into Brazil have declined progressively from 85% in 1990 to 35%
in October 1993. As a result, imports are expected to gain a
progressively larger share of the car market in Brazil.
Autolatina's future results largely will be dependent on the
political and economic environments in Brazil and Argentina,
which historically have been unpredictable.
Asia-Pacific. In the Asia-Pacific region, Australia and
Taiwan are the principal markets for Ford products. In both
markets, Ford is the car market share leader. In Taiwan (where
sales of built-up vehicles manufactured in Japan are prohibited),
Ford has total vehicle sales leadership. Ford's principal
competition in the Asia-Pacific region has been the Japanese
manufacturers. It
-7-
Item 1. Business (Continued)
is anticipated that the continuing relaxation
of import restrictions (including duty reductions) in Australia
and Taiwan will intensify competition in those markets.
Ford believes that the Asia-Pacific region offers many
important opportunities for the future. Ford is investigating
automotive component manufacturing and vehicle assembly
opportunities in China and is expanding the number of right-hand-
drive vehicles it will offer in Japan. A key element of Ford's
presence in the Asia-Pacific region is its long-standing
relationship with Mazda Motor Corporation, in which it has held a
25% ownership interest since 1979. Recent management
appointments by Mazda of Ford personnel have been made to improve
coordination of business and product plans in the Asia-Pacific
region.
Financial Services Operations
Ford Motor Credit Company
Ford Credit is a wholly owned subsidiary of Ford. It
provides wholesale financing and capital loans to franchised Ford
dealers and other dealers associated with such dealers and
purchases retail installment sale contracts and retail leases
from them. Ford Credit also makes loans to vehicle leasing
companies, the majority of which are affiliated with such
dealers. In addition, a wholly owned subsidiary of Ford Credit
provides these financing services in the U.S. to other vehicle
dealers. More than 85% of all new vehicles financed by Ford
Credit are manufactured by Ford or its affiliates. In addition
to vehicle financing, Ford Credit makes loans to affiliates of
Ford, finances certain receivables of Ford and its subsidiaries
and offers diversified financing services which are managed by
USL Capital, a wholly owned subsidiary of Ford Holdings. Ford
Credit also manages the activities of a number of international
credit affiliates of Ford and the insurance business of American
Road, a wholly owned subsidiary of Ford Holdings.
Ford Credit financed the following percentages of new Ford
cars and trucks sold or leased at retail and sold at wholesale in
the United States during each of the past five years:
Years ended December 31
------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Retail*............... 38.5% 37.7% 35.2% 31.4% 29.7%
Wholesale............. 81.4 77.6 74.9 71.0 69.8
____________
* As a percentage of total sales and leases, including cash
sales.
-8-
Item 1. Business (Continued)
Ford Credit's finance receivables and investments in
operating leases were as follows at the dates indicated (in
millions):
December 31,
---------------------
1993 1992
---- ----
Finance receivables
Retail $38,609 $35,601
Wholesale 11,699 10,057
Diversified 3,084 3,550
Other 3,626 3,279
------- -------
Total finance receivables 57,018 52,487
Loan origination costs, net 126 102
Unearned income (5,263) (5,213)
Allowance for credit losses (718) (765)
------- -------
Finance receivables, net $51,163 $46,611
======== ========
Investments in operating leases $15,773 $ 9,820
Accumulated depreciation (2,974) (1,922)
Allowance for credit losses (198) (151)
------- -------
Investments in operating
leases, net $12,601 $ 7,747
======= =======
Installments on finance receivables, including interest,
past-due 60 days or more and the aggregate receivable balances
related to such past-due installments were as follows at the
dates indicated (in millions):
December 31, 1993 December 31, 1992
----------------------- -----------------------
Installments Balances Installments Balances
------------ -------- ------------ --------
Retail $ 10 $ 98 $ 12 $ 97
Diversified 13 56 10 94
Other 24 95 29 89
---- ---- ---- ----
Total $ 47 $249 $ 51 $280
==== ==== ==== ====
Installments past-due less than 60 days included in finance
receivables at December 31, 1993 and 1992 were $298 million and
$231 million, respectively.
-9-
Item 1. Business (Continued)
The following table sets forth information concerning Ford
Credit's credit loss experience with respect to the various
categories of financing during the years indicated (dollar
amounts in millions).
Years Ended or at December 31,
------------------------------
1993 1992 1991
---- ---- ----
Net losses
Retail* $213 $298 $443
Wholesale (4) 15 40
Diversified 14 23 24
Other 5 6 22
---- ---- ----
Total $228 $342 $529
==== ==== ====
Net losses as a percentage of
average receivables
Retail* 0.46% 0.75% 1.18%
Total finance receivables* 0.35 0.60 0.92
Provision for credit losses $270 $418 $578
Allowance for credit losses 916 916 825
Allowance as a percent of
net receivables* 1.42% 1.66% 1.60%
*Includes investments in operating leases.
An analysis of Ford Credit's allowance for credit losses on
finance receivables and operating leases is as follows for the
years indicated (in millions):
1993 1992 1991
---- ---- ----
Beginning balance $ 916 $ 825 $ 895
Additions 270 418 578
Deductions
Losses 392 476 674
Recoveries (164) (134) (145)
----- ----- -----
Net losses 228 342 529
Other changes, including
reclassifications and
amounts related to finance
receivables sold 42 (15) 119
--- --- ---
Net deductions 270 327 648
----- ----- -----
Ending balance $ 916 $ 916 $ 825
===== ===== =====
-10-
Item 1. Business (Continued)
Ford Credit relies heavily on its ability to raise
substantial amounts of funds. These funds are obtained primarily
by sales of commercial paper and issuance of term debt. Funds
also are provided by retained earnings and sales of receivables.
The level of funds can be affected by certain transactions with
Ford, such as capital contributions and dividend payments,
interest supplements and other support from Ford for vehicles
financed by Ford Credit under Ford-sponsored special financing or
leasing programs, and the timing of payments for the financing of
dealers' wholesale inventories and for income taxes. Ford
Credit's ability to obtain funds is affected by its debt ratings,
which are closely related to the financial condition of and the
outlook for Ford, and the nature and availability of support
facilities, such as revolving credit and receivables sales
agreements.
The long-term senior debt of Ford and Ford Credit is rated
"A2" and "A" and Ford Credit's commercial paper is rated "Prime-
1" and "A-1" by Moody's Investors Service, Inc. and Standard &
Poor's Corporation ("S&P"), respectively. Such ratings have been
in effect since February 1991, when they were respectively
reduced to the present levels from "Aa3" and "AA-" (in the case
of long-term senior debt) and "Prime-1" and "A-1+" (in the case
of commercial paper).
Ford and Ford Credit have entered into a profit maintenance
agreement which provides for payments by Ford to the extent
required to maintain Ford Credit's earnings at specified minimum
levels. No payments were required under the agreement during the
period 1988 through 1993.
Ford Credit Europe plc
In 1993, most of the European credit operations of Ford,
which generally had been organized as subsidiaries of the
respective automotive affiliates of Ford throughout Europe, were
consolidated into a single company, Ford Credit Europe. Ford
Credit Europe, which was originally incorporated in 1963 in
England as a private limited company, is wholly owned by Ford and
certain of its subsidiaries. Ford Credit Europe's primary
business is to support the sale of Ford vehicles in Europe
through the Ford dealer network. A variety of retail, leasing
and wholesale finance plans is provided in most countries in
which it operates. The business of Ford Credit Europe is
substantially dependent upon Ford's automotive operations in
Europe. Ford Credit Europe issues commercial paper, certificates
of deposits and term debt to fund its credit operations. One of
the purposes of the consolidation described above is to
facilitate Ford Credit Europe's access to public debt markets.
Ford Credit Europe's ability to obtain funds in these markets is
affected by its credit ratings, which are closely related to the
financial condition of and outlook for Ford.
First Nationwide Financial Corporation
First Nationwide, a savings and loan holding company
organized in Delaware in 1959, was acquired by Ford in December
1985. It is a wholly owned subsidiary of Ford.
The principal asset of First Nationwide is the capital
stock of First Nationwide Bank, A Federal Savings Bank ("First
Nationwide Bank" or the "Bank"). The Bank is a federally
chartered, capital stock savings bank which, with its predecessor
institutions, has been in the savings and loan business since
1885. The principal business of the Bank consists of attracting
savings deposits from
-11-
Item 1. Business (Continued)
the public and making loans collateralized by liens on residential and other
real estate. Income is derived from interest charges on real estate loans
and, to a lesser extent, from fees received in connection with such loans and
interest on securities investments. The major expense of the
Bank is the interest it pays on savings accounts and on
borrowings.
First Nationwide's loans receivable (including those of the
Bank) were as follows at the dates indicated (in millions):
December 31,
--------------------------
1993 1992*
---- -----
Real estate loans $11,712 $13,097
Consumer and other loans 485 536
------- -------
Total 12,197 13,633
Unearned fees and discounts, net (109) (120)
Allowance for loan losses (396) (405)
------ -------
Total loans receivable, net $11,692 $13,108
======= =======
______________
* Certain amounts for 1992 have been restated to conform with
presentations adopted in 1993.
Included in the above receivables at December 31, 1993 and 1992
were $9.0 billion and $10.2 billion, respectively, of variable
rate real estate loans. Loans held for sale, not included above,
were $288 million and $195 million at December 31, 1993 and 1992,
respectively.
The percentages of real estate loans by state were as
follows at December 31, 1993, excluding accrued interest
receivable, discounts and premiums, and loss reserves, and
including $288 million of loans held for sale: California -
55.4%; New York - 10.8%; Florida - 3.8%; Illinois - 3.2%; and 46
other states, none of which exceeded 3.0% of total real estate
loans.
The following table reflects at the dates indicated the
amount of non-accrual, past due, and troubled debt restructured
loans including the interest income recognized and total interest
income that would have been recognized had the borrowers
performed under the original terms of the loans (in millions):
-12-
Item 1. Business (Continued)
December 31,
-----------------------------------------------------------------
1993 1992*
------------------------------ -------------------------------
Total Total
Interest Interest Interest Interest
Income Income if Income Income if
Balance Recognized Performing Balance Recognized Performing
-------- --------- ---------- ------- ---------- ----------
Non-accrual loans $ 708 $ 17 $ 55 $1,072 $19 $ 93
Accruing loans
contractually past
due 91 days or more 0 0 0 2 0 0
Troubled debt
restructured loans 512 41 45 336 25 32
------ --- ----- ------ --- ----
Total $1,220 $58 $100 $1,410 $44 $125
====== === ==== ====== === ====
______________
* Certain amounts for 1992 have been restated to conform with
presentations adopted in 1993.
At December 31, 1993, there were no commitments to lend
additional funds to borrowers whose loans were on non-accrual
status or were restructured.
An analysis of First Nationwide's allowance for losses on
loans is as follows for the years indicated (in millions):
Real Consumer
Estate and Other Commercial Total
------ -------- ---------- -----
Balance, December 31, 1990 $267 $16 $ 3 $ 286
Additions 254 5 14 273
Charge-offs (121) (14) (10) (145)
Recoveries 2 3 - 5
---- --- ---- ----
Balance, December 31, 1991 402 10 7 419
Additions 121 3 4 128
Charge-offs (135) (5) (6) (146)
Recoveries 2 1 1 4
---- --- ---- ----
Balance, December 31, 1992 390 9 6 405
Additions 137 3 - 140
Charge-offs (152) (5) (6) (163)
Recoveries 12 1 1 14
---- --- --- ----
Balance, December 31, 1993 $387 $ 8 $ 1 $396
==== === === ====
Federally chartered savings and loan institutions are
regulated principally by the Office of Thrift Supervision
("OTS"), a bureau of the Department of Treasury. Deposit
insurance for these institutions is provided by the Federal
Deposit Insurance Corporation ("FDIC"). Regulated areas include:
capital requirements, payments of dividends, transactions with
affiliates and activities that might create a serious risk to
insured institutions.
The Bank is subject to regular concurrent examinations of
its operations by the OTS and the FDIC, the most recent of which
were completed in December 1993. In response to examiners'
concerns expressed in recent examinations, the
-13-
Item 1. Business (Continued)
Bank has taken positive steps to improve asset quality and other areas
of its operations. The Bank filed its response to the most recent OTS
examination report in January 1994. Pursuant to an agreement
with the OTS, the FDIC did not issue a separate examination
report.
For a discussion of the losses incurred by First Nationwide
in 1993 and 1992, see Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Ford presently is investigating strategic actions with
respect to First Nationwide. Such actions could include the sale
of a substantial portion of the Bank's assets. It is premature
at this time, however, to determine whether any actions will
occur and what impact, if any, such actions could have on Ford's
financial results.
The Hertz Corporation
On March 8, 1994, Ford purchased from Commerzbank
Aktiengesellschaft, a German bank, additional shares of common
stock of Hertz aggregating 5% of the total outstanding voting
stock, thereby bringing Ford's ownership of the total voting
stock of Hertz to 54% from 49%. Since the Company was a
principal shareholder of Hertz prior to the purchase from
Commerzbank, no significant change in the relationship between
Ford and Hertz is expected. The effect of this transaction on
Ford's consolidated financial statements is not expected to be
material. Hertz had been accounted for on an equity basis;
following the purchase, Hertz's operating results, assets,
liabilities, and cash flows will be consolidated in Ford's
financial statements, as part of the Financial Services business
segment. Hertz is engaged principally in the business of renting
automobiles and renting and leasing trucks, without drivers, in
or through approximately 5,200 locations throughout the U.S. and
in over 140 foreign countries.
Ford Holdings, Inc.
Ford Holdings was incorporated on September 1, 1989 for the
principal purpose of acquiring, owning and managing certain
assets of Ford. All the outstanding common stock of Ford
Holdings, representing 75% of the combined voting power of all
classes of capital stock, is owned, directly or indirectly, by
Ford. The balance of the capital stock, consisting of shares of
Flexible Rate Auction Preferred Stock (Exchange), Series A
Cumulative Preferred Stock, Series B Cumulative Preferred Stock
and Series C Cumulative Preferred Stock, is held by persons other
than Ford and accounts for the remaining 25% of the total voting
power. Ford Holdings' primary activities consist of consumer and
commercial financing operations, insurance underwriting and
equipment leasing through its wholly owned subsidiaries, The
Associates, American Road and USL Capital.
-14-
Item 1. Business (Continued)
Associates First Capital Corporation
The Associates conducts its operations primarily through
its principal operating subsidiary, Associates Corporation of
North America. The Associates' primary business activities are
consumer finance, commercial finance and insurance underwriting.
The consumer finance operation is engaged in making and investing
in residential real estate-secured loans to individuals, making
secured and unsecured installment loans to individuals,
purchasing consumer retail installment obligations, investing in
credit card receivables, financing manufactured housing purchases
and providing other consumer financial services. The commercial
finance operation is principally engaged in financing sales of
transportation and industrial equipment and leasing, and
providing other financial services, including automobile club,
mortgage banking, and relocation services. The insurance
operation is engaged in underwriting credit life, credit accident
and health, property, casualty and accidental death and
dismemberment insurance, principally for customers of the finance
operations of The Associates.
The Associates' finance receivables were as follows at the
dates indicated (in millions):
December 31,
--------------------
1993 1992
---- ----
Consumer finance
Residential real estate-secured receivables $10,626 $ 9,820
Direct installment and credit card receivables 6,060 5,277
Manufactured housing and other
installment receivables 3,810 2,846
------ -------
Total consumer finance receivables 20,496 17,943
Commercial finance
Heavy-duty truck receivables 4,334 3,500
Other industrial equipment receivables 4,743 4,172
------ --------
Total commercial finance receivables 9,077 7,672
------ -------
Gross receivables 29,573 25,615
Unearned finance income (3,208) (2,781)
------ -------
Net finance receivables $26,365 $22,834
======= =======
Allowance for losses on finance receivables $ 809 $ 699
-15-
Item 1. Business (Continued)
Credit loss experience, net of recoveries, of The
Associates' finance business was as follows for the years
indicated (dollar amounts in millions):
Years Ended or at December 31,
------------------------------
1993 1992 1991
---- ----- ----
NET CREDIT LOSSES
Consumer finance
Amount $ 372 $ 383 $ 354
% of average net receivables 2.19% 2.64% 2.84%
% of receivables liquidated 3.41 4.57 5.65
Commercial finance
Amount $ 22 $ 42 $ 35
% of average net receivables .30% .64% .60%
% of receivables liquidated .26 .61 .61
Total net credit losses
Amount $ 394 $ 425 $ 389
% of average net receivables 1.61% 2.02% 2.13%
% of receivables liquidated 2.03 2.80 3.24
ALLOWANCE FOR LOSSES
Balance at end of period $ 809 $ 699 $ 591
% of net receivables 3.07% 3.06% 2.93%
The following table shows total balances delinquent sixty days and more by
type of business at the dates indicated (dollar amounts in millions):
Consumer Finance Commercial Finance Total
------------------- ------------------- -------------------
Balances Delinquent Balances Delinquent Balances Delinquent
60 Days and More 60 Days and More 60 Days and More
------------------ ------------------- --------------------
Gross % of Gross % of Gross % of
Amount Outstandings Amount Outstandings Amount Outstandings
------ ------------ ------ ----------- ------ ------------
At December 31,
1993 $380 1.85% $48 .53% $428 1.45%
1992 359 2.00 63 .82 422 1.65
An analysis of The Associates' allowance for losses on
finance receivables is as follows for the years indicated (in
millions):
1993 1992 1991
---- ---- ----
Beginning balance $699 $591 $450
Additions 477 513 434
Recoveries 88 72 54
Losses (482) (497) (443)
Other adjustments, primarily
reserves of acquired
businesses 27 20 96
---- ---- ----
Ending balance $809 $699 $591
==== ==== ====
-16-
Item 1. Business (Continued)
The American Road Insurance Company
American Road was incorporated as a wholly owned subsidiary
of Ford Credit in 1959 and was transferred to Ford Holdings in
1989. The operations of American Road consist primarily of
underwriting floor plan insurance related to substantially all
new vehicle inventories of dealers financed at wholesale by Ford
Credit in the United States and Canada, credit life and
disability insurance in connection with retail vehicle financing,
and insurance related to retail contracts sold by automobile
dealers to cover vehicle repairs. In addition, Ford Life
Insurance Company ("Ford Life"), a wholly owned subsidiary of
American Road, offers single premium deferred annuities which are
sold primarily through banks and brokerage firms. The
obligations of Ford Life, including annuities, are guaranteed by
American Road.
In the second quarter of 1992, Ford Credit discontinued
purchasing collateral protection insurance ("CPI") from American
Road for vehicles financed at retail by Ford Credit. As a
result, total premiums written by American Road in 1992 were down
38% from 1991. The discontinuance of Ford Credit's purchase of
CPI was a significant factor in American Road's 1992 profit
decline from 1991 and had a negative but smaller impact on 1993
earnings. American Road exited the CPI market for vehicles and
homes financed by other institutions by the end of 1993.
USL Capital Corporation
USL Capital, a diversified commercial leasing and financing
Organization, originally incorporated in 1956, was acquired by
Ford in 1987 and was transferred to Ford Holdings in 1989. In
November 1993, the corporation's name was changed from United
States Leasing International, Inc. to USL Capital Corporation.
The primary operations of USL Capital include the leasing,
financing, and management of office, manufacturing and other
general-purpose business equipment; commercial fleets of
automobiles, vans, and trucks; large-balance transportation
equipment (principally commercial aircraft, rail, and marine
equipment); industrial and energy facilities; and essential-use
equipment for state and local governments. It also provides
intermediate-term, first-mortgage loans on commercial properties
and invests in corporate preferred stock and debt instruments.
Certain of these financing transactions are carried on the books
of Ford affiliates.
-17-
Item 1. Business (Continued)
The following table sets forth certain information
regarding USL Capital's earning assets, credit losses, and
delinquent accounts at the dates indicated (dollar amounts in
millions):
December 31,
----------------------------
1993 1992 1991
----- ---- ----
Total earning assets
Investments in finance leases - net $2,364 $2,075 $1,463
Investments in operating leases - net 695 558 492
Investments in leveraged leases - net 191 4 -
Notes receivable 721 502 416
Investment in securities 563 329 236
Inventory held for sale or lease 55 97 100
Investments in associated companies 18 20 20
------ ------ ------
Total $4,607 $3,585 $2,727
====== ====== ======
Allowance for doubtful accounts
Beginning balance $ 40 $ 30 $ 25
Additions 25 19 11
Deductions (10) (9) (6)
------ ------ ------
Ending balance $ 55 $ 40 $ 30
====== ====== ======
Allowance for doubtful accounts
as a percent of earning assets 1.2% 1.1% 1.1%
Total balance over 90 days past due
at year end $ 44 $ 49 $ 23
Percent of earning assets 1.0% 1.4% 0.8%
Governmental Standards
A number of governmental standards and regulations relating
to safety, corporate average fuel economy ("CAFE"), emissions
control, noise control, damageability and theft prevention are
applicable to new motor vehicles, engines, and equipment
manufactured for sale in the United States and Europe. In
addition, manufacturing and assembly facilities in the United
States and Europe are subject to stringent standards regulating
air emissions, water discharges and the handling and disposal of
hazardous substances. Such facilities in the United States also
are subject to a comprehensive federal-state permit program
relating to air emissions. Many of the standards will become
increasingly stringent. Moreover, additional and even more
stringent standards and regulations, notably car and truck
emissions and CAFE standards, may be made applicable to future
model vehicles as well as to existing and future facilities. The
technological feasibility of achieving compliance with some of
these standards and regulations has not been established on a
commercial basis. Assuming that compliance with all applicable
standards and regulations can be achieved within the prescribed
time frame, it will be extremely costly and it could be necessary
for Ford to take such actions as curtailing or eliminating
production of certain cars, trucks and engines. Such actions
could have substantial adverse effects on Ford's sales volume and
profits.
-18-
Item 1. Business (Continued)
Mobile Source Emissions Control -- As amended in November
1990, the Federal Clean Air Act (the "Clean Air Act" or the
"Act") imposes significantly more stringent limits on the amount
of regulated pollutants that lawfully may be emitted by new motor
vehicles and engines produced for sale in the United States than
those previously in effect. The effective dates of these
standards, some of which have phase-in periods, vary depending
upon the type of vehicle, but begin to apply as early as the 1994
model year. In addition, the Act doubles the length of the
"useful life" during which compliance with the applicable
standards must be achieved. Passenger cars, for example, must
comply for 10 years or 100,000 miles, whichever first occurs.
The Act prohibits, among other things, the sale in or importation
into the United States of any new motor vehicle or engine which
is not covered by a certificate of conformity issued by the
United States Environmental Protection Agency (the "EPA").
The Act also may require production of certain new cars and
trucks capable of operating on fuels other than gasoline or
diesel fuel ("alternative fuels") under a pilot test program to
be conducted in California beginning in the 1996 model year.
Under this pilot program, each manufacturer will be required to
sell its pro rata share of 150,000 vehicles in each of the 1996,
1997 and 1998 model years and its pro rata share of 300,000
vehicles in each model year thereafter. The Act also authorizes
certain states to establish programs to encourage the purchase of
such vehicles.
Motor vehicle emissions standards even more stringent than
those referred to above will become effective as early as the
2003 model year, unless the EPA determines that such standards
are not necessary, technologically feasible or cost-effective.
The Act authorizes California to establish unique emissions
control standards that, in the aggregate, are at least as
stringent as the federal standards if it secures the requisite
waiver of federal preemption from the EPA. The Health and Safety
Code of the State of California prohibits, among other things,
the sale to an ultimate purchaser who is a resident of or doing
business in California of a new motor vehicle or engine which is
intended for use or registration in that state which has not been
certified by the California Air Resources Board (the "CARB").
The CARB received a waiver from the EPA for a series of passenger
car and light truck emissions standards (the "low emission
vehicle", or "LEV", standards), effective beginning between the
1994 and 2003 model years, that are more stringent than those
prescribed by the Act for the corresponding periods of time.
These California standards are intended to promote the
development of various classes of low emission vehicles.
California also requires that a specified percentage of each
manufacturer's vehicles produced for sale in California,
beginning at 2% in 1998 and increasing to 10% in 2003, must be
"zero-emission vehicles" ("ZEVs"), which produce no emissions of
regulated pollutants.
Electric vehicles are the only presently known type of
zero-emission vehicles. However, despite intensive research
activities, technologies have not been identified that would
allow manufacturers to produce a commercially viable electric
vehicle. To comply with the mandate, manufacturers may have to
offer substantial discounts on electric vehicles, selling them
well below cost, or increase the price or curtail the sale of
non-electric vehicles. The California
-19-
Item 1. Business (Continued)
emissions standards present significant technological challenges
to manufacturers and compliance may require costly actions that
would have a substantial adverse effect on Ford's sales volume
and profits.
The Act also permits other states with air quality problems
to adopt new motor vehicle emissions standards identical to those
adopted by California, if such states lawfully adopt such
standards two years before commencement of the affected model
year. In October 1991, a group of twelve northeastern states and
the District of Columbia, the Ozone Transport Commission (the
"OTC"), organized under provisions of the Act and executed a
Memorandum of Understanding under which they agreed to propose
adoption of the California LEV standards. On February 1, 1994,
the OTC voted to recommend to the EPA that it require all member
states to adopt the California LEV standards in their state
implementation programs. The EPA must act on the petition within
nine months after its receipt. Adoption of the California LEV
standards by any state will present challenges and potential
adverse effects similar to those that will be experienced in
California, which may be further aggravated by conditions in a
particular state.
In November 1990, the Department of Environmental
Conservation (the "DEC") of the State of New York adopted
regulations, effective beginning in the 1993 model year, that are
intended to require that vehicles sold in that state comply with
California's 1993 model year (pre-LEV) emissions standards. In
May 1992, the DEC adopted regulations purporting to implement the
California LEV standards beginning in the 1994 model year. The
American Automobile Manufacturers Association ("AAMA"), of which
Ford is a member, and the Association of International Automobile
Manufacturers ("AIAM") challenged the legality of the DEC's
adoption of the LEV standards, as inconsistent with its legal
authority under the Act. A ruling by the U.S. District Court in
Binghamton, New York, that the DEC's adoption of the LEV
standards violated certain provisions of the Act (and was,
therefore, invalid) was appealed to the U.S. Court of Appeals for
the Second Circuit (the "Second Circuit Court"). On February 4,
1994, the Second Circuit Court upheld certain aspects of the
State of New York's adoption of the California LEV standards,
including the ZEV sales mandate. However, the Second Circuit
Court also held that the standard would not apply to 1995 model
year vehicles, thereby making the standard applicable to 1996 and
beyond model year vehicles. A 1990 Massachusetts law, as
implemented by regulations issued in 1992, purports to adopt the
California LEV standards beginning in the 1995 model year. A
special study commission established by the Massachusetts
legislature to re-evaluate adoption of the California Act and
standards recommended proceeding with their adoption. The AAMA
and AIAM are challenging the adoption of the standards in the
U.S. District Court in Massachusetts.
Under the Act, if the EPA determines that a substantial
number of any class or category of vehicles, although properly
maintained and used, do not conform to applicable emissions
standards, a manufacturer may be required to recall and remedy
such nonconformity at its expense. Further, if the EPA
determines through testing of production vehicles that emission
control performance requirements are not met, it can halt
shipment of motor vehicles of the configuration tested.
California has similar, and in some respects greater, authority
to order manufacturers to recall vehicles. Ford has been
required, and may in the future be required, to recall vehicles
for such purposes from time to time. The costs of related
repairs or inspections associated with such recalls can be
substantial.
-20-
Item 1. Business (Continued)
The European Union has established standards which, in many
cases, will require motor vehicle emissions control equipment
similar to that used in the U.S. These standards, which are of
generally equivalent stringency to 1983 model year U.S. standards
for gasoline-powered vehicles and 1987 model year standards for
diesel-powered vehicles, are applicable to vehicles type-approved
after July 1, 1992, and registered after December 31, 1992. The
EU Council of Ministers has unanimously adopted a common position
approving a proposal by the European Commission to adopt more
stringent motor vehicle emission standards. Under the European
Union's new co-decision procedure, the Council's common position
must be referred to the European Parliament (which may accept,
modify or reject the proposal) for further action before the
proposal can be adopted. Under the co-decision procedure,
adoption is expected to be completed in the first half of 1994.
The proposed standards would apply to vehicle homologations
(i.e., the European regulatory certification process) beginning
January 1, 1996 and to new vehicle registrations beginning
January 1, 1997 and are of generally equivalent numerical
stringency to those which begin to apply in the U.S. for the 1994
model year. The common position also provides for the European
Commission to propose by the end of 1994 supplementary reductions
in motor vehicle emissions that would take effect beginning
January 1, 2000. Such supplemental reductions would be a
function of technical progress achieved between now and 2000.
When the more stringent standards are adopted, European Union
member countries would be permitted to provide "green" incentives
for the purchase of vehicles that comply with the new standards
before their effective date. Certain other European countries
also have established, and may in the future establish, unique
automotive emissions standards.
Certain European countries, including member countries of
the European Union, are conducting in-use emissions testing to
ascertain compliance of motor vehicles with applicable emissions
standards. These actions could lead to recalls of vehicles and
the future costs of related repairs or inspections could be
substantial.
Motor Vehicle Safety -- Under the National Traffic and
Motor Vehicle Safety Act of 1966, as amended (the "Safety Act"),
the National Highway Traffic Safety Administration (the "Safety
Administration") is required to establish appropriate federal
motor vehicle safety standards that are practicable, meet the
need for motor vehicle safety and are stated in objective terms.
Since 1968 the Safety Act has prohibited the sale in the United
States of any new motor vehicle or item of motor vehicle
equipment that does not conform to applicable federal motor
vehicle safety standards. The Safety Administration has
announced its intention to establish additional such standards in
the near future, which Ford supports in principle. Ford expects
to be able to comply with those standards but only at
significantly increased costs, because doing so will tend to
conflict with the need to reduce vehicle weight in order to meet
stringent emissions and fuel economy standards. The Safety
Administration also is required to make a determination on the
basis of its investigation whether motor vehicles or equipment
contain defects related to motor vehicle safety or fail to comply
with applicable safety standards and, generally, to require the
manufacturer to remedy any such condition at its own expense.
The same obligation is imposed on a manufacturer which obtains
knowledge that any motor vehicle manufactured by it contains a
defect determined in good faith by it to be related to motor
vehicle safety. There currently are pending before the Safety
Administration a number of major investigations relating to
alleged safety defects or alleged noncompliance with applicable
safety standards in vehicles built, imported or
-21-
Item 1. Business (Continued)
sold by Ford. The cost of recall programs to remedy safety defects or
noncompliance, should any be determined to exist as a result of
certain of such investigations, could be substantial.
The European Union, individual Member States within the
European Union and other countries in Europe also have safety
standards applicable to motor vehicles and are likely to adopt
additional or more stringent standards in the future. The cost
of complying with these standards, as well as the cost of any
recall programs to remedy safety defects or noncompliance, could
be substantial.
Motor Vehicle Fuel Economy -- Passenger cars and trucks
rated at less than 8,500 pounds gross vehicle weight are required
by regulations issued by the Safety Administration pursuant to
the Motor Vehicle Information and Cost Savings
Act (the "Cost Savings Act") to meet separate minimum CAFE
standards. Failure to meet the CAFE standard in any model year, after
taking into account all available credits, is deemed to be unlawful conduct
and would subject a manufacturer to the imposition of a civil
penalty equivalent to $5 for each one-tenth of a mile per gallon
("mpg") under the applicable standard multiplied by the number of
vehicles in the class (i.e., domestic cars, domestic trucks,
imported cars or imported trucks) produced in that model year.
Each such class of vehicle may earn credits either as a result of
exceeding the standard in one or more of the preceding three
model years ("carryforward credits") or pursuant to a plan,
approved by the Safety Administration, under which a manufacturer
expects to exceed the standard in one or more of the three
succeeding model years ("carryback credits") but credits earned
by a class may not be applied to any other class of vehicles.
The Cost Savings Act established a passenger car CAFE
standard of 27.5 mpg for the 1985 and later model years, which
the Safety Administration asserts it has the authority to amend
to a level it determines to be the "maximum feasible" level
(considering the following factors: technological feasibility,
economic practicality, the effect of other federal motor vehicle
standards on fuel economy, and the need of the nation to conserve
energy). Pursuant to the Cost Savings Act, the Safety
Administration established CAFE standards applicable to 1994 and
1995 model year light trucks (under 8,500 lbs. GVW) at 20.5 mpg
and 20.6 mpg, respectively (on a combined two-wheel drive/four-
wheel drive basis). It also has issued a Notice of Proposed
Rulemaking ("NPRM") proposing to set standards for light trucks
within the range of 20.5 mpg to 21.5 mpg for model years 1996 and
1997.
If the Safety Administration sets light truck standards for
the 1996 and 1997 model years within the range proposed in the
NPRM referred to above, Ford expects to be able to comply with
the CAFE standards applicable to its 1994 through 1997 model year
"domestic" and "import" cars and light trucks, although it may be
necessary to use credits to do so.
Despite Ford's expectations of compliance, however, there
are factors that could jeopardize its ability to comply. These
factors include the possibility of changes in market conditions,
including a shift in demand for larger vehicles and a decline in
demand for small and middle-size vehicles; or conversely, a
shortage of reasonably priced gasoline resulting in a decreased
demand for more profitable vehicles and a corresponding increase
in demand for relatively less profitable vehicles.
-22-
Item 1. Business (Continued)
It is anticipated that efforts may be made to raise the
CAFE standard because of concerns for CO2 emissions, energy
security or other reasons. President Clinton's Climate Change
Action Plan sets a goal to improve new vehicle fuel efficiency in
an amount equivalent to at least 2% per year over a 10 to 15 year
period, using a combination of regulatory and non-regulatory
measures. If the entire goal, or a substantial portion of the
goal, is to be achieved through higher CAFE standards, Ford would
find it necessary to take various costly actions that would have
substantial adverse effects on its sales volume and profits. For
example, Ford could find it necessary to curtail or eliminate
production of larger family-size and luxury passenger cars and
full-size light trucks, restrict offerings of engines and popular
options, and continue or increase market support programs for its
most fuel-efficient passenger cars and light trucks.
The Energy Tax Act of 1978, as amended, imposes a federal
excise tax on automobiles which do not achieve prescribed fuel
economy levels. Additional legislative proposals could be
introduced that, if enacted, would increase excise taxes or
create economic disincentives to purchase any except the least
fuel consuming vehicles. Because of the uncertainties and
variables inherent in testing for fuel economy and the uncertain
effect on fuel economy of other government requirements, it is
not possible to predict the amount of excise tax, if any, which
may be incurred.
Stationary Source Air Pollution Control -- Pursuant to the
Clean Air Act the states are required to amend their
implementation plans to require more stringent limitations on the
quantity of pollutants which may be emitted into the atmosphere,
and other controls, to achieve national ambient air quality
standards established by the EPA. In addition, the Act requires
reduced emissions of substances that are classified as hazardous
or that contribute to acid deposition, imposes comprehensive
permit requirements for manufacturing facilities in addition to
those required by various states, and expands federal authority
to impose severe penalties and criminal sanctions. The Act
requires the EPA and the states to adopt regulations, and allows
states to adopt standards more stringent than those required by
the Act. The costs to comply with these provisions of the Act
cannot presently be quantified but could be substantial. In
addition, the enormous complexity and time-consuming nature of
the comprehensive federal-state permit program provided for by
the Act may reduce operational flexibility and may delay or
prevent future competitive upgrading of Ford's production
facilities in the United States.
Water Pollution Control -- Pursuant to the Federal Clean
Water Act (the "Clean Water Act"), Ford has been issued National
Pollutant Discharge Elimination System permits which establish
certain pollution control standards for its manufacturing
facilities that discharge wastewater into public waters. Ford,
among many other companies, also is required to comply with
certain standards and obtain permits relating to discharges into
municipal sewerage systems. The EPA also requires management
standards and, in some cases, permits for the discharge of storm
water. The standards under the Clean Water Act are established
by the EPA and by the state where a facility is located. Many
states have requirements that go beyond those established under
the Clean Water Act. These various requirements may necessitate
the addition of costly control equipment.
-23-
Item 1. Business (Continued)
The EPA recently issued proposed regulations, pursuant to
the Great Lakes Critical Programs Act of 1990, that would require
more restrictive standards for discharges into waters that impact
the Great Lakes. Ford and many others have expressed opposition
to these proposed regulations which, if adopted, could require
the addition of costly control equipment.
Hazardous Waste Control -- Pursuant to the Federal Resource
Conservation and Recovery Act ("RCRA"), the EPA has issued
regulations establishing certain procedures and standards for
persons who generate, transport, treat, store, or dispose of
hazardous wastes. These regulations also require permits for
treatment, storage, and disposal facilities and corrective action
for prior releases at sites where permits are issued. The EPA
has delegated permit authority to states with programs
equivalent to RCRA, and states may adopt even more extensive
requirements. The Federal Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended
(the "Superfund Act"), requires disclosure of certain releases
from Ford facilities into the environment, creates potential
liability for remediation costs at sites where Ford waste was
disposed and for damage to natural resources resulting from a
release, and provides for citizens' suits for failure to comply
with final requirements of orders or regulations. A number of
states have enacted separate state laws of this type. In
addition, under the Federal Toxic Substances Control Act
("TSCA"), the EPA evaluates environmental and health effects of
existing chemicals and new substances. Pursuant to TSCA, the EPA
has banned production of polychlorinated biphenyls and regulates
their use in transformers, capacitors and other equipment that
may be located at Ford's facilities.
European Pollution and Waste Control -- The European Union,
individual Member States within the European Union and other
countries in Europe also have requirements governing air and
water pollution and hazardous waste control and are likely to
adopt additional or more stringent requirements in the future.
The cost of complying with these standards could be substantial.
Ozone Depleting Chemicals -- An international agreement,
the Montreal Protocol on Substances that Deplete the Ozone Layer,
as amended (the "Montreal Protocol"), and the Clean Air Act
require a phaseout beginning in 1993 of certain chemicals deemed
to be ozone-depleting, including chlorofluorocarbons ("CFCs"), in
both products and manufacturing processes. The EPA Administrator
is required by the Clean Air Act to adopt regulations that are
consistent with the Montreal Protocol. In February 1992, acting
under provisions of the Clean Air Act, former President Bush
announced the acceleration of the phase-out of CFCs by requiring
the elimination of production of CFCs by December 31, 1995
(except for amounts necessary for essential uses and for
servicing existing equipment) and directing CFC producers to
reduce their production in each of the years 1992-1995 to one-
half of 1986 production levels. In November 1992, the phaseout
schedule for CFC production under the Montreal Protocol was
accelerated even further, requiring CFC producers to reduce their
production in 1994 and 1995 to one-quarter of 1986 production
levels and requiring a complete phaseout of CFC production by
January 1, 1996, except for production or importation of CFC's
for "essential uses" only. The Act also specifies mandatory
recycling of CFCs during vehicle air conditioning service.
-24-
Item 1. Business (Continued)
The Company expects that its vehicle air-conditioning
systems and most of its manufacturing operations will become free
of CFCs within the mandated phaseout and elimination schedule for
these chemicals, but some continued need for them will exist to
service existing equipment and vehicles.
Several states (e.g., Vermont and Maine) have enacted laws
requiring a complete ban on CFCs in mobile air conditioners prior
to imposition of the phaseout mandated by the Act. As a result,
the Company may not be able to offer certain vehicles for sale
with air conditioners in those states.
The European Union also has adopted provisions accelerating
the Montreal Protocol schedule for CFC reduction. Under the
proposal adopted by the European Council, CFCs and certain other
ozone depleting chemicals must be completely phased out by
January 1, 1995. In addition, the EU Council of Environmental
Ministers have agreed to accelerate by 15 years the timetable
agreed to in the Montreal Protocol for restrictions on the use
and sale of hydrochlorofluoro-carbons ("HCFCs"). The use of
HCFCs within the European Union must now be reduced by 35% from
their peak 1995 usage by 2004 before being phased out completely
by 2015. The Montreal Protocol establishes a final phase-out by
2030.
Pollution Control Costs -- During the period 1994 through
1998, Ford expects that approximately $700 million will be spent
on its North American facilities (primarily all in the U.S.) to
comply with air and water pollution and hazardous waste control
standards which now are in effect or are scheduled to come into
effect. Of this total, Ford estimates that approximately $140
million will be spent in 1994 and $150 million will be spent in
1995.
Employment Data
In 1993, Ford's worldwide employment decreased 1% to
322,213 from 325,333 in 1992. The decrease in average employment
for 1993 resulted primarily from the ongoing cost-reduction
programs in Europe. Worldwide payrolls were $13.8 billion in
1993, unchanged from 1992.
Average employment by geographic area in 1993 compared with
1992 levels was as follows:
1993 1992
United States 166,943 158,377
Canada 15,747 14,863
Europe 99,527 109,156
Latin-America 27,259 29,668
Asia Pacific 12,737 13,269
------- -------
Total 322,213 325,333
======= =======
For further information regarding employment statistics of
Ford, see Item 6. "Selected Financial Data". For information
concerning employee retirement benefits, see Note 8 of Notes to
Financial Statements.
Substantially all hourly employees of Ford in the United
States are included in collective bargaining units represented by
unions. Approximately 99% of these unionized hourly employees
are represented by the United Automobile Workers (the "UAW").
Approximately 3% of salaried employees are represented by unions.
Most hourly employees and many nonmanagement salaried employees
of subsidiaries outside the United States also are represented by
-25-
Item 1. Business (Continued)
unions. Affiliates of Ford also are parties to collective
bargaining agreements in Britain, Spain, Germany and France.
Collective bargaining agreements between Ford and the UAW
and between Ford of Canada and the Canadian Automobile Workers
were entered into in 1993 and are scheduled to expire in
September 1996.
Research and Development
Ford and certain of its subsidiaries have staffs of
professional employees whose activities are directed primarily to
the improvement of the performance (including fuel efficiency),
safety and comfort of the products of those companies and to the
development of new products, and also have staffs of scientists
engaged in basic research. Extensive engineering, research and
design facilities are maintained for these purposes. Principal
among them are the engineering, research and design centers of
Ford at Dearborn, Michigan; of Ford of Britain at Dunton,
England; and of Ford of Germany at Merkenich, Germany.
In 1993, 1992 and 1991, $5 billion, $4.3 billion, and $3.7
billion, respectively, were charged to income of Ford and its
consolidated subsidiaries for Ford-sponsored research and
development activities relating to the development of new
products and services and the improvement of existing products
and services. In addition, $55 million, $46 million and $44
million were charged to income in 1993, 1992 and 1991,
respectively, for customer-sponsored research and development
activities.
Item 2. Properties
Ford's United States manufacturing and assembly facilities,
substantially all of which are owned by Ford and its
subsidiaries, are situated in various sections of the country and
include assembly plants, engine plants, casting plants, metal
stamping plants, electronic components plants, transmission and
axle plants, glass plants and industrial equipment plants. A
major portion of the distribution centers, warehouses and sales
offices is owned by Ford, with the remainder being leased.
In addition, Ford's foreign subsidiaries maintain and
operate manufacturing plants, assembly facilities, parts
distribution centers and engineering centers outside the United
States, substantially all of which are owned by such
subsidiaries.
The furniture, equipment and other physical property owned
by Ford's Financial Services operations are not significant in
relation to their total assets.
-26-
Item 3. Legal Proceedings
Various legal actions, governmental investigations and
proceedings and claims are pending or may be instituted or
asserted in the future against the Company and its subsidiaries,
including those arising out of alleged defects in the Company's
products, governmental regulations relating to safety, emissions
and fuel economy, financial services, intellectual property
rights, product warranties and environmental matters. Certain of
the pending legal actions are, or purport to be, class actions.
Some of the foregoing matters involve or may involve
compensatory, punitive or antitrust or other treble damage claims
in very large amounts, or demands for recall campaigns,
environmental remediation programs, sanctions or other relief
which, if granted, would require very large expenditures. See
Item 1, "Business--Governmental Standards". Included among the
foregoing matters are the following:
Product Matters -- Three suits purporting to be nationwide
class actions were filed by some of the plaintiffs of a
previously dismissed federal action that allege claims that are
substantially the same as those in the dismissed federal action -
- - i.e., that they are or were purchasers or owners of or
passengers in 1976 through 1979 model year Ford vehicles equipped
with certain automatic transmissions who have incurred property
damage, personal injury, economic losses or liability for such
losses by reason of an alleged tendency of the vehicles to slip
from park to reverse. A judgment dismissing the first such suit
by the Superior Court for the District of Columbia was vacated by
the local Court of Appeals for the District of Columbia, and
renewed motions to dismiss are under consideration by the
Superior Court. The second suit was filed in the Court of Common
Pleas in Philadelphia, Pennsylvania, and has been stayed pending
the entry of final and non-appealable orders in the action
referred to in the immediately preceding sentence. The third
suit was filed in the Circuit Court of Cook County, Illinois.
That court granted the Company's motion to stay proceedings
indefinitely and the plaintiffs have appealed that ruling to the
Appellate Court of Illinois for the First Judicial District-Third
Division.
Ford is a defendant in various actions for damages arising
out of automobile accidents where plaintiffs claim that the
injuries resulted from (or were aggravated by) alleged defects in
the occupant restraint systems in vehicle lines of various model
years. The damages specified by the plaintiffs in these actions,
including both actual and punitive damages, aggregated
approximately $439 million at January 1, 1994.
Ford is a defendant in various actions involving the
alleged propensity of Bronco II utility vehicles to roll over.
The damages specified in these actions, including both actual and
punitive damages, aggregated approximately $367 million at
January 1, 1994.
In some of the actions described in the foregoing
paragraphs no dollar amount of damages is specified or the
specific amount referred to is only the jurisdictional minimum.
In addition to the pending actions, accidents have occurred and
claims have arisen which also may result in lawsuits in which
such a defect may be alleged.
Ford is a defendant in various actions for injuries claimed
to have resulted from alleged contact with certain Ford parts and
other products containing asbestos. Damages specified by
plaintiffs in complaints in these actions, including both actual
and punitive damages, aggregated approximately $163 million at
January 1, 1994. (In some of these actions no dollar amount of
damages is specified or the specific amount referred to is only
the jurisdictional minimum.) As distinguished from most lawsuits
against Ford, in
-27-
Item 3. Legal Proceedings (Continued)
most of these asbestos-related cases, Ford is
but one of many defendants, and many of these co-defendants have
substantial resources.
Environmental Matters -- Ford has received notices from two
government environmental enforcement agencies concerning two
separate matters, each potentially involving monetary sanctions
exceeding $100,000. One agency believes a Ford facility may have
violated regulations relating to the management of certain of the
facility's wastes and the other agency believes a Ford facility
may violate or may have violated limits established by
regulations or permits for emissions or discharges.
Ford has received notices under RCRA, the Superfund Act and
applicable state laws that it (along with others) may be a
potentially responsible party for the costs associated with
remediating numerous hazardous substance storage, recycling or
disposal sites in many states and, in some instances, for natural
resource damages. Ford also may have been a generator of
hazardous substances at a number of other sites. The amount of
any such costs or damages for which Ford may be held responsible
could be substantial. Contingent losses expected to be incurred
by Ford in connection with many of these sites have been accrued
and are reflected in Ford's financial statements in accordance
with generally accepted accounting principles. However, for many
other of these sites the remediation costs and other damages for
which Ford ultimately may be responsible are not reasonably
estimable because of the uncertainties with respect to factors
such as Ford's connection to the site or to materials there, the
involvement of other potentially responsible parties, the
application of laws and other standards or regulations, site
conditions, and the nature and scope of investigations, studies
and remediation to be undertaken (including the technologies to
be required and the extent, duration and success of remediation).
As a result, Ford is unable to determine or reasonably estimate
the amount of costs or other damages for which it is potentially
responsible in connection with these sites, although it could be
substantial.
Other Matters -- A number of claims have been made or may
be asserted in the future against Ford alleging infringement of
patents held by others. Ford believes that it has valid defenses
with respect to the claims that have been asserted. If some of
such claims should lead to litigation, however, and if the
claimant were to prevail, Ford could be required to pay
substantial damages.
On August 7, 1992, Ford was sued in federal court in Nevada
by an individual patent owner seeking damages and an injunction
for alleged infringement of three (later amended to four) U.S.
patents characterized by the individual as covering machine
vision inspection technologies, including bar code reading. Ford
and one of its suppliers, Motorola, have filed a declaratory
judgment action in the same court to have those patents and
several other patents directed to machine vision, radiation beam
(e.g., laser and electron beam) uses and semiconductor
manufacturing (17 patents in all) declared invalid, unenforceable
and not infringed. If the patent holder were to prevail, Ford
could be required to pay substantial damages of an as yet
indeterminate amount and could become subject to an injunction
preventing future uses of any process or product found to be
covered by a valid patent.
-28-
Item 3. Legal Proceedings (Continued)
On March 15, 1993, Ford was served with a private purported
class action lawsuit in Texas relating to allegations of paint
peeling on unspecified Ford vehicles. The purported class would
include all persons who purchased new or used Ford vehicles in
Texas and who experienced paint peeling as a result of
unspecified defects in Ford's paint process. The plaintiffs seek
an unspecified amount of damages.
Ford has been served with various private purported class
action lawsuits seeking economic damages (including damages for
diminution in value and rescission of purchase agreements) on
behalf of Bronco II vehicle owners relating to the alleged
propensity of such vehicles to roll over. The purported classes
include all Bronco II owners in the United States. Each lawsuit
expressly excludes personal injury claimants, whose claims are
discussed above. Several of the lawsuits seek recovery of
unspecified punitive damages. In addition, several of the
lawsuits seek an order requiring the Company to recall and
retrofit these vehicles.
Ford of Germany and Volkswagen AG have formed a joint
venture to produce a multi-purpose vehicle ("MPV") in Portugal.
The Portuguese government has agreed to grant an incentive
package to the joint venture. On June 15, 1993 the European
Court of Justice rejected a claim filed by a French manufacturer
of MPVs challenging the legality of the grant. The same
manufacturer has filed an appeal with the European Court
challenging the decision of the European Commission in December
1992 granting antitrust approval of the joint venture. Ford has
intervened in these proceedings. If the French manufacturer
succeeds in the antitrust case, which Ford considers unlikely,
the joint venture could be dissolved, the grants may have to be
repaid and the participants in the joint venture might have to
write off substantial development costs.
Item 4. Submission of Matters to a Vote of Security Holders
Not required.
-29-
Item 4A. Executive Officers of the Registrant
The executive officers of the Registrant and their respective positions and
ages at March 25, 1994 are shown in the table below:
Present
Position
with the
Registrant
Name Position Held Since Age
Alex Trotman.............. Chairman of the Board November 1993 60
(1)(2) of Directors, President
and Chief Executive
Officer
Director
Allan D. Gilmour.......... Vice Chairman January 1993 59
(2) Director
Louis R. Ross............. Vice Chairman and Chief January 1993 62
(2) Technical Officer
Director
Stanley A. Seneker........ Executive Vice President October 1987 62
(2) and Chief Financial Officer
Director
Kenneth Whipple........... Executive Vice President-- March 1988 59
Ford and President, Ford
Financial Services Group
W. Wayne Booker........... Executive Vice President-- October 1992 59
International Automotive
Operations
Edward E. Hagenlocker..... Executive Vice President-- January 1993 54
North American Automotive
Operations
Peter J. Pestillo......... Executive Vice President-- January 1993 56
Corporate Relations
William E. Odom........... Group Vice President--Ford December 1993 58
and Chairman of the Board
of Directors and Chief
Executive Officer, Ford
Motor Credit Company
Robert L. Rewey........... Group Vice President-- December 1993 55
Marketing and Sales
Operations
-30-
Item 4A. Executive Officers of the Registrant (Continued)
Present
Position
with the
Registrant
Name Position Held Since Age
Albert Caspers............ Vice President--Ford and January 1991 61
Vice President-Engineering
and Vehicle Manufacturing
Group, Ford of Europe
Incorporated
James D. Donaldson........ Vice President--General July 1992 51
Manager, Truck Operations
Norman F. Ehlers.......... Vice President--Purchasing January 1992 56
and Supply
Edsel B. Ford II.......... Vice President--Ford and December 1993 45
(2) President and Chief
Operating Officer, Ford
Motor Credit Company
Director
Ronald E. Goldsberry...... Vice President--General February 1994 51
Manager, Ford Customer
Service Division
Elliott S. Hall........... Vice President--Washington July 1987 55
Affairs
John A. Hall.............. Vice President--Employee November 1993 56
Relations
Kenneth K. Kohrs.......... Vice President--Car December 1991 55
Product Development
Keith C. Magee............ Vice President--General February 1994 47
Manager, Lincoln-Mercury
Division
John W. Martin, Jr........ Vice President--General April 1989 57
Counsel
Oscar B. Marx III......... Vice President--Automotive January 1991 55
Components
David N. McCammon......... Vice President--Finance October 1987 59
and Treasurer
W. Dale McKeehan.......... Vice President--General November 1993 56
Manager, Vehicle Operations
-31-
Item 4A. Executive Officers of the Registrant (Continued)
Present
Position
with the
Registrant
Name Position Held Since Age
John P. McTague......... Vice President--Technical March 1990 55
Affairs
Jacques A. Nasser....... Vice President--Ford and January 1993 46
Chairman of the Board,
Ford of Europe Incorporated
John A. Oldfield........ Vice President--Ford and February 1994 57
Chairman, Aston Martin
Lagonda Limited
Helen O. Petrauskas..... Vice President--Environmental March 1983 49
and Safety Engineering
Murray L. Reichenstein.... Vice President--Controller January 1991 56
John M. Rintamaki......... Secretary July 1993 52
Ross H. Roberts........... Vice President--General May 1991 56
Manager, Ford Division
David W. Scott............ Vice President--Public January 1988 53
Affairs
Robert P. Sparvero........ Vice President--Asia-Pacific October 1992 53
Automotive Operations
John J. Telnack........... Vice President--Corporate Design August 1993 56
Robert H. Transou......... Vice President-General January 1993 54
Manager, Powertrain
Operations
Thomas J. Wagner.......... Vice President-Customer February 1994 55
Communication and
Satisfaction
(1) Also Chairman of the Organization Review and Nominating Committee of the
Board of Directors.
(2) Also a member of the Finance Committee of the Board of Directors.
-32-
Item 4A. Executive Officers of the Registrant (Continued)
Alex Trotman, Allan D. Gilmour, Louis R. Ross, Stanley A.
Seneker and Kenneth Whipple are members of the Office of the Chief
Executive of the Registrant.
Some of the officers listed above also are members of one or
more additional committees of the Registrant that are not committees
of the Board of Directors.
General Notes:
All of the above officers have been employed by the
Registrant or its subsidiaries in one or more executive capacities
during the past five years.
Under the By-Laws of the Registrant the executive officers
are elected by the Board of Directors at the Annual Meeting of the
Board of Directors held for this purpose, each to hold office until
his or her successor shall have been chosen and shall have qualified
or as otherwise provided in the By-Laws.
-33-
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
The Common Stock of Ford presently is listed on the New
York, Boston, Philadelphia, Midwest and Pacific Coast Stock
Exchanges in the United States; on the Montreal and Toronto Stock
Exchanges in Canada; the Tokyo Stock Exchange in Japan; and on
certain stock exchanges in Belgium, France, Germany, Switzerland and
the United Kingdom. Ford is considering, however, the withdrawal of
its Common Stock from listing and registration on certain of these
U.S. regional and foreign stock exchanges.
The high and low sales prices for Ford Common Stock and the
dividends paid per share of Common and Class B Stock for each full
quarterly period in the years indicated were as follows:
1993 1992
------------------------------------ -----------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------- ------ ------ ------ ------ ------- ------- -------
Common Stock price
per share*
High $53 1/2 $56 1/2 $57 3/4 $66 1/8 $40 5/8 $48 7/8 $46 1/4 $43 5/8
Low 43 49 3/4 48 3/8 54 3/4 27 3/4 37 3/4 37 7/8 34 3/8
Dividends per share of
Common and
Class B Stock $0.40 $0.40 $0.40 $0.40 $0.40 $0.40 $0.40 $0.40
*Prices reflect New York Stock Exchange Composite Transactions
As of January 31, 1994, stockholders of record of Ford included
255,378 holders of Common Stock and 107 holders of Class B Stock.
J:\10K\10kpth
-34-
Item 6. Selected Financial Data
The following tables set forth selected financial data and other data
concerning Ford for each of the last ten years (dollar amounts in millions
except per share amounts):
Summary of Operations 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
Automotive
Sales $91,568 $84,407 $72,051 $81,844 $82,879 $82,193 $71,797 $62,868 $52,915 $52,527
Operating income/(loss) 1,432 (1,775) (3,769) 316 4,252 6,612 6,256 4,142 2,902 3,528
Income/(Loss) before
income taxes and
cumulative effects
of changes in
accounting principles 1,291 (1,952) (4,052) 275 5,155 7,312 6,499 4,300 3,154 3,909
Income/(Loss) before
cumulative effects of
changes in accounting
principles (1) 940 (1,534) (3,186) 99 3,175 4,609 3,767 2,512 2,012 2,528
Net income/(loss) 940 (8,628) (3,186) 99 3,175 4,609 3,767 2,512 2,012 2,528
Financial Services
Revenues $16,953 $15,725 $16,235 $15,806 $13,267 $10,253 $8,096 $ 6,826 $4,700 $3,797
Income before income
taxes and cumulative
effects of changes
in accounting principles 2,712 1,825 1,465 1,221 874 1,301 1,385 1,321 816 629
Income before cumulative
effects of changes in
accounting principles 1,589 1,032 928 761 660 691 858 773 504 379
Net income 1,589 1,243 928 761 660 691 858 773 504 379
Total Company
Income/(Loss) before
income taxes and
cumulative effects
of changes in accounting
principles $4,003 $ (127) $ (2,587) $1,495 $6,030 $8,343 $7,885 $5,620 $4,015 $4,539
Provision/(Credit) for
income taxes 1,350 295 (395) 530 2,112 2,999 3,226 2,324 1,487 1,584
Minority interests 124 80 66 105 82 44 34 12 13 48
Income/(Loss) before
cumulative effects of
changes in accounting
principles (1) $2,529 $ (502) $(2,258) $ 860 $3,835 $5,300 $4,625 $3,285 $2,515 $2,907
Cumulative effects of
changes in accounting
principles - (6,883) - - - - - - - -
Net income/(loss) 2,529 (7,385) (2,258) 860 3,835 5,300 4,625 3,285 2,515 2,907
Total Company Data Per
Share of Common and
Class B Stock (2)
Income/(Loss) before
cumulative effects of
changes in accounting
principles $4.55 $(1.46) $(4.79) $ 1.86 $8.22 $ 10.96 $ 9.05 $ 6.16 $4.54 $ 5.26
Income/(Loss)
Assuming no dilution 4.55 (15.61) (4.79) 1.86 8.22 10.96 9.05 6.16 4.54 5.26
Assuming full dilution 4.20 (15.61) 4.79 1.84 8.12 10.80 8.92 6.05 4.40 4.97
Cash dividends 1.60 1.60 1.95 3.00 3.00 2.30 1.58 1.11 0.80 0.67
Common stock price
range (NYSE)
. High 66 1/8 48 7/8 37 3/4 49 1/8 56 5/8 55 56 3/8 31 3/4 19 3/4 17 1/8
. Low 43 27 3/4 23 3/8 25 41 3/8 38 1/8 28 1/2 18 13 3/8 11
Average number of
shares of Common
and Class B Stock
outstanding
(in millions) 493 486 476 463 467 484 511 533 554 552
(1) 1989 includes an after-tax loss of $424 million from
the sale of Rouge Steel Company.
(2) Share data have been adjusted to reflect stock dividends
and stock splits.
-35-
Item 6. Selected Financial Data (Continued)
Summary of Operations,
cont. 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
Total Company Balance
Sheet Data at Year End
Assets
Automotive $ 61,737 $ 57,170 $ 52,397 $ 50,824 $ 45,819 $ 43,128 $ 39,734 $34,021 $29,297 $25,781
Financial Services 137,201 123,375 122,032 122,839 115,074 100,239 76,260 59,211 45,797 26,209
Total Assets $198,938 $180,545 $174,429 $173,663 $160,893 $143,367 $115,994 $93,232 $75,094 $51,990
Long-term debt
Automotive $ 7,084 $ 7,068 $ 6,539 $ 4,553 $ 1,137 $ 1,336 $ 2,058 $ 2,467 $ 2,459 $ 2,347
Financial Services 47,900 42,369 43,680 40,779 37,784 30,777 26,009 19,128 13,753 8,833
Stockholders' equity (3) 15,574 14,753 22,690 23,238 22,728 21,529 18,493 14,860 12,269 9,838
Total Company Facility
and Tooling Data
Capital expenditures
for facilities
(excluding special
tools) $ 4,339 $ 3,613 $ 3,611 $ 4,702 $ 4,412 $ 3,148 $ 2,415 $ 2,179 $ 2,385 $ 2,332
Depreciation 5,456 4,658 3,956 3,185 2,720 2,458 2,107 1,859 1,559 1,405
Expenditures for
special tools 2,475 2,177 2,236 2,556 2,354 1,634 1,343 1,285 1,417 1,223
Amortization of
special tools 2,012 2,097 1,822 1,695 1,509 1,335 1,353 1,293 948 979
Total Company Employee
Data - Worldwide
Payroll $ 13,753 $ 13,754 $ 12,850 $ 14,014 $ 13,327 $ 13,010 $ 11,683 $11,290 $10,175 $10,018
Total labor costs 20,087 19,824 17,998 18,962 18,152 18,108 16,591 15,610 14,033 13,803
Average number of
employees 322,213 325,333 331,977 368,547 366,641 358,939 351,711 382,274 369,314 389,917
Total Company Employee
Data - U.S. Operations
Payroll $ 8,888 $ 8,015 $ 7,389 $ 8,309 $ 8,650 $ 8,473 $ 7,762 $ 7,704 $ 7,213 $ 6,875
Average number
of employees 166,943 158,377 156,079 179,104 188,286 185,540 180,838 181,476 172,165 178,758
Average hourly labor
costs (4)
Earnings $ 20.94 $ 19.92 $ 19.10 $ 18.44 $ 17.77 $ 17.39 $ 16.50 $ 16.12 $ 15.70 $ 15.06
Benefits 18.12 19.24 17.97 14.12 13.21 13.07 12.38 11.01 10.75 9.40
Total hourly
labor costs $ 39.06 $ 39.16 $ 39.07 $ 32.56 $ 30.98 $ 30.46 $ 28.88 $ 27.13 $ 26.45 $ 24.46
(3) The cumulative effects of changes in accounting principles
reduced equity by $6,883 million in 1992.
(4) Per hour worked (in dollars). Excludes data for subsidiary companies.
-36-
Item 6. Selected Financial Data (Continued)
Summary of Vehicle
Sales (5) 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
U.S.
Cars and Trucks (6)
Cars
United States 1,950,238 1,841,248 1,605,972 1,853,095 2,186,344 2,376,766 2,171,442 2,093,698 1,940,662 2,047,671
Canada 126,297 123,551 143,57 147,712 190,037 200,629 187,840 188,887 194,540 167,295
Total Cars 2,076,535 1,964,799 1,749,543 2,000,807 2,376,381 2,577,395 2,359,282 2,282,585 2,135,202 2,214,966
Trucks
United States 1,875,711 1,520,049 1,260,439 1,422,116 1,523,275 1,540,926 1,481,059 1,404,002 1,260,123 1,238,928
Canada 125,906 109,161 103,757 112,930 136,082 145,142 151,982 126,758 119,583 94,552
Total Trucks 2,001,617 1,629,210 1,364,196 1,535,046 1,659,357 1,686,068 1,633,041 1,530,760 1,379,706 1,333,480
Total in U.S.
and Canada 4,078,152 3,594,009 3,113,739 3,535,853 4,035,738 4,263,463 3,992,323 3,813,345 3,514,908 3,548,446
Cars and Trucks
Outside
U.S. and Canada
Germany 831,216 923,763 969,003 979,941 1,023,380 1,008,198 899,609 862,288 769,883 789,655
Britain 421,939 473,178 481,794 481,260 515,520 507,367 484,057 438,155 422,003 371,598
Spain 211,413 310,957 340,796 334,665 310,481 281,679 276,448 268,114 265,783 269,021
Mexico 90,710 126,334 111,849 84,673 86,830 62,663 34,495 43,601 70,238 50,560
Australia 126,753 120,017 108,986 157,388 158,740 136,203 134,222 143,415 177,108 156,304
Taiwan 113,861 113,966 102,631 104,073 99,713 79,906 59,082 34,757 23,714 33,965
Japan 52,805 66,654 96,298 108,437 91,229 61,722 51,446 44,309 38,559 34,672
Other Countries
(7) 36,737 35,496 20,461 18,529 14,723 39,471 119,692 267,761 268,304 330,430
Total Outside
United States
and Canada 1,885,434 2,170,365 2,231,818 2,268,966 2,300,616 2,177,209 2,059,051 2,102,400 2,035,592 2,036,205
Total Worldwide
- -Cars
and Trucks 5,963,586 5,764,374 5,345,557 5,804,819 6,336,354 6,440,672 6,051,374 5,915,745 5,550,500 5,584,651
Total
Worldwide-Tractors
(8) - - 13,243 67,50 71,690 76,514 63,914 68,336 83,848 82,511
Total Worldwide
Factory Sales 5,963,586 5,764,374 5,358,800 5,872,389 6,408,044 6,517,186 6,115,288 5,984,081 5,634,348 5,667,162
(5) Includes units manufactured by other companies and sold by Ford.
(6) Factory sales are by source of manufacture, except that Canadian,
Mexican and Australian exports to the United States are included
as U.S. vehicle sales, and U.S. exports to Canada are included as
Canadian vehicle sales.
(7) Includes units sold by Ford in Brazil and Argentina through
June 30, 1987, and excludes units sold by Autolatina.
(8) Ford's tractor operation, Ford New Holland, was sold on May 6, 1991.
-37-
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
OVERVIEW
The Company's worldwide net income in 1993 was $2,529 million, or $4.55
per share of Common and Class B Stock, compared with a loss of
$7,385 million, or $15.61 per share in 1992. Sales and revenues totaled
$108.5 billion in 1993, up 8% from 1992. Factory unit sales of cars and
trucks were 5,964,000, up 200,000 or 3%.
In 1992, Ford adopted new accounting standards for postretirement
benefits (principally retiree health care) and income taxes that resulted in
a one-time charge to net income in 1992 for prior years of $6,883 million.
Excluding the one-time effects of these accounting changes, the Company
incurred a net loss of $502 million or $1.46 per share in 1992.
The Company's financial results in 1993 showed substantial improvement
compared with 1992. Improvements in U.S. Automotive operations included the
favorable effects of higher industry volume, higher share, and improved
margins. Automotive operations outside the U.S. also improved, despite
lower industry volumes in Europe. Earnings from Financial Services
operations were a record and increased 54% compared with 1992.
The Company continued its product development and cost reduction
programs to strengthen its competitive position. In 1993, capital spending
for new products and facilities was $6.8 billion, up $1 billion from 1992.
Automotive debt at the end of 1993 was $8,016 million, down $301 million
from year-end 1992. Cash and marketable securities for the Company's
Automotive segment totaled $9,752 million, up $717 million from year-end
1992.
In 1994, the Company expects continued improvements in operating
results from cost reduction efforts, new product introductions, and a
moderate rate of economic growth in the United States. The Company expects
sales for the U.S. car and truck industry to reach about 15 million units in
1994. Several new products will be introduced in 1994, including the Ford
Windstar, Ford Aspire, Ford Contour and Mercury Mystique. Per-unit U.S.
marketing costs for Ford, which declined in 1993, should decline further in
1994 as industry sales increase and new products are introduced.
The Company expects industry sales in Europe to be up slightly in 1994,
compared with 1993. As a result of an expected continuation of the gradual
economic recovery in Great Britain and the restructuring actions undertaken
in Europe during 1993, the operating results of European Automotive
operations are projected to improve in 1994, compared with 1993. In Latin
America, the near-term business outlook is favorable, but business
conditions have historically been volatile and subject to rapid change.
Fourth Quarter of 1993
In the fourth quarter of 1993, the Company's worldwide net income was
$719 million or $1.30 per share of Common and Class B Stock, compared with a
loss of $840 million, or $1.85 per share in the fourth quarter of 1992.
-38-
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Worldwide Automotive operations earned $297 million in the fourth
quarter of 1993, compared with a loss of $1,037 million a year ago. U.S.
Automotive operations earned $669 million in the fourth quarter of 1993,
compared with a loss of $128 million a year ago, while Automotive operations
outside the U.S. incurred a loss of $372 million, compared with a loss of
$909 million a year ago. Financial Services earned $422 million in the
fourth quarter of 1993, compared with $197 million a year ago.
Net income for Automotive operations outside the U.S. were adversely
affected in the fourth quarter of 1993 by restructuring actions at Jaguar
($109 million) and Ford of Australia ($57 million), offset partially by the
favorable one-time effects of a reduction in German tax rates ($59 million).
Automotive operations in the U.S. were favorably affected by the gain on the
sale of Ford's North American automotive seating and seat trim business
($73 million). The loss a year ago included one-time European restructuring
charges of $334 million for Automotive operations and $85 million for
Financial Services operations.
The following discussion of the results of operations excludes the one-
time effects associated with accounting changes in 1992 as discussed above.
The consolidated financial statements on pages FS-1 through FS-28 should be
read as an integral part of this review.
RESULTS OF OPERATIONS: 1993 COMPARED WITH 1992
Automotive Operations
Net income from Ford's worldwide Automotive operations was $940 million
in 1993 on sales of $91.6 billion. In 1992, worldwide Automotive operations
incurred a loss of $1,534 million (excluding the accounting changes) on
sales of $84.4 billion.
In the U.S., Ford's Automotive operations earned $1,482 million on
sales of $61.6 billion, compared with a loss of $405 million in 1992 on
sales of $51.9 billion. Higher vehicle production, reflecting higher
industry sales and a higher Ford market share, accounted for most of the
improvement. Improved margins, reflecting mainly favorable material costs,
manufacturing efficiencies, and lower marketing costs, were offset partially
by higher costs for new products and related facilities. Results in 1993
included the one-time favorable effect of tax legislation ($171 million) for
the restatement of U.S. deferred tax balances for the Federal income tax
rate increase from 34% to 35% and the gain on the sale of Ford's North
American automotive seating and seat trim business ($73 million). On an
ongoing basis, the effect of the tax rate change on future tax expense will
be unfavorable.
In 1993, the U.S. economy continued to grow at a modest rate. In the
eleven quarters since the recovery began in the Spring of 1991, the rate of
growth in the gross domestic product (GDP) has averaged 2.7%, 60% of the
rate over the comparable period during the last six recoveries. Slow growth
has helped reduce interest rates and inflation to low levels. Industry
sales of cars and trucks in the United States have gradually increased from
12.5 million units in 1991 to 14.2 million units in
-39-
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
1993. Over this period, Ford's combined U.S. car and truck market share has
improved -- from 23.2% in 1991 to 25.5% in 1993 -- to the highest level since
1978. The Company also has benefited from reduced marketing incentives,
lower supplier cost increases, and other cost efficiencies.
Full year U.S. car and truck industry volumes increased from
13.1 million units in 1992 to 14.2 million units in 1993. Over 70% of the
increase in industry sales was attributable to trucks (including minivans,
compact utility vehicles, and compact pickups). Ford's share of the U.S.
car market (including Jaguar) was 22.3%, up 5/10 of a point from 1992. The
Company's U.S. truck share was 30.5%, up 8/10 of a point from 1992. The
improved market share for cars and trucks reflected strong product
acceptance.
Outside the U.S., Ford's Automotive operations lost $542 million in
1993 on sales of $30.0 billion, compared with a loss of $1,129 million in
1992 on sales of $32.5 billion. Results improved despite a weak economy in
Europe that resulted in the lowest level of industry sales in eight years.
Savings from cost reduction actions in Europe and improved results in Latin
America, reflecting primarily higher industry volume in Brazil, more than
offset the effects of lower volume in Europe. The loss in 1993 included
restructuring charges at Jaguar ($174 million), primarily for resourcing
stamping and restructuring other operations to improve efficiency, and at
Ford of Australia ($57 million) related to discontinuing production of the
Capri and Laser models, offset partially by the favorable one-time effect of
a reduction in German tax rates ($59 million). Losses in 1992 included
restructuring charges of $334 million.
Ford's European Automotive operations (excluding Jaguar) lost
$407 million, compared with a loss of $647 million in 1992. The improvement
reflected nonrecurrence of the one-time restructuring charge ($334 million)
in the fourth quarter of 1992, primarily for planned reductions in
employment levels. Lower vehicle production, reflecting lower industry
sales (down 16%), higher costs for new products, and the unfavorable effect
of fluctuations in foreign currency exchange rates were partially offset by
manufacturing efficiencies and other cost improvements.
Car and truck industry sales in Europe were 12.5 million units in 1993,
compared with 15 million units in 1992. Ford's European car market share
(including Jaguar) was 11.8% in 1993, up 3/10 of a point from 1992. Ford's
European truck share improved 9/10 of a point to 12.6%.
Financial Services Operations
The Company's Financial Services operations earned a record
$1,589 million in 1993, up $557 million from 1992. Higher volume, reduced
interest rates and operating costs, and lower credit losses contributed to
record earnings at Financial Services operations, including Ford Credit, The
Associates, and USL Capital. Results in 1993 included an unfavorable one-
time effect of $31 million from tax legislation in the U.S. Results in 1992
of $1,032 million excluded a favorable effect of $211 million associated
with one-time accounting changes, mainly for income taxes, but include
organizational restructuring charges relating to European Financial Services
operations ($85 million).
-40-
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Ford Credit's consolidated net income was a record $1,194 million in
1993, up $302 million or 34% from 1992 and included income from its
financing operations and its equity in the net income of affiliated
companies, primarily Ford Holdings. Ford Holdings is a holding company that
owns primarily The Associates, American Road and USL Capital (formerly U.S.
Leasing). Ford Credit's financing operations earned a record $996 million
in 1993, up $259 million from 1992. Operating improvements resulted
primarily from higher levels of earning assets, lower credit losses and
higher gains on the sales of receivables, offset partially by the
unfavorable effect of tax legislation in the U.S. and lower net interest
margins. In addition, international operations managed by Ford Credit
earned $199 million in 1993, up $11 million from 1992, primarily reflecting
improved net interest margins and lower credit losses offset partially by
the unfavorable effect of exchange rates.
The Associates earned a record $470 million in the U.S. in 1993, up
$77 million from 1992. The improvement was more than explained by improved
credit loss performance and higher levels of earning assets. In addition,
international operations managed by The Associates earned $38 million in
1993, the same as in 1992.
First Nationwide incurred a loss of $55 million in 1993, compared with
a loss of $81 million in 1992. The improvement resulted primarily from
reduced borrowing costs, continued improvements in operating costs, a lower
adjustment in 1993 to the carrying value of derivative securities and the
gain on sale of certain branches. These factors were partially offset by
lower levels of earning assets, lower yields from the reinvestment of FDIC
proceeds, and a reduction in income tax benefits.
First Nationwide's 1993 revenues included $72 million from the Federal
Savings and Loan Insurance Corporation Resolution Fund (FSLIC/RF), compared
with $221 million in 1992. These revenues represented reimbursements for
losses or guaranteed yields on covered assets paid pursuant to First
Nationwide's agreements with FSLIC/RF to acquire certain savings and loan
institutions, as described below in the discussion of 1992 compared with
1991.
USL Capital earned a record $77 million in 1993, up $17 million from
1992. The improvement resulted primarily from higher earning assets and
continued operating cost reductions. American Road earned $79 million in
1993, compared with $47 million in 1992. The increase resulted primarily
from improved underwriting experience in extended service plan and floor
plan products, partially offset by lower investment income.
HISTORICAL REFERENCE: 1992 COMPARED WITH 1991
Automotive Operations
In 1992, Ford's worldwide Automotive operations lost $1,534 million
on sales of $84.4 billion. The losses include the portion of one-time
European restructuring charges relating to Automotive operations
($334 million). As noted previously, these results exclude the one-time
effects of accounting changes adopted in 1992. In 1991, the Company's
Automotive operations lost $3.2 billion on sales of $72.1 billion.
-41-
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
In the U.S., Ford's Automotive operations lost $405 million in 1992 on
sales of $51.9 billion, compared with a loss of $2.2 billion in 1991 on
sales of $40.6 billion. Higher vehicle production, reflecting higher
industry sales and a higher Ford market share, accounted for most of the
improvement. Improved margins, reflecting mainly lower supplier cost
increases and lower marketing costs, were offset partially by the ongoing
effect of the accounting change for retiree health care and by revised
accruals for estimates of costs for prior model-year customer satisfaction
claims.
Full year U.S. car and truck industry volumes increased from
12.5 million units in 1991 to 13.1 million units in 1992. Ford's share of
the U.S. car market was 21.8%, up 1.7 percentage points from 1991, primarily
reflecting record sales of the Ford Taurus. The Company's U.S. truck share
was 29.7%, up 8/10 of a point from 1991, reflecting strong performance of
the Econoline Van and Club Wagon, Explorer, and the new Mercury Villager
minivan. The strong share performance and improved industry sales helped to
reduce U.S. marketing costs from 16% of revenue in 1991 to 12% of revenue in
1992.
Outside the U.S., Ford's Automotive operations lost $1,129 million in
1992 on sales of $32.5 billion, compared with a loss of $970 million in 1991
on sales of $31.4 billion. One-time restructuring charges and lower volume
in Europe more than accounted for the decline. Partially offsetting these
adverse factors were lower costs in Europe and improved operating results in
Latin America and Asia-Pacific.
Ford's European Automotive operations (excluding Jaguar operating
results and acquisition costs) lost $647 million in 1992, compared with a
loss of $478 million in 1991. The decline was more than accounted for by
the one-time restructuring charge and lower volume, primarily reflecting
lower Ford car market share. Ford's 1992 European car market share was
11.5%, down 6/10 of a percentage point from 1991, reflecting mainly reduced
sales of the Sierra which was replaced by the all-new Mondeo in early 1993.
Ford's European truck share improved 1.3 points to 11.7%. Car and truck
industry sales in Europe were 15 million units in 1992. Manufacturing
efficiencies and other cost improvements were offset partially by higher
marketing incentives and the unfavorable effect of fluctuations in foreign
currency exchange rates, primarily the devaluation of the Italian lira and
British pound compared with the German mark.
Financial Services Operations
The Company's Financial Services operations earned $1,032 million in
1992, up $105 million or 11% from 1991. Results in 1992 exclude a favorable
effect of $211 million associated with one-time effects of accounting
changes, mainly for income taxes, but include organizational restructuring
charges relating to European Financial Services operations ($85 million).
The increase resulted primarily from lower credit losses and improved net
interest margins, offset in part by adjustments to the carrying value of
derivative securities, lower gains from sales of receivables and a decline
in insurance underwriting and investment income. Depreciation costs
increased in 1992 as a result of continued growth in operating leases at
Ford Credit; the related lease revenues more than offset the increased
depreciation.
-42-
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Ford Credit's consolidated net income was $892 million in 1992, up
$143 million or 19% from 1991 and included income from its financing
operations and its equity in the net income of affiliated companies,
primarily Ford Holdings. Ford Credit's financing operations earned
$737 million in 1992, up $179 million from 1991. The improvement in 1992
was more than explained by lower credit losses and improved net interest
margins, offset partially by lower gains from sales of receivables. In
addition, international operations managed by Ford Credit earned
$188 million in 1992, up $23 million from 1991, primarily reflecting higher
levels of receivables and lower credit losses.
The Associates earned $393 million in the U.S. in 1992, up $46 million
from 1991. The improvement resulted primarily from higher levels of
receivables and improved net interest margins. In addition, international
operations managed by The Associates earned $38 million in 1992, compared
with $25 million in 1991.
First Nationwide incurred a loss of $81 million in 1992, compared with
a loss of $73 million in 1991. The decline resulted primarily from a lower
level of earning assets, reductions in the carrying value of derivative
securities, lower yields from reinvestment of proceeds received from a
settlement with FSLIC/RF discussed below, and lower gains on sales of
mortgage securities. These factors were offset partially by reduced
borrowing costs, lower credit loss provisions, and continued reductions in
operating costs.
First Nationwide's 1992 revenues included $221 million from FSLIC/RF,
compared with $310 million in 1991. These revenues represented
reimbursements for losses or guaranteed yields on covered assets paid
pursuant to First Nationwide's agreements with FSLIC/RF to acquire certain
savings and loan institutions. During the second quarter of 1992, First
Nationwide entered into a settlement agreement with the Resolution Trust
Corporation ("RTC") which substantially terminated the assistance agreements
between First Nationwide and the FSLIC/RF relating to the acquisitions. The
proceeds from the assets that were reacquired by the FSLIC/RF as part of the
agreement were used to reduce associated debt and to reinvest in other
earning assets. Although the settlement is not expected to have a material
effect on the longer-term earnings of First Nationwide, 1992 earnings were
reduced because yields obtained from the reinvestment of the settlement
proceeds were lower than yields obtained from the previously held assets.
American Road earned $47 million in 1992, compared with $126 million in
1991. The decline resulted primarily from discontinuance of the sale of
collateral protection insurance to Ford Credit and lower investment income.
USL Capital earned $60 million in 1992, up $5 million from 1991.
LIQUIDITY AND CAPITAL RESOURCES
Automotive Operations
Cash and marketable securities of the Company's Automotive operations
were $9,752 million at December 31, 1993, up $717 million from December 31,
1992. The Company paid $1,086 million in cash dividends on its capital
stock during 1993. In 1993, the Company contributed $1 billion to its
pension funds.
-43-
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Automotive capital expenditures were $6.7 billion in 1993, up
$1 billion from 1992. Over the last five years (1989 through 1993), the
Company's worldwide capital spending totaled $32 billion. During the next
several years, the pace of spending for product change at Ford will continue
at similar or higher levels.
At December 31, 1993, Automotive debt totaled $8,016 million, which was
34% of total capitalization (stockholders' equity and Automotive debt),
compared with $8,317 million, or 36% of total capitalization, at year-end
1992.
At December 31, 1993, Ford (parent company only) had long-term
contractually committed credit agreements for use in the U.S. under which
$4.8 billion is available from various banks at least through June 30, 1998.
The entire $4.8 billion may be used, at Ford's option, by either Ford or
Ford Credit. As of December 31, 1993, these facilities were unused.
Outside the U.S., Ford has additional long-term contractually committed
credit-line facilities of approximately $2.4 billion. These facilities are
available in varying amounts from 1994 through 1998; none had been utilized
at December 31, 1993.
Financial Services Operations
The Financial Services operations rely heavily on their ability to
raise substantial amounts of funds in capital markets in addition to
collections on loans and retained earnings. The levels of funds for certain
Financial Services operations are affected by certain transactions with
Ford, such as capital contributions, dividend payments and the timing of
payments for income taxes. Their ability to obtain funds also is affected
by their debt ratings which, for certain operations, are closely related to
the financial condition and outlook for Ford and the nature and availability
of support facilities, such as revolving credit and receivables sales
agreements.
Ford Credit's outstanding commercial paper totaled $24.5 billion at
December 31, 1993. Support facilities represent additional sources of
funds, if required. At December 31, 1993, Ford Credit had approximately
$15.4 billion of contractually committed facilities for use in the United
States, 84% of which are available through June 30, 1998. These facilities
included $12.5 billion of revolving credit agreements with banks (which
included $4.8 billion of Ford bank lines that may be used either by Ford or
Ford Credit at Ford's option) and $2.9 billion of agreements to sell retail
automotive receivables. At December 31, 1993, all of the U.S. facilities
were unused. In addition, at December 31, 1993, international subsidiaries
and other credit operations managed by Ford Credit had $14.2 billion of
support facilities available outside the U.S., approximately 44% of which
were contractually committed. At December 31, 1993, approximately 42% of
these support facilities outside the U.S. were in use.
First Nationwide's principal sources of funds include borrowings,
collections on loans, proceeds from the sale of loans, and customers'
deposits. In addition, the Federal Home Loan Bank System provides both
short- and long-term alternative sources of funds. Other sources include
the sale of mortgage pass-through securities and
-44-
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
reverse repurchase agreements. Federal regulations require that an insured
institution maintain certain regulatory capital requirements. New minimum
regulatory capital standards were established in 1989 and will be phased in
through 1994. First Nationwide Bank met all of the minimum capital
requirements in effect at December 31, 1993.
At December 31, 1993, The Associates had contractually committed lines
of credit with banks of $3.1 billion, with various maturities ranging from
January 30, 1994 to December 31, 1994, none of which was utilized at
December 31, 1993. Also, at December 31, 1993, The Associates had
$4.1 billion of contractually committed revolving credit facilities with
banks, with maturity dates ranging from February 1, 1994 through October 1,
1997, and $1 billion of contractually committed receivables sale facilities,
$500 million of which are available through April 15, 1994 and $500 million
of which are available through April 30, 1995; none of these facilities was
in use at December 31, 1993. At December 31, 1993, foreign operations
managed by The Associates had $195 million of support facilities available
outside the U.S., approximately 64% of which were contractually committed.
At December 31, 1993, about 15% of these support facilities outside the U.S.
were in use.
At December 31, 1993, Ford Holdings had outstanding debt of
$1.9 billion, all of which was long-term. All of the Ford Holdings debt
held by nonaffiliated persons is guaranteed by Ford. Ford Holdings had no
contractually committed lines of credit at December 31, 1993. In 1993, Ford
Holdings sold 1,728 shares of its Series B Cumulative Preferred Stock having
an aggregate liquidation preference of $173 million and 2,000 shares of its
Series C Cumulative Preferred Stock having an aggregate liquidation
preference of $200 million.
American Road's principal sources of funds are insurance premiums,
annuity deposits and investment income. American Road had no debt or credit
lines at December 31, 1993.
At December 31, 1993, USL Capital had $1.4 billion of contractually
committed credit facilities, 70% of which are available through September
1998. These facilities included $200 million of contractually committed
receivables sale facilities, of which about 86% were in use at December 31,
1993. At December 31, 1993, foreign operations managed by USL Capital had
approximately $90 million of contractually committed support facilities
available outside the U.S., of which about 75% were in use at December 31,
1993.
NEW ACCOUNTING STANDARDS
In November 1992, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 112,
"Employers' Accounting for Postemployment Benefits", which requires
companies to account for employee benefits on an accrual basis for periods
when employees are no longer actively employed but have not yet reached
retirement. The effect on the Company's financial statements was not
material.
In May 1993, the FASB issued SFAS 114, "Accounting by Creditors for
Impairment of a Loan". The standard requires that impaired loans be
measured based on the
-45-
Item 7. Managment's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
present value of expected future cash flows discounted
at the loan's effective interest rate. The Company does not plan to adopt
this standard until January 1, 1995, and the effect is not expected to be
material.
In May 1993, the FASB issued SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities". The standard establishes
financial accounting and reporting requirements for investments in equity
securities (excluding those accounted for under the equity method and
investments in consolidated subsidiaries) that have readily determinable
fair values and for all investments in debt securities. The Company has
adopted this standard effective January 1, 1994, and the effect is not
expected to be material.
Item 8. Financial Statements and Supplementary Data
The Financial Statements and Notes to Financial Statements of the
Registrant and the Report of Independent Accountants that are filed as part
of this Report are listed under Item 14. "Exhibits, Financial Statement
Schedules, and Reports on Form 8-K" and are set forth on pages FS-1 through
FS-28 immediately following the signature pages of this Report.
Selected quarterly financial data of Ford and its consolidated
subsidiaries for 1992 and 1993 are set forth in Note 17 of Notes to
Financial Statements.
Item 9. Disagreements With Accountants on Accounting and Financial
Disclosure
Not required.
-46-
PART III
Item 10. Directors and Executive Officers of the Registrant
The information called for by Item 10 is incorporated by reference from
the information under the caption "Election of Directors" in the Proxy
Statement, except that the information called for by Item 10 with respect to
executive officers of the Registrant appears as Item 4A under Part I of this
Report.
Item 11. Executive Compensation
The information called for by Item 11 is incorporated by reference from
the information under the captions "Compensation of Directors",
"Compensation and Option Committee Report on Executive Compensation", and
"Compensation of Executive Officers" in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information called for by Item 12 is incorporated by reference from
the information on page 1 of, and under the caption "Election of Directors"
in, the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information called for by Item 13 is incorporated by reference from
the information under the caption "Compensation of Directors" in the Proxy
Statement.
-47-
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements - Ford Motor Company and Subsidiaries
Consolidated Statement of Income, for the years ended December 31,
1993, 1992 and 1991.
Consolidated Balance Sheet, December 31, 1993 and 1992.
Consolidated Statement of Cash Flows, for the years ended December 31,
1993, 1992 and 1991.
Consolidated Statement of Stockholders' Equity, for the years ended
December 31, 1993, 1992 and 1991.
Notes to Financial Statements
Report of Independent Accountants
The Financial Statements, the Notes to Financial Statements and
the Report of Independent Accountants listed above are filed as part of
this Report and are set forth on pages FS-1 through FS-28 immediately
following the signatures pages of this Report.
(a) 2. Financial Statement Schedules
Designation Description
- ----------- -----------
Schedule IX Short-Term Borrowings
Schedule X Supplementary Income Statement Information
Supplemental
Schedule Condensed Financial Information of Subsidiary
The Financial Statement Schedules listed above are filed as part of
this Report and are set forth on pages FSS-1 through FSS-4 immediately
following page FS-28. The schedules not filed are omitted because the
information required to be contained therein is disclosed elsewhere in the
Financial Statements or the amounts involved are not sufficient to require
submission.
(a) 3. Exhibits
Designation Description Method of Filing
- ----------- ----------- ----------------
Exhibit 3-A Certificate of Incorporation, Filed as Exhibit 3-A to the
as amended on November 19, Registrant's Annual Report on
1991 and as further amended Form 10-K for the year ended
on October 28, 1992. December 31, 1992.*
-48-
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
Designation Description Method of Filing
- ----------- ----------- ----------------
Exhibit 3-B By-Laws of the Registrant as Filed with this Report.
amended through December 9,
1993.
Exhibit 4-A Form of Deposit Agreement Filed as Exhibit 4-E to
dated as of November 20, 1991 the Registrant's
among Ford Motor Company, Registration Statement
Manufacturers Hanover Trust No. 33-43085.*
Company, as Depositary, and the
holders from time to time of
Depositary Shares, each
representing 1/1,000 of a share
of the Registrant's Series A
Cumulative Convertible
Convertible Preferred Stock.
Exhibit 4-B Form of Deposit Agreement Filed as Exhibit 4-E to
dated as of October 29, 1992 the Registrant's
among Ford Motor Company, Registration Statement
Chemical Bank, as Depositary, No. 33-53092.*
and the holders from time to
time of Depositary Shares, each
representing 1/2,000 of a share
of the Registrant's Series B
Cumulative Preferred Stock.
Exhibit 10-A Amended and Restated Filed with this Report.
Agreement dated as of July 1,
1993 between the Registrant
and Ford Credit.
Exhibit 10-B 1985 Stock Option Plan of Filed as Exhibit 10-D to
the Registrant.** the Registrant's Annual
Report on Form 10-K
for the year ended
December 31, 1985.*
Exhibit 10-B-1 Amendment dated as of Filed as Exhibit 10-C-1
March 8, 1990 to 1985 Stock to the Registrant's
Option Plan.** Annual Report on Form
10-K for the year ended
December 31, 1989.*
-49-
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
Designation Description Method of Filing
- ----------- ----------- ----------------
Exhibit 10-C 1980 Stock Option Plan of Filed as Exhibit 10-E to
the Registrant, as amended the Registrant's Annual
on October 8, 1981.** Report on Form 10-K
for the year ended
December 31, 1981.*
Exhibit 10-C-1 Amendment dated as of Filed as Exhibit 10-D-1
March 8, 1990 to 1980 Stock to the Registrant's
Option Plan.** Annual Report on Form
10-K for the year ended
December 31, 1989.**
Exhibit 10-D Ford Motor Company Filed as Exhibit 10-H
Supplemental Compensation to the Registrant's Annual
Plan as amended through Report on Form 10-K
May 8, 1986.** for the year ended
December 31, 1986.*
Exhibit 10-D-1 Amendment to Ford Motor Filed as Exhibit 10-F-1
Company Supplemental to the Registrant's Annual
Compensation Plan, dated Report on Form 10-K
May 12, 1988.** for the year ended
December 31, 1988.*
Exhibit 10-D-2 Amendment to Ford Motor Filed as Exhibit 10-D-2 to
Company Supplemental the Registrant's Annual
Compensation Plan, dated Report on Form 10-K for the
July 8, 1992.** year ended December 31, 1992.*
Exhibit 10-E Ford Motor Company Executive Filed as Exhibit 10-G to
Separation Allowance Plan as the Registrant's Annual
revised for separations on Report on Form 10-K
or after January 1, 1981.** for the year ended
December 31, 1987.*
Exhibit 10-E-1 Amendment to Ford Motor Filed as Exhibit 10-G-1
Company Executive Separation to the Registrant's Annual
Allowance Plan.** Report on Form 10-K
for the year ended
December 31, 1988.*
-50-
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
Designation Description Method of Filing
- ----------- ----------- ----------------
Exhibit 10-F Description of Company Filed as Exhibit 10-I to
practices regarding club the Registrant's Annual
memberships for executives.** Report on Form 10-K
for the year ended
December 31, 1981.*
Exhibit 10-G Description of Company Filed as Exhibit 10-J to
practices regarding travel the Registrant's Annual
expenses of spouses of Report on Form 10-K
certain executives.** for the year ended
December 31, 1980.*
Exhibit 10-H Ford Motor Company Deferred Filed as Exhibit 10-L to
Compensation Plan for Non- the Registrant's Annual
Employee Directors, adopted Report on Form 10-K
January 13, 1983.** for the year ended
December 31, 1982.*
Exhibit 10-H-1 Deferred Compensation Plan Filed as Exhibit 10-H-1 to
for Non-Employee Directors, the Registrant's Annual
as amended on July 11, 1991.** Report on Form 10-K
for the year ended
December 31, 1991.*
Exhibit 10-I Ford Motor Company Benefit Filed as Exhibit 10-K to
Equalization Plan, as amended the Registrant's Annual
through January 10, 1985.** Report on Form 10-K
for the year ended
December 31, 1988.*
Exhibit 10-I-1 Description of Amendment to Filed as Exhibit 10-K-1 to
Ford Motor Company Benefit the Registrant's Annual
Equalization Plan adopted Report on Form 10-K
on November 10, 1988.** for the year ended
December 31, 1988.*
Exhibit 10-J Description of Financial Filed as Exhibit 10-N to
Counseling Services provided the Registrant's Annual
to certain executives.** Report on Form 10-K for
for the year ended
December 31, 1983.*
-51-
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
Designation Description Method of Filing
- ----------- ----------- ----------------
Exhibit 10-K Agreement and Plan of Reor- Filed as Exhibit 2 to
ganization Among Ford Motor the Registrant's Current
Company and Ford Affiliate Report on Form 8-K dated
Company and National Inter- December 16, 1985.*
group, Inc. and NHC Corpor-
ation and First Nationwide
Financial Corporation dated
as of August 2, 1985.
Exhibit 10-L 1986 Long-Term Incentive Plan Filed as Exhibit 10-Q to
of the Registrant.** the Registrant's Annual
Report on Form 10-K
for the year ended
December 31, 1985.*
Exhibit 10-L-1 Amendment dated as of June 1, Filed as Exhibit 10-N-1
1990 to 1986 Long-Term Incen- to the Registrant's
tive Plan of the Annual Report on Form 10-K
Registrant.** for the year ended
December 31, 1990.*
Exhibit 10-M Supplemental Executive Filed as Exhibit 10-R to
Retirement Plan, as amended the Registrant's Annual
as of December 11, 1986.** Report on Form 10-K
December 31, 1986.*
Exhibit 10-M-1 Description of Amendment to Filed as Exhibit 10-O-1
the Supplemental Executive to the Registrant's
Retirement Plan, adopted Annual Report on Form 10-K
July 13, 1989.** for the year ended
December 31, 1990.*
Exhibit 10-M-2 Description of Amendment to Filed as Exhibit 10-M-2
the Supplemental Executive to the Registrant's
Retirement Plan, adopted Annual Report on Form 10-K
October 10, 1991.** for the year ended
December 31, 1991.*
Exhibit 10-M-3 Description of Amendment to Filed as Exhibit 10-M-3
the Supplemental Executive to the Registrant's
Retirement Plan, adopted Annual Report on Form 10-K
October 8, 1992.** for the year ended
December 31, 1992.*
Exhibit 10-M-4 Description of Amendment to Filed with this Report.
the Supplemental Executive
Retirement Plan, adopted
October 1, 1993.**
-52-
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
Designation Description Method of Filing
- ----------- ----------- ----------------
Exhibit 10-N Ford Motor Company Restricted Filed as Exhibit 10-P to
Stock Plan for Non-Employee the Registrant's Annual
Directors adopted by the Board Report on Form 10-K
of Directors on November 10, for the year ended
1988, and approved by the December 31, 1988.*
stockholders at the 1989
Annual Meeting.**
Exhibit 10-O 1990 Long-Term Incentive Plan, Filed as Exhibit 10-R to
amended as of June 1, 1990, of the Registrant's Annual
the Registrant.** Report on Form 10-K
for the year ended
December 31, 1990.*
Exhibit 10-O-1 Amendment to 1990 Long-Term Filed as Exhibit 10-P-1
Incentive Plan, effective as to the Registrant's Annual
of October 1, 1990.** Report on Form 10-K
for the year ended
December 31, 1991.*
Exhibit 10-P Description of Matching Gift Filed as Exhibit 10-Q to
Program for Non-Employee the Registrant's Annual
Directors.** Report on Form 10-K
for the year ended
December 31, 1991.*
Exhibit 10-Q Description of Non-Employee Filed as Exhibit 10-R to
Directors Life Insurance the Registrant's Annual
and Optional Retirement Report on Form 10-K for
Plan (amended as of the year ended December
January 1, 1993).** 31, 1992.*
Exhibit 10-R Description of Non-Employee Filed as Exhibit 10-S to
Directors Accidental Death, the Registrant's Annual
Dismemberment and Permanent Report on Form 10-K for
Total Disablement the year ended December
Indemnity.** 31, 1992.*
Exhibit 10-S Agreement dated December 10, Filed as Exhibit 10-T to
1992 between William C. Ford the Registrant's Annual
and the Registrant.** Report on Form 10-K for
the year ended December
31, 1992.*
-53-
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
Designation Description Method of Filing
- ----------- ----------- ----------------
Exhibit 10-T Support Agreement dated as of Filed with this Report.
October 1, 1993 between the
Registrant and Ford Credit
Europe.
Exhibit 10-U Description of Amendments to Filed with this Report.
Company Benefit Plans, including
the Supplemental Executive
Retirement Plan, Benefit
Equalization Plan and Executive
Separation Allowance Plan,
adopted December 9, 1993.**
Exhibit 11 Computation of Primary and Filed with this Report.
Fully Diluted Earnings a
Share.
Exhibit 12 Computation of Ratio of Filed with this Report.
Earnings to Combined Fixed
Charges and Preferred Stock
Dividends.
Exhibit 21 List of Subsidiaries of Filed with this Report.
the Registrant as of
December 31, 1993.
Exhibit 23 Consent of Independent Filed with this Report.
Certified Public Accountants.
Exhibit 24 Powers of Attorney. Filed with this Report.
- -------------------
* Incorporated by reference as an exhibit hereto
** Management contract or compensatory plan or arrangement
-54-
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
Instruments defining the rights of holders of certain issues of
long-term debt of the Registrant and of certain consolidated subsidiaries
and of any unconsolidated subsidiary, for which financial statements are
required to be filed with this Report, have not been filed as exhibits to
this Report because the authorized principal amount of any one of such
issues does not exceed 10% of the total assets of the Registrant and its
subsidiaries on a consolidated basis. The Registrant agrees to furnish a
copy of each of such instruments to the Commission upon request.
(b) Reports on Form 8-K
During the quarter ended December 31, 1993, the Registrant filed the
following Current Reports on Form 8-K:
1. Current Report on Form 8-K dated September 29, 1993 that included
information relating to the ratification of a new collective
bargaining agreement between the Registrant and the UAW.
2. Current Report on Form 8-K dated October 27, 1993 that included
information regarding the consolidated results of operations and
financial condition of the Registrant and its subsidiaries for the
three and nine-month periods ended or at September 30, 1993.
3. Current Report on Form 8-K dated December 1, 1993 that included
information regarding certain comments made by Alex Trotman, Chairman
of the Board of Directors, President and Chief Executive Officer of
the Registrant.
4. Current Report on Form 8-K dated December 13, 1993 that included
information regarding certain comments made by W. Wayne Booker,
Executive Vice President--International Automotive Operations of the
Registrant.
-55-
SIGNATURES
Pursuant to the requirements of Section 13 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
By: Murray L. Reichenstein*
(Murray L. Reichenstein)
Vice President--Controller
(principal accounting officer)
Date: March 21, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
Director and
Chairman of the Board
of Directors, President
and Chief Executive Officer
Alex Trotman* (principal executive officer) March 21, 1994
(Alex Trotman)
Colby H. Chandler* Director March 21, 1994
(Colby H. Chandler)
Michael D. Dingman* Director March 21, 1994
(Michael D. Dingman)
Director, Vice
President-Ford and
President and Chief
Operating Officer, Ford
Edsel B. Ford II* Motor Credit Company March 21, 1994
(Edsel B. Ford II)
-56-
Signature Title Date
Director and Chairman
William Clay Ford* of the Finance Committee March 21, 1994
(William Clay Ford)
Director and
General Manager,
William Clay Ford, Jr.* Climate Control Division March 21, 1994
(William Clay Ford, Jr.)
Director and
Allan D. Gilmour* Vice Chairman March 21, 1994
(Allan D. Gilmour)
Roberto C. Goizueta* Director March 21, 1994
(Roberto C. Goizueta)
Irvine O. Hockaday, Jr.* Director March 21, 1994
(Irvine O. Hockaday, Jr.)
Drew Lewis* Director March 21, 1994
(Drew Lewis)
Ellen R. Marram* Director March 21, 1994
(Ellen R. Marram)
Kenneth H. Olsen* Director March 21, 1994
(Kenneth H. Olsen)
-57-
Signature Title Date
Carl E. Reichardt* Director March 21, 1994
(Carl E. Reichardt)
Director and Vice Chairman
Louis R. Ross* and Chief Technical Officer March 21, 1994
(Louis R. Ross)
Director and
Executive Vice President
and Chief Financial Officer
Stanley A. Seneker* (principal financial officer) March 21, 1994
(Stanley A. Seneker)
Clifton R. Wharton, Jr.* Director March 21, 1994
(Clifton R. Wharton, Jr.)
*By:/s/John M. Rintamaki
(John M. Rintamaki, Attorney-in-Fact)
-58-
Ford Motor Company and Subsidiaries
HIGHLIGHTS
-----------
Fourth Quarter Full Year
----------------- ----------------
1993 1992 1993 1992
Worldwide factory sales of cars
and trucks (in thousands)
- - United States 942 873 3,826 3,361
- - Outside United States 512 529 2,138 2,403
------ ------- ------ -----
Total 1,454 1,402 5,964 5,764
======= ======= ====== =====
Sales and revenues (in millions)
- - Automotive $23,511 $21,498 $ 91,568 $ 84,407
- - Financial Services 4,330 3,908 16,953 15,725
------- ------- -------- --------
Total $27,841 $25,406 $108,521 $100,132
======= ======= ======== ========
Income/(loss) before cumulative effects
of changes in accounting principles
(in millions)
- - Automotive $ 297 $(1,037) $ 940 $ (1,534)
- - Financial Services 422 197 1,589 1,032
------- -------- -------- -------
Total $ 719 $ (840) $ 2,529 $ (502)
======= ======= ======== ========
Net income/(loss) (in millions)
- - Automotive $ 297 $(1,037) $ 940 $ (8,628)
- - Financial Services 422 197 1,589 1,243
------- -------- -------- -------
Total $ 719 $ (840) $ 2,529 $ (7,385)
======= ======= ======== ========
Capital expenditures (in millions)
- - Automotive $ 1,985 $ 1,747 $ 6,714 $ 5,697
- - Financial Services 32 41 100 93
------- ------- --------- -------
Total $ 2,017 $ 1,788 $ 6,814 $ 5,790
======= ======= ======== ========
Stockholders' equity at December 31
- - Total (in millions) $15,574 $14,753 $ 15,574 $ 14,753
- - After-tax return on Common and
Class B stockholders' equity 21.1% * 18.6% *
Automotive cash, cash equivalents,
and marketable securities at
December 31 (in millions) $ 9,752 $ 9,035 $ 9,752 $ 9,035
Automotive debt at December 31
(in millions) $ 8,016 $ 8,317 $ 8,016 $ 8,317
After-tax returns on sales
- - Automotive 1.3% * 1.1% *
- - Total Company 2.6% * 2.4% *
Shares of Common and Class B Stock
(in millions)
- - Average number outstanding 498 488 493 486
- - Number outstanding at December 31 499 489 499 489
AMOUNTS PER SHARE OF COMMON AND
CLASS B STOCK AFTER PREFERRED
STOCK DIVIDENDS
Income/(loss) before cumulative
effects of changes in accounting
principles
- - Automotive $ 0.45 $ (2.25) $ 1.33 $ (3.58)
- - Financial Services 0.85 0.40 3.22 2.12
Total $ 1.30 $ (1.85) $ 4.55 $ (1.46)
======= ======= ======== ========
Income/(loss)
- - Automotive $ 0.45 $ (2.25) $ 1.33 $ (18.16)
- - Financial Services 0.85 0.40 3.22 2.55
Total $ 1.30 $ (1.85) $ 4.55 $ (15.61)
======= ======= ======== ========
Income/(loss) assuming full dilution $ 1.19 $ (1.85) $ 4.20 $ (15.61)
Cash dividends per share of Common
and Class B Stock $ 0.40 $ 0.40 $ 1.60 $ 1.60
- - - - - -
*Results in this period were a loss.
FS-1
Ford Motor Company and Subsidiaries
VEHICLE FACTORY SALES
----------------------
For the Periods Ended December 31, 1993 and 1992
Fourth Quarter Full Year
------------------------- ---------------------------
1993 1992 1993 1992
------- ------- -------- -------
U.S. and Canada
Cars - U.S. 458,253 446,772 1,950,238 1,841,248
- Canada 34,668 28,978 126,297 123,551
Total cars 492,921 475,750 2,076,535 1,964,799
Trucks - U.S. 483,623 426,166 1,875,711 1,520,049
- Canada 42,571 34,938 125,906 109,161
Total trucks 526,194 461,104 2,001,617 1,629,210
Total U.S. and Canada 1,019,115 936,854 4,078,152 3,594,009
Outside U.S. and Canada
Germany 192,563 201,851 831,216 923,763
Britain 98,146 82,302 421,939 473,178
Spain 48,208 70,739 211,413 310,957
Taiwan 18,881 23,923 113,861 113,966
Mexico 22,429 31,577 90,710 126,334
Australia 33,527 32,092 126,753 120,017
Japan 10,725 13,855 52,805 66,654
Other countries 10,562 9,177 36,737 35,496
Total overseas 435,041 465,516 1,885,434 2,170,365
Total worldwide vehicle
factory sales 1,454,156 1,402,370 5,963,586 5,764,374
========= ========= ========= =========
Includes units manufactured by other companies and sold by Ford. Factory sales
are shown by source of manufacture, except that Canadian, Mexican and
Australian exports to the United States are included as U.S. vehicle sales,
and U.S. exports to Canada are included as Canadian vehicle sales.
FS-2
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
For the Years Ended December 31, 1993, 1992 and 1991
(in millions)
1993 1992 1991
------ ------- --------
AUTOMOTIVE
Sales (Note 1) $91,568 $84,407 $72,051
Costs and expenses (Note 1)
Costs of sales 85,168 81,748 71,827
Selling, administrative, and other expenses 4,968 4,434 3,993
Total costs and expenses 90,136 86,182 75,820
Operating income/(loss) 1,432 (1,775) (3,769)
Interest income 563 653 677
Interest expense 807 860 903
Net interest expense (244) (207) (226)
Equity in net income/(loss) of affiliated
companies (Note 1) 127 15 (29)
Net (expense)/revenue from transactions with
Financial Services (Note 16) (24) 15 (28)
Income/(loss) before income taxes
and cumulative effects of changes
in accounting principles -
Automotive 1,291 (1,952) (4,052)
FINANCIAL SERVICES
Revenues (Note 1) 16,953 15,725 16,235
Costs and expenses (Note 1)
Interest expense 6,482 7,056 8,317
Operating and other expenses 3,196 2,945 2,822
Provision for credit and insurance losses 1,523 1,795 2,159
Depreciation 3,064 2,089 1,500
Total costs and expenses 14,265 13,885 14,798
Net revenue/(expense) from
transactions with
Automotive (Note 16) 24 (15) 28
Income before income taxes and cumulative
effects of changes in accounting
principles -
Financial Services 2,712 1,825 1,465
TOTAL COMPANY
Income/(loss) before income taxes and
cumulative effects of changes in
accounting principles 4,003 (127) (2,587)
Provision/(credit) for
income taxes (Note 6) 1,350 295 (395)
Income/(loss) before minority
interests and cumulative effects
of changes in accounting
principles 2,653 (422) (2,192)
Minority interests in net
income of subsidiaries 124 80 66
Income/(loss) before cumulative effects of
changes in accounting principles 2,529 (502) (2,258)
Cumulative effects of changes in accounting
principles (Notes 6 and 8) - (6,883) -
Net income/(loss) 2,529 (7,385) (2,258)
Preferred stock dividend requirements 288 209 22
Income/(loss) attributable to Common
and Class B Stock $ 2,241 $(7,594) $(2,280)
======= ======= =======
FS-3
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
---------------------------------
For the Years Ended December 31, 1993, 1992, and 1991
(in millions)
1993 1992 1991
---- ---- ----
Average number of shares of
Common and Class B Stock
outstanding 493 486 476
AMOUNTS PER SHARE OF COMMON
STOCK AND CLASS B STOCK
AFTER PREFERRED STOCK DIVIDENDS (Note 1)
Income/(loss) before cumulative
effects of changes in
accounting principles $ 4.55 $ (1.46) $(4.79)
Cumulative effects of changes
in accounting principles - (14.15) -
------ ------- ------
Income/(loss) $ 4.55 $(15.61) $(4.79)
====== ======= ======
Income/(loss) assuming full dilution $ 4.20 $(15.61) $(4.79)
Cash dividends $ 1.60 $ 1.60 $ 1.95
The accompanying notes are part of the financial statements.
FS-4
Ford Motor Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
--------------------------
(in millions)
December 31, December 31,
1993 1992
------------- -----------
ASSETS
Automotive
Cash and cash equivalents $ 5,667 $ 3,504
Marketable securities, at cost
and accrued interest
(approximates market, Note 2) 4,085 5,531
-------- --------
Total cash, cash equivalents,
and marketable securities 9,752 9,035
Receivables 2,302 2,204
Inventories (Note 4) 5,538 5,451
Deferred income taxes 2,830 2,480
Other current assets 1,226 1,298
Net current receivable from
Financial Services (Note 16) 834 1,368
-------- --------
Total current assets 22,482 21,836
Equity in net assets of affiliated companies (Note 1) 3,002 2,751
Net property (Note 5) 23,059 22,160
Deferred income taxes 5,427 5,015
Other assets (Notes 1 and 8) 7,691 5,339
Net noncurrent receivable from
Financial Services (Note 16) 76 69
------- --------
Total Automotive assets 61,737 57,170
Financial Services
Cash and cash equivalents 2,555 3,182
Investments in securities (Note 2) 8,219 6,874
Net receivables and lease investments (Note 3) 119,535 106,144
Other assets (Note 1) 6,892 7,175
Total Financial Services assets 137,201 123,375
------- -------
Total assets $198,938 $180,545
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive
Trade payables $ 8,769 $ 7,944
Other payables 1,976 1,631
Accrued liabilities (Note 7) 10,815 9,983
Income taxes payable 160 318
Debt payable within one year (Note 9) 932 1,249
-------- --------
Total current liabilities 22,652 21,125
Long-term debt (Note 9) 7,084 7,068
Other liabilities (Note 7) 25,911 21,866
Deferred income taxes 1,089 1,333
------- --------
Total Automotive liabilities 56,736 51,392
Financial Services
Payables 1,881 1,514
Debt (Note 9) 103,960 90,188
Deposit accounts (Note 10) 10,549 14,030
Deferred income taxes 2,287 1,616
Other liabilities and deferred income 5,583 4,532
Net payable to Automotive (Note 16) 910 1,437
------- -------
Total Financial Services liabilities 125,170 113,317
Preferred stockholders' equity in a
subsidiary company (Note 1) 1,458 1,083
Stockholders' equity
Capital stock (Notes 11 and 14)
Preferred Stock, par value $1.00 per share (aggregate
liquidation preference of $3.4 billion) * *
Common Stock, par value $1.00 per share
(464 and 454 million shares issued) 464 454
Class B Stock, par value $1.00 per share
(35 million shares issued) 35 35
Capital in excess of par value of stock 5,082 4,698
Foreign currency translation adjustments
and other (Note 1) (678) (62)
Minimum pension liability adjustment (400) -
Earnings retained for use in business 11,071 9,628
------ -----
Total stockholders' equity 15,574 14,753
------ ------
Total liabilities and stockholders' equity $198,938 $180,545
======== ========
- - - - - -
*Less than $1 million
The accompanying notes are part of the financial statements.
Certain amounts for 1992 have been reclassified to conform with presentations
adopted in 1993.
FS-5
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
-----------------------------------------------
For the Years Ended December 31, 1993, 1992, and 1991
(in millions)
1993 1992 1991
------ --------- ---------
CAPITAL STOCK (Note 11)
Common Stock
Balance at beginning of year $ 454 $ 448 $ 438
Issued for employee benefit
plans and other 10 6 10
------- ------- -------
Balance at end of year 464 454 448
Class B Stock 35 35 35
Series A Preferred Stock
Balance at beginning of year * * -
Sale of Series A Preferred Stock 0 0 *
------- ------- -------
Balance at end of year * * *
Series B Preferred Stock
Balance at beginning of year * - -
Sale of Series B Preferred Stock 0 * -
------- ------- -------
Balance at end of year * * -
CAPITAL IN EXCESS OF PAR VALUE OF STOCK
Balance at beginning of year 4,698 3,379 766
Issued for employee benefit
plans and other 384 215 361
Sale of Series A Preferred Stock 0 0 2,252
Sale of Series B Preferred Stock 0 1,104 -
----- ----- -----
Balance at end of year 5,082 4,698 3,379
FOREIGN CURRENCY TRANSLATION
ADJUSTMENTS AND OTHER (Note 1)
Balance at beginning of year (62) 838 823
Translation adjustments during year (508) (975) 8
Minimum pension liability adjustment (400) - -
Other (108) 75 7
----- ----- ----
Balance at end of year (1,078) (62) 838
EARNINGS RETAINED FOR USE IN THE
BUSINESS
Balance at beginning of year 9,628 17,990 21,175
Net income/(loss) 2,529 (7,385) (2,258)
Cash dividends (1,086) (977) (927)
------ ------ ------
Balance at end of year 11,071 9,628 17,990
------ ------ ------
Total stockholders' equity $15,574 $14,753 $22,690
======= ======= =======
Common Class B Preferred Preferred
SHARES OF CAPITAL STOCK Stock Stock Stock Stock
--------- -------- ---------- ---------
Issued at December 31, 1990 438 35 - -
Additions
1991 10 0 0.046 -
1992 6 0 0 0.023
1993 10 0 0 0
--- -- ----- -----
Net additions 26 0 0.046 0.023
--- -- ----- -----
Issued at December 31, 1993 464 35 0.046 0.023
====== ====== ======= =======
- - - - - -
*Less than 1 million
The accompanying notes are part of the financial statements.
FS-7
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
-------------------------------------
For the Years Ended December 31, 1993, 1992, and 1991
(in millions)
1993 1992 1991
----------------------- ----------------------- ---------------------
Financial Financial Financial
Automotive Services Automotive Services Automotive Services
Cash and cash equivalents at
January 1 $ 3,504 $ 3,182 $ 4,958 $ 3,175 $ 4,599 $ 2,168
Cash flows from operating
activities (Note 15) 6,862 7,145 5,753 5,762 3,341 4,780
Cash flows from investing
activities
Capital expenditures (6,714) (100) (5,697) (93) (5,723) (124)
Proceeds from sale and
leaseback of fixed assets 884 - 263 - 619 -
Acquisitions of other companies 0 (336) 0 (461) 0 (860)
Proceeds from sales of subsidiaries 173 0 52 0 273 0
Acquisitions of receivables and
lease investments - (163,858) - (134,619) - (124,606)
Collections of receivables and
lease investments - 142,844 - 123,144 - 117,581
Purchases of securities (100,493) (13,741) (50,437) (12,877) (56,141) (11,876)
Sales of securities 101,927 12,426 49,629 12,169 52,795 14,450
Proceeds from sales of receivables - 4,794 - 6,465 - 4,533
Loans originated net of principal
payments - (1,466) - (938) - (321)
Investing activity with Financial
Services (117) - 709 - 837 -
Other (69) 389 (492) 372 (175) 555
------ ------ ----- ------- ------- ------
Net cash used in investing
activities (4,409) (19,048) (5,973) (6,838) (7,515) (668)
Cash flows from financing activities
Cash dividends (1,086) - (977) - (927) -
Sale of Preferred Stock 0 - 1,104 - 2,252 -
Issuance of Common Stock 394 - 221 - 371 -
Changes in short-term debt (66) 6,065 (426) 2,739 117 (3,931)
Proceeds from issuance of other debt 424 22,128 1,865 13,382 4,808 13,889
Principal payments on other debt (376) (13,791) (1,598) (13,122) (2,477) (9,981)
Financing activity with Automotive - 117 - (709) - (837)
Changes in customers' deposits,
excluding interest credited - (3,861) - (3,418) - (1,875)
Receipts from annuity contracts - 821 - 703 - 46
Issuance of subsidiary company
preferred stock - 375 - 283 - 0
Other (124) (76) 79 (10) 3 12
---- ----- ----- ------ ----- ----
Net cash (used in)/provided by
financing activities (834) 11,778 268 (152) 4,147 (2,677)
Effect of exchange rate changes
on cash 17 25 (220) (47) (35) (7)
Net transactions with Automotive/
Financial Services 527 (527) (1,282) 1,282 421 (421)
---- ------ ----- ----- ----- -----
Net increase/(decrease) in
cash and cash equivalents 2,163 (627) (1,454) 7 359 1,007
-------- -------- ------- ------ ----- -----
Cash and cash equivalents at
December 31 $ 5,667* $ 2,555 $ 3,504* $ 3,182 $ 4,958* $ 3,175
======== ======== ======== ======== ========= =======
Total cash and cash equivalents $8,222 $6,686 $8,133
====== ====== ======
- - - - - -
*Automotive cash, cash equivalents, and marketable securities on December 31
were as follows (in millions): 1993 - $9,752 ; 1992 - $9,035; 1991 - $9,753
The accompanying notes are part of the financial statements.
FS-6
[TEXT]
Ford Motor Company and Subsidiaries
Notes to Financial Statements
NOTE 1. Accounting Policies
- ----------------------------
Principles of Consolidation
- ---------------------------
The consolidated financial statements include all significant
majority-owned subsidiaries and reflect the operating results, assets,
liabilities and cash flows for two business segments: Automotive and
Financial Services. The assets and liabilities of the Automotive
segment are classified as current or noncurrent, and those of the
Financial Services segment are unclassified. Affiliates that are
20% to 50% owned, principally Mazda Motor Corporation, Autolatina and
AutoAlliance International Inc., and subsidiaries where control is
expected to be temporary, principally investments in certain
dealerships, are generally accounted for on an equity basis. For
purposes of Notes to Financial Statements, "Ford" or "the company"
means Ford Motor Company and its majority-owned subsidiaries unless
the context requires otherwise.
Revenue Recognition - Automotive
- --------------------------------
Sales are recorded by the company when products are shipped to
dealers. Provisions for approved sales incentive programs normally
are recognized as sales reductions at the time of sale. Sales
incentive programs approved subsequent to the time that related sales
were recorded are recognized when the programs are approved.
Revenue Recognition - Financial Services
- ----------------------------------------
Revenue from finance receivables is recognized over the term of the
receivable using the interest method. Certain loan origination costs
are deferred and amortized over the term of the related receivable as
a reduction in financing revenue. Revenue from operating leases is
recognized as scheduled payments become due. Agreements between
Automotive operations and certain Financial Services operations
provide for interest supplements and other support to be paid by
Automotive operations on certain financing and leasing transactions.
Financial Services operations recognize this revenue in income over
the period that the related receivables and leases are outstanding;
these interest supplements and other support costs are recorded as
sales reductions by the Automotive operations at the time of sale of
the related vehicle.
Other Costs
- -----------
Advertising and sales promotion costs are expensed as incurred.
Anticipated costs related to product warranty are accrued at the time
of sale.
Research and development costs are expensed as incurred and were
$5,021 million in 1993, $4,332 million in 1992 and $3,728 million in
1991.
FS-8
NOTE 1. Accounting Policies - Continued
- ---------------------------------------
Income/(Loss) Per Share of Common and Class B Stock
- ---------------------------------------------------
Income/(loss) per share of Common and Class B Stock is calculated by
dividing income/(loss) attributable to Common and Class B Stock by the
average number of shares of Common Stock and Class B Stock outstanding
during the applicable period.
The company has outstanding securities, primarily Series A Preferred
Stock and certain convertible debt of subsidiary companies, which
could be converted to Common Stock. Other obligations, such as stock
options, are considered to be common stock equivalents. The
calculation of income/(loss) per share of Common and Class B Stock
assuming full dilution takes into account the effect of these
convertible securities and common stock equivalents when the effect is
material and dilutive.
Foreign-Currency Translation
- ----------------------------
Revenues, costs and expenses of foreign subsidiaries are translated to
U.S. dollars at average-period exchange rates. The effect of changes
in foreign exchange rates on revenues and costs was generally
unfavorable in 1993, particularly in Europe.
Assets and liabilities of foreign subsidiaries are translated to U.S.
dollars at end-of-period exchange rates. The effects of this
translation for most foreign subsidiaries and certain other foreign
currency transactions are reported in a separate component of
stockholders' equity. Translation gains and losses for foreign
subsidiaries that are located in highly inflationary countries or
conduct a major portion of their business with the company's U.S.
operations are included in income. Also included in income are gains
and losses arising from transactions denominated in a currency other
than the functional currency of the entity involved.
The effect of changes in foreign exchange rates on assets and
liabilities, as described above, increased net income by $419 million
in 1993 and decreased the net loss by $132 million in 1992 and by $81
million in 1991. These amounts included net transaction and
translation gains before taxes of $988 million in 1993, $557 million
in 1992 and $662 million in 1991. These gains were offset
substantially by costs of sales that reflected historical exchange
rates for costs associated with inventories in countries with high
inflation rates.
Goodwill
- --------
Goodwill represents the excess of the purchase price over the fair
value of the net assets of acquired companies and is being amortized
using the straight-line method principally over 40 years. Total
goodwill included in Automotive and Financial Services other assets at
December 31, 1993 was $2.6 billion and $2.9 billion, respectively.
Preferred Stockholders' Equity in a Subsidiary Company
- ------------------------------------------------------
Preferred stockholders' equity in a subsidiary company refers to the
outstanding preferred stock of Ford Holdings, Inc. ("Ford Holdings"),
a subsidiary of Ford. All the outstanding common stock of Ford
Holdings, representing 75% of the combined voting power of all classes
of capital stock of Ford Holdings, is owned directly or indirectly by
Ford. The balance of the capital stock and voting power is owned by
persons other than Ford.
FS-9
NOTE 2. Marketable and Other Securities
- ----------------------------------------
Automotive
- ----------
Automotive marketable securities are recorded at cost plus accrued
interest, which approximates fair value.
Financial Services
- ------------------
Investments in debt securities are recorded at amortized cost because
of the ability to hold such securities until maturity and the intent
to hold them for the foreseeable future. If market conditions change,
however, certain of these securities may be sold prior to maturity.
Marketable equity securities are recorded at fair value.
Investments in debt securities at December 31 were as follows (in
millions):
1993 1992
------------------------------------ -----------------------------------------
Gross Gross Gross Gross
Book Unrealized Unrealized Fair Book Unrealized Unrealized Fair
Value Gains Losses Value Value Gains Losses Value
------ ------- -------- ------ ------ -------- ------ -----
Debt securities issued
by the U.S. government
and agencies $ 974 $ 27 $ 1 $1,000 $ 964 $17 $ 1 $ 980
Municipal securities 126 3 0 129 35 1 0 36
Debt securities
issued by foreign
governments 88 4 1 91 35 1 0 36
Corporate securities 1,779 48 19 1,808 1,107 28 10 1,125
Mortgage-backed
securities (including
derivatives) 2,588 39 82 2,545 1,851 17 140 1,728
Other debt securities 192 0 1 191 407 1 3 405
------ ---- ---- ------ ------ --- ---- ------
Total $5,747 $121 $104 $5,764 $4,399 $65 $154 $4,310
====== ==== ==== ====== ====== === ==== ======
The fair value of most securities was estimated based on quoted
market prices for those securities. For those securities for
which there were no quoted market prices, the estimate of fair
value was based on similar types of securities that are traded in
the market.
The book value and fair value of investments in debt securities
at December 31, by contractual maturity, are shown below (in
millions). Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without penalty.
1993 1992
----------------- -----------------
Book Fair Book Fair
Value Value Value Value
------- ----- ----- -----
Due in one year or less $ 96 $ 96 $ 280 $ 281
Due after one year through five 1,023 1,035 1,119 1,126
Due after five years through ten years 563 580 434 443
Due after ten years 1,477 1,508 715 732
Mortgage-backed securities
(including derivatives) 2,588 2,545 1,851 1,728
------ ----- ----- -----
Total $5,747 $5,764 $4,399 $4,310
====== ====== ====== ======
Proceeds from sales of investments in debt securities were $11.2
billion in 1993, $10.5 billion in 1992 and $13.9 billion in 1991.
In 1993, gross gains of $113 million and gross losses of $20
million were realized on those sales; gross gains of $142 million
and gross losses of $86 million were realized in 1992, and gross
gains of $141 million and gross losses of $22 million were
realized in 1991.
Investments in securities other than debt securities totaled
$2,472 million at December 31, 1993 and $2,475 million at
December 31, 1992. The estimated fair value in excess of book
value of those securities which were practicable to value was $59
million at December 31, 1993 and $2 million at December 31, 1992.
It was not practicable to calculate the fair value of certain
securities totaling $660 million at December 31, 1993 and
$740 million at December 31, 1992 because they represented
preferred stocks of non-traded companies with whom the company
does business and for which similar market-traded securities were
not available for comparison.
FS-10
NOTE 3. Net Receivables and Lease Investments - Financial
Services
- ----------------------------------------------------------
Included in net receivables and lease investments at December 31
were net finance receivables, investments in direct financing
leases and investments in operating leases. The investments in
direct financing and operating leases relate to the leasing of
motor vehicles and various types of transportation and other
equipment and facilities.
Net finance receivables at December 31 were as follows (in
millions):
1993 1992
--------- --------
Automotive $ 58,738 $54,807
Real estate, mainly residential 24,152 24,421
Other 24,968 19,945
--------- ------
Total finance receivables 107,858 99,173
Loan origination costs 124 158
Unearned income (9,037) (8,325)
Allowance for credit losses (2,017) (1,948)
Unearned insurance premiums and
unpaid insurance claims related
to finance receivables (139) (199)
-------- -------
Net finance receivables $ 96,789 $88,859
======== =======
Fair value $ 98,505 $90,992
Included in finance receivables was a total of $1.5 billion for
1993 and $1.9 billion for 1992 owed by three customers with the
largest receivable balances. Other finance receivables consisted
primarily of commercial and consumer loans, collateralized loans,
credit card receivables, general corporate obligations and
accrued interest. Also included in other finance receivables at
December 31, 1993 and 1992 were $2,430 million and
$1,767 million, respectively, of accounts receivable purchased by
certain Financial Services operations from Automotive operations.
Contractual maturities of automotive and other finance
receivables are as follows (in millions): 1994 - $41,376;
1995 - $16,316; 1996 - $11,321; thereafter - $14,693. Experience
indicates that a substantial portion of the portfolio generally
is repaid before contractual maturity dates.
The fair value of most receivables was estimated by discounting
future cash flows using an estimated discount rate which
reflected the credit, interest rate and prepayment risks
associated with similar types of instruments. For receivables
with short maturities, the book value approximated fair value.
Sales of finance receivables increased net income by $60 million
in 1993, $7 million in 1992 and $84 million in 1991. Allowances
for anticipated credit losses are made where limited guarantee
provisions of the sales contracts exist.
Investments in direct financing leases at December 31 were as
follows (in millions):
1993 1992
---- ----
Minimum lease rentals $ 7,382 $ 7,673
Estimated residual values 2,764 2,395
Lease origination costs 69 47
Unearned income (2,010) (2,169)
Allowance for credit losses (133) (154)
------- -----
Net investments in direct
financing leases $ 8,072 $ 7,792
======= =======
Minimum direct financing lease rentals (including executory costs
of $68 million) are as follows (in millions): 1994 - $2,485;
1995 - $1,731; 1996 - $1,031; 1997 - $576; thereafter - $1,627.
FS-11
NOTE 3. Net Receivables and Lease Investments - Financial Services
(Continued)
- -------------------------------------------------------------------
Investments in operating leases at December 31 were as follows
(in millions):
1993 1992
---- ----
Vehicles and other equipment, at cost $18,589 $12,231
Lease origination costs 23 8
Accumulated depreciation (3,736) (2,591)
Allowance for credit losses (202) (155)
------- -------
Net investments in operating leases $14,674 $ 9,493
======= =======
Future minimum rentals on operating leases are as follows (in
millions): 1994 - $3,719; 1995 - $1,837; 1996 - $387; 1997 -
$77; thereafter - $118.
Depreciation expense on operating leases reflects primarily the
straight-line method over the term of the leases and was as
follows (in millions): 1993 - $2,984; 1992 - $2,000; 1991 -
$1,400.
Allowances For Credit Losses
- ----------------------------
Allowances for credit losses are established as required based on
historical experience. Other factors that affect collectibility
also are evaluated, and additional amounts may be provided.
Finance receivables and lease investments are charged to the
allowances for credit losses when an account is deemed to be
uncollectible, taking into consideration the financial condition
of the borrower, the value of the collateral, recourse to
guarantors and other factors. Recoveries on finance receivables
and lease investments previously charged off as uncollectible are
credited to the allowances for credit losses.
Changes in the allowances for credit losses were as follows (in
millions):
1993 1992 1991
Beginning Balance $2,257 $2,078 $1,847
Additions 1,019 1,218 1,485
Net losses (903) (993) (1,304)
Other changes (21) (46) 50
Ending Balance $2,352 $2,257 $2,078
====== ====== ======
NOTE 4. Inventories - Automotive
- ---------------------------------
Inventories are stated at the lower of cost or market. The cost
of most U.S. inventories is determined by the last-in, first-out
("LIFO") method. The cost of the remaining inventories is
determined substantially by the first-in, first-out ("FIFO")
method.
If FIFO was the only method of inventory accounting used by the
company, inventories would have been $1,342 million and $1,365
million higher than reported at December 31, 1993 and 1992,
respectively.
The major classes of inventories at December 31 were as follows
(in millions):
1993 1992
Raw materials, work in process and supplies $2,937 $2,959
Finished products 2,601 2,492
------ ------
Total Inventories $5,538 $5,451
====== ======
Inventories - U.S. Automotive $2,575 $2,401
FS-12
NOTE 5. Net Property, Depreciation and Amortization - Automotive
- -----------------------------------------------------------------
Net property, at cost, at December 31 was as follows (in millions):
1993 1992
Land $ 360 $ 362
Buildings and land improvements 5,923 6,059
Machinery, equipment and other 29,655 28,294
Construction in progress 1,551 1,493
Total land, plant and equipment 37,489 36,208
Accumulated depreciation (20,691) (19,991)
Net land, plant and equipment 16,798 16,217
Unamortized special tools 6,261 5,943
Net Property $ 23,059 $ 22,160
======== ========
Assets placed in service before January 1, 1993 are depreciated using
an accelerated method that results in accumulated depreciation of
approximately two-thirds of asset cost during the first half of the
asset's estimated useful life. Assets placed in service after
December 31, 1992 are depreciated using the straight-line method of
depreciation. This change in accounting principle was made to reflect
improvements in the design and flexibility of manufacturing machinery
and equipment and improvements in maintenance practices. These
improvements have resulted in more uniform productive capacities and
maintenance costs over the useful life of an asset, and straight-line
depreciation is preferable in these circumstances. The effect of this
change was not significant in 1993.
On average, buildings and land improvements are depreciated based on a
30-year life; automotive machinery and equipment are depreciated based
on a 14-year life.
When plant and equipment are retired, the general policy is to charge
the cost of those assets, reduced by net salvage proceeds, to
accumulated depreciation. All maintenance, repair and rearrangement
costs are expensed as incurred. Expenditures that increase the value
or productive capacity of assets are capitalized. Special tools are
amortized over periods of time representing the productive use of
those tools. Preproduction costs related to new facilities are
expensed as incurred.
Depreciation and amortization expenses were as follows (in millions):
1993 1992 1991
Depreciation $2,392 $2,569 $2,456
Amortization 2,012 2,097 1,822
------ ------ ------
Total $4,404 $4,666 $4,278
====== ====== ======
NOTE 6. Income Taxes
- ---------------------
The provision/(credit) for income taxes was as follows (in millions):
1993 1992 1991
Currently payable/(refundable)
U.S. federal $1,259 $(122) $ 92
Foreign 169 427 445
State and local 123 104 82
------ ----- -------
Total currently payable 1,551 409 619
Deferred tax liability/(benefit)
U.S. federal (161) 434 (742)
Foreign (106) (499) (272)
State and local 66 (49) 0
------ ----- ------
Total deferred (201) (114) (1,014)
------- ------ ------
Total provision/(credit) $1,350 $ 295* $ (395)
====== ===== =======
- - - - - -
*Excludes cumulative effects of changes in accounting principles
The provision/(credit) includes estimated taxes payable on that
portion of retained earnings of subsidiaries expected to be received
by the company. No provision was made with respect to $4.9 billion of
retained earnings at December 31, 1993 which have been invested by
foreign subsidiaries. These retained earnings have incurred foreign
income taxes that would have the effect of reducing substantially
income tax liabilities that could result from their distribution.
FS-13
NOTE 6. Income Taxes (Continued)
- --------------------------------
The company adopted Statement of Financial Accounting Standards No.
109 ("SFAS 109"), "Accounting for Income Taxes," as of January 1,
1992. The cumulative effect of this change in accounting principle
decreased the net loss in 1992 by $657 million. Financial statements
for prior years were not restated to apply the provisions of SFAS 109.
The adoption of SFAS 109 changes the method of accounting for income
taxes from the deferred method using Accounting Principles Board
Opinion No. 11 ("APB 11") to an asset and liability approach.
Under SFAS 109, deferred income taxes reflect the estimated tax effect
of temporary differences between assets and liabilities for financial
reporting purposes and those amounts as measured by tax laws and
regulations.
The components of deferred income tax assets and liabilities at
December 31 were as follows (in millions):
1993 1992
---------------------------------- -----------------------------
Deferred Tax Deferred Tax Deferred Tax Deferred Tax
Assets Liabilities Assets Liabilities
Employee benefit plans $ 5,839 $ 697 $ 5,376 $ 576
Dealer and customer allowances
and claims 3,243 - 2,864 -
Net operating loss carryforwards 1,378 - 909 -
Allowance for credit losses 858 - 840 -
Alternative minimum tax 129 - 426 -
Depreciation and amortization
(excludes leasing transactions) 30 2,574 27 2,694
Leasing transactions - 3,166 - 2,437
All other 1,093 1,157 732 882
------- ----- ----- -----
Subtotal 12,570 7,594 11,174 6,589
Valuation allowances (174) - (181) -
-------- ------ ------- -----
Total deferred taxes $12,396 $7,594 $10,993 $6,589
======= ====== ====== ======
Net foreign operating loss carryforwards for tax purposes were $3.7
billion at December 31, 1993. A significant portion of these losses
have an indefinite carryforward period; the remaining losses have
expiration dates beginning in 1995. For financial statement purposes,
the tax benefit of operating losses is recognized as a deferred tax
asset, subject to appropriate valuation allowances.
Deferred income taxes for 1991 were derived using the guidelines in
APB 11. Under APB 11, deferred income taxes result from timing
differences in the recognition of revenues and expenses between
financial statements and tax returns. The principal sources of these
differences and the related effect of each on the provision for income
taxes were as follows (in millions):
1991
Depreciation and amortization (excludes
leasing transactions) $ 191
Dealer and customer allowances and claims (542)
Employee benefit plans (442)
Net operating loss carryforwards - foreign (399)
Leasing transactions 377
Alternative minimum tax (26)
Income/(loss) before income taxes and cumulative effects of changes in
accounting principles for U.S. and foreign operations, excluding
equity in net income/(loss) of affiliated companies, was as follows
(in millions):
1993 1992 1991
------ ------- -------
U.S. $4,152 $ 889 $(2,049)
Foreign (276) (1,031) (509)
------ ------- -------
Total income/(loss) before
income taxes $3,876 $ (142)* $(2,558)
====== ======= =======
- - - - - -
*Excludes cumulative effects of changes in accounting principles
FS-14
NOTE 6. Income Taxes (Continued)
- --------------------------------
A reconciliation of the provision/(credit) for income taxes compared
with the amounts at the U.S. statutory tax rate is shown below (in
millions):
1993 1992 1991
----- ----- ----
Tax provision/(credit) at U.S.
statutory rate of 35% for 1993
and 34% for 1992 and 1991 $1,357 $ (48) $(870)
Effect of:
Foreign taxes over U.S. tax rate 219 263 345
State and local income taxes 118 36 54
Rate adjustments on U.S. and
foreign deferred taxes (199) - -
Income not subject to tax or
subject to tax at reduced rates (70) (112) (121)
Other (75) 156 197
------ ----- -----
Provision/(credit) for
income taxes $1,350 $ 295* $(395)
====== ===== =====
Effective Tax Rate 34.8% - 15.4%
- - - - - -
*Excludes cumulative effects of changes in accounting principles
NOTE 7. Liabilities - Automotive
- ---------------------------------
Current Liabilities
- -------------------
Included in accrued liabilities at December 31 were the following (in
millions):
1993 1992
------- ------
Dealer and customer allowances and claims $ 6,645 $6,266
Employee benefit plans 1,415 1,471
Salaries, wages, and employer taxes 594 562
Postretirement benefits other than pensions 674 595
Other 1,487 1,089
Total accrued liabilities $10,815 $9,983
======= ======
Noncurrent Liabilities
- ----------------------
Included in other liabilities at December 31 were the following (in
millions):
1993 1992
------- -------
Postretirement benefits other than pensions $13,288 $12,744
Dealer and customer allowances and claims 5,170 4,348
Employee benefit plans 2,353 2,241
Minority interests in net assets of
subsidiaries 161 144
Unfunded pension obligation 2,873 136
Other 2,066 2,253
Total other liabilities $25,911 $21,866
======= =======
- - - - - -
Certain amounts for 1992 have been reclassified to conform with
presentations adopted in 1993.
FS-15
NOTE 8. Employee Retirement Benefits
- -------------------------------------
Employee Retirement Plans
- -------------------------
The company has two principal retirement plans in the U.S. The Ford-
UAW Retirement Plan covers hourly employees represented by the UAW,
and the General Retirement Plan covers substantially all other
employees of the company and several finance subsidiaries in the U.S.
The hourly plan provides noncontributory benefits related to employee
service. The salaried plan provides similar noncontributory benefits
and contributory benefits related to pay and service. Other U.S. and
non-U.S. subsidiaries have separate plans which generally provide
similar types of benefits covering their employees. The company and
its subsidiaries also have defined benefit plans applicable to certain
executives that provide unfunded benefits.
The company's policy for funded plans is to contribute annually, at a
minimum, amounts required by applicable law, regulations and union
agreements. Plan assets consist principally of investments in stocks,
government and other fixed income securities and real estate. The
various plans generally are funded, except in Germany where this has
not been the custom, and as such, an unfunded liability is recorded.
The company's pension expense, including Financial Services, reflected
the following (in millions):
1993 1992 1991
------------------------ ----------------------- ---------------------
Non- Non- Non-
U.S. Plans U.S. Plans U.S. Plans U.S. Plans U.S. Plans U.S. Plans
---------- --------- ---------- ---------- ---------- ----------
Benefits attributed to
employees' service $ 419 $ 181 $ 342 $ 213 $ 311 $ 204
Interest on projected
benefit obligations 1,517 667 1,437 698 1,413 619
Return on assets:
Actual (gain) (2,264) (1,370) (1,465) (865) (3,909) (877)
Deferred gain/(loss) 389 677 (204) 190 2,497 188
----- ----- ----- --- ----- ---
Recognized (gain) (1,875) (693) (1,669) (675) (1,412) (689)
Net amortization and other 259 169 228 180 331 84
------- ------ ------ ----- ------- -----
Net pension expense $ 320 $ 324 $ 338 $ 416 $ 643 $ 218
======= ======= ======= ====== ======== ======
Costs associated with amendments made in 1993 to the Ford-UAW
Retirement Plan and to the General Retirement Plan were more than
offset by an increased return on assets that decreased net pension
expense in 1993 compared with 1992. Non-U.S. pension expense also
decreased in 1993, reflecting the result of restructuring actions in
Europe.
FS-16
NOTE 8. Employee Retirement Benefits (Continued)
- ------------------------------------------------
The status of these plans at December 31 was as follows (in millions):
1993 1992
---------------------------- ------------------------------
Assets Accum. Assets Accum.
Exceed Benefits Exceed Benefits
Accum. Exceed Total Accum. Exceed Total
Benefits Assets Plans Benefits Assets Plans
U.S. Plans
Plan assets at fair value $12,122 $10,779 $22,901 $11,776 $ 9,441 $21,217
Actuarial present value of:
Vested benefits $ 8,708 $ 9,962 $18,670 $ 7,546 $ 7,757 $15,303
Accumulated benefits 9,700 12,603 22,303 8,248 9,691 17,939
Projected benefits 10,896 12,767 23,663 9,222 9,759 18,981
Plan assets in excess
of/(less than)
projected benefits $ 1,226 $(1,988) $ (762) $ 2,554 $ (318) $ 2,236
Unamortized
(net asset)/net
transition obligation a/ (760) 563 (197) (861) 640 (221)
Unamortized prior service
cost b/ 538 2,053 2,591 347 1,174 1,521
Unamortized net
(gains)/losses c/ (159) 297 138 (1,333) (817) (2,150)
--- --- ----- ----- ---- -----
Prepaid pension
asset/(liability) 845 925 1,770 707 679 1,386
Adjustment required to
recognize
minimum liability d/ - (2,771) (2,771) - (950) (950)
------- ------- ------- ------- ----- ----
Prepaid pension asset/
(liability) recognized in
the balance sheet $ 845 $(1,846) $(1,001) $ 707 $(271) $ 436
======= ======= ======= ====== ====== =======
Plan assets in excess
of/(less than)
accumulated benefits $ 2,422 $(1,824) $ 598 $ 3,528 $(250) $ 3,278
Assumptions:
Discount rate 7.0% 8.0%
Average rate of increase
in compensation 5.5% 5.5%
Long-term rate of return on assets 9.5% 9.5%
Non-U.S. Plans
- --------------
Plan assets at fair value $ 5,806 $ 1,815 $ 7,621 $ 6,037 $ 617 $ 6,654
Actuarial present value of:
Vested benefits $ 4,538 $ 3,888 $ 8,426 $ 4,608 $ 2,124 $ 6,732
Accumulated benefits 4,619 4,092 8,711 4,685 2,264 6,949
Projected benefits 5,333 4,484 9,817 5,573 2,435 8,008
Plan assets in excess
of/(less than)
projected benefits $ 473 $(2,669) $(2,196) $ 464 $(1,818) $(1,354)
Unamortized (net asset)/net
transition obligation a/ (209) 461 252 42 253 295
Unamortized prior service cost b/ 267 232 499 303 36 339
Unamortized net (gains)/losses c/ (88) 863 775 (105) 7 (98)
------- ----- ------ ------- ------ -----
Prepaid pension asset/(liability) 443 (1,113) (670) 704 (1,522) (818)
Adjustment required to recognize
minimum liability d/ - (1,164) (1,164) - (126) (126)
------- ----- ----- ------- ------- -------
Prepaid pension asset/(liability)
recognized in the
balance sheet $ 443 $(2,277) $(1,834) $ 704 $(1,648) $ (944)
======= ======= ======= ======= ======= =======
Plan assets in excess
of/(less than)
accumulated benefits $ 1,187 $(2,277) $(1,090) $ 1,352 $(1,647) $ (295)
Assumptions:
Discount rate 7.2% 8.6%
Average rate of increase
in compensation 5.1% 6.0%
Long-term rate of return on assets 9.5% 9.6%
- - - - - -
a/The balance of the initial difference between assets and obligation
deferred for recognition over a 15 year period.
b/The prior service effect of plan amendments deferred for recognition over
remaining service.
c/The deferred gain or loss resulting from investments, other experience and
changes in assumptions.
d/An adjustment to reflect the unfunded accumulated benefit obligation in the
balance sheet for plans whose benefits exceed the assets -- in 1993 the
unfunded liability in excess of $3,250 million of unamortized prior service
cost and net transition obligation is recorded net of deferred taxes as a $400
million reduction in stockholders' equity.
FS-17
NOTE 8. Employee Retirement Benefits (Continued)
- -------------------------------------------------
Postretirement Health Care and Life Insurance Benefits
- ------------------------------------------------------
The company and certain of its subsidiaries sponsor unfunded plans to
provide selected health care and life insurance benefits for retired
employees. The company's U.S. and Canadian employees may become
eligible for those benefits if they retire while working for the
company; however, benefits and eligibility rules may be modified from
time to time. Prior to 1992, the expense recognized for
postretirement health care benefits was based on actual expenditures
for the year. Beginning in 1992, the estimated cost for
postretirement health care benefits is accrued on an actuarially
determined basis, in accordance with the requirements of Statement of
Financial Accounting Standards No. 106 ("SFAS 106"), "Employer's
Accounting for Postretirement Benefits Other Than Pensions".
Implementation of SFAS 106 has not increased the company's cash
expenditures for postretirement benefits. The company elected to
recognize immediately the prior-year unaccrued accumulated
postretirement benefit obligation, resulting in an adverse effect on
income of $7,540 million in the first quarter of 1992. The charge
reflected an unaccrued retiree benefit obligation liability of
$12 billion, offset partially by projected tax benefits of
$4.5 billion. In addition, the loss in 1992 was increased by
$455 million ($723 million before taxes) for the ongoing effect of
adopting SFAS 106.
Net postretirement benefit expense included the following (in
millions):
1993 1992
Benefits attributed to employees' service $ 240 $ 235
Interest on accumulated benefit obligation 1,207 1,129
------ ------
Net postretirement benefit expense $1,447 $1,364
====== ======
Retiree benefit payments were as follows (in millions): 1993 - $654;
1992 - $641; 1991 - $628.
The status of these plans, reconciled with the amounts recognized in
the company's balance sheet at December 31, was as follows (in
millions):
1993 1992
Accumulated postretirement
benefit obligation:
Retirees $ 8,147 $ 7,035
Active employees eligible to retire 2,725 2,269
Other active employees 5,984 5,091
------- -------
Total accumulated obligation 16,856 14,395
Unamortized amendments 387 0
Unamortized net (loss) (2,880) (807)
------- -------
Accrued liability $14,363 $13,588
======= =======
Assumptions:
Discount rate at year-end 7.5% 8.5%
Present health care cost trend rate 9.7% 10.3%
Ultimate trend rate in ten years 5.5% 5.5%
Weighted-average trend rate 6.8% 6.9%
Changing the assumed health care cost trend rates by one percentage
point would change the aggregate service and interest cost components
of net periodic postretirement benefit cost for 1993 by $240 million
and the accumulated postretirement benefit obligation at December 31,
1993 by $2.4 billion.
FS-18
NOTE 9. Debt
- -------------
Automotive
- ----------
Debt at December 31 was as follows (in millions):
1993
------------------------------ Book Value
Weighted Average -----------------
Interest Rate* Maturity 1993 1992
------------------------------- ----- -----
Debt payable within one year
Short-term debt $ 887 $1,200
Long-term debt payable within
one year 45 49
------ ------
Total debt payable within
one year 932 1,249
Long-term debt
Notes and other debt 9.0% 1995-2043 7,084 7,020
Short-term obligations
issued under long-term
borrowing agreements 0 48
------- -----
Total long-term debt 7,084 7,068
------- -----
Total debt $8,016 $8,317
======= ======
Fair value $9,044 $8,855
- - - - - -
*Excludes the effect of interest-rate swap agreements
The fair value of debt was estimated based on quoted market prices or
current rates for similar debt with the same remaining maturities.
Long-term debt at December 31, 1993 included maturities as follows (in
millions): 1994 - $45 (included in current liabilities); 1995 - $44;
1996 - $998; 1997 - $599; 1998 - $1,738; thereafter - $3,705.
Included in debt at December 31, 1993 and December 31, 1992 were
obligations payable in foreign currencies of $970 million and $957
million, respectively.
Financial Services
- ------------------
Debt at December 31 was as follows (in millions):
1993
-------------------------------- Book Value
Weighted Average ----------------
Interest Rate* Maturity 1993 1992
------------------- ---------- ---- ----
Debt payable within one year
Unsecured short-term debt $ 2,852 $ 2,944
Commercial paper 37,793 32,192
Other short-term debt 3,111 2,213
-------- -------
Total short-term debt 43,756 37,349
Long-term debt payable
within one year 12,304 10,470
-------- -------
Total debt payable
within one year 56,060 47,819
Long-term debt
Secured indebtedness 8.0% 1995-2016 1,821 2,292
Unsecured senior indebtedness
Notes and bank debt 7.1% 1995-2048 41,471 36,884
Debentures 9.4% 1995-2010 916 798
Unamortized
premium/(discount) (55) 1
------- --------
Total unsecured senior
indebtedness 42,332 37,683
Unsecured subordinated
indebtedness
Notes 8.9% 1995-2022 3,634 2,077
Debentures 8.1% 1995-2009 141 333
Convertible debentures 4.5% 1995-1996 1 2
Unamortized (discount) (29) (18)
------ ------
Total unsecured
subordinated indebtedness 3,747 2,394
----- -----
Total long-term debt 47,900 42,369
------ ------
Total debt $103,960 $90,188
======== =======
Fair value $107,233 $92,409
- - - - - -
*Excludes the effect of interest-rate swap agreements
The fair value of debt was estimated based on quoted market prices or
current rates for similar debt with the same remaining maturities.
FS-19
NOTE 9. Debt (Continued)
- -----------------------
Information concerning short-term borrowings (excluding long-term debt
payable within one year) is as follows (in millions):
1993 1992 1991
------- ------- -------
Average amount of short-term
borrowings $38,353 $33,993 $32,568
Weighted average short-term
interest rates per annum 3.8% 5.2% 7.7%
Average remaining term of
commercial paper at December 31 29 days 29 days 33 days
Secured indebtedness is collateralized by pledges of real estate
loans, mortgage-backed certificates and municipal securities having an
aggregate carrying amount of $5,926 million at December 31, 1993.
Long-term debt at December 31, 1993 included maturities as follows (in
millions): 1994 - $12,304; 1995 - $9,362; 1996 - $11,042; 1997 -
$5,810; 1998 - $8,502; thereafter - $13,184.
Included in debt at December 31, 1993 and December 31, 1992 were
obligations payable in foreign currencies of $12.9 billion and
$14.7 billion, respectively. These obligations were issued primarily
to fund foreign business operations.
Support Facilities
- ------------------
At December 31, 1993, Ford (parent company only) had long-term
contractually committed credit agreements in the U.S. under which
$4.8 billion is available from various banks at least through
June 30, 1998. The entire $4.8 billion may be used, at Ford's option,
by either Ford or Ford Credit. These facilities were unused at
December 31, 1993.
Outside the U.S., Ford had additional long-term contractually
committed credit-line facilities of $2.4 billion. These facilities
are available in varying amounts from 1994 through 1998; these
facilities were unused at December 31, 1993.
At December 31, 1993, Financial Services had $24.9 billion of support
facilities (including the $4.8 billion of the Ford credit agreements)
for use in the U.S., all of which were contractually committed. At
December 31, 1993, less than 1% of these facilities, excluding the
Ford credit agreements, were in use. At that date, an additional
$14.5 billion of support facilities were available outside the U.S.,
of which $6.4 billion were contractually committed. At
December 31, 1993, $6 billion of these support facilities outside the
U.S. were in use.
NOTE 10. Deposit Accounts and Annuity Contracts - Financial
Services
- ------------------------------------------------------------
Deposit accounts by category at December 31 were as follows (in
millions):
1993 1992
--------------------------- ---------------------------
Weighted Average Weighted Average
Interest Rate Amount Interest Rate Amount
Term accounts 5.16% $ 5,417 5.80% $ 8,008
Money market deposit
accounts 2.51% 2,786 2.95% 3,342
Passbook accounts 2.14% 840 2.98% 1,313
NOW accounts and other 0.53% 1,506 1.82% 1,367
------- -------
Total deposit accounts $10,549 $14,030
======= =======
Fair value $10,650 $14,208
The fair value of demand deposits, savings accounts, and certain money
market deposits was the amount payable on demand at December 31, 1993.
The fair value of fixed-maturity certificates of deposit was estimated
using the rate currently offered for deposits with similar remaining
maturities.
At December 31, 1993, term accounts included scheduled maturities as
follows (in millions): 1994 - $3,846; 1995 - $596; 1996 - $596; 1997 -
$214; 1998 - $145; thereafter - $20.
FS-20
NOTE 10. Deposit Accounts and Annuity Contracts - Financial Services
- --------------------------------------------------------------------
The liability for annuity contracts, included in other liabilities,
was $1,598 million at December 31, 1993 and $777 million at December
31, 1992, and reflected deposits received and interest credited, less
related withdrawals. The weighted-average interest rate on annuity
contracts outstanding at December 31, 1993 and 1992 was 6.2% and 7.3%,
respectively. Interest rates offered are initially guaranteed for
periods of either one or five years. Interest credited to annuity
account balances is recognized as expense; surrender charges are
recognized as a reduction of interest credited to annuitants. The
fair value of annuity contracts at December 31, 1993 and 1992
approximated book value because the contractual interest rate due
holders is reset annually for more than 97% of contracts outstanding.
NOTE 11. Capital Stock
- -----------------------
The authorized capital stock of the company consists of Common Stock,
Class B Stock and Preferred Stock. Authorized shares of stock at
December 31, 1993 were as follows: 1 billion shares of Common Stock;
88.4 million shares of Class B Stock; and 30 million shares of
Preferred Stock.
At December 31, 1993, all general voting power was vested in the
holders of Common Stock and the holders of Class B Stock, voting
together without regard to class. At that date, the holders of Common
Stock were entitled to one vote per share and, in the aggregate, had
60% of the general voting power; the holders of Class B Stock were
entitled to such number of votes per share as would give them, in the
aggregate, the remaining 40% of the general voting power, as provided
in the company's Certificate of Incorporation.
The Certificate provides that all shares of Common Stock and Class B
Stock share equally in dividends (other than dividends declared with
respect to any outstanding Preferred Stock), except that any stock
dividends are payable in shares of Common Stock to holders of that
class and in Class B Stock to holders of that class. Upon
liquidation, all shares of Common Stock and Class B Stock are entitled
to share equally in the assets of the company available for
distribution to the holders of such shares.
In 1991, the company sold 46,000,000 Depositary Shares, each
representing 1/1,000 of a share of Series A Cumulative Convertible
Preferred Stock ("Series A Preferred Stock"), for a total public
offering price of $2.3 billion. As a result, 46,000 shares of Series
A Preferred Stock were issued. The Series A Preferred Stock has a
liquidation preference equivalent to $50 per Depositary Share and
dividends accumulate on the Series A Preferred Stock at a rate
equivalent to $4.20 per year per Depositary Share. The Series A
Preferred Stock is convertible at the option of the holder at any time
into shares of Common Stock of the company at a rate equivalent to
1.6327 shares of Common Stock for each Depositary Share (equivalent to
a conversion price of $30.625 per share of Common Stock). The Series
A Preferred Stock and the Depositary Shares representing such stock
are not redeemable prior to December 7, 1997. On and after December
7, 1997, the Series A Preferred Stock is redeemable for cash at the
company's option, in whole or in part, initially at an amount
equivalent to $51.68 per Depositary Share and thereafter at prices
declining to $50 per Depositary Share on and after
December 1, 2001, plus, in each case, an amount equal to the sum of
all accrued and unpaid dividends. At December 31, 1993, the
liquidation preference of Series A Preferred Stock was
$2.3 billion, and 45,994 shares were outstanding.
In 1992, the company sold 45,600,000 Depositary Shares, each
representing 1/2,000 of a share of Series B Cumulative Preferred Stock
("Series B Preferred Stock"), for a total public offering price of
$1.1 billion. As a result, 22,800 shares of Series B Preferred Stock
were issued. The Series B Preferred Stock has a liquidation
preference equivalent to $25 per Depositary Share and dividends
accumulate at a rate equivalent to $2.0625 per year per Depositary
Share. The Series B Preferred Stock and the Depositary Shares
representing such stock are not redeemable prior to December 1, 2002.
On and after December 1, 2002 and upon satisfaction of certain
conditions, the Series B Preferred Stock is redeemable for cash at the
option of Ford, in whole or in part, at a redemption price equivalent
to $25 per Depositary Share, plus an amount equal to the sum of all
accrued and unpaid dividends. The Series B Preferred Stock does not
have any sinking fund and is not convertible into any other
securities. At December 31, 1993, the liquidation preference of the
Series B Preferred Stock was $1.1 billion, and 22,800 shares were
outstanding.
FS-21
NOTE 11. Capital Stock (Continued)
- ----------------------------------
The Series A Preferred Stock and Series B Preferred Stock rank (and
any other outstanding Preferred Stock of the company would rank)
senior to the Common Stock and Class B Stock in respect of dividends
and liquidation rights.
NOTE 12. Stock Options
- -----------------------
The company has stock options outstanding under the 1985 Stock Option
Plan and the 1990 Long-term Incentive Plan. These plans were approved
by the stockholders.
Information concerning stock options for the last three years is shown
below (shares in millions):
1993 1992 1991
------ ------ ------
Option price of new grants a/ $57.69 $37.00 $30.00
and
$24.13
Shares subject to option
- ----------------------
Outstanding at beginning of period 20.6 16.5 13.3
New grants 3.6 4.8 3.6
Exercised b/ (3.4) (0.5) (0.1)
Surrendered upon exercise of stock
appreciation rights (1.9) (0.2) (0.1)
Terminated and expired (0.1) * (0.2)
---- ----- -----
Outstanding at end of period 18.8 c/ 20.6 16.5
Outstanding but not exercisable (9.7) (9.8) (8.1)
---- ----- -----
Exercisable at end of period 9.1 10.8 8.4
===== ====== ======
Shares authorized for future grants
(as of December 31)d/ 0 0 0.9
- - - - - -
* Less than 50,000 shares.
a/ Fair market value of Common Stock at dates of grant.
b/ At option prices ranging from $18.19 to $51.69 during 1993, from
$7.03 to $30.69 during 1992, and from 4.25 to $26.84 during 1991.
c/ Including 6.0 and 12.8 million shares under the 1985 and 1990
Plans, respectively, at option prices ranging from $18.19 to
$57.69 per share.
d/ In addition, up to 1% of the issued Common Stock as of December 31
of any year may be made available for stock options and other plan
awards in the next succeeding calendar year. That limit may be
increased up to 2% in any year, with a corresponding reduction in
shares available for grants in future years.
No further grants may be made under the 1985 Plan. Grants may be made
under the 1990 Plan through April 2000. In general, options granted
under the 1985 Plan and options granted to date under the 1990 Plan
become exercisable 25% after one year from the date of grant, 50%
after two years, 75% after three years and in full after four years.
Options under both Plans expire after 10 years. Certain options
outstanding under the plans were granted with an equal number of
accompanying stock appreciation rights which may be exercised in lieu
of the options. Under the Plans, a stock appreciation right entitles
the holder to receive, without payment, the excess of the fair market
value of the Common Stock on the date of exercise over the option
price, either in Common Stock or cash or a combination. In addition,
grants of Contingent Stock Rights were made with respect to
1,163,600 shares in 1993, 632,400 shares in 1992 and 1,015,500 shares
in 1991 under the 1990 Long-Term Incentive Plan (not included in the
table above). The number of shares ultimately awarded will depend on
the extent to which the Performance Target specified in each Right is
achieved, the individual performances of the recipients and other
factors.
FS-22
NOTE 13. Litigation and Claims
- -------------------------------
Various legal actions, governmental investigations and proceedings and
claims are pending or may be instituted or asserted in the future
against the company and its subsidiaries, including those arising out
of alleged defects in the company's products, governmental regulations
relating to safety, emissions and fuel economy, financial services,
intellectual property rights, product warranties and environmental
matters. Certain of the pending legal actions are, or purport to be,
class actions. Some of the foregoing matters involve or may involve
compensatory, punitive, or antitrust or other treble damage claims in
very large amounts, or demands for recall campaigns, environmental
remediation programs, sanctions, or other relief which, if granted,
would require very large expenditures.
Litigation is subject to many uncertainties, the outcome of individual
litigated matters is not predictable with assurance, and it is
reasonably possible that some of the foregoing matters could be
decided unfavorably to the company or the subsidiary involved.
Although the amount of the ultimate liability at December 31, 1993
with respect to these matters cannot be ascertained, the company
believes that any resulting liability should not materially affect the
consolidated financial position of the company at December 31, 1993.
NOTE 14. Commitments and Contingencies
- ---------------------------------------
At December 31, 1993, the company had the following minimum rental
commitments under non-cancelable operating leases (in millions):
1994 - $509; 1995 - $573; 1996 - $501; 1997 - $463;
1998 - $201; thereafter - $708.
These amounts include rental commitments related to the sales and
leasebacks of certain Automotive machinery and equipment.
During 1993, the company and certain of its subsidiaries entered into
agreements with various banks to introduce credit card programs that
offer rebates which can be applied against the purchase or lease of
Ford cars or trucks. The maximum amount of rebates available to
qualified cardholders at December 31, 1993 was $1.7 billion. The
company has provided for the estimated net cost of these programs as a
vehicle marketing cost based on the estimated number of participants
who will ultimately purchase vehicles.
The company and many of its subsidiaries have entered into foreign
exchange agreements to manage exposure to foreign exchange rate
fluctuations. These exchange agreements hedge primarily debt, firm
commitments and dividends that are denominated in foreign currencies
and net investments in foreign subsidiaries. Agreements entered into
to manage these exposures include foreign currency forward contracts,
currency swaps and foreign currency options. Gains or losses on the
various agreements are either recognized during the period or included
in the bases of the related transactions.
The fair value of these foreign exchange agreements generally was
estimated using current market prices provided by outside quotation
services. The fair value was estimated to be a net receivable of
$124 million at December 31, 1993 and $302 million at December 31,
1992. In the unlikely event that a counterparty fails to meet the
terms of a foreign exchange agreement, the company's market risk is
limited to the currency rate differential. In the case of currency
swaps, the company's market risk also may include an interest rate
differential. At December 31, 1993 and 1992, the total amount of the
company's foreign currency forward contracts, option contracts and
currency swaps outstanding was $8.6 billion and $11.3 billion,
respectively, maturing primarily through 1995.
The company and many of its subsidiaries have entered into
arrangements to manage exposure to fluctuations in interest rates.
These arrangements include primarily interest-rate swap agreements
and, to a lesser extent, interest-rate futures contracts. The
differential paid or received on interest-rate swap agreements is
recognized as an adjustment to interest expense. Realized and
unrealized gains and losses on interest-rate futures contracts are
deferred and recognized as adjustments to interest income or expense.
FS-23
NOTE 14. Commitments and Contingencies (Continued)
- ---------------------------------------------------
The fair value of interest-rate swaps is the estimated amount the
company would receive or pay to terminate the swap agreement. The
fair value is calculated using information provided by outside
quotation services, taking into account current interest rates and the
current credit-worthiness of the swap counterparties. The fair value
was estimated to be a net receivable of $585 million at December 31,
1993 and $371 million at December 31, 1992. In the unlikely event
that a counterparty fails to meet the terms of an interest-rate swap
agreement, the company's exposure is limited to the interest rate
differential. The underlying principal amounts on which the company
has interest-rate swap agreements and futures contracts outstanding
aggregated $36.5 billion at December 31, 1993 and $21.1 billion at
December 31, 1992.
Certain Financial Services subsidiaries make credit lines available to
holders of their credit cards. At December 31, 1993 and 1992, the
unused portion of available credit was approximately $9.9 billion and
$5.5 billion, respectively, and is revocable under specified
conditions. The fair value of unused credit lines and the potential
risk of loss was not considered to be significant.
In addition, the company and its subsidiaries have entered into a
variety of other financial agreements which contain potential risk of
loss. These agreements include limited guarantees under sales of
receivables agreements, financial guarantees, letters of credit,
interest rate caps and floors and government security repurchase
agreements. The fair value of these agreements and the potential risk
of loss was not considered to be significant.
NOTE 15. Cash Flows
- --------------------
The reconciliation of net income/(loss) to cash flows from operating
activities is as follows (in millions):
1993 1992 1991
------------------- --------------------- -----------------------
Financial Financial Financial
Automotive Services Automotive Services Automotive Services
----------- ----------- ----------- ----------- ------------- -----------
Net income/(loss) $ 940 $1,589 $(8,628) $1,243 $(3,186) $ 927
Adjustments to reconcile net
income/(loss) to cash flows
from operating activities:
Cumulative effects of changes in
accounting principles - - 7,094 (211) - -
Depreciation and amortization 4,404 3,064 4,666 2,089 4,278 1,500
(Earnings)/losses of affiliated
companies in excess of dividends
remitted (21) (9) 16 51 83 61
Provision for credit and
insurance losses - 1,523 - 1,795 - 2,159
Foreign currency adjustments (650) - (362) - (331) -
(Credit)/provision for deferred
income taxes (796) 595 (447) 333 (1,122) 108
Gain on sales of receivables - (98) - (9) - (113)
Interest credited to deposit accounts - 380 - 571 - 873
Changes in assets and liabilities:
(Increase)/decrease in accounts
receivable and other current
assets 34 - 103 - 673 -
(Increase)/decrease in inventory (275) - 380 - 78 -
Increase in accounts payable and
accrued and other liabilities 3,735 594 2,617 295 3,006 142
Changes in unearned premiums - (65) - (281) - (288)
Other (509) (428) 314 (114) (138) (589)
----- ---- ----- ---- ----- ----
Cash flows from operating
activities $6,862 $7,145 $ 5,753 $ 5,762 $ 3,341 $4,780
======= ======= ======= ======= ======= =======
The company considers all highly-liquid investments purchased with a
maturity of three months or less to be cash equivalents. The book
value of these investments approximates fair value because of the
short maturity. Cash flows resulting from futures contracts,
forward contracts and options that are accounted for as hedges of
identifiable transactions are classified in the same category as the
item being hedged.
Cash paid for interest and income taxes was as follows (in
millions):
1993 1992 1991
------ ------ ------
Interest $6,969 $8,255 $9,458
Income taxes 1,522 31 356
FS-24
NOTE 16. Segment Information
- ----------------------------
The company operates in two principal business segments: Automotive
and Financial Services. The Automotive segment consists of the
manufacture, assembly and sale of cars, trucks and related parts and
accessories. The Financial Services segment consists primarily of
financing operations, insurance operations, savings and loan
operations, and vehicle and equipment leasing operations.
Intersegment transactions represent principally transactions
occurring in the ordinary course of business, borrowings and related
transactions between entities in the Financial Services and
Automotive segments, and interest and other support under special
vehicle financing programs. These arrangements are reflected in the
respective business segments.
Intercompany sales among geographic areas consist primarily of
vehicles, parts and components manufactured by the company and
various subsidiaries and sold to different entities within the
consolidated group. Transfer prices for these transactions are
established through negotiations between the affected entities.
Financial information segregated by major geographic area is as
follows (in millions):
Automotive
- ----------
1993 1992 1991
-------- ------- --------
Sales to unaffiliated customers
United States $ 61,559 $ 51,918 $ 40,627
Europe* 18,507 21,579 21,012
All other 11,502 10,910 10,412
-------- -------- --------
Total $ 91,568 $ 84,407 $ 72,051
======== ======== ========
Intercompany sales among
geographic areas
United States $ 8,721 $ 6,978 $ 7,094
Europe* 1,690 1,717 1,619
All other 9,791 10,120 8,644
-------- -------- --------
Total $ 20,202 $ 18,815 $ 17,357
======== ======== ========
Total sales
United States $ 70,280 $ 58,896 $ 47,721
Europe* 20,197 23,296 22,631
All other 21,293 21,030 19,056
Elimination of intercompany
sales (20,202) (18,815) (17,357)
-------- ------- ---------
Total $ 91,568 $ 84,407 $ 72,051
======== ======== ========
Operating income/(loss)
United States $ 1,677 $ (582) $ (3,238)
Europe* (402) (924) (280)
All Other 157 (269) (251)
-------- -------- --------
Total $ 1,432 $ (1,775) $ (3,769)
======== ======== ========
Net income/(loss) before
cumulative effects of changes
in accounting principles
United States $ 1,482 $ (405) $ (2,215)
Europe* (407) (647) (478)
All other (135) (482) (492)
-------- -------- --------
Total $ 940 $ (1,534) $ (3,185)
======== ======== ========
Assets at December 31
United States $ 39,666 $ 34,334 $ 26,728
Europe* 13,452 13,414 15,950
All Other 18,248 17,534 17,938
Net receivables from
Financial Services 910 1,437 156
Elimination of intercompany
receivables (10,539) (9,549) (8,375)
-------- -------- --------
Total $ 61,737 $ 57,170 $ 52,397
======== ======== ========
Capital expenditures (facilities,
machinery and equipment and
tooling)
United States $ 4,289 $ 3,018 $ 3,042
Europe* 1,376 1,857 1,979
All Other 1,049 822 702
-------- -------- --------
Total $ 6,714 $ 5,697 $ 5,723
======== ======== ========
- - - - - -
*Excludes Jaguar
Certain amounts for 1992 and 1991 have been reclassified to conform
with presentations adopted in 1993.
FS-25
NOTE 16. Segement Information (Continued)
- ----------------------------------------
Financial Services
- ------------------
1993 1992 1991
------- -------- ------
Revenues
United States $ 14,102 $ 12,514 $ 13,182
Europe 1,673 2,051 1,847
All other 1,178 1,160 1,206
-------- -------- --------
Total $ 16,953 $ 15,725 $ 16,235
======== ======== ========
Income before income taxes and
cumulative effects of changes
in accounting principles**
United States $ 2,311 $ 1,452 $ 1,163
Europe 285 266 184
All other 116 107 118
-------- -------- --------
Total $ 2,712 $ 1,825 $ 1,465
======== ======== ========
- - - - - -
** Financial Services activities do not report operating income;
income before income taxes is representative of operating
income.
Net income before cumulative
effects of changes in accounting
principles
United States $ 1,340 $ 919 $ 768
Europe 187 68 118
All other 62 45 41
-------- -------- --------
Total $ 1,589 $ 1,032 $ 927
======== ======== ========
Assets at December 31
United States $117,290 $104,749 $100,730
Europe 12,132 11,512 13,662
All other 7,779 7,114 7,640
-------- -------- --------
Total $137,201 $123,375 $122,032
======== ======== ========
Financial Services revenues included $72 million in 1993,
$221 million in 1992 and $310 million in 1991 from the Federal
Savings and Loan Insurance Corporation Resolution Fund in connection
with the acquisition by First Nationwide of certain savings and loan
institutions. During 1992, First Nationwide entered into a
settlement agreement with the Resolution Trust Corporation which
substantially terminated these assistance agreements.
FS-26
Note 17. Summary Quarterly Financial Data (Unaudited)
- -----------------------------------------------------
(in millions except amounts per share)
1993 1992
------------------------------------------ --------------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------------------------------------------- -----------------------------------------
Automotive
Sales $22,686 $25,264 $20,107 $23,511 $20,636 $22,903 $19,370 $21,498
Operating income/
(loss) 505 787 (242) 382 243 551 (964) (1,605)
Financial Services
Revenues 4,077 4,155 4,391 4,330 3,922 3,940 3,955 3,908
Income before income
taxes 670 654 732 656 420 483 501 421
Total Company
Income/(loss) before
cumulative effects of
changes in accounting
principles $ 572 $ 775 $ 463a/ $ 719b/ $ 223c/ $ 387 $ (272) $ (840)d/
Cumulative effects of
changes in accounting
principles - - - - (6,883) - - -
Net income/(loss) 572 775 463 719 (6,660) 387 (272) (840)
Preferred stock dividend
requirements 72 72 72 72 48 48 48 65
Income/(loss)
attributable
to Common and
Class B Stock $ 500 $ 703 $ 391 $ 647 $(6,708) $ 339 $ (320) $ (905)
======= ======= ======= ======= ======== ======= ======== ========
AMOUNTS PER SHARE OF
COMMON AND CLASS B
STOCK AFTER PREFERRED
STOCK DIVIDENDSe/
Income/(loss) before
cumulative effects of
changes in accounting
principles $ 1.02 $ 1.43 $ 0.79 $ 1.30 $ 0.36 $ 0.70 $ (0.66) $ (1.85)
Cumulative effects of
changes in accounting
principles - - - - (14.21) - - -
------- ------- ------- ------- ------- ------- ------- -------
Income/(loss) $ 1.02 $ 1.43 $ 0.79 $ 1.30 $(13.85) $ 0.70 $ (0.66) $ (1.85)
======= ======= ======= ======= ======= ======= ======= =======
Income/(loss) assuming
full dilution $ 0.95 $ 1.30 $ 0.76 $ 1.19 $(13.85) $ 0.68 $ (0.66) $ (1.85)
Dividends $ 0.40 $ 0.40 $ 0.40 $ 0.40 $ 0.40 $ 0.40 $ 0.40 $ 0.40
- - - - - -
a/ Includes a one-time tax reduction of $140 million to reflect revaluation
of U.S. deferred tax balances, offset partially by restructuring
charges at Jaguar ($65 million).
b/ Includes restructuring charges at Jaguar ($109 million) and Ford of Australia
($57 million), partially offset by the favorable one-time effect
of a reduction in German tax rates ($59 million) and a gain on the sale of
part of Ford's North American automotive seating and seat trim business
($73 million).
c/ Includes a gain of $61 million on the sale of the U.S. portion of Ford's
Dealer Computer Services business.
d/ Includes $419 million of one-time charges principally associated with
restructuring actions in Europe.
e/ The sum of the per-share amounts in 1993 and 1992 is different than the
amounts reported for the full year because of the effect that sales
of the company's stock had on average shares for those periods.
FS-27
Coopers & Lybrand certified public accountants
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Ford Motor Company
We have audited the consolidated financial statements, the financial statement
schedules and the supplemental schedule of condensed financial information of
selected subsidiaries of Ford Motor Company and Subsidiaries listed in Items
14(a)1 and 14(a)2 of this Form 10-K. These financial statements, financial
statement schedules and supplemental schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements, financial statement schedules and supplemental schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Ford Motor
Company and Subsidiaries at December 31, 1993 and 1992 and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1993, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedules and supplemental schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
As discussed in Notes 6 and 8 to the consolidated financial statements, the
Company changed its methods of accounting for postretirement benefits
other than pensions and income taxes in 1992.
/s/ COOPERS & LYBRAND
COOPERS & LYBRAND
400 Renaissance Center
Detroit, Michigan 48243
313-446-7100
February 1, 1994
FS-28
Schedule IX
Ford Motor Company and Subsidiaries
SHORT-TERM BORROWINGS
For the Years Ended December 31, 1993, 1992 and 1991
(in millions)
Weighted Maximum Average Weighted
Average Amount Amount Average
Balance Interest Outstanding Outstanding Interest Rate
Category of Aggregate at End of Rate at End During the During the During the
Short-Term Borrowings a/ Period of Period Period b/ Period c/ Period d/
- ----------------------- ------ ----------- ----------- ----------- --------------
AUTOMOTIVE
1993
Bank Borrowings $ 887 5.6% $ 1,004 $ 903 7.1%
1992
Bank Borrowings $ 1,200 8.9% $ 1,552 $ 1,528 8.3%
1991
Bank Borrowings $ 2,479 10.3% $ 3,177 $ 2,519 10.0%
- - - - - -
a/At December 31, 1993, Ford (parent company only) had long-term contractually
committed credit agreements in the U.S. under which $4.8 billion is available
from various banks at least through June 30, 1998. The entire $4.8 billion
may be used, at Ford's option, by either Ford or Ford Credit. These
facilities were unused at December 31, 1993.
Outside the U.S., Ford has additional long-term contractually committed
credit-line facilities of approximately $2.4 billion. These facilities are
available in varying amounts from 1994 through 1998; these facilities were
unused at December 31, 1993.
b/For Automotive operations, the maximum amount outstanding during the period
represents the maximum quarter-end balance.
c/For Automotive operations, the average amount outstanding during the period
represents the average of quarter-end balances.
d/For Automotive operations, the weighted average interest rate represents
total annual short-term interest expense divided by the average quarter-end
short-term debt outstanding.
FSS-1
Schedule IX
Ford Motor Company and Subsidiaries
SHORT-TERM BORROWINGS (Continued)
For the Years Ended December 31, 1993, 1992 and 1991
(in millions)
Weighted Maximum Average Weighted
Average Amount Amount Average
Balance Interest Outstanding Outstanding Interest Rate
Category of Aggregate at End of Rate at End During the During the During the
Short-Term Borrowings a/ Period of Period Period b/ Period c/ Period d/
FINANCIAL SERVICES e/
1993
Commercial Paper $37,793 3.5% $37,793 $34,199 3.4%
Short-Term Borrowing
Agreements 444 12.8 480 432 14.9
Bank Debt 5,098 5.7 5,357 4,153 7.2
Other Short-Term Debt 421 6.0 1,248 580 7.6
1992
Commercial Paper $31,446 3.7% $32,888 $28,734 4.0%
Short-Term Borrowing
Agreements 360 6.9 413 266 7.1
Bank Debt 3,853 9.8 4,273 3,620 11.1
Other Short-Term Debt 1,690 6.3 3,247 2,107 6.4
1991
Commercial Paper $28,151 5.4% $29,953 $27,663 6.1%
Short-Term Borrowing
Agreements 251 5.4 2,627 1,725 6.5
Bank Debt 4,016 9.9 5,092 3,920 11.4
Other Short-Term Debt 2,876 7.2 3,024 1,800 6.8
- - - - - -
a/At December 31, 1993, Financial Services had approximately $24.9 billion of
support facilities (including $4.8 billion of the Ford credit lines) for use
in the U.S., all of which were contractually committed. At December 31, 1993,
less than 1% of these facilities, excluding the Ford credit agreements, were
in use. At that date, an additional $14.5 billion of support facilities were
available outside the U.S., of which $6.4 billion were contractually
committed. At December 31, 1993, $6 billion of these support facilities
outside the U.S. were in use.
b/For Financial Services operations, the maximum amount outstanding during the
period represents the maximum month-end balance.
c/For Financial Services operations, the average amount outstanding during the
period represents the daily average debt outstanding.
d/For Financial Services operations, the weighted average interest rate
represents total annual short-term interest expense divided by the daily
average debt outstanding.
e/U.S. commercial paper, the majority of commercial paper outstanding, is
comprised of short-term, unsecured promissory notes with maturities ranging
from one day to 270 days. Borrowings under short-term borrowing agreements
(STBAs) are payable on demand. Bank debt outstandings range from short-term
borrowings to bank notes payable on specific dates. Other short-term debt
primarily consists of notes having either a provision for optional redemption
within one year or original maturities of less than one year.
FSS-2
Schedule X
Ford Motor Company and Consolidated Subsidiaries
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Charged to Costs and Expenses
For the Years Ended December 31
1993 1992 1991
(Mils.) (Mils.) (Mils.)
Maintenance, repairs and
rearrangement expenses $1,933.6 $1,872.0 $1,641.8
Depreciation and
amortization of
intangible assets,
preoperating costs and Not Not Not
similar deferrals significant significant significant
Taxes, other than payroll Not Not Not
and income taxes significant significant significant
Royalties Not Not Not
significant significant significant
Advertising costs $1,772.7 $1,702.3 $1,568.7
FSS-3
Supplemental Schedule
Ford Motor Company
CONDENSED FINANCIAL INFORMATION OF SUBSIDIARY
(in millions)
December 31, December 31,
Ford Capital B.V. 1993 1992
Current assets $ 919 $ 894
Noncurrent assets 5,205 5,019
------ ------
Total assets $6,124 $5,913
====== ======
Current liabilities $ 434 $ 412
Noncurrent liabilities 5,245 5,100
Minority's interest in net
assets of subsidiaries 7 3
Stockholder's equity 438 398
------ ------
Total liabilities and
stockholder's equity $6,124 $5,913
====== ======
1993 1992 1991
------- ------- -------
Sales and other revenue $1,935 $2,141 $2,117
Operating income/(loss) 2 (30) 28
Income/(loss) before income taxes
and cumulative effects of changes
in accounting principles 18 (33) 31
Net income/(loss) 14 (19) 19
Ford Capital B.V., a wholly-owned subsidiary of Ford Motor
Company, was established on February 2, 1990 primarily for the
purpose of raising funds through the issuance of commercial paper
and debt securities. Under a reorganization in December 1990,
Ford Motor Company contributed all of its shares of the capital
stock of Ford Nederland B.V., Ford Motor Company (Belgium) B.V.
and Ford Motor Company A/S (Denmark) to Ford Capital B.V. This
reorganization of entities under common control has been
accounted for at historical cost in a manner similar to a
pooling-of-interests combination from January 1, 1990 forward.
Substantially all of the assets of Ford Capital B.V. represent
receivables from Ford Motor Company or its consolidated
subsidiaries.
FSS-4
EXHIBIT INDEX
Designation Description Method of Filing
- ----------- --------------------------- ------------------------------
Exhibit 3-A Certificate of Incorporation, Filed as Exhibit 3-A to the
as amended on November 19, Registrant's Annual Report on
1991 and as further amended Form 10-K for the year ended
on October 28, 1992. December 31, 1992.
Exhibit 3-B By-Laws of the Registrant as Filed with this Report.
amended through December 9,
1993.
Exhibit 4-A Form of Deposit Agreement Filed as Exhibit 4-E to
dated as of November 20, 1991 the Registrant's
among Ford Motor Company, Registration Statement
Manufacturers Hanover Trust No. 33-43085.*
Company, as Depositary, and the
holders from time to time of
Depositary Shares, each
representing 1/1,000 of a share
of the Registrant's Series A
Cumulative Convertible
Convertible Preferred Stock.
Exhibit 4-B Form of Deposit Agreement Filed as Exhibit 4-E to
dated as of October 29, 1992 the Registrant's
among Ford Motor Company, Registration Statement
Chemical Bank, as Depositary, No. 33-53092.*
and the holders from time to
time of Depositary Shares, each
representing 1/2,000 of a share
of the Registrant's Series B
Cumulative Preferred Stock.
Exhibit 10-A Amended and Restated Filed with this Report.
Agreement dated as of July 1,
1993 between the Registrant
and Ford Credit.
Exhibit 10-B 1985 Stock Option Plan of Filed as Exhibit 10-D to
the Registrant.** the Registrant's Annual
Report on Form 10-K
for the year ended
December 31, 1985.*
Exhibit 10-B-1 Amendment dated as of Filed as Exhibit 10-C-1
March 8, 1990 to 1985 Stock to the Registrant's
Option Plan.** Annual Report on Form
10-K for the year ended
December 31, 1989.
Exhibit Index (Continued)
Designation Description Method of Filing
Exhibit 10-C 1980 Stock Option Plan of Filed as Exhibit 10-E to
the Registrant, as amended the Registrant's Annual
on October 8, 1981.** Report on Form 10-K
for the year ended
December 31, 1981.*
Exhibit 10-C-1 Amendment dated as of Filed as Exhibit 10-D-1
March 8, 1990 to 1980 Stock to the Registrant's
Option Plan.** Annual Report on Form
10-K for the year ended
December 31, 1989.**
Exhibit 10-D Ford Motor Company Filed as Exhibit 10-H
Supplemental Compensation to the Registrant's Annual
Plan as amended through Report on Form 10-K
May 8, 1986.** for the year ended
December 31, 1986.*
Exhibit 10-D-1 Amendment to Ford Motor Filed as Exhibit 10-F-1
Company Supplemental to the Registrant's Annual
Compensation Plan, dated Report on Form 10-K
May 12, 1988.** for the year ended
December 31, 1988.*
Exhibit 10-D-2 Amendment to Ford Motor Filed as Exhibit 10-D-2 to
Company Supplemental the Registrant's Annual
Compensation Plan, dated Report on Form 10-K for the
July 8, 1992.** year ended December 31, 1992.*
Exhibit 10-E Ford Motor Company Executive Filed as Exhibit 10-G to
Separation Allowance Plan as the Registrant's Annual
revised for separations on Report on Form 10-K
or after January 1, 1981.** for the year ended
December 31, 1987.*
Exhibit 10-E-1 Amendment to Ford Motor Filed as Exhibit 10-G-1
Company Executive Separation to the Registrant's Annual
Allowance Plan.** Report on Form 10-K
for the year ended
December 31, 1988.*
Exhibit Index (Continued)
Designation Description Method of Filing
Exhibit 10-F Description of Company Filed as Exhibit 10-I to
practices regarding club the Registrant's Annual
memberships for executives.** Report on Form 10-K
for the year ended
December 31, 1981.*
Exhibit 10-G Description of Company Filed as Exhibit 10-J to
practices regarding travel the Registrant's Annual
expenses of spouses of Report on Form 10-K
certain executives.** for the year ended
December 31, 1980.*
Exhibit 10-H Ford Motor Company Deferred Filed as Exhibit 10-L to
Compensation Plan for Non- the Registrant's Annual
Employee Directors, adopted Report on Form 10-K
January 13, 1983.** for the year ended
December 31, 1982.*
Exhibit 10-H-1 Deferred Compensation Plan Filed as Exhibit 10-H-1 to
for Non-Employee Directors, the Registrant's Annual
as amended on July 11, 1991.** Report on Form 10-K
for the year ended
December 31, 1991.*
Exhibit 10-I Ford Motor Company Benefit Filed as Exhibit 10-K to
Equalization Plan, as amended the Registrant's Annual
through January 10, 1985.** Report on Form 10-K
for the year ended
December 31, 1988.*
Exhibit 10-I-1 Description of Amendment to Filed as Exhibit 10-K-1 to
Ford Motor Company Benefit the Registrant's Annual
Equalization Plan adopted Report on Form 10-K
on November 10, 1988.** for the year ended
December 31, 1988.*
Exhibit 10-J Description of Financial Filed as Exhibit 10-N to
Counseling Services provided the Registrant's Annual
to certain executives.** Report on Form 10-K for
for the year ended
December 31, 1983.*
Exhibit Index (Continued)
Designation Description Method of Filing
Exhibit 10-K Agreement and Plan of Reor- Filed as Exhibit 2 to
ganization Among Ford Motor the Registrant's Current
Company and Ford Affiliate Report on Form 8-K dated
Company and National Inter- December 16, 1985.*
group, Inc. and NHC Corpor-
ation and First Nationwide
Financial Corporation dated
as of August 2, 1985.
Exhibit 10-L 1986 Long-Term Incentive Plan Filed as Exhibit 10-Q to
of the Registrant.** the Registrant's Annual
Report on Form 10-K
for the year ended
December 31, 1985.*
Exhibit 10-L-1 Amendment dated as of June 1, Filed as Exhibit 10-N-1
1990 to 1986 Long-Term Incen- to the Registrant's
tive Plan of the Annual Report on Form 10-K
Registrant.** for the year ended
December 31, 1990.*
Exhibit 10-M Supplemental Executive Filed as Exhibit 10-R to
Retirement Plan, as amended the Registrant's Annual
as of December 11, 1986.** Report on Form 10-K
December 31, 1986.*
Exhibit 10-M-1 Description of Amendment to Filed as Exhibit 10-O-1
the Supplemental Executive to the Registrant's
Retirement Plan, adopted Annual Report on Form 10-K
July 13, 1989.** for the year ended
December 31, 1990.*
Exhibit 10-M-2 Description of Amendment to Filed as Exhibit 10-M-2
the Supplemental Executive to the Registrant's
Retirement Plan, adopted Annual Report on Form 10-K
October 10, 1991.** for the year ended
December 31, 1991.*
Exhibit 10-M-3 Description of Amendment to Filed as Exhibit 10-M-3
the Supplemental Executive to the Registrant's
Retirement Plan, adopted Annual Report on Form 10-K
October 8, 1992.** for the year ended
December 31, 1992.*
Exhibit Index (Continued)
Designation Description Method of Filing
Exhibit 10-M-4 Description of Amendment to Filed with this Report.
the Supplemental Executive
Retirement Plan, adopted
October 1, 1993.**
Exhibit 10-N Ford Motor Company Restricted Filed as Exhibit 10-P to
Stock Plan for Non-Employee the Registrant's Annual
Directors adopted by the Board Report on Form 10-K
of Directors on November 10, for the year ended
1988, and approved by the December 31, 1988.*
stockholders at the 1989
Annual Meeting.**
Exhibit 10-O 1990 Long-Term Incentive Plan, Filed as Exhibit 10-R to
amended as of June 1, 1990, of the Registrant's Annual
the Registrant.** Report on Form 10-K
for the year ended
December 31, 1990.*
Exhibit 10-O-1 Amendment to 1990 Long-Term Filed as Exhibit 10-P-1
Incentive Plan, effective as to the Registrant's Annual
of October 1, 1990.** Report on Form 10-K
for the year ended
December 31, 1991.*
Exhibit 10-P Description of Matching Gift Filed as Exhibit 10-Q to
Program for Non-Employee the Registrant's Annual
Directors.** Report on Form 10-K
for the year ended
December 31, 1991.*
Exhibit 10-Q Description of Non-Employee Filed as Exhibit 10-R to
Directors Life Insurance the Registrant's Annual
and Optional Retirement Report on Form 10-K for
Plan (amended as of the year ended December
January 1, 1993).** 31, 1992.*
Exhibit 10-R Description of Non-Employee Filed as Exhibit 10-S to
Directors Accidental Death, the Registrant's Annual
Dismemberment and Permanent Report on Form 10-K for
Total Disablement the year ended December
Indemnity.** 31, 1992.*
Exhibit Index (Continued)
Designation Description Method of Filing
Exhibit 10-S Agreement dated December 10, Filed as Exhibit 10-T to
1992 between William C. Ford the Registrant's Annual
and the Registrant.** Report on Form 10-K for
the year ended December
31, 1992.*
Exhibit 10-T Support Agreement dated as of Filed with this Report.
October 1, 1993 between the
Registrant and Ford Credit
Europe.
Exhibit 10-U Description of Amendments to Filed with this Report.
Company Benefit Plans, including
the Supplemental Executive
Retirement Plan, Benefit
Equalization Plan and Executive
Separation Allowance Plan,
adopted December 9, 1993.**
Exhibit 11 Computation of Primary and Filed with this Report.
Fully Diluted Earnings a
Share.
Exhibit 12 Computation of Ratio of Filed with this Report.
Earnings to Combined Fixed
Charges and Preferred Stock
Dividends.
Exhibit 21 List of Subsidiaries of Filed with this Report.
the Registrant as of
December 31, 1993.
Exhibit 23 Consent of Independent Filed with this Report.
Certified Public Accountants.
Exhibit 24 Powers of Attorney. Filed with this Report.
* Incorporated by reference as an exhibit hereto
** Management contract or compensatory plan or arrangement