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1
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, 1994 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 New York Stock Exchange
Pacific Coast 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
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
Tokyo Stock Exchange in Japan and on certain stock exchanges in the United
Kingdom and Continental Europe.
[COVER PAGE 1 OF 2 PAGES]
2
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, 1995, the Registrant had outstanding 953,486,149 shares of
Common Stock and 70,852,076 shares of Class B Stock. Based on the New York
Stock Exchange Composite Transaction closing price of the Common Stock on that
date ($25 1/8 a share), the aggregate market value of such Common Stock was
$23,956,339,493.63. 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, 1995 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 11, 1995 (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]
3
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 design,
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 direct
subsidiaries, the activities of which include financing operations, vehicle and
equipment leasing and insurance operations: Ford Motor Credit Company ("Ford
Credit"), Ford Credit Europe plc ("Ford Credit Europe"), Ford Holdings, Inc.
("Ford Holdings"), The Hertz Corporation ("Hertz") and Granite Management
Corporation (formerly First Nationwide Financial Corporation) ("Granite").
Ford Holdings is a holding company that owns primarily Associates First Capital
Corporation ("The Associates"), USL Capital Corporation (formerly United States
Leasing International, Inc.) ("USL Capital") and The American Road Insurance
Company ("American Road"). In addition, there are a number of international
affiliates not listed above that are consolidated in the total Financial
Services results, but are managed by either Ford Credit (which manages Ford
Credit Europe, as well as other international affiliates), The Associates or
USL Capital.
See Note 18 of Notes to Financial Statements and Item 6. "Selected
Financial Data" for information 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.
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.
4
Item 1. Business (Continued)
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, as well as by the
timing of new model introductions and capacity limitations. 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.
Ford has operations in over 30 countries and sells vehicles in over 200
markets. These businesses frequently have foreign currency exposures when they
buy, sell, and finance in currencies other than their local currencies. Ford's
primary foreign currency exposures, in terms of revenue and income, are in the
German Mark, Japanese Yen, Italian Lira and French Franc. The effect of
changes in exchange rates on income depends largely on the relationship between
revenues and costs incurred in the local currency versus other currencies.
Historically, the effect of changes in exchange rates on Ford's earnings
generally has been small relative to other factors that also affect earnings
(such as unit sales).
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
------------------------------------
1994 1993 1992 1991 1990
---- ---- ----- ---- ----
Cars........................................ 9.0 8.5 8.2 8.2 9.3
Trucks...................................... 6.4 5.7 4.9 4.3 4.8
---- ---- ---- ---- ----
Total....................................... 15.4 14.2 13.1 12.5 14.1
==== ==== ==== ==== ====
-2-
5
Item 1. Business (Continued)
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
------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Small........................... 31.5% 28.8% 29.3% 29.0% 28.9%
Middle.......................... 48.9 52.1 51.7 51.4 51.8
Large........................... 8.2 8.5 9.2 9.6 9.1
Luxury.......................... 11.4 10.6 9.8 10.0 10.2
----- ----- ----- ----- -----
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
------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Small........................... 35.0% 29.0% 26.6% 31.2% 31.1%
Middle.......................... 45.3 51.7 53.4 47.3 44.8
Large........................... 10.3 9.9 10.5 10.1 11.2
Luxury.......................... 9.4 9.4 9.5 11.4 12.9
----- ----- ----- ----- -----
Total Ford U.S. Car Sales....... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
As shown in the first table above, the percentages of industry sales in
the various car segments have remained relatively stable since 1990. As shown
in the second table above, Ford's proportion of sales in 1994 has increased in
the small segment and decreased in the middle segment, reflecting lower sales
of Tempo and Topaz models, which were discontinued in 1994.
U.S. Industry Truck Sales by Segment
------------------------------------------
Years Ended December 31
------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Compact pickup.................. 18.5% 18.9% 20.8% 22.4% 22.9%
Compact van/utility............. 40.4 41.1 40.1 38.8 34.7
Full-Size pickup................ 26.3 24.8 24.2 25.1 26.0
Full-Size van/utility........... 9.9 10.6 10.6 9.4 11.4
Medium/Heavy.................... 4.9 4.6 4.3 4.3 5.0
----- ----- ----- ----- -----
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
------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Compact pickup.................. 17.8% 19.7% 17.0% 18.5% 19.8%
Compact van/utility............. 33.5 32.6 33.5 31.5 25.3
Full-Size pickup................ 33.4 32.6 33.6 35.8 36.8
Full-Size van/utility........... 12.5 12.4 13.1 11.7 14.9
Medium/Heavy.................... 2.8 2.7 2.8 2.5 3.2
----- ----- ----- ----- -----
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 1990, while the full-size
segments (pickups and van/utility) have declined slightly as a percentage of
total truck sales.
-3-
6
Item 1. Business (Continued)
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
--------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
U.S. Manufacturers (Including Imports)
Ford................................. 21.8% 22.3% 21.8% 20.1% 21.1%
General Motors....................... 34.0 34.1 34.6 35.6 35.6
Chrysler............................. 9.0 9.8 8.3 8.6 9.2
----- ----- ----- ----- -----
Total U.S. Manufacturers........... 64.8 66.2 64.7 64.3 65.9
Foreign-Based Manufacturers**
Japanese............................. 29.6 29.1 30.1 30.2 27.9
All Other............................ 5.6 4.7 5.2 5.5 6.2
----- ----- ----- ----- -----
Total Foreign-Based Manufacturer.. 35.2 33.8 35.3 35.7 34.1
----- ----- ----- ----- -----
Total U.S. Car Retail Deliveries.. 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
U.S. Truck Market Shares*
--------------------------------------
Years Ended December 31
--------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
U.S. Manufacturers (Including Imports)
Ford................................. 30.1% 30.5% 29.7% 28.9% 29.3%
General Motors....................... 30.9 31.4 32.2 32.9 34.3
Chrysler............................. 21.7 21.4 21.1 18.5 17.3
Navistar International............... 1.3 1.3 1.3 1.4 1.5
All Other............................ 1.8 1.6 1.4 1.3 1.4
----- ----- ----- ----- -----
Total U.S. Manufacturers........... 85.8 86.2 85.7 83.0 83.8
Foreign-Based Manufacturers**
Japanese............................. 13.5 13.2 13.8 16.5 15.6
All Other............................ 0.7 0.6 0.5 0.5 0.6
----- ----- ----- ----- -----
Total Foreign-Based Manufacturers.. 14.2 13.8 14.3 17.0 16.2
----- ----- ----- ----- -----
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
------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
U.S. Manufacturers (Including Imports)
Ford................................. 25.2% 25.5% 24.7% 23.2% 23.9%
General Motors....................... 32.7 33.1 33.7 34.6 35.2
Chrysler............................. 14.3 14.4 13.1 12.0 12.0
Navistar International............... 0.5 0.5 0.5 0.5 0.5
All Other............................ 0.8 0.7 0.5 0.5 0.5
----- ----- ----- ----- -----
Total U.S. Manufacturers........... 73.5 74.2 72.5 70.8 72.1
Foreign-Based Manufacturers**
Japanese............................. 22.9 22.8 24.0 25.5 23.7
All Other............................ 3.6 3.0 3.5 3.7 4.2
----- ----- ----- ----- -----
Total Foreign-Based Manufacturers.. 26.5 25.8 27.5 29.2 27.9
----- ----- ----- ----- -----
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.
** 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-
7
Item 1. Business (Continued)
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 23.7% in 1990 to 25.5% in
1991, but declined to 22.9% in 1994, reflecting in part the effects of the
strengthening of the Japanese yen on the prices of vehicles produced by the
Japanese manufacturers.
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. In response to the strengthening of the Japanese yen to the
U.S. dollar, Japanese manufacturers are continuing to add production capacity
(particularly in the profitable truck segments) in the United States.
Production in the U.S. by Japanese transplants reached about 2.4 million units
in 1994 and is expected to increase gradually over the next several years.
Marketing Incentives and Fleet Sales. As a result of intense competition
from new product offerings (from both domestic and foreign manufacturers) 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). Marketing incentives
are particularly prevalent during periods of economic downturns, when excess
capacity in the industry tends to exist.
Ford's U.S. and Canada marketing costs as a percentage of gross sales
revenue for each of 1994, 1993 and 1992 were: 8.5%, 9.9% and 10.9%,
respectively. During the 1983-1988 period, such costs as a percentage of sales
revenue were in the 4% to 7% range. In 1991, marketing costs peaked at 14% of
gross revenues. "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
---------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Units Sold..................... 924,000 881,000 882,000 782,000 821,000
Percent of Ford's
Total Car and Truck Sales.... 24% 25% 28% 27% 24%
Fleet sales generally are less profitable than retail sales and sales to daily
rental companies generally are less profitable than sales to other fleet
purchasers. The mix between sales to daily rental companies and other fleet
sales has been about evenly split in recent years.
Warranty Coverages. 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", the Federal Clean Air Act requires a useful
-5-
8
Item 1. Business (Continued)
life of 10 years or 100,000 miles (whichever occurs first) for emissions
equipment on vehicles sold in the U.S. 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.
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 further as Japanese manufacturers, which together had a European car
market share of 11% for 1994, increase their production capacity in Europe and
import restrictions on Japanese built-up vehicles gradually are removed in
total by December 31, 1999.
In 1994, European car industry sales were 11.8 million cars, up 6% from
1993 levels. Truck sales were 1.4 million units, up 6% from 1993 levels.
Ford's European car share for 1994 was 11.8%, compared with 11.5% for 1993, and
its European truck share for 1994 was 14.7%, compared with 14.6% for 1993.
For Ford, Great Britain and Germany are the most important markets within
Europe, although the Southern European countries are becoming increasingly
significant. Any adverse change in the British or German market has a
significant effect on total automotive profits. For 1994 compared with 1993,
total industry sales were up 8% in Great Britain and unchanged 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. In 1994, industry sales of cars and trucks in Canada were up 5% from
1993 levels, slightly less than the increase of 8% in the U.S. over the same
period. Mexico has been a growing market. In 1994, industry sales were up 2%
to 619,000 units. However, substantial devaluation of the Mexican peso in late
1994 created a high level of uncertainty regarding economic activity in Mexico.
Although the long-term outlook remains positive, industry volume is expected to
be down substantially in 1995. Ongoing financial effects of the devaluation on
Ford are expected to be unfavorable; the magnitude of these will be dependent
in large part upon overall economic conditions and the extent to which the
Mexican government permits price increases.
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. In 1994, Ford had 28,448 export sales to Mexico,
compared with none in 1993.
South 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 1994, Ford's
profitability in the region improved
-6-
9
Item 1. Business (Continued)
compared with 1993, primarily reflecting strong results in Brazil and
Argentina. Autolatina (Ford's joint venture with Volkswagen AG in Brazil and
Argentina) remained the market leader in Brazil. Industry sales in Brazil and
Argentina were at record levels in 1994. In Brazil, the economic plan
implemented in late 1993 has had a stabilizing effect on the Brazilian economy
and has reduced inflation, but the ongoing success of the plan remains
uncertain. In addition, duties on vehicles imported into Brazil have declined
progressively from 85% in 1990 to 32% in 1995. As a result, imports have been
and are expected to continue to gain a progressively larger share of the car
market in Brazil.
Ford and Volkswagen have agreed on a separation process leading toward
dissolution of Autolatina in Brazil and Argentina by year-end 1995. See Item
7. "Management's Discussion and Analysis of Financial Condition and Results of
Operations" for more information concerning this plan for dissolution. Ford's
future results in the region 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, Taiwan and Japan are
the principal markets for Ford products. In 1994, Ford was the car market
share leader in Australia with a 22.9% car market share and a 20.3% combined
car and truck market share. In Taiwan (where sales of built-up vehicles
manufactured in Japan are prohibited), Ford had a combined car and truck market
share in 1994 of 16.3%. Ford's principal competition in the Asia-Pacific
region has been the Japanese manufacturers. It 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 believes that China is strategically
important to Ford's long-term success in the Asia-Pacific region. Ford China
Operations was established in 1994 to coordinate all of Ford's activities in
China. In 1994, Ford invested in automotive component manufacturing joint
ventures in China (automotive interior trim, automotive glass and automotive
electronic/audio components) and purchased a 6.5% equity interest in Mahindra
and Mahindra Limited, an automotive and tractor manufacturer in India. Ford is
continuing to investigate additional automotive component manufacturing and
vehicle assembly opportunities in those markets as well as others. In
addition, Ford is expanding the number of right-hand-drive vehicles it will
offer in Japan, including the Probe, Explorer and Taurus models.
Ford's relationship with Mazda Motor Corporation, in which it has held a
25% ownership interest since 1979, has been a key element of Ford's presence in
the Asia-Pacific region. Recent management appointments by Mazda of
Ford-nominated executives have been made to improve coordination of business
and product plans in the Asia-Pacific region.
Africa. In late 1994, Ford re-entered the South African market by
acquiring a 45% equity interest in South African Motor Corporation (Pty.)
Limited ("SAMCOR"). SAMCOR is an assembler of Ford and other manufacturers'
vehicles in South Africa.
-7-
10
Item 1. Business (Continued)
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 franchisees 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 80% 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
-------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Retail*................. 36.6% 38.5% 37.7% 35.2% 31.4%
Wholesale............... 81.5 81.4 77.6 74.9 71.0
_________________________
* As a percentage of total sales and leases, including cash sales.
Ford Credit's finance receivables and investments in operating leases were
as follows at the dates indicated (in millions):
December 31,
--------------------------
1994 1993
--------- ---------
Finance receivables
Retail $40,567 $38,609
Wholesale 15,253 11,699
Diversified 2,738 2,626
Other 4,264 3,681
------- -------
Total finance receivables 62,822 56,615
Loan origination costs, net 156 125
Unearned income (5,371) (5,263)
Allowance for credit losses (660) (718)
------- -------
Finance receivables, net $56,947 $50,759
======= =======
Investments in operating leases $24,853 $15,773
Accumulated depreciation (4,603) (2,974)
Allowance for credit losses (256) (198)
------- -------
Investments in operating
leases, net $19,994 $12,601
======= =======
-8-
11
Item 1. Business (Continued)
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, 1994 December 31, 1993
----------------------- -----------------------
Installments Balances Installments Balances
------------ -------- ------------ --------
Retail $27 $183 $10 $ 98
Diversified 5 8 13 56
Other 1 7 24 95
--- ---- --- ----
Total $33 $198 $47 $249
=== ==== === ====
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,
------------------------------
1994 1993 1992
------ ------ ------
Net losses
Retail* $221 $213 $298
Wholesale 1 (4) 15
Diversified 2 14 23
Other 5 5 6
---- ---- ----
Total $229 $228 $342
==== ==== ====
Net losses as a percentage of
average receivables
Retail* 0.38% 0.46% 0.75%
Total finance receivables* 0.30 0.35 0.60
Provision for credit losses $247 $270 $418
Allowance for credit losses 916 916 916
Allowance as a percent of
net receivables* 1.18% 1.42% 1.66%
_______________________
*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):
1994 1993 1992
------ ------ ------
Beginning balance $ 916 $ 916 $ 825
Additions 247 270 418
Deductions
Losses 378 392 476
Recoveries (149) (164) (134)
----- ----- -----
Net losses 229 228 342
Other changes, including
reclassifications and
amounts related to finance
receivables sold 18 42 (15)
----- ----- -----
Net deductions 247 270 327
----- ----- -----
Ending balance $ 916 $ 916 $ 916
===== ===== =====
-9-
12
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 "a1" 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 Ratings Group, respectively.
Ford and Ford Credit have 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 1994.
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.
Ford Credit Europe's finance receivables and investments in operating
leases were as follows at the dates indicated (in millions):
December 31,
--------------------------
1994 1993
--------- ---------
Finance receivables
Retail $ 9,356 $ 7,143
Wholesale 4,615 3,724
Other 234 100
------- -------
Total finance receivables 14,205 10,967
Loan origination costs, net 85 63
Unearned income (1,159) (955)
Allowance for credit losses (162) ( 89)
------- -------
Finance receivables, net $12,969 $ 9,986
======= =======
Investments in operating leases $ 1,010 $ 818
Accumulated depreciation (231) (212)
Allowance for credit losses (7) (1)
------- -------
Investments in operating
leases, net $ 772 $ 605
======= =======
-10-
13
Item 1. Business (Continued)
An analysis of Ford Credit Europe's allowance for credit losses in finance
receivables and operating leases is as follows for the years indicated (in
millions):
1994 1993 1992
------ ------ ------
Beginning balance $ 90 $123 $145
Additions 50 46 62
Net losses (66) (72) (51)
Other changes 95 (7) (33)
---- ---- ----
Ending balance $169 $ 90 $123
==== ==== ====
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 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.
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 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,
-------------------------
1994 1993
--------- ---------
Consumer finance
Residential real estate-secured receivables $12,003 $10,626
Direct installment and credit card receivables 7,200 6,060
Manufactured housing and other
installment receivables 4,864 3,810
------- -------
Total consumer finance receivables 24,067 20,496
Commercial finance
Heavy-duty truck receivables 5,001 4,334
Other industrial equipment receivables 5,877 4,743
------- -------
Total commercial finance receivables 10,878 9,077
------- -------
Gross receivables 34,945 29,573
Unearned finance income (3,769) (3,208)
------- -------
Net finance receivables $31,176 $26,365
======= =======
Allowance for losses on finance receivables $ 944 $ 809
-11-
14
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,
------------------------------
1994 1993 1992
------ ------ ------
NET CREDIT LOSSES
Consumer finance
Amount $ 456 $ 372 $ 383
% of average net receivables 2.33% 2.19% 2.64%
% of receivables liquidated 3.09 3.41 4.57
Commercial finance
Amount $ 8 $ 22 $ 42
% of average net receivables .09% .30% .64%
% of receivables liquidated .08 .26 .61
Total net credit losses
Amount $ 464 $ 394 $ 425
% of average net receivables 1.62% 1.61% 2.02%
% of receivables liquidated 1.84 2.03 2.80
ALLOWANCE FOR LOSSES
Balance at end of period $ 944 $ 809 $ 699
% of net receivables 3.03% 3.07% 3.06%
The following table shows total gross balances contractually 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,
1994 $443 1.84% $31 .28% $474 1.36%
1993 363 1.77 48 .53 411 1.39
An analysis of The Associates' allowance for losses on finance receivables
is as follows for the years indicated (in millions):
1994 1993 1992
------ ------ ------
Beginning balance $809 $699 $591
Additions 577 477 513
Recoveries 101 88 72
Losses (565) (482) (497)
Other adjustments, primarily
reserves of acquired businesses 22 27 20
---- ---- ----
Ending balance $944 $809 $699
==== ==== ====
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. 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 senior and subordinated debt
instruments. Certain of these financing transactions are carried on the books
of Ford affiliates.
-12-
15
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,
--------------------------------
1994 1993 1992
-------- -------- --------
Total earning assets
Investments in finance leases - net $2,435 $2,364 $2,075
Investments in operating leases - net 712 695 558
Investments in leveraged leases - net 266 191 4
Notes receivable 825 721 502
Investments in securities 700 563 329
Inventory held for sale or lease 87 55 97
Investments in associated companies 18 18 20
------ ------ ------
Total $5,043 $4,607 $3,585
====== ====== ======
Allowance for doubtful accounts
Beginning balance $ 55 $ 40 $ 30
Additions 8 25 19
Deductions (5) (10) (9)
------ ------ ------
Ending balance $ 58 $ 55 $ 40
====== ====== ======
Allowance for doubtful accounts
as a percent of earning assets 1.2% 1.2% 1.1%
Total balance over 90 days past due
at year end $ 37 $ 44 $ 49
Percent of earning assets 0.7% 1.0% 1.4%
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 deferred annuities which are sold primarily through
banks and brokerage firms. The obligations of Ford Life, including annuities,
are guaranteed by American Road. In addition, American Road has agreed to
maintain Ford Life's surplus and capital at levels necessary to meet applicable
insurance regulations.
The following table summarizes the revenues and net income of American
Road (in millions):
Premiums Investment Annuities and Net
Earned Income Other Income Total Income
------ ------ ------------ ----- ------
1994 $376 $ 41 $159 $576 $ 58(a)
1993 465 141 130 736 79
1992 519 175 42 736 63(b)
1991 706 211 2 919 126
1990 764 149 4 917 103
_____________
(a) Includes an increase of $26 million for nonrecurring recovery of
income taxes in 1994 from prior years.
(b) Includes an increase of $16 million resulting from the cumulative
effect of adopting new accounting rules on income taxes.
-13-
16
Item 1. Business (Continued)
The detail of premiums earned by American Road was as follows (in
millions):
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Extended service contracts $148 $211 $217 $318 $355
Physical damage 119 139 176 227 228
Credit life and disability 109 115 126 161 181
---- ---- ---- ---- ----
Total $376 $465 $519 $706 $764
==== ==== ==== ==== ====
The Hertz Corporation
On March 8, 1994, Ford purchased from Commerzbank Aktiengellschaft, 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%. On April 29, 1994, Ford acquired 20% of
Hertz' common stock from Park Ridge Limited Partnership, and Hertz redeemed the
common stock (26%) and preferred stock of Hertz owned by AB Volvo for $145
million. These transactions resulted in Hertz becoming a wholly owned
subsidiary of Ford. In addition, a $150 million subordinated promissory note
of Hertz held by Ford Credit was exchanged for $150 million of preferred stock
of Hertz. Because the Company was a principal shareholder of Hertz prior to
these transactions, there was no significant change in the relationship between
Ford and Hertz. Prior to these transactions, Hertz had been accounted for on
an equity basis as part of the Automotive segment. Hertz' operating results,
assets, liabilities and cash flows were consolidated as part of the Financial
Services segment effective March 31, 1994.
Hertz was incorporated in 1967 and is a successor to corporations which
were engaged in the automobile and truck leasing and rental business since
1924. Hertz' affiliates, independent licensees and associates are engaged
principally in the business of renting automobiles and renting and leasing
trucks, without drivers, in the U.S. and in over 150 foreign countries.
Collectively, they operate what Hertz believes is the largest rent-a-car
business in the world and one of the largest one-way truck rental businesses in
the U.S. In addition, through its wholly owned subsidiary, Hertz Equipment
Rental Corporation, Hertz operates what it believes to be the largest business
in the U.S. involving the rental, lease and sale of construction and materials
handling equipment. Other activities of Hertz include the sale of its used
vehicles, the leasing of automobiles, and providing claim management and
telecommunications services in the U.S.
Revenue earning equipment is used in the rental of vehicles and
construction equipment and the leasing of vehicles under closed-end leases
where the disposition of the vehicles upon termination of the lease is for the
account of Hertz.
The cost and accumulated depreciation of revenue earning equipment were as
follows for the nine months ended December 31, 1994 (in millions):
Revenue Earning Equipment
----------------------------------------
Accumulated
Cost Depreciation Net Book Value
--------- ------------ --------------
Balance, March 31, 1994 $ 4,211 $ 441 $ 3,770
Additions 5,002 554 4,448
Retirements and other (4,402) (444) (3,958)
------- ----- -------
Balance, December 31, 1994 $ 4,811 $ 551 $ 4,260
======= ===== =======
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17
Item 1. Business (Continued)
Granite Management Corporation
Granite, 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.
Until September 30, 1994, the principal asset of Granite was the capital
stock of First Nationwide Bank, A Federal Savings Bank, since known as Granite
Savings Bank (the "Bank"). On September 30, 1994, substantially all of the
assets of the Bank were sold to, and substantially all of the liabilities of
the Bank were assumed by, First Madison Bank, FSB ("First Madison").
The stated sale price for the Bank was $1.1 billion, slightly higher than
tangible net book value at December 31, 1993. In total, Ford retained, through
Granite, approximately $1.2 billion of commercial real estate and other assets
as of the closing date. These retained assets generally are of lower quality
than those included in the sale. In addition, for the three-year period ending
in November 1996, First Madison has the option of requiring Granite to
repurchase up to $500 million of the assets included in the sale that become
nonperforming. This repurchase obligation is guaranteed by Ford.
The sale of the Bank resulted in an after-tax charge of $440 million
against Ford's 1994 first quarter earnings, reflecting the nonrecovery of
goodwill and reserves for estimated losses on the assets retained and to be
repurchased by Granite. These assets will be liquidated over time as market
conditions permit. Historically, Granite (including the Bank) has not had a
significant effect on Ford's operating results.
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, Europe and
elsewhere. In addition, manufacturing and assembly facilities in the United
States, Europe and elsewhere 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.
Mobile Source Emissions Control -- United States Requirements. As amended
in November 1990, the Federal Clean Air Act (the "Clean Air Act" or the "Act")
imposes 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. In addition, the Act requires that emissions equipment for
vehicles sold in the U.S. have a minimum "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
-15-
18
Item 1. Business (Continued)
to sell its pro rata share of 150,000 alternate fuel vehicles in each of the
1996, 1997 and 1998 model years and its pro rata share of 300,000 alternate
fuel 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 presently
in effect will become effective as early as the 2004 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 significantly 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 an electric
vehicle that either meets customer expectations or is commercially viable.
Such vehicles likely will run on lead-acid batteries with a limited range (well
under 100 miles per recharge in optimal conditions), have a long recharge time
(up to 8 hours), lack substantial infrastructure support (home and public
facilities for recharging) and have a significant cost premium over
conventional vehicles. 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 nonelectric vehicles.
As part of its State Implementation Plan ("SIP"), California is
considering more stringent standards for medium duty trucks. Adoption of such
standards could require Ford to accelerate implementation of costly and
unproven technology and incur additional recall and warranty expenses or
preclude the sale in California of some medium duty trucks. Further action by
California on SIP provisions could similarly impact light duty vehicles and
heavy trucks.
The California 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 which do not meet national ambient air
quality standards 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. A group of twelve
northeastern states and the District of Columbia, the Ozone Transport
Commission (the "OTC"), organized under provisions of the Act, petitioned the
EPA to require California LEV standards in that region. There are major
problems with transferring California standards to the Northeast -- many
dealers sell vehicles
-16-
19
Item 1. Business (Continued)
in neighboring states and the range of present ZEVs is greatly diminished (by
more than 50 percent) in cold weather. Also, the Northeast states have refused
to adopt the California reformulated (i.e., cleaner burning) gasoline
requirement -- the absence of which makes the task of meeting standards even
more difficult. California LEV standards (including the ZEV requirements)
already have been adopted in New York and Massachusetts.
To mitigate these problems, the automobile industry proposed to
voluntarily meet emissions standards nationwide that are more stringent than
those required by the Act. The proposal was based on using technology
developed to meet the California LEV standards, but adjusting for the absence
of the California reformulated gasoline and ZEV requirements. While there was
a general receptivity to the industry's proposal, some of the states are
insisting on either a ZEV mandate or a guarantee that "advanced technology"
vehicles will be sold in their states.
In December 1994, the EPA granted the OTC petition to impose California
LEV standards, while at the same time urging states and manufacturers to agree
on a national approach which the EPA described as "environmentally superior" to
the California standards. The states will have until February 1996 to decide
between the two approaches.
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.
European Requirements. The European Union has established standards
which, in many cases, require motor vehicle emissions control equipment similar
to that used in the U.S. These standards 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. New more stringent
vehicle emissions standards were established by the European Union in March
1994. These new standards apply to new vehicle homologations beginning January
1, 1996 and to new vehicle registrations beginning January 1, 1997 and are of
generally equivalent numerical stringency to 1994 model year U.S. standards.
The European Commission also is examining proposals for more stringent
emissions standards and enforcement procedures (the "Stage III Directive"). It
is proposed that the Stage III Directive would become effective beginning in
2000 for new vehicle homologations and 2001 for new vehicle registrations.
European Union member countries are 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.
-17-
20
Item 1. Business (Continued)
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. The
Safety Act prohibits 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. Compliance with many safety standards is
costly because doing so tends 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 learns that
motor vehicles manufactured by it contain a defect which the manufacturer
decides in good faith is 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 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.
Canada, the European Union, individual member countries within the
European Union and other countries in Europe, Latin America and the
Asia-Pacific markets 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 has established CAFE standards
applicable to light trucks (under 8,500 lbs. GVW) for the following model years
(on a combined two-wheel drive/four-wheel drive basis): 1995 - 20.6 mpg, 1996
- - 20.7 mpg and 1997 - 20.7 mpg.
-18-
21
Item 1. Business (Continued)
Although Ford expects to be able to comply with the foregoing CAFE
standards, 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.
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 ("CCAP") 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
nonregulatory measures. The Safety Administration is considering significant
increases in the truck CAFE standard for the 1988 - 2006 model years that could
be as high as 28 mpg by the 2006 model year. If the CCAP goals are partially
or fully implemented through increases in the CAFE standard, or if significant
increases in car or light truck CAFE standards for subsequent model years
otherwise are imposed, 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 European Union and its member countries also are examining measures to
reduce C02 emissions, some of which may affect the automotive industry. These
may include proposals: to limit CO2 exhaust emissions for vehicles to 120g/km
by 2005 (which translates into fuel economy requirements of approximately
5L/100 km for gasoline engines and 4.5L/100 km for diesel engines); to improve
fuel economy for vehicles by as much as 15% over the 1995-2005 period and/or by
as much as 25% in one or more markets over the 1990-2005 period; and for member
countries to increase fuel taxes. Some of these proposals, if adopted, would
result in Ford having to take costly actions that could have substantial
adverse effects on its sales volume and profits.
The U.S. 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.
-19-
22
Item 1. Business (Continued)
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.
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 Stationary Source Environmental Control -- The European Union (now
including Finland, Sweden and Austria) by Directives and Regulations, and
individual member countries by legislation and regulations, impose requirements
on waste and hazardous wastes, incineration, packaging, landfill, soil
pollution, integrated pollution control, air emissions standards, import/export
and use of dangerous substances, air and water quality standards, noise,
environmental management systems, energy efficiency, emissions reporting, and
planning and permitting. Additional or more stringent requirements (including
tax measures and civil liability schemes for cleaning polluted sites) are
likely to be adopted in the future. The cost of complying with these standards
could be substantial.
Climate Change Convention -- In response to the requirements of the United
Nations Climate Change Convention held in Brazil in 1992, national governments
are examining ways to reduce potential global warming risks. These actions may
restrict the use of certain chemicals that are used as refrigerants (in
vehicles and buildings) and cleaning solvents, such as R-134a.
-20-
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Item 1. Business (Continued)
Worldwide Regulatory Compatibility -- Ford's efforts to develop new
markets and increase imports are impeded by incompatible automotive safety,
environmental and other product regulatory standards. At present, differing
standards either restrict the vehicles Ford can export to serve new markets or
increase the cost and complexity to do so. Also, vehicle safety is a priority
with customers in North America, Europe and key Asia-Pacific markets and better
global understanding of real-world accidents and injuries is a competitive
necessity.
The "traditional" and developed automotive markets have developed their
own bodies of regulation. In Europe, two sets of vehicle regulations exist:
1) European Union directives, which must be accepted by the member countries;
and 2) United Nations Economic Commission for Europe (ECE) regulations, which
may be accepted by the member countries. Although European Union directives
and ECE regulations generally are aligned, some variations exist in the manner
in which they are interpreted and enforced by each member country. The United
States and Canada use a substantially different regulatory system, and Japan
and Australia use a hybrid of the ECE system.
The ECE regulations are generally recognized outside the above markets.
Countries in the process of defining motor vehicle regulations, such as China,
India, Malaysia and Russia, are adopting ECE (versus U.S.) regulations. As a
result, U.S.-built vehicles have to be modified for these markets.
The U.S. and Europe have shown limited willingness to accept each other's
regulations, and negotiations for acceptance of U.S. regulations as being
functionally equivalent to the ECE standards in emerging markets have had
limited success.
Pollution Control Costs -- During the period 1995 through 1999, Ford
expects that approximately $800 million will be spent on its North American and
European facilities 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 $170 million will be spent in
1995 and $220 million will be spent in 1996.
Employment Data
In 1994, Ford's worldwide average employment increased to 337,778 from
321,925 in 1993. The increase in average employment for 1994 resulted
primarily from the inclusion of Hertz as a consolidated subsidiary beginning
April 1, 1994. Worldwide payrolls were $15.8 billion in 1994, an increase of
$2.1 billion from 1993.
Average employment by geographic area in 1994 compared with 1993 levels
was as follows:
1994 1993
------- -------
United States 180,460 166,593
Canada 16,840 15,747
Europe 102,738 99,527
Latin-America 24,605 27,321
Asia Pacific 13,135 12,737
------- -------
Total 337,778 321,925
======= =======
-21-
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Item 1. Business (Continued)
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
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 Motor Company, Limited at Dunton, England; and of Ford Werke A.G. at
Merkenich, Germany.
In 1994, 1993 and 1992, $5.2 billion, $5.0 billion and $4.3 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, $38 million, $55 million and $46 million
were charged to income in 1994, 1993 and 1992, 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.
-22-
25
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, employment-related matters, 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 -- 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 $1 billion at December 31, 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
$911 million at December 31, 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
$214 million at December 31, 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
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 a notice from a government
environmental enforcement agency concerning a matter which potentially involves
monetary sanctions exceeding $100,000. The agency believes a Ford facility may
have violated regulations relating to the management of certain of the
facility's wastes.
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
-23-
26
Item 3. Legal Proceedings (Continued)
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.
In 1992, Ford was sued in federal court in Nevada by an individual patent
owner seeking damages and an injunction for alleged infringement of four U.S.
patents characterized by the individual as covering machine vision inspection
technologies, including bar code reading. Ford filed a declaratory judgment
action in the same court to have those patents and several other patents
directed to machine vision and laser uses declared invalid, unenforceable and
not infringed. The individual counterclaimed, alleging infringement of the
patents added by Ford and several additional patents. 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.
Currently pending against Ford are three purported class action lawsuits
that allege defects in the paint processes used with respect to certain
vehicles manufactured by Ford. One lawsuit, pending in Texas state court, is
limited to Texas purchasers who allegedly experienced paint chipping or
peeling. The other two lawsuits (one pending in federal court in Louisiana,
and one pending in federal court in Alabama) are nationwide in scope and also
allege defects claimed to result in paint chipping and peeling. All three
lawsuits appear to be focusing on vehicles painted with high-build electrocoat
systems and seek unspecified compensatory and punitive damages and unspecified
injunctive relief. Cumulatively, the three lawsuits apparently cover certain
F-Series/Bronco, Ranger/Bronco II and Mustang vehicles for several model years
beginning in 1984. If the plaintiffs were to prevail in these lawsuits, Ford
could be required to pay substantial 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. A settlement has been reached
in each of these matters, subject to final court approval.
The Federal Trade Commission and the Department of Justice have advised
Ford that they are investigating the retail vehicle financing credit practices
of Ford and Ford Credit for compliance with the Equal Credit Opportunity Act
and Regulation B thereunder.
Item 4. Submission of Matters to a Vote of Security Holders
Not required.
-24-
27
Item 4A. Executive Officers of the Registrant
The executive officers of the Registrant and their respective positions
and ages at March 25, 1995 are shown in the table below:
Present
Position
with the
Registrant
Name Position Held Since Age
---- -------- ---------- ---
Alex Trotman Chairman of the Board November 1993 61
(1)(2) of Directors, President
and Chief Executive
Officer
Director
Louis R. Ross Vice Chairman and Chief January 1993 63
(2) Technical Officer
Director
W. Wayne Booker Executive Vice President-- October 1992 60
International Automotive
Operations
Edward E. Hagenlocker Executive Vice President May 1994 55
(President, Ford Automotive
Operations)
Peter J. Pestillo Executive Vice President-- January 1993 57
Corporate Relations
Kenneth Whipple Executive Vice President March 1988 60
(President, Ford
Financial Services Group)
John M. Devine Group Vice President and October 1994 50
Chief Financial Officer
Jacques A. Nasser Group Vice President-- May 1994 47
Product Development
William E. Odom Group Vice President--Ford December 1993 59
and Chairman of the Board
of Directors and Chief
Executive Officer, Ford
Motor Credit Company
-25-
28
Item 4A. Executive Officers of the Registrant (Continued)
Present
Position
with the
Registrant
Name Position Held Since Age
---- -------- ---------- ---
Robert L. Rewey Group Vice President-- December 1993 56
Marketing and Sales
Operations
Robert H. Transou Group Vice President-- May 1994 55
Manufacturing
Albert Caspers Vice President--Ford and May 1994 62
Chairman of the Board of
Directors, Ford of Europe
Incorporated
Kenneth R. Dabrowski Vice President-- Commercial May 1994 51
Truck Vehicle Center
James D. Donaldson Vice President--Large Front May 1994 52
Wheel Drive Vehicle Center
Norman F. Ehlers Vice President--Facilities, May 1994 57
Materials and Services
Purchasing
James E. Englehart Vice President--Light Truck May 1994 58
Vehicle Center
Edsel B. Ford II Vice President--Ford and December 1993 46
(2) President and Chief
Operating Officer, Ford
Motor Credit Company
Director
Ronald E. Goldsberry Vice President--General February 1994 52
Manager, Ford Customer
Service Division
Elliott S. Hall Vice President--Washington July 1987 56
Affairs
John A. Hall Vice President--Employee November 1993 57
Relations
-26-
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Item 4A. Executive Officers of the Registrant (Continued)
Present
Position
with the
Registrant
Name Position Held Since Age
---- -------- ---------- ---
John T. Huston Vice President--Powertrain May 1994 52
Operations
Kenneth K. Kohrs Vice President--Real Wheel May 1994 56
Drive Car Vehicle Center
Malcolm S. Macdonald Treasurer January 1995 55
Frank E. Macher Vice President--General Manager, May 1994 54
Automotive Components Division
Keith C. Magee Vice President--General February 1994 48
Manager, Lincoln-Mercury
Division
John W. Martin, Jr Vice President--General April 1989 58
Counsel
Carlos E. Mazzorin Vice President--Production May 1994 53
Purchasing
David N. McCammon Vice President--Finance October 1987 60
W. Dale McKeehan Vice President--Vehicle May 1994 57
Operations
John P. McTague Vice President--Technical March 1990 56
Affairs
John A. Oldfield Vice President--Ford and February 1994 58
Chairman, Aston Martin
Lagonda Limited
Richard Parry-Jones Vice President--Small/Medium May 1994 43
Vehicle Center
Helen O. Petrauskas Vice President--Environmental March 1983 50
and Safety Engineering
Murray L. Reichenstein Vice President--Controller January 1991 57
-27-
30
Item 4A. Executive Officers of the Registrant (Continued)
Present
Position
with the
Registrant
Name Position Held Since Age
---- -------- ---------- ---
Neil W. Ressler Vice President--Advanced May 1994 55
Vehicle Technology
John M. Rintamaki Secretary July 1993 53
Ross H. Roberts Vice President--General May 1991 57
Manager, Ford Division
Robert P. Sparvero Vice President January 1995 54
David W. Scott Vice President--Communications December 1994 54
Charles W. Szuluk Vice President--Process May 1994 52
Leadership
John J. Telnack Vice President--Design August 1993 57
Thomas J. Wagner Vice President--Customer February 1994 56
Communication and
Satisfaction
Dennis W. Wilkie Vice President--Business December 1994 52
Development Office
__________________
(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.
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.
-28-
31
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 and Pacific
Coast Stock Exchanges in the United States; 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 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 (in each case, adjusted to reflect a 2-for-1
stock split in the form of a 100% stock dividend on Ford's Common and Class B
Stock effective June 6, 1994):
1994 1993
---------------------------------- ----------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- -------
Common Stock price per share*
High $35 1/16 $31 1/8 $32 3/4 $30 $26 3/4 $28 1/4 $28 7/8 $33 1/16
Low 28 1/2 26 3/4 26 1/8 25 5/8 21 1/2 24 7/8 24 3/16 27 3/8
Dividends per share of
Common and Class B Stock $0.20 $0.225 $0.225 $0.26 $0.20 $0.20 $0.20 $0.20
___________________________
*Prices reflect New York Stock Exchange Composite Transactions
As of February 1, 1995, stockholders of record of Ford included 260,260
holders of Common Stock and 109 holders of Class B Stock.
-29-
32
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 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
AUTOMOTIVE
Sales $107,137 $91,568 $84,407 $72,051 $81,844 $82,879 $82,193 $71,797 $62,868 $52,915
Operating income/(loss) 5,826 1,432 (1,775) (3,769) 316 4,252 6,612 6,256 4,142 2,902
Income/(Loss) before income
taxes and cumulative
effects of changes in
accounting principles 5,997 1,291 (1,952) (4,052) 275 5,155 7,312 6,499 4,300 3,154
Income/(Loss) before
cumulative effects of
changes in accounting
principles (1) 3,824 940 (1,534) (3,186) 99 3,175 4,609 3,767 2,512 2,012
Net income/(loss) 3,824 940 (8,628) (3,186) 99 3,175 4,609 3,767 2,512 2,012
FINANCIAL SERVICES
Revenues $21,302 $16,953 $15,725 $16,235 $15,806 $13,267 $10,253 $ 8,096 $ 6,826 $ 4,700
Income before income taxes
and cumulative effects
of changes in accounting
principles 2,792 2,712 1,825 1,465 1,221 874 1,031 1,385 1,321 861
Income before cumulative
effects of changes in
accounting principles 1,484 1,589 1,032 928 761 660 691 858 773 504
Net income 1,484 1,589 1,243 928 761 660 691 858 773 504
TOTAL COMPANY
Income/(Loss) before
income taxes and
cumulative effects of
changes in accounting
principles $ 8,789 $ 4,003 $ (127) $(2,587) $ 1,495 $ 6,030 $ 8,343 $ 7,885 $ 5,620 $ 4,015
Provision/(Credit) for
income taxes 3,329 1,350 295 (395) 530 2,112 2,999 3,226 2,324 1,487
Minority interests 152 124 80 66 105 82 44 34 12 13
Income/(Loss) before
cumulative effects of
changes in accounting
principles (1) $5,308 $ 2,529 $ (502) $(2,258) $ 860 $ 3,835 $ 5,300 $ 4,625 $ 3,285 $ 2,515
Cumulative effects of
changes in accounting
principles - - (6,883) - - - - - - -
Net income/(loss) 5,308 2,529 (7,385) (2,258) 860 3,835 5,300 4,625 3,285 2,515
TOTAL COMPANY DATA PER
SHARE OF COMMON AND
CLASS B STOCK (2)
Income/(Loss) before
cumulative effects
of changes in
accounting principles $ 4.97 $ 2.27 $ (0.73) $ (2.40) $ 0.93 $ 4.11 $ 5.48 $ 4.53 $ 3.08 $ 2.27
Income/(Loss)
Assuming no dilution 4.97 2.27 (7.81) (2.40) 0.93 4.11 5.48 4.53 3.08 2.27
Assuming full dilution 4.44 2.10 (7.81) (2.40) 0.92 4.06 5.40 4.46 3.03 2.20
Cash dividends 0.91 0.80 0.80 0.98 1.50 1.50 1.15 0.79 0.56 0.40
Common stock price range
(NYSE)
. High 35 1/16 33 1/16 24 1/2 18 7/8 24 5/8 28 3/8 27 1/2 28 1/4 15 7/8 9 7/8
. Low 25 5/8 21 1/2 13 7/8 11 3/4 12 1/2 20 3/4 19 1/8 14 1/4 9 6 3/4
Average number of shares
of Common and Class B
stock outstanding
(in millions) 1,010 986 972 952 926 934 968 1,022 1,066 1,108
- ------------------------
(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.
-30-
33
Item 6. Selected Financial Data (Continued)
SUMMARY OF OPERATIONS, CONT. 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
TOTAL COMPANY BALANCE
SHEET DATA AT YEAR END
Assets
Automotive $ 68,371 $ 61,737 $ 57,170 $ 52,397 $ 50,824 $ 45,819 $ 43,128 $ 39,734 $ 34,021 $ 29,297
Financial Services 150,983 137,201 123,375 122,032 122,839 115,074 100,239 76,260 59,211 45,797
Total Assets $219,354 $198,938 $180,545 $174,429 $173,663 $160,893 $143,367 $115,994 $ 93,232 $ 75,094
Long-term debt
Automotive $ 7,103 $ 7,084 $ 7,068 $ 6,539 $ 4,553 $ 1,137 $ 1,336 $ 2,058 $ 2,467 $ 2,459
Financial Services 58,104 47,900 42,369 43,680 40,779 37,784 30,777 26,009 19,128 13,753
Stockholders' equity (3) 21,659 15,574 14,753 22,690 23,238 22,728 21,529 18,493 14,860 12,269
TOTAL COMPANY FACILITY
AND TOOLING DATA
Capital expenditures for
facilities (excluding
special tools) $ 5,236 $ 4,339 $ 3,613 $ 3,611 $ 4,702 $ 4,412 $ 3,148 $ 2,415 $ 2,179 $ 2,385
Depreciation 7,207 5,456 4,658 3,956 3,185 2,720 2,458 2,107 1,859 1,559
Expenditures for special
tools 3,310 2,475 2,177 2,236 2,556 2,354 1,634 1,343 1,285 1,417
Amortization of special
tools 2,129 2,012 2,097 1,822 1,695 1,509 1,335 1,353 1,293 948
TOTAL COMPANY EMPLOYEE
DATA - WORLDWIDE
Payroll $ 15,785 $ 13,750 $ 13,754 $ 12,850 $ 14,014 $ 13,327 $ 13,010 $ 11,670 $ 11,290 $ 10,175
Total labor costs 22,896 20,065 19,850 17,998 18,962 18,152 18,108 16,567 15,610 14,033
Average number of employees 337,778 321,925 325,333 331,977 369,547 366,641 358,939 350,320 382,274 369,314
TOTAL COMPANY EMPLOYEE
DATA - U.S. OPERATIONS
Payroll $ 10,396 $ 8,888 $ 8,015 $ 7,389 $ 8,309 $ 8,650 $ 8,473 $ 7,762 $ 7,704 $ 7,213
Average number of employees 180,460 166,593 158,377 156,079 180,104 188,286 185,540 180,838 181,476 172,165
Average hourly labor
costs (4)
Earnings $ 21.81 $ 20.94 $ 19.92 $ 19.10 $ 18.44 $ 17.77 $ 17.39 $ 16.50 $ 16.12 $ 15.70
Benefits 19.12 18.12 19.24 17.97 14.12 13.21 13.07 12.38 11.01 10.75
Total hourly labor costs $ 40.93 $ 39.06 $ 39.16 $ 37.07 $ 32.56 $ 30.98 $ 30.46 $ 28.88 $ 27.13 $ 26.45
- -----------------
(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.
-31-
34
Item 6. Selected Financial Data (Continued)
SUMMARY OF VEHICLE SALES (5)
(UNITS IN THOUSANDS) 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
NORTH AMERICA (6)
CARS
United States 2,077 1,950 1,841 1,605 1,847 2,186 2,377 2,171 2,094 1,941
Canada 124 130 128 154 143 189 204 198 194 195
Mexico 49 51 67 55 51 47 32 17 21 36
TOTAL CARS 2,250 2,131 2,036 1,814 2,041 2,422 2,613 2,386 2,309 2,172
TRUCKS
United States 2,199 1,874 1,520 1,260 1,420 1,523 1,541 1,481 1,404 1,260
Canada 156 126 108 104 114 138 145 151 127 120
Mexico 42 39 59 57 37 40 31 18 23 34
TOTAL TRUCKS 2,397 2,039 1,687 1,421 1,571 1,701 1,717 1,650 1,554 1,414
TOTAL NORTH AMERICA 4,647 4,170 3,723 3,235 3,612 4,123 4,330 4,036 3,863 3,586
OUTSIDE NORTH AMERICA
Germany 938 831 924 969 980 1,023 1,008 900 862 770
Britain 463 422 473 482 481 516 507 484 438 422
Spain 302 211 311 341 335 310 282 276 268 266
Australia 130 127 120 109 157 159 136 134 143 177
Taiwan 86 114 114 103 104 100 80 59 35 24
Japan 34 53 67 96 108 91 62 51 44 39
Other Countries (7) 39 37 35 20 19 15 39 120 268 268
TOTAL OUTSIDE NORTH AMERICA 1,992 1,795 2,044 2,120 2,184 2,214 2,114 2,024 2,058 1,966
TOTAL WORLDWIDE - CARS AND TRUCKS 6,639 5,965 5,767 5,355 5,796 6,337 6,444 6,060 5,921 5,552
TOTAL WORLDWIDE - TRACTORS (8) 0 0 0 13 68 72 77 64 68 84
TOTAL WORLDWIDE FACTORY SALES 6,639 5,965 5,767 5,368 5,864 6,409 6,521 6,124 5,989 5,636
- ------------------------
(5) Includes units manufactured by other companies and sold by Ford.
(6) Factory sales are shown by source of manufacture, except within North
America. In North America, U.S. sales include exports from Canada,
Mexico and Australia, Canadian sales include exports from the
U.S. and Mexico and Mexican sales include exports from the U.S. and
Canada
(7) Unit sales for Brazil and Argentina are included through June 30, 1987.
Excludes units sold by Autolatina, a joint venture in Brazil and
Argentina in which Ford holds a 49% interest.
(8) Ford's tractor operation, Ford New Holland, was sold on May 6, 1991.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
OVERVIEW
The Company's worldwide net income in 1994 was a record $5,308 million, or
$4.97 per share of Common and Class B Stock, compared with earnings of $2,529
million, or $2.27 per share in 1993. Fully diluted earnings per share were
$4.44, compared with $2.10 a year ago. Sales and revenues totaled $128.4
billion in 1994, up 18% from 1993. Factory unit sales of cars and trucks were
6,639,000, up 674,000 or 11%.
On June 6, 1994, a 2-for-1 stock split in the form of a 100% stock
dividend on the Company's outstanding Common and Class B Stock became
effective. Earnings per share for prior periods have been restated to reflect
the stock split.
The Company's financial results in 1994 showed substantial improvement
compared with 1993. Improvements in U.S. Automotive operations included the
favorable effects of higher industry volume and improved margins. Automotive
operations outside the U.S. also improved. The improvement reflected primarily
higher unit volume, lower manufacturing costs, and improved margins in Europe.
Earnings from Financial Services operations were down $105 million compared
with 1993, which was more than explained by a $440 million write-off for the
disposition of First Nationwide Bank, discussed below. The write-off was
offset largely by substantially improved earnings at the other operations.
The Company continued to strengthen its competitive position through cost
reduction programs and the development of new products. In 1994, capital
spending for new products and facilities was up $1.7 billion from 1993.
Automotive debt at the end of 1994 was $7.3 billion, down $0.7 billion from
year-end 1993. Cash and marketable securities for the Company's Automotive
segment totaled $12.1 billion, up $2.3 billion from year-end 1993.
In 1994, the Company announced a reorganization of its Automotive
operations, called "Ford 2000." Ford 2000 is a fundamental change intended to
provide customers with a wider array of vehicles in more markets, assure full
competitiveness in vehicle design, quality and value, and substantially reduce
the cost of operating Ford's automotive business. The new structure reduces
duplication of effort and facilitates best practices around the world by
merging Ford's North American Automotive Operations, European Automotive
Operations, and Automotive Components Group into a single organization, Ford
Automotive Operations. The new organization became effective on January 1,
1995.
Fourth Quarter of 1994
In the fourth quarter of 1994, the Company's worldwide net income was
$1,569 million or $1.47 per share of Common and Class B Stock, compared with
$719 million, or $0.65 per share in the fourth quarter of 1993.
Worldwide Automotive operations earned $1,085 million in the fourth
quarter of 1994, compared with $297 million a year ago. U.S. Automotive
operations earned $720 million in the fourth quarter of 1994, compared with
$669 million a year ago. The improved results for U.S. Automotive operations
reflected higher industry volume. Automotive operations outside the U.S. earned
$365 million, compared with a loss of $372 million a year ago. The improvement
for Automotive operations outside the U.S. reflected higher unit volumes and
lower manufacturing costs in Europe, improved operating results and
nonrecurrence of restructuring charges at Jaguar and Ford of Australia, and a
one-time gain of $110 million from the recent devaluation of the Mexican peso.
Ford's European Automotive operations (excluding Jaguar) earned $11 million in
the fourth quarter compared with a loss of $143 million in 1993.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Financial Services earned a record $484 million in the fourth quarter of
1994, compared with $422 million a year ago.
The consolidated financial statements on pages FS-1 through FS-30 should
be read as an integral part of this review.
RESULTS OF OPERATIONS: 1994 COMPARED WITH 1993
Automotive Operations
Net income from Ford's worldwide Automotive operations was $3,824 million
in 1994 on sales of $107.1 billion, compared with $940 million in 1993 on sales
of $91.6 billion.
In the U.S., Ford's Automotive operations earned $3,040 million on sales
of $73 billion, compared with $1,482 million in 1993 on sales of $61.6 billion.
Higher vehicle production, reflecting increased industry sales, 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, and the gain on the
sale of Ford's North American automotive seating and seat trim business ($73
million).
The U.S. economy continued to grow at a modest rate in 1994, helping to
maintain interest rates and inflation at comparatively low levels. Full-year
U.S. car and truck industry volumes increased from 14.2 million units in 1993
to 15.4 million units in 1994. Over 70% of the increase in industry sales was
attributable to trucks (including minivans, compact utility vehicles, full-size
pickups, and compact pickups). Ford's share of the U.S. car market was 21.6%,
down half of a point from 1993, reflecting lower shares for Tempo and Topaz,
which were discontinued in 1994. The Company's U.S. truck share was 30.1%,
down 4/10 of a point from 1993, reflecting capacity constraints on Explorer.
Outside the U.S., Ford's Automotive operations earned $784 million in 1994
on sales of $34.1 billion, compared with a loss of $542 million in 1993 on
sales of $30 billion. The improvement reflected primarily higher unit volumes,
lower manufacturing costs, and improved margins in Europe. Ford's European
Automotive operations (excluding Jaguar) earned $388 million, compared with a
loss of $407 million in 1993. Results outside the U.S. in 1993 included
restructuring charges at Jaguar ($174 million) and at Ford of Australia ($57
million), offset partially by the favorable one-time effect of a reduction in
German tax rates ($59 million).
Car and truck industry sales in Europe were 13.2 million units in 1994,
compared with 12.6 million units in 1993. Ford's European car market share was
11.8% in 1994, up 3/10 of a point from 1993. Ford's European truck share
improved 2/10 of a point to 14.8%.
Ford and Volkswagen AG have agreed on a separation process leading toward
dissolution of their Autolatina joint venture in Brazil and Argentina by
year-end 1995. Since it was formed in 1987, the joint venture has been a
successful and profitable participant in these volatile markets. Recent
industry volume growth in Brazil and Argentina, however, has resulted in
somewhat lower Autolatina market shares -- primarily because of capacity
limitations and increased competitive action. It is not known at this time
what effect, if any, the dissolution of Autolatina will have on Ford's future
earnings. Historically, earnings in Brazil and Argentina have represented a
significant portion of Ford's Automotive earnings outside the U.S. and Europe.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Financial Services Operations
The Company's Financial Services operations earned $1,484 million in 1994,
down $105 million from 1993. The decline was more than explained by the charge
to net income of $440 million in 1994 related to the disposition of First
Nationwide Bank. This charge, however, was offset largely by record earnings
at Ford Credit, The Associates, USL Capital, and the consolidation of results
for Hertz. Results in 1993 included an unfavorable one-time effect of $31
million from tax legislation in the U.S.
Ford Credit's consolidated net income was a record $1,313 million in 1994,
up $119 million from 1993. Ford Credit's financing operations earned a record
$1,080 million in 1994, up $84 million from 1993. The improvements reflected
primarily higher levels of earning assets, the one-time effect of the gain on
sale of an interest in Manheim Auctions, Inc. (an auto auction company), the
nonrecurrence of the one-time tax adjustment in 1993 for increased U.S. tax
rates, and improved cost performance; partial offsets included lower net
interest margins and lower gains from the sale of receivables. Ford Credit
results also include $233 million from 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. Depreciation
costs increased as a result of continued growth in operating leases; the
related lease revenues more than offset the increased depreciation. The
international operations managed by Ford Credit earned $241 million in 1994, up
$42 million from 1993, reflecting primarily higher levels of earning assets and
lower credit losses.
The Associates earned a record $548 million in the U.S. in 1994, up $78
million from 1993. The increase reflected higher levels of earning assets and
improved net interest margins. The international operations managed by The
Associates earned $76 million in 1994, up $38 million from 1993, reflecting
primarily higher levels of earning assets.
USL Capital earned a record $109 million in 1994, up $32 million from
1993. The increase reflected higher earning assets, lower operating costs, and
the nonrecurrence of the one-time tax adjustment in 1993 for increased U.S. tax
rates. American Road earned $58 million in 1994, compared with $79 million in
1993. The decrease reflected primarily reduced investment income from capital
gains.
In April 1994, Hertz became a wholly-owned subsidiary of Ford. In 1994,
Financial Services net income included $92 million for Hertz. In 1993,
Automotive net income included $26 million for Hertz (reflecting Ford's prior
equity interest).
On September 30, 1994, substantially all of the assets of First Nationwide
Bank, since known as Granite Savings Bank (the "Bank"), were sold to, and
substantially all of the Bank's liabilities were assumed by, First Madison
Bank, FSB ("First Madison"). The Bank is a wholly-owned subsidiary of Granite
Management Corporation (formerly First Nationwide Financial Corporation)
("Granite"), which in turn is a wholly-owned subsidiary of Ford. In 1994,
Granite incurred a loss of $484 million including a charge of $440 million
related to the disposition of the Bank, reflecting the nonrecovery of goodwill
and reserves for estimated losses on assets not included in the sale. Granite
incurred a loss of $55 million in 1993.
HISTORICAL REFERENCE: 1993 COMPARED WITH 1992
The Company's worldwide net income in 1993 was $2,529 million, or $2.27
per share of Common and Class B Stock, compared with a loss of $7,385 million,
or $7.81 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%.
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38
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
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 $0.73 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.
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).
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, full-size pickups, and compact pickups). Ford's share of the U.S.
car market was 22.3%, up half of a point from 1992. The Company's U.S. truck
share was 30.5%, up 8/10 of a point from 1992.
Outside the U.S., Ford's Automotive operations lost $542 million in 1993
on sales of $30 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) and at Ford of Australia ($57 million), offset
partially by the favorable one-time effect of a reduction in German tax rates
($59 million). Losses in 1992 included a one-time restructuring charge of $334
million for planned reductions in employment levels in the Company's European
Automotive operations.
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.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Car and truck industry sales in Europe were 12.6 million units in 1993,
compared with 15 million units in 1992. Ford's European car market share was
11.7% in 1993, up 2/10 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,
lower operating costs and 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).
Ford Credit's consolidated net income was a record $1,194 million in 1993,
up $302 million from 1992. 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. Ford Credit results also include $198 million from equity in the net
income of affiliated companies, primarily Ford Holdings. The 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
losses and higher levels of earning assets. The international operations
managed by The Associates earned $38 million in 1993, the same as in 1992.
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.
Granite 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.
LIQUIDITY AND CAPITAL RESOURCES
Automotive Operations
Cash and marketable securities of the Company's Automotive operations were
$12.1 billion at December 31, 1994, up $2.3 billion from December 31, 1993.
The Company paid $1.2 billion in cash dividends on its capital stock and
contributed $1.7 billion to its U.S. pension plans and $300 million to its
non-U.S. plans during 1994.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Automotive capital expenditures were $8.3 billion in 1994, up $1.6 billion
from 1993. During the next several years, the pace of spending for product
change at Ford is expected to be at similar or higher levels.
At December 31, 1994, Automotive debt totaled $7.3 billion, which was 25%
of total capitalization (stockholders' equity and Automotive debt), compared
with $8 billion, or 34% of total capitalization, at year-end 1993.
At December 31, 1994, Ford (parent company only) had long-term
contractually committed credit agreements in the U.S. under which $5.9 billion
is available from various banks at least through June 30, 1999. The entire
$5.9 billion may be used, at Ford's option, by either Ford or Ford Credit. As
of December 31, 1994, these facilities were unused.
Outside the U.S., Ford has additional long-term contractually committed
credit-line facilities of approximately $2.5 billion. These facilities are
available in varying amounts from 1995 through 1999; less than 1% was used at
December 31, 1994.
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 $33.2 billion at
December 31, 1994. Support facilities represent additional sources of funds,
if required. At December 31, 1994, Ford Credit had approximately $21.1 billion
of contractually committed facilities for use in the U.S., 76% of which are
available through June 30, 1999. These facilities included $18.2 billion of
revolving credit agreements with banks (which included $5.9 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, 1994, all of the U.S. facilities were unused. At December 31, 1994,
international subsidiaries and other credit operations managed by Ford Credit
had $8.1 billion of contractually committed support facilities available
outside the U.S. At December 31, 1994, approximately 12% of these facilities
were in use.
At December 31, 1994, 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, 1994. In 1994, Ford
Holdings sold 2,000 shares of its Series D Cumulative Preferred Stock having an
aggregate liquidation preference of $200 million, and sold 2,150 shares of its
Flexible Rate Auction Preferred Stock, Series L, M, and N, having an aggregate
liquidation preference of $215 million.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
At December 31, 1994, The Associates had contractually committed lines of
credit with banks of $3.8 billion, with various maturities ranging from January
4, 1995 to December 31, 1995, none of which were utilized at December 31, 1994.
Also, at December 31, 1994, The Associates had $4.4 billion of contractually
committed revolving credit facilities with banks, with maturity dates ranging
from February 1, 1995 through January 1, 2000, and $1 billion of contractually
committed receivables sale facilities, $500 million of which are available
through April 30, 1995 and $500 million of which are available through April
15, 1997; none of these facilities were in use at December 31, 1994. At
December 31, 1994, foreign operations managed by The Associates had
approximately $260 million of contractually committed support facilities
available outside the U.S., of which about 20% were in use at December 31,
1994.
At December 31, 1994, USL Capital had $1.5 billion of contractually
committed credit facilities, 69% of which are available through September 1999.
These facilities included $120 million of contractually committed receivables
sale facilities, of which 100% were in use at December 31, 1994. At December
31, 1994, foreign operations managed by USL Capital had approximately $30
million of contractually committed support facilities available outside the
U.S., of which about 84% were in use at December 31, 1994.
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, 1994.
At December 31, 1994, Hertz had $2 billion of contractually committed
credit facilities in the U.S., none of which were utilized at December 31,
1994. These facilities included $750 million and $1 billion of agreements with
banks, which mature June 30, 1995 and June 30, 1999, respectively, and a $250
million revolving credit facility with Ford. At December 31, 1994, Hertz'
foreign operations had approximately $488 million of contractually committed
support facilities available outside the U.S., of which about 75% were in use
at December 31, 1994.
ACCOUNTING CHANGES
The Emerging Issues Task Force (the "EITF") of the Financial Accounting
Standards Board is considering an accounting issue that, depending on its
outcome, could result in a significant one-time effect on Ford's reported
financial results, but not its cash flow. The issue concerns timing of revenue
recognition where a manufacturer sells a product to a dealer who in turn enters
into an operating lease for the product with a retail customer, and the lease
and title to the product are then sold by the dealer to the manufacturer (or a
finance subsidiary of the manufacturer). Ford recognizes revenue upon the sale
of vehicles to dealers, including vehicles that ultimately are leased under
Ford Credit's retail leasing program. If the EITF decides that later timing of
revenue recognition is required, Ford likely would be required to defer a
substantial amount of revenue and income from these transactions, but without
any impact on cash flow.
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42
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-31 immediately following the signature pages of this Report.
Selected quarterly financial data of Ford and its consolidated
subsidiaries for 1993 and 1994 are set forth in Note 19 of Notes to Financial
Statements.
Item 9. Disagreements With Accountants on Accounting and Financial Disclosure
Not required.
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 "Certain Relationships and Related
Transactions" in the Proxy Statement.
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43
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,
1994, 1993 and 1992.
Consolidated Balance Sheet, December 31, 1994 and 1993.
Consolidated Statement of Cash Flows, for the years ended December
31, 1994, 1993 and 1992.
Consolidated Statement of Stockholders' Equity, for the years ended
December 31, 1994, 1993 and 1992.
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-31 immediately following the signatures
pages of this Report.
(a) 2. Financial Statement Schedules
Designation Description
- ----------- -----------
Supplemental
Schedule Condensed Financial Information of Subsidiary
The Financial Statement Schedule listed above is filed as part of this
Report and is set forth on page FSS-1 immediately following page FS-31. 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 Restated Certificate of Incorporation, Filed as Exhibit 4.1 to the Registrant's
of the Registrant dated June 6, 1994. Registration Statement No. 33-55171.*
Exhibit 3-B By-Laws of the Registrant as Filed as Exhibit 3-B to the Registrant's
amended through December 9, 1993. Annual Report on Form 10-K for the year
ended December 31, 1993.*
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44
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
Designation Description Method of Filing
- ----------- ----------- ----------------
Exhibit 4-A Form of Deposit Agreement dated as of Filed as Exhibit 4-E to the Registrant's
November 20, 1991 among Ford Motor Registration Statement No. 33-43085.*
Company, Manufacturers Hanover Trust
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 Preferred Stock.
Exhibit 4-B Form of Deposit Agreement dated as of Filed as Exhibit 4-E to the Registrant's
October 29, 1992 among Ford Motor Registration Statement No. 33-53092.*
Company, Chemical Bank, as Depositary,
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 Agreement dated Filed as Exhibit 10-A to the Registrant's
as of July 1, 1993 between the Annual Report on Form 10-K for the year
Registrant and Ford Credit. ended December 31, 1993.*
Exhibit 10-B 1985 Stock Option Plan of the Registrant.** Filed as Exhibit 10-D to the Registrant's
Annual Report on Form 10-K for the year
ended December 31, 1985.*
Exhibit 10-B-1 Amendment dated as of March 8, 1990 Filed as Exhibit 10-C-1 to the Registrant's
to 1985 Stock Option Plan.** Annual Report on Form 10-K for the year
ended December 31, 1989.*
Exhibit 10-C Ford Motor Company Supplemental Filed as Exhibit 10-H to the Registrant's
Compensation Plan as amended through Annual Report on Form 10-K for the year
May 8, 1986.** ended December 31, 1986.*
Exhibit 10-C-1 Amendment to Ford Motor Company Filed as Exhibit 10-F-1 to the Registrant's
Supplemental Compensation Plan, dated Annual Report on Form 10-K for the year
May 12, 1988.** ended December 31,1988.*
Exhibit 10-C-2 Amendment to Ford Motor Company Filed as Exhibit 10-D-2 to the Registrant's
Supplemental Compensation Plan, dated Annual Report on Form 10-K for the year
July 8, 1992** ended December 31, 1992.*
Exhibit 10-D Ford Motor Company Executive Separation Filed with this Report.
Allowance Plan as amended through
December 9, 1993 for separations on
or after January 1, 1981.**
-42-
45
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
Designation Description Method of Filing
- ----------- ----------- ----------------
Exhibit 10-E Description of Company practices regarding Filed as Exhibit 10-I to the Registrant's
club memberships for executives.** Annual Report on Form 10-K for the year
ended December 31, 1981.*
Exhibit 10-F Description of Company practices regarding Filed as Exhibit 10-J to the Registrant's
travel expenses of spouses of certain Annual Report on Form 10-K for the year
executives.** ended December 31, 1980.*
Exhibit 10-G Ford Motor Company Deferred Compensation Filed as Exhibit 10-L to the Registrant's
Plan for Non-Employee Directors, adopted Annual Report on Form 10-K for the year
January 13, 1983.** ended December 31, 1982.*
Exhibit 10-G-1 Deferred Compensation Plan for Non- Filed as Exhibit 10-H-1 to the Registrant's
Employee Directors, as amended on Registrant's Annual Report on Form 10-K
July 11, 1991.** for the year ended December 31, 1991.*
Exhibit 10-H Ford Motor Company Benefit Equalization Filed with this Report.
Plan, as amended as of January 1,
1989.**
Exhibit 10-I Description of Financial Counseling Filed as Exhibit 10-N to the Registrant's
Services provided to certain executives.** Annual Report on Form 10-K for the year
ended December 31, 1983.*
Exhibit 10-J 1986 Long-Term Incentive Plan of the Filed as Exhibit 10-Q to the Registrant's
Registrant.** Annual Report on Form 10-K for the year
ended December 31, 1985.*
Exhibit 10-J-1 Amendment dated as of June 1, 1990 to Filed as Exhibit 10-N-1 to the Registrant's
1986 Long-Term Incentive Plan of the Annual Report on Form 10-K for the year
Registrant.** ended December 31, 1990.*
Exhibit 10-K Supplemental Executive Retirement Plan, Filed with this Report.
as restated and incorporating amendments
through December 9, 1993.**
Exhibit 10-L Ford Motor Company Restricted Stock Filed as Exhibit 10-P to the Registrant's
Plan for Non-Employee Directors adopted Annual Report on Form 10-K for the year
by the Board of Directors on November 10, ended December 31, 1988.*
1988, and approved by the stockholders at
the 1989 Annual Meeting.**
Exhibit 10-M 1990 Long-Term Incentive Plan, amended Filed as Exhibit 10-R to the Registrant's
as of June 1, 1990.** Annual Report on Form 10-K for the year
ended December 31, 1990.*
-43-
46
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
Designation Description Method of Filing
- ----------- ----------- ----------------
Exhibit 10-M-1 Amendment to 1990 Long-Term Incentive Filed as Exhibit 10-P-1 to the Registrant's
Plan, effective as of October 1, 1990.** Annual Report on Form 10-K for the year
ended December 31, 1991.*
Exhibit 10-N Description of Matching Gift Program for Filed as Exhibit 10-Q to the Registrant's
Non-Employee Directors.** Annual Report on Form 10-K for the year
ended December 31, 1991.*
Exhibit 10-O Non-Employee Directors Life Insurance Filed with this Report.
and Optional Retirement Plan (as
(amended as of January 1, 1993).**
Exhibit 10-P Description of Non-Employee Directors Filed as Exhibit 10-S to the Registrant's
Accidental Death, Dismemberment and Annual Report on Form 10-K for the year
Permanent Total Disablement Indemnity.** ended December 31, 1992.*
Exhibit 10-Q Agreement dated December 10, 1992 Filed as Exhibit 10-T to the Registrant's
between William C. Ford and the Annual Report on Form 10-K for the year
Registrant.** ended December 31, 1992.*
Exhibit 10-R Support Agreement dated as of October 1, Filed as Exhibit 10-T to the Registrant's
1993 between the Registrant and Ford Annual Report on Form 10-K for the year
Credit Europe. ended December 31, 1993.*
Exhibit 10-S Description of Select Retirement Plan Filed as Exhibit 10 to the Registrant's
adopted on June 9, 1994.** Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994.*
Exhibit 11 Computation of Primary and Fully Diluted Filed with this Report.
Earnings a Share.
Exhibit 12 Computation of Ratio of Earnings to Filed with this Report.
Combined Fixed Charges and Preferred
Stock Dividends.
Exhibit 21 List of Subsidiaries of the Registrant Filed with this Report.
as of December 31, 1994.
Exhibit 23 Consent of Independent Certified Public Filed with this Report.
Accountants.
Exhibit 24 Powers of Attorney. Filed with this Report.
- --------------------------
* Incorporated by reference as an exhibit hereto
** Management contract or compensatory plan or arrangement
-44-
47
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, 1994, the Registrant filed the
following Current Reports on Form 8-K:
1. Current Report on Form 8-K dated October 26, 1994 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, 1994.
2. Current Report on Form 8-K dated November 18, 1994 that included
information regarding foreign currency and interest rate exposures of the
Registrant.
3. Current Report on Form 8-K dated December 1, 1994 that included
information regarding an agreement between the Registrant and Volkswagen
AG to dissolve their Autolatina joint venture in Brazil and Argentina.
-45-
48
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 15, 1995
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 15, 1995
- --------------------------------
(Alex Trotman)
Colby H. Chandler* Director March 15, 1995
- --------------------------------
(Colby H. Chandler)
Michael D. Dingman* Director March 15, 1995
- --------------------------------
(Michael D. Dingman)
Director, Vice
President-Ford and
President and Chief
Operating Officer, Ford
Edsel B. Ford II* Motor Credit Company March 15, 1995
- --------------------------------
(Edsel B. Ford II)
-46-
49
Signature Title Date
--------- ----- ----
William Clay Ford* Director March 15, 1995
- --------------------------------
(William Clay Ford)
Director and
Chairman of the
William Clay Ford, Jr.* Finance Committee March 15, 1995
- --------------------------------
(William Clay Ford, Jr.)
Roberto C. Goizueta* Director March 15, 1995
- --------------------------------
(Roberto C. Goizueta)
Irvine O. Hockaday, Jr.* Director March 15, 1995
- --------------------------------
(Irvine O. Hockaday, Jr.)
Marie-Josee Kravis* Director March 15, 1995
- --------------------------------
(Marie-Josee Kravis)
Drew Lewis* Director March 15, 1995
- --------------------------------
(Drew Lewis)
Ellen R. Marram* Director March 15, 1995
- --------------------------------
(Ellen R. Marram)
Kenneth H. Olsen* Director March 15, 1995
- --------------------------------
(Kenneth H. Olsen)
-47-
50
Signature Title Date
--------- ----- ----
Carl E. Reichardt* Director March 15, 1995
- ------------------------------
(Carl E. Reichardt)
Director and Vice Chairman
Louis R. Ross* and Chief Technical Officer March 15, 1995
- ------------------------------
(Louis R. Ross)
Clifton R. Wharton, Jr.* Director March 15, 1995
- ------------------------------
(Clifton R. Wharton, Jr.)
John M. Devine* Group Vice President and
- ------------------------------ Chief Financial Officer
(John M. Devine) (principal financial officer) March 15, 1995
*By:/s/ John M. Rintamaki
---------------------
(John M. Rintamaki)
Attorney-in-Fact
-48-
51
Ford Motor Company and Subsidiaries
HIGHLIGHTS
Fourth Quarter Full Year
------------------------- -------------------------
1994 1993 1994 1993
-------- -------- -------- --------
Worldwide factory sales of cars
and trucks (in thousands)
- - United States 1,062 941 4,276 3,824
- - Outside United States 584 512 2,363 2,141
----- ----- ----- -----
Total 1,646 1,453 6,639 5,965
===== ===== ===== =====
Sales and revenues (in millions)
- - Automotive $27,766 $23,511 $107,137 $ 91,568
- - Financial Services 5,877 4,330 21,302 16,953
------- ------- -------- --------
Total $33,643 $27,841 $128,439 $108,521
======= ======= ======== ========
Net income (in millions)
- - Automotive $ 1,085 $ 297 $ 3,824 $ 940
- - Financial Services 484 422 1,484* 1,589
------- ------- -------- --------
Total $ 1,569 $ 719 $ 5,308 $ 2,529
======= ======= ======== ========
Capital expenditures (in millions)
- - Automotive $ 2,404 $ 1,985 $ 8,310 $ 6,714
- - Financial Services 65 32 236 100
------- ------- -------- --------
Total $ 2,469 $ 2,017 $ 8,546 $ 6,814
======= ======= ======== ========
Stockholders' equity at December 31
- - Total (in millions) $21,659 $15,574 $ 21,659 $ 15,574
- - After-tax return on Common and
Class B stockholders' equity 34.5% 21.1% 33.6% 18.6%
Automotive cash, cash equivalents,
and marketable securities at
December 31 (in millions) $12,083 $ 9,752 $ 12,083 $ 9,752
Automotive debt at December 31
(in millions) $ 7,258 $ 8,016 $ 7,258 $ 8,016
Automotive after-tax returns on sales 3.9% 1.3% 3.6% 1.1%
Shares of Common and Class B Stock
(in millions)
- - Average number outstanding 1,020 996 1,010 986
- - Number outstanding at December 31 1,023 998 1,023 998
AMOUNTS PER SHARE OF COMMON AND
CLASS B STOCK AFTER PREFERRED
STOCK DIVIDENDS
Income
- - Automotive $ 1.00 $ 0.23 $ 3.50 $ 0.66
- - Financial Services 0.47 0.42 1.47 1.61
------- ------- -------- --------
Total $ 1.47 $ 0.65 $ 4.97 $ 2.27
======= ======= ======== ========
Income assuming full dilution $ 1.31 $ 0.60 $ 4.44 $ 2.10
Cash dividends per share of Common
and Class B Stock $ 0.26 $ 0.20 $ 0.91 $ 0.80
- - - - - -
*Includes a loss of $440 million related to the disposition of Granite Savings
Bank (formerly First Nationwide Bank)
Share data have been restated to reflect the 2-for-1 stock split that became
effective June 6, 1994.
FS-1
52
Ford Motor Company and Subsidiaries
VEHICLE FACTORY SALES
For the Periods Ended December 31, 1994 and 1993
(in thousands)
Fourth Quarter Full Year
-------------------------- --------------------------
1994 1993 1994 1993
--------- --------- --------- ---------
NORTH AMERICA
Cars - U.S. 537 458 2,077 1,950
- Canada 33 35 124 130
- Mexico 15 12 49 51
----- ----- ----- -----
Total cars 585 505 2,250 2,131
Trucks - U.S. 525 483 2,199 1,874
- Canada 42 42 156 126
- Mexico 12 10 42 39
----- ----- ----- -----
Total trucks 579 535 2,397 2,039
----- ----- ----- -----
Total North America 1,164 1,040 4,647 4,170
OUTSIDE NORTH AMERICA
Germany 216 193 938 831
Britain 115 98 463 422
Spain 77 48 302 211
Australia 38 34 130 127
Taiwan 17 19 86 114
Japan 8 11 34 53
Other countries 11 10 39 37
----- ----- ----- -----
Total outside North America 482 413 1,992 1,795
----- ----- ----- -----
Total worldwide vehicle
factory sales 1,646 1,453 6,639 5,965
===== ===== ===== =====
Includes units manufactured by other companies and sold by Ford. Factory sales
are shown by source of manufacture, except within North America. In North
America, U.S. sales include exports from Canada, Mexico, and Australia.
Canadian sales include exports from the U.S. and Mexico. Mexican sales include
exports from the U.S. and Canada.
FS-2
53
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
For the Years Ended December 31, 1994, 1993 and 1992
(in millions)
1994 1993 1992
-------- -------- --------
AUTOMOTIVE
SALES (NOTE 1) $107,137 $91,568 $84,407
COSTS AND EXPENSES (Note 1)
Costs of sales 96,180 85,168 81,748
Selling, administrative, and other expenses 5,131 4,968 4,434
-------- ------- -------
Total costs and expenses 101,311 90,136 86,182
OPERATING INCOME/(LOSS) 5,826 1,432 (1,775)
Interest income 665 563 653
Interest expense 721 807 860
-------- ------- -------
Net interest expense (56) (244) (207)
Equity in net income of affiliated companies (Note 1) 271 127 15
Net (expense)/revenue from transactions with
Financial Services (Note 18) (44) (24) 15
-------- ------- -------
INCOME/(LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECTS OF
CHANGES IN ACCOUNTING PRINCIPLES - AUTOMOTIVE 5,997 1,291 (1,952)
FINANCIAL SERVICES
REVENUES (Note 1) 21,302 16,953 15,725
COSTS AND EXPENSES (Note 1)
Interest expense 7,023 6,482 7,056
Depreciation 4,910 3,064 2,089
Operating and other expenses 4,607 3,196 2,945
Provision for credit and insurance losses 1,539 1,523 1,795
Loss on disposition of Granite Savings Bank (formerly
First Nationwide Bank) (Note 16) 475 - -
-------- ------- -------
Total costs and expenses 18,554 14,265 13,885
Net revenue/(expense) from transactions with Automotive (Note 18) 44 24 (15)
-------- ------- -------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECTS OF
CHANGES IN ACCOUNTING PRINCIPLES - FINANCIAL SERVICES 2,792 2,712 1,825
-------- ------- -------
TOTAL COMPANY
INCOME/(LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECTS OF
CHANGES IN ACCOUNTING PRINCIPLES 8,789 4,003 (127)
Provision for income taxes (Note 6) 3,329 1,350 295
-------- ------- -------
INCOME/(LOSS) BEFORE MINORITY INTERESTS AND CUMULATIVE EFFECTS
OF CHANGES IN ACCOUNTING PRINCIPLES 5,460 2,653 (422)
Minority interests in net income of subsidiaries 152 124 80
-------- ------- -------
Income/(loss) before cumulative effects of changes in
accounting principles 5,308 2,529 (502)
Cumulative effects of changes in accounting
principles (Notes 6 and 8) - - (6,883)
-------- ------- -------
NET INCOME/(LOSS) 5,308 2,529 (7,385)
Preferred stock dividend requirements 287 288 209
-------- ------- -------
Income/(loss) attributable to Common and Class B Stock $ 5,021 $ 2,241 $(7,594)
======== ======= =======
FS-3
54
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
For the Years Ended December 31, 1994, 1993, and 1992
(in millions)
1994 1993 1992
------- ------- -------
Average number of shares of Common and Class B Stock
outstanding 1,010 986 972
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 $ 4.97 $ 2.27 $ (0.73)
Cumulative effects of changes in accounting principles - - (7.08)
------- ------ -------
INCOME/(LOSS) $ 4.97 $ 2.27 $ (7.81)
======= ====== =======
INCOME/(LOSS) ASSUMING FULL DILUTION $ 4.44 $ 2.10 $ (7.81)
CASH DIVIDENDS $ 0.91 $ 0.80 $ 0.80
The accompanying notes are part of the financial statements.
Share data have been restated to reflect the 2-for-1 stock split that became
effective June 6, 1994.
FS-4
55
Ford Motor Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(in millions)
December 31, December 31,
1994 1993
------------ -------------
ASSETS
AUTOMOTIVE
Cash and cash equivalents $ 4,481 $ 5,667
Marketable securities (Note 2) 7,602 4,085
-------- --------
Total cash, cash equivalents, and marketable securities 12,083 9,752
Receivables 2,548 2,302
Inventories (Note 4) 6,487 5,538
Deferred income taxes 3,062 2,830
Other current assets 2,006 1,226
Net current receivable from Financial Services (Note 18) 677 834
-------- --------
Total current assets 26,863 22,482
Equity in net assets of affiliated companies (Note 1) 3,554 3,002
Net property (Note 5) 27,048 23,059
Deferred income taxes 4,146 5,427
Other assets (Notes 1 and 8) 6,760 7,691
Net noncurrent receivable from Financial Services (Note 18) 0 76
-------- --------
Total Automotive assets 68,371 61,737
FINANCIAL SERVICES
Cash and cash equivalents 1,739 2,555
Investments in securities (Note 2) 6,105 8,219
Net receivables and lease investments (Note 3) 130,356 119,535
Other assets (Note 1) 12,783 6,892
-------- --------
Total Financial Services assets 150,983 137,201
-------- --------
TOTAL ASSETS $219,354 $198,938
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
AUTOMOTIVE
Trade payables $ 10,777 $ 8,769
Other payables 2,624 1,976
Accrued liabilities (Note 7) 11,599 10,815
Income taxes payable 316 160
Debt payable within one year (Note 9) 155 932
-------- --------
Total current liabilities 25,471 22,652
Long-term debt (Note 9) 7,103 7,084
Other liabilities (Note 7) 24,920 25,911
Deferred income taxes 948 1,089
-------- --------
Total Automotive liabilities 58,442 56,736
FINANCIAL SERVICES
Payables 2,361 1,881
Debt (Note 9) 123,713 103,960
Deposit accounts - 10,549
Deferred income taxes 2,958 2,287
Other liabilities and deferred income 7,669 5,583
Net payable to Automotive (Note 18) 677 910
-------- --------
Total Financial Services liabilities 137,378 125,170
Preferred stockholders' equity in a subsidiary company (Note 1) 1,875 1,458
STOCKHOLDERS' EQUITY
Capital stock (Notes 11 and 12)
Preferred Stock, par value $1.00 per share (aggregate liquidation
preference of $3.4 billion) * *
Common Stock, par value $1.00 per share (952 and 464 million shares issued) 952 464
Class B Stock, par value $1.00 per share (71 and 35 million shares issued) 71 35
Capital in excess of par value of stock 5,273 5,082
Foreign currency translation adjustments and other (Note 1) 189 (678)
Minimum pension liability adjustment - (400)
Earnings retained for use in business 15,174 11,071
-------- --------
Total stockholders' equity 21,659 15,574
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $219,354 $198,938
- - - - - - ======== ========
*Less than $1 million
The accompanying notes are part of the financial statements.
FS-5
56
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Years Ended December 31, 1994, 1993, and 1992
(in millions)
1994 1993 1992
---------------------- ---------------------- ----------------------
Financial Financial Financial
Automotive Services Automotive Services Automotive Services
---------- --------- ---------- --------- ---------- ---------
CASH AND CASH EQUIVALENTS AT JANUARY 1 $ 5,667 $ 2,555 $ 3,504 $ 3,182 $ 4,958 $ 3,175
Cash flows from operating activities (Note 17) 7,542 9,087 6,862 7,145 5,753 5,762
Cash flows from investing activities
Capital expenditures (8,310) (236) (6,714) (100) (5,697) (93)
Proceeds from sale and leaseback of
fixed assets 0 - 884 - 263 -
Acquisitions of other companies 0 (485) 0 (336) 0 (461)
Proceeds from sales of subsidiaries 0 715 173 0 52 0
Acquisitions of receivables and lease
investments - (202,407) - (163,858) - (134,619)
Collections of receivables and
lease investments - 172,694 - 142,844 - 123,144
Acquisitions of daily rental vehicles, net
of disposals - (924) - - - -
Purchases of securities (Note 17) (412) (10,688) (100,493) (13,741) (50,437) (12,877)
Sales and maturities of securities (Note 17) 511 9,649 101,927 12,426 49,629 12,169
Proceeds from sales of receivables - 3,622 - 4,794 - 6,465
Loans originated net of principal payments - (207) - (1,466) - (938)
Investing activity with Financial Services 355 - (117) - 709 -
Other (331) (312) (69) 389 (492) 372
-------- -------- -------- -------- -------- --------
Net cash used in investing activities (8,187) (28,579) (4,409) (19,048) (5,973) (6,838)
Cash flows from financing activities
Cash dividends (1,205) - (1,086) - (977) -
Sale of Preferred Stock 0 - 0 - 1,104 -
Issuance of Common Stock 715 - 394 - 221 -
Changes in short-term debt (795) 10,314 (66) 6,065 (426) 2,739
Proceeds from issuance of other debt 158 21,885 424 22,128 1,865 13,382
Principal payments on other debt (75) (14,088) (376) (13,791) (1,598) (13,122)
Financing activity with Automotive - (355) - 117 - (709)
Changes in customers' deposits, excluding
interest credited - (422) - (3,861) - (3,418)
Receipts from annuity contracts (Note 10) - 1,124 - 821 - 703
Redemption of Hertz common and preferred stock
(Note 16) - (145) - - - -
Issuance of subsidiary company preferred stock - 417 - 375 - 283
Other 31 13 (124) (76) 79 (10)
-------- -------- -------- ------- -------- --------
Net cash (used in)/provided by financing
activities (1,171) 18,743 (834) 11,778 268 (152)
Effect of exchange rate changes on cash 397 166 17 25 (220) (47)
Net transactions with Automotive/
Financial Services 233 (233) 527 (527) (1,282) 1,282
-------- -------- -------- -------- -------- --------
Net (decrease)/increase in cash and cash
equivalents (1,186) (816) 2,163 (627) (1,454) 7
-------- -------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT DECEMBER 31 $ 4,481 $ 1,739 $ 5,667 $ 2,555 $ 3,504 $ 3,182
======== ======== ======== ======== ======== ========
The accompanying notes are part of the financial statements.
FS-6
57
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1994, 1993, and 1992
(in millions)
1994 1993 1992
-------- -------- --------
CAPITAL STOCK (NOTE 11)
Common Stock
- ------------
Balance at beginning of year $ 464 $ 454 $ 448
Stock split in form of a 100% stock dividend 469 - -
Issued for employee benefit plans and other 19 10 6
------- ------- -------
Balance at end of year 952 464 454
Class B Stock
- -------------
Balance at beginning of year 35 35 35
Stock split in form of a 100% stock dividend 36 - -
------- ------- -------
Balance at end of year 71 35 35
Series A Preferred Stock * * *
Series B Preferred Stock * * *
CAPITAL IN EXCESS OF PAR VALUE OF STOCK
Balance at beginning of year 5,082 4,698 3,379
Stock split in form of a 100% stock dividend (505) - -
Issued for employee benefit plans and other 696 384 215
Sale of Series B Preferred Stock 0 0 1,104
------- ------- -------
Balance at end of year 5,273 5,082 4,698
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
AND OTHER (NOTE 1)
Balance at beginning of year (1,078) (62) 838
Translation adjustments during year 800 (508) (975)
Minimum pension liability adjustment 400 (400) -
Other 67 (108) 75
------- ------- -------
Balance at end of year 189 (1,078) (62)
EARNINGS RETAINED FOR USE IN THE BUSINESS
Balance at beginning of year 11,071 9,628 17,990
Net income/(loss) 5,308 2,529 (7,385)
Cash dividends (1,205) (1,086) (977)
------- ------- -------
Balance at end of year 15,174 11,071 9,628
------- ------- -------
Total stockholders' equity $21,659 $15,574 $14,753
======= ======= =======
Series A Series B
Common Class B Preferred Preferred
SHARES OF CAPITAL STOCK Stock Stock Stock Stock
------ ------- --------- ---------
Issued at December 31, 1991 448 35 0.046 0
Additions
1992 6 0 0 0.023
1993 10 0 0 0
1994 - Stock split in form of a 100% stock
dividend 469 36 - -
- Employee benefit plans and other 19 - - -
----- -- ----- -----
Net additions 504 36 0.046 0.023
----- -- ----- -----
Issued at December 31, 1994 952 71 0.046 0.023
===== == ===== =====
Authorized at December 31, 1994 3,000 265 -- In total: 30 --
- - - - - -
*The balances at the beginning and end of each period were less than $1 million
The accompanying notes are part of the financial statements.
FS-7
58
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 consolidated 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 revenue recognition. Provisions for 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 costs 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; interest supplements
and other support costs are recorded as sales incentives by Automotive
operations.
Other Costs
Advertising and sales promotion costs are expensed as incurred. Advertising
costs were $1,977 million in 1994, $1,773 million in 1993 and $1,702 million in
1992.
Anticipated costs related to product warranty are accrued at the time of sale.
Research and development costs are expensed as incurred and were $5,214 million
in 1994, $5,021 million in 1993 and $4,332 million in 1992.
Income/(Loss) Per Share of Common and Class B Stock
Income/(loss) per share of Common and Class B Stock is calculated by dividing
the 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.
FS-8
59
NOTE 1. Accounting Policies (Cont'd)
The company has outstanding securities, primarily Series A Preferred Stock,
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.
Derivative Financial Instruments
The company and many of its subsidiaries have entered into agreements to manage
certain exposures to fluctuations in foreign exchange and interest rates. All
derivative financial instruments are classified as "held for purposes other
than trading"; company policy specifically prohibits the use of derivatives for
speculative purposes.
Ford has operations in many countries outside the U.S., and purchases and sales
of finished vehicles and production parts, debt and other payables, subsidiary
dividends, and investments in subsidiaries are frequently denominated in
foreign currencies. Agreements to manage foreign exchange exposure include
foreign currency forward contracts, currency swaps and, to a lesser extent,
foreign currency options. Gains and losses on the various agreements are
recognized in income during the period of the related transactions, included in
the bases of the related transactions, or, in the case of hedges of net
investments in foreign subsidiaries, recognized as an adjustment to the foreign
currency translation component of stockholders' equity.
Financial Services operations issue debt and other payables for which the
maturity and interest rate structure differs from the invested assets to ensure
continued access to capital markets and to minimize overall borrowing costs.
Agreements to manage interest rate fluctuations include interest-rate swap
agreements. The differential paid or received on interest-rate swap agreements
is recognized as an adjustment to interest expense in the period.
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 1994.
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 subsidiary involved.
The effect of changes in foreign exchange rates on assets and liabilities, as
described above, increased net income by $376 million in 1994 and by $419
million in 1993 and decreased the net loss by $132 million in 1992. These
amounts included net transaction and translation gains before taxes of $574
million in 1994, $988 million in 1993 and $557 million in 1992. A majority of
these gains were offset by higher costs of sales that resulted from the use of
historical exchange rates for inventories sold during the period 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 amortized using the straight-line
method principally over 40 years. Total goodwill included in Automotive and
Financial Services other assets at December 31, 1994 was $2.4 billion and $3.3
billion, respectively.
FS-9
60
NOTE 1. Accounting Policies (Cont'd)
Goodwill (Cont'd)
The company evaluates the carrying value of goodwill for potential impairment
on an ongoing basis. Such evaluations compare operating income before
amortization of goodwill to the amortization recorded for the operations to
which the goodwill relates. The company also considers projected future
operating results, trends and other circumstances in making such evaluations.
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, consisting of preferred stock, is owned by persons other than
Ford and accounts for the remaining 25% of the combined voting power.
NOTE 2. Marketable and Other Securities
The company adopted Statement of Financial Accounting Standards No. 115 ("SFAS
115"), "Accounting for Certain Investments in Debt and Equity Securities," as
of January 1, 1994. The cumulative effect of this change in accounting
principle on the company's financial statements was not material.
Trading securities are recorded at fair value, with unrealized gains and losses
included in income. Available-for-sale securities are recorded at fair value,
with unrealized gains and losses excluded from income and reported in a
separate component of stockholders' equity net of tax. Held-to-maturity
securities are recorded at amortized cost. Equity securities which do not have
readily determinable fair values are recorded at cost. The bases of cost used
in determining realized gains and losses are specific identification for
Automotive operations and first-in, first-out for Financial Services
operations.
The fair value of most securities was estimated based on quoted market prices.
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.
Expected maturities of debt securities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without penalty.
Automotive
Investments in securities at December 31, 1994 were as follows (in millions):
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ------
Trading securities $7,382 $3 $56 $7,329
Available-for-sale securities
- -----------------------------
Debt securities issued by foreign governments 23 0 0 23
Corporate securities 231 0 1 230
------ -- --- ------
Total available-for-sale securities 254 0 1 253
Held-to-maturity securities
- ---------------------------
Corporate securities 20 0 0 20
------ -- --- ------
Total investments in securities $7,656 $3 $57 $7,602
====== == === ======
FS-10
61
NOTE 2. Marketable and Other Securities (Cont'd)
All debt securities classified as available-for-sale or held-to-maturity have
contractual maturities of one year or less.
For trading securities, the net unrealized loss included in income during 1994
was $53 million.
Proceeds from sales of available-for-sale securities were $87 million in 1994;
gross losses of $2 million were realized on those sales. Included in
stockholders' equity at December 31, 1994 was $188 million that represented
principally the company's equity interest in the unrealized gains on securities
owned by certain unconsolidated subsidiaries.
Other securities classified as cash equivalents were $3.4 billion and $3.3
billion at December 31, 1994 and 1993, respectively, and consisted primarily of
debt securities issued by the U.S. government and agencies and short-term time
deposits.
Marketable securities at December 31, 1993 totaled $4.1 billion and were
recorded at cost plus accrued interest, which approximated fair value.
Financial Services
Investments in securities at December 31, 1994 were as follows (in millions):
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ------
Trading securities $ 715 $ 6 $ 10 $ 711
Available-for-sale securities
- -----------------------------
Debt securities issued by the U.S.
government and agencies 692 1 38 655
Municipal securities 155 1 11 145
Debt securities issued by foreign governments 106 0 10 96
Corporate securities 1,929 3 152 1,780
Mortgage-backed securities 871 0 62 809
Other debt securities 22 0 0 22
Equity securities 172 34 6 200
------ --- ---- ------
Total available-for-sale securities 3,947 39 279 3,707
Held-to-maturity securities
- ---------------------------
Debt securities issued by the U.S.
government and agencies 10 0 0 10
Municipal securities 783 0 12 771
Corporate securities 570 4 27 547
------ --- ---- ------
Total held-to-maturity securities 1,363 4 39 1,328
Total investments in securities with
readily determinable fair value 6,025 $49 $328 $5,746
=== ==== ======
Equity securities not practicable to fair value 324
------
Total investments in securities $6,349
======
FS-11
62
NOTE 2. Marketable and Other Securities (Cont'd)
The amortized cost and fair value of investments in available-for-sale
securities and held-to-maturity securities at December 31, 1994, by contractual
maturity, were as follows (in millions):
Available-for-sale Held-to-maturity
---------------------- -----------------------
Amortized Amortized
Cost Fair Value Cost Fair Value
--------- ---------- ---------- ----------
Due in one year or less $ 113 $ 112 $ 59 $ 58
Due after one year through five years 755 728 184 184
Due after five years through ten years 637 596 782 768
Due after ten years 1,399 1,262 338 318
Mortgage-backed securities 871 809 - -
Equity securities 172 200 - -
------ ------ ------ ------
Total $3,947 $3,707 $1,363 $1,328
====== ====== ====== ======
For trading securities, the net unrealized loss included in income during 1994
was $4 million.
Proceeds from sales of available-for-sale securities were $9.1 billion in 1994;
gross gains of $24 million and gross losses of $56 million were realized on
those sales. The net unrealized loss net of tax included in stockholders'
equity was $155 million at December 31, 1994.
Other securities classified as cash equivalents were $1.4 billion and $1.6
billion at December 31, 1994 and 1993, respectively, and consisted primarily of
short-term time deposits and corporate securities.
At December 31, 1993, investments in debt securities were recorded at amortized
cost because of the ability to hold such securities until maturity and the
intent to hold them for the foreseeable future. Marketable equity securities
were recorded at fair value.
Investments in debt securities at December 31, 1993 were as follows (in
millions):
Gross Gross
Book Unrealized Unrealized
Value Gains Losses Fair Value
--------- ---------- ---------- ----------
Debt securities issued by the U.S.
government and agencies $ 974 $ 27 $ 1 $1,000
Municipal securities 126 3 0 129
Debt securities issued by foreign
governments 88 4 1 91
Corporate securities 1,779 48 19 1,808
Mortgage-backed securities 2,588 39 82 2,545
Other debt securities 192 0 1 191
------ ---- ---- ------
Total $5,747 $121 $104 $5,764
====== ==== ==== ======
The book value and fair value of investments in debt securities at December 31,
1993, by contractual maturity, were as follows (in millions):
Book
Value Fair Value
------- ----------
Due in one year or less $ 96 $ 96
Due after one year through five years 1,023 1,035
Due after five years through ten years 563 580
Due after ten years 1,477 1,508
Mortgage-backed securities 2,588 2,545
------ ------
Total $5,747 $5,764
====== ======
FS-12
63
NOTE 2. Marketable and Other Securities (Cont'd)
Proceeds from sales of investments in debt securities were $11.2 billion in
1993 and $10.5 billion in 1992. 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.
Other securities other than debt securities totaled $2,472 million at December
31, 1993. The estimated fair value in excess of book value of those securities
which were practicable to value was $59 million at December 31, 1993. It was
not practicable to calculate the fair value of certain securities totaling $660
million at December 31, 1993 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.
NOTE 3. Receivables
Automotive
Automotive receivables are generally short-term, and book value approximates
fair value.
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):
1994 1993
--------- --------
Automotive $ 87,858 $ 58,738
Real estate, mainly residential 15,560 24,152
Other 6,237 24,968
-------- --------
Total finance receivables 109,655 107,858
Loan origination costs 194 124
Unearned income (9,656) (9,037)
Allowance for credit losses (1,671) (2,017)
Unearned insurance premiums and
unpaid insurance claims related
to finance receivables (90) (139)
-------- --------
Net finance receivables $ 98,432 $ 96,789
======== ========
Fair value $ 99,609 $ 98,505
Included in finance receivables was a total of $1.3 billion for 1994 and $1.5
billion for 1993 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, 1994 and 1993 were $3.4 billion and $2.4 billion, 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): 1995 - $49,084; 1996 - $18,444; 1997 - $12,841;
thereafter - $13,726. Experience indicates that a substantial portion of the
portfolio generally is repaid before the 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 $15 million in 1994, $60
million in 1993 and $7 million in 1992.
FS-13
64
NOTE 3. Receivables (Cont'd)
Investments in direct financing leases at December 31 were as follows (in
millions):
1994 1993
-------- --------
Minimum lease rentals $ 8,321 $ 7,382
Estimated residual values 3,715 2,764
Lease origination costs 70 69
Unearned income (2,299) (2,010)
Allowance for credit losses (185) (133)
------- -------
Net investments in direct financing leases $ 9,622 $ 8,072
======= =======
Minimum direct financing lease rentals (including executory costs of $36
million) are contractually due as follows (in millions): 1995 - $2,736;
1996 - $1,998; 1997 - $1,282; 1998 - $740; thereafter - $1,601.
Investments in operating leases at December 31 were as follows (in millions):
1994 1993
-------- --------
Vehicles and other equipment, at cost $28,050 $18,589
Lease origination costs 38 23
Accumulated depreciation (5,425) (3,736)
Allowance for credit losses (361) (202)
------- -------
Net investments in operating leases $22,302 $14,674
======= =======
Future minimum rentals on operating leases are contractually due as follows
(in millions): 1995 - $4,533; 1996 - $1,807;1997 - $220; 1998 - $56;
thereafter - $108.
Depreciation expense on operating leases reflects primarily the straight-line
method over the term of the leases and was as follows (in millions): 1994 -
$4,231; 1993 - $2,984; 1992 - $2,000.
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):
1994 1993 1992
------- ------- -------
Beginning balance $2,352 $2,257 $2,078
Additions 988 1,019 1,218
Net losses (826) (903) (993)
Other changes (297) (21) (46)
------ ------ ------
Ending balance $2,217 $2,352 $2,257
====== ====== ======
Statement of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan", was issued in May 1993 and amended in October 1994
by Statement of Financial Accounting Standards No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures". The
Standards require that impaired loans be measured based on the present value of
expected future cash flows discounted at the loan's effective interest rate.
The company will adopt these standards as of January 1, 1995, and the effect is
not expected to be material.
FS-14
65
NOTE 4. Inventories - Automotive
Inventories at December 31 were as follows (in millions):
1994 1993
------ ------
Raw materials, work in process and supplies $3,192 $2,937
Finished products 3,295 2,601
------ ------
Total inventories $6,487 $5,538
====== ======
U.S. Inventories $2,917 $2,575
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 primarily by the first-in, first-out
("FIFO") method.
If the FIFO method had been used instead of the LIFO method, inventories would
have been higher by $1,383 million and $1,342 million at December 31, 1994 and
1993, respectively.
NOTE 5. Net Property, Depreciation and Amortization - Automotive
Net property at December 31 was as follows (in millions):
1994 1993
--------- ---------
Land $ 359 $ 360
Buildings and land improvements 6,939 5,923
Machinery, equipment and other 33,551 29,655
Construction in progress 1,685 1,551
-------- --------
Total land, plant and equipment 42,534 37,489
Accumulated depreciation (22,738) (20,691)
-------- --------
Net land, plant and equipment 19,796 16,798
Unamortized special tools 7,252 6,261
-------- --------
Net property $ 27,048 $ 23,059
======== ========
Property, equipment, and special tools are stated at cost, less accumulated
depreciation. 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.
Depreciation and amortization expenses were as follows (in millions):
1994 1993 1992
------ ------ ------
Depreciation $2,297 $2,392 $2,569
Amortization 2,129 2,012 2,097
------ ------ ------
Total $4,426 $4,404 $4,666
====== ====== ======
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. Special tools are amortized over periods of time representing the
productive use of those tools. 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. Maintenance, repairs and rearrangement
costs are expensed as incurred and were $2,377 million in 1994, $1,934 million
in 1993 and $1,872 million in 1992. Expenditures that increase the value or
productive capacity of assets are capitalized. Preproduction costs related to
new facilities are expensed as incurred.
FS-15
66
NOTE 6. Income Taxes
Income/(loss) before income taxes and cumulative effects of changes in
accounting principles for U.S. and foreign operations, excluding equity in net
income of affiliated companies, was as follows (in millions):
1994 1993 1992
------ ------- --------
U.S. $6,944 $4,152 $ 889
Foreign 1,574 (276) (1,031)
------ ------ -------
Total income/(loss)
before income taxes $8,518 $3,876 $ (142)*
====== ====== =======
- - - - -
*Excludes cumulative effects of changes in accounting principles
The provision for income taxes was as follows (in millions):
1994 1993 1992
------ ------ ------
Currently payable/(refundable)
U.S. federal $1,640 $1,259 $(122)
Foreign 690 169 427
State and local 165 123 104
------ ------ -----
Total currently payable 2,495 1,551 409
Deferred tax liability/(benefit)
U.S. federal 827 (161) 434
Foreign (71) (106) (499)
State and local 78 66 (49)
------ ------ -----
Total deferred 834 (201) (114)
------ ------ -----
Total provision $3,329 $1,350 $ 295*
====== ====== =====
- - - - -
*Excludes cumulative effects of changes in accounting principles
The provision 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 $3.3 billion of retained earnings at December 31, 1994
which have been invested by foreign subsidiaries. It is not practicable to
estimate the amount of unrecognized deferred tax liability for the
undistributed foreign earnings.
A reconciliation of the provision for income taxes compared with the amounts at
the U.S. statutory tax rate is shown below (in millions):
1994 1993 1992
------ ------ ------
Tax provision/(credit) at U.S. statutory rate
of 35% for 1994 and 1993 and 34% for 1992 $2,981 $1,357 $ (48)
Effect of:
Foreign taxes over U.S. tax rate 68 219 263
State and local income taxes 158 118 36
Rate adjustments on U.S. and foreign
deferred taxes - (199) -
Income not subject to tax or subject to
tax at reduced rates (62) (70) (112)
Other 184 (75) 156
------ ------ -----
Provision for income taxes $3,329 $1,350 $ 295*
====== ====== =====
Effective Tax Rate 39.1% 34.8% -
- - - - -
*Excludes cumulative effects of changes in accounting principles
The company adopted Statement of Financial Accounting Standards No. 109 ("SFAS
109"), "Accounting for Income Taxes," as of January 1, 1992. The adoption of
SFAS 109 changed 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. The cumulative effect of this change in accounting
principle decreased the net loss in 1992 by $657 million.
FS-16
67
NOTE 6. Income Taxes (Cont'd)
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):
1994 1993
------- -------
Deferred Tax Assets
-------------------
Employee benefit plans $ 5,951 $ 5,839
Dealer and customer allowances and claims 3,375 3,243
Net operating loss carryforwards 1,152 1,378
Allowance for credit losses 821 858
Alternative minimum tax 318 129
Depreciation and amortization
(excludes leasing transactions) 39 30
All other 1,198 1,093
Valuation allowances (159) (174)
------- -------
Total deferred tax assets 12,695 12,396
Deferred Tax Liabilities
------------------------
Leasing transactions 3,935 3,166
Depreciation and amortization
(excludes leasing transactions) 2,804 2,574
Employee benefit plans 1,443 697
All other 1,336 1,157
------- -------
Total deferred tax liabilities 9,518 7,594
------- -------
Net deferred tax assets $ 3,177 $ 4,802
======= =======
Net foreign operating loss carryforwards for tax purposes were $3.2 billion at
December 31, 1994. A substantial portion of these losses has an indefinite
carryforward period; the remaining losses have expiration dates beginning in
1996. For financial statement purposes, the tax benefit of operating losses is
recognized as a deferred tax asset, subject to appropriate valuation
allowances. The company evaluates the tax benefits of operating loss
carryforwards on an ongoing basis. Such evaluations include a review of
historical and consideration of projected future operating results, the
eligible carryforward period and other circumstances.
NOTE 7. Liabilities - Automotive
Current Liabilities
Included in accrued liabilities at December 31 were the following (in
millions):
1994 1993
------- -------
Dealer and customer allowances and claims $ 6,716 $ 6,645
Employee benefit plans 1,786 1,415
Postretirement benefits other than pensions 688 674
Salaries, wages, and employer taxes 598 594
Other 1,811 1,487
------- -------
Total accrued liabilities $11,599 $10,815
======= =======
Noncurrent Liabilities
Included in other liabilities at December 31 were the following (in millions):
1994 1993
------- -------
Postretirement benefits other than pensions $14,025 $13,288
Dealer and customer allowances and claims 6,044 5,170
Employee benefit plans 2,232 2,353
Unfunded pension obligation 362 2,873
Minority interests in net assets of subsidiaries 118 161
Other 2,139 2,066
------- -------
Total other liabilities $24,920 $25,911
======= =======
FS-17
68
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 which are not funded.
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 noted above; in
those cases, an unfunded liability is recorded. In 1994, the company
contributed $1.7 billion to its U.S. plans and $300 million to its non-U.S.
plans.
The company's pension expense, including Financial Services, was as follows (in
millions):
1994 1993 1992
------------------------ ------------------------ ------------------------
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 $ 526 $ 236 $ 419 $ 181 $ 342 $ 213
Interest on projected
benefit obligation 1,639 677 1,517 667 1,437 698
Return on assets:
Actual (gain)/loss (74) 137 (2,264) (1,370) (1,465) (865)
Deferred gain/(loss) (1,928) (759) 389 677 (204) 190
------- ------- ------- ------ ------- -----
Recognized (gain) (2,002) (622) (1,875) (693) (1,669) (675)
Net amortization and other 452 151 259 169 228 180
------- ------- ------- ------ ------- -----
Net pension expense $ 615 $ 442 $ 320 $ 324 $ 338 $ 416
======= ======= ======= ====== ======= =====
Pension expense increased in 1994 as a result of lower discount rates for both
U.S. and non-U.S. plans, compared with 1993. In addition, amendments made in
September 1993 to the Ford-UAW Retirement Plan and the General Retirement Plan
provided benefit improvements that increased net U.S. expense in 1994.
FS-18
69
NOTE 8. Employee Retirement Benefits (Cont'd)
The status of these plans at December 31 was as follows (in millions):
1994 1993
------------------------------ ------------------------------
Assets in Accum. Assets in Accum.
Excess of Benefits Excess of Benefits
Accum. in Excess Total Accum. in Excess Total
Benefits of Assets Plans Benefits of Assets Plans
--------- --------- -------- --------- --------- --------
U.S. Plans
- ----------
Plan assets at fair value $23,264 $ 132 $23,396 $12,122 $10,779 $22,901
Actuarial present value of:
Vested benefits $17,217 $ 404 $17,621 $ 8,708 $ 9,962 $18,670
Accumulated benefits 20,256 453 20,709 9,700 12,603 22,303
Projected benefits 21,404 541 21,945 10,896 12,767 23,663
Plan assets in excess of/(less than)
projected benefits $ 1,860 $ (409) $ 1,451 $ 1,226 $(1,988) $ (762)
Unamortized (net asset)/net
transition obligation a/ (164) 12 (152) (760) 563 (197)
Unamortized prior service cost b/ 2,134 86 2,220 538 2,053 2,591
Unamortized net (gains)/losses c/ (717) 56 (661) (159) 297 138
------- ------- ------- ------- ------- -------
Prepaid pension asset/(liability) 3,113 (255) 2,858 845 925 1,770
Adjustment required to recognize
minimum liability d/ - (77) (77) - (2,771) (2,771)
------- ------- ------- ------- ------- -------
Prepaid pension asset/(liability)
recognized in the balance sheet $ 3,113 $ (332) $ 2,781 $ 845 $(1,846) $(1,001)
======= ======= ======= ======= ======= =======
Plan assets in excess of/(less than)
accumulated benefits $ 3,008 $ (321) $ 2,687 $ 2,422 $(1,824) $ 598
Assumptions:
Discount rate at year-end 8.25% 7.0%
Average rate of increase in compensation 5.5 % 5.5%
Long-term rate of return on assets 9.0 % 9.5%
Non-U.S. Plans
- --------------
Plan assets at fair value $ 7,018 $ 950 $ 7,968 $ 5,806 $ 1,815 $ 7,621
Actuarial present value of:
Vested benefits $ 5,318 $ 2,895 $ 8,213 $ 4,538 $ 3,888 $ 8,426
Accumulated benefits 5,419 3,053 8,472 4,619 4,092 8,711
Projected benefits 6,321 3,240 9,561 5,333 4,484 9,817
Plan assets in excess of/(less than)
projected benefits $ 697 $(2,290) $(1,593) $ 473 $(2,669) $(2,196)
Unamortized (net asset)/net
transition obligation a/ 32 241 273 (209) 461 252
Unamortized prior service cost b/ 227 248 475 267 232 499
Unamortized net (gains)/losses c/ (81) (25) (106) (88) 863 775
------- ------- ------- ------- ------- -------
Prepaid pension asset/(liability) 875 (1,826) (951) 443 (1,113) (670)
Adjustment required to recognize
minimum liability d/ - (284) (284) - (1,164) (1,164)
------- ------- ------- ------- ------- -------
Prepaid pension asset/(liability)
recognized in the balance sheet $ 875 $(2,110) $(1,235) $ 443 $(2,277) $(1,834)
======= ======= ======= ======= ======= =======
Plan assets in excess of/(less than)
accumulated benefits $ 1,599 $(2,103) $ (504) $ 1,187 $(2,277) $(1,090)
Assumptions:
Discount rate at year-end 8.3% 7.2%
Average rate of increase in compensation 5.2% 5.1%
Long-term rate of return on assets 9.0% 9.5%
- - - - - -
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 benefits -- at year-end
1994 this amount is offset by an intangible asset; at year-end 1993, the
unfunded liability in excess of $3,250 million was recorded net of deferred
taxes as a $400 million reduction in stockholders' equity.
FS-19
70
NOTE 8. Employee Retirement Benefits (Cont'd)
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. The estimated cost for postretirement
health care benefits is accrued over periods of employee service on an
actuarially determined basis, in accordance with the requirements of Statement
of Financial Accounting Standards No. 106 ("SFAS 106"), "Employers' Accounting
for Postretirement Benefits Other Than Pensions".
In adopting SFAS 106, 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 of $12 billion,
offset partially by projected tax benefits of $4.5 billion.
Net postretirement benefit expense, including Financial Services, was as
follows (in millions):
1994 1993 1992
------ ------ ------
Benefits attributed to employees' service $ 263 $ 240 $ 235
Interest on accumulated benefit obligation 1,088 1,207 1,129
Net amortization (32) - -
------ ------ ------
Net postretirement benefit expense $1,319 $1,447 $1,364
====== ====== ======
Retiree benefit payments $ 639 $ 654 $ 641
The status of these plans at December 31 was as follows (in millions):
1994 1993
-------- --------
Accumulated postretirement benefit obligation:
Retirees $ 6,720 $ 8,147
Active employees eligible to retire 2,282 2,725
Other active employees 4,266 5,984
------- -------
Total accumulated obligation 13,268 16,856
Unamortized prior service cost a/ 321 387
Unamortized net gains/(losses) b/ 1,440 (2,880)
------- -------
Accrued liability $15,029 $14,363
======= =======
Assumptions:
Discount rate 8.75% 7.5%
Present health care cost trend rate 5.9 % 9.7%
Ultimate trend rate in ten years 5.5 % 5.5%
Weighted-average trend rate 6.6 % 6.8%
- - - - -
a/ The prior service effect of plan amendments deferred for
recognition over remaining service to retirement eligibility.
b/ The deferred gain or loss resulting from experience and changes in
assumptions deferred for recognition over remaining service to
retirement.
Changing the assumed health care cost trend rates by one percentage point would
change the aggregate service and interest cost components of net postretirement
benefit expense for 1994 by $180 million and the accumulated postretirement
benefit obligation at December 31, 1994 by $1.6 billion.
FS-20
71
NOTE 9. Debt
The fair value of debt was estimated based on quoted market prices or current
rates for similar debt with the same remaining maturities.
Automotive
Debt at December 31 was as follows (in millions):
Weighted Average
Interest Rate* Book Value
------------------- -------------------
Maturity 1994 1993 1994 1993
--------- -------- -------- -------- --------
Debt payable within one year
----------------------------
Short-term debt 10.0% 7.1% $ 112 $ 887
Long-term debt payable within one year 43 45
------ ------
Total debt payable within one year 155 932
Long-term debt 1996-2043 9.0% 9.0% 7,103 7,084
------ ------
Total debt $7,258 $8,016
====== ======
Fair value $7,492 $9,044
- - - - -
*Excludes the effect of interest-rate swap agreements
Long-term debt at December 31, 1994 included maturities as follows (in
millions): 1995 - $43 (included in current liabilities); 1996 - $932; 1997 -
$599; 1998 - $1,210; 1999 - $350; thereafter - $4,012.
Included in long-term debt at December 31, 1994 and 1993 were obligations of
$6,567 million and $6,568 million, respectively, with fixed interest rates and
$536 million and $516 million, respectively, with variable interest rates
(generally based on LIBOR or other short-term rates). Obligations payable in
foreign currencies at December 31, 1994 and 1993 were $994 million and $970
million, respectively.
Agreements to manage exposures to fluctuations in interest rates, which include
primarily interest-rate swap agreements and futures contracts, did not
materially change the overall weighted-average rate on long-term debt and
effectively decreased the obligations subject to variable interest rates to
$465 million at December 31, 1994.
Financial Services
Debt at December 31 was as follows (in millions):
Weighted Average
Interest Rate* Book Value
------------------- -------------------
Maturity 1994 1993 1994 1993
--------- -------- -------- -------- --------
Debt payable within one year
----------------------------
Unsecured short-term debt $ 2,990 $ 2,852
Commercial paper 51,008 37,793
Other short-term debt 2,301 3,111
-------- --------
Total short-term debt 5.9% 3.9% 56,299 43,756
Long-term debt payable within one year 9,310 12,304
-------- --------
Total debt payable within one year 65,609 56,060
Long-term debt
--------------
Secured indebtedness 1996-2005 6.7% 8.0% 98 1,821
Unsecured senior indebtedness
Notes and bank debt 1996-2048 7.1% 7.1% 54,248 41,471
Debentures 1996-2010 7.8% 9.4% 560 916
Unamortized (discount) (61) (55)
-------- --------
Total unsecured senior indebtedness 54,747 42,332
Unsecured subordinated indebtedness
Notes 1996-2021 9.2% 8.9% 3,159 3,634
Debentures 1996-2009 8.1% 8.1% 141 142
Unamortized (discount) (41) (29)
-------- --------
Total unsecured subordinated indebtedness 3,259 3,747
-------- --------
Total long-term debt 58,104 47,900
-------- --------
Total debt $123,713 $103,960
======== ========
Fair value $122,252 $107,233
- - - - -
*Excludes the effect of interest-rate swap agreements
FS-21
72
NOTE 9. Debt (Cont'd)
Information concerning short-term borrowings (excluding long-term debt payable
within one year) is as follows (in millions):
1994 1993 1992
-------- -------- --------
Average amount of short-term borrowings $50,106 $38,353 $33,993
Weighted-average short-term interest rates per annum
(average year) 4.6% 3.8% 5.2%
Average remaining term of commercial paper
at December 31 27 days 29 days 29 days
Long-term debt at December 31, 1994 included maturities as follows (in
millions): 1995 - $9,310; 1996 - $12,086; 1997 - $13,106; 1998 - $9,871; 1999
- - $9,883; thereafter - $13,158.
Included in long-term debt at December 31, 1994 and 1993 were obligations of
$45.9 billion and $40.7 billion, respectively, with fixed interest rates and
$12.2 billion and $7.2 billion, respectively, with variable interest rates
(generally based on LIBOR or other short-term rates). Obligations payable in
foreign currencies at December 31, 1994 and 1993 were $12.2 billion and $12.9
billion, respectively. These obligations were issued primarily to fund foreign
business operations.
Agreements to manage exposures to fluctuations in interest rates include
primarily interest-rate swap agreements. These agreements decreased the
overall weighted-average rate on long-term debt to 7.1%, compared with 7.2%
excluding these agreements, and effectively decreased the obligations subject
to variable interest rates to $7.2 billion at December 31, 1994. The
weighted-average interest rate on short-term debt decreased to 5.6%, compared
with 5.9% excluding these agreements.
Support Facilities
At December 31, 1994, Ford (parent company only) had long-term contractually
committed credit agreements in the U.S. under which $5.9 billion is available
from various banks at least through June 30, 1999. The entire $5.9 billion may
be used, at Ford's option, by either Ford or Ford Credit. These facilities
were unused at December 31, 1994.
Outside the U.S., Ford had additional long-term contractually committed
credit-line agreements of $2.5 billion. These facilities are available in
varying amounts from 1995 through 1999; $21 million were in use at December 31,
1994.
At December 31, 1994, Financial Services had $33.8 billion of contractually
committed support facilities (including the $5.9 billion of the Ford credit
agreements) for use in the U.S.; less than 1% of these facilities, excluding
the Ford credit agreements, were in use. An additional $8.9 billion of
contractually committed support facilities were available outside the U.S. at
December 31, 1994; $1.4 billion of these were in use.
NOTE 10. Annuity Contracts - Financial Services
The liability for annuity contracts, included in other liabilities, was $2,722
million at December 31, 1994 and $1,598 million at December 31, 1993, and
reflected deposits received and interest credited, less related withdrawals.
The weighted-average interest rate on annuity contracts outstanding at December
31, 1994 and 1993 was 6.3% and 6.2%, 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, 1994 and 1993 approximated book
value because the contractual interest rate due holders is reset annually for
more than 97% of contracts outstanding.
FS-22
73
NOTE 11. Capital Stock
On April 14, 1994, the company's Board of Directors declared a 2-for-1 stock
split in the form of a 100% stock dividend on the company's Common Stock and
Class B Stock effective June 6, 1994. Share data have been restated to reflect
the split, where appropriate.
At December 31, 1994, 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.
Information concerning the Preferred Stock of the company is as follows:
Series A Preferred Stock Series B Preferred Stock
-------------------------------------- --------------------------------------
Year issued 1991 1992
Shares issued 46,000 shares 22,800 shares
Shares sold 46,000,000 Depositary Shares, each 45,600,000 Depositary Shares, each
representing 1/1,000 of a share of representing 1/2,000 of a share of
Series A Cumulative Convertible Series B Cumulative Preferred Stock
Preferred Stock
Dividends $4.20 per year per Depositary Share $2.0625 per year per Depositary Share
Conversion Shares can be converted any time None
into shares of Common Stock of the
company at a rate equivalent to
3.2654 shares of Common Stock for
each Depositary Share (equivalent to
a conversion price of $15.3121 per
share of Common Stock).
Redemption Not redeemable prior to Not redeemable prior to
December 7, 1997 December 1, 2002.
On and after December 7, 1997, the On and after December 1, 2002, and
stock is redeemable for cash at the upon satisfaction of certain
company's option, in whole or in conditions, the stock is redeemable
part, initially at an amount equi- for cash at the option of Ford, in
valent to $51.68 per Depositary whole or in part, at a redemption
Share and thereafter at prices price equivalent to $25 per Depositary
declining to $50 per Depositary Share, plus an amount equal to the sum
Share on and after December 1, 2001, of all accrued and unpaid dividends.
plus, in each case, an amount equal
to the sum of all accrued and unpaid
dividends.
Liquidation preference $50 per Depositary Share $25 per Depositary Share
and shares outstanding $2.3 billion and 45,946 shares $1.1 billion and 22,800 shares
at December 31, 1994 outstanding outstanding
The Series A 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.
FS-23
74
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, restated to reflect the 2-for-1 stock
split, is as follows (shares in millions):
1994 1993 1992
------ ------ ------
Option price of new grants a/ $29.06 $28.84 $18.50
and
$28.63
Shares subject to option
------------------------
Outstanding at beginning of period 37.4 41.1 33.0
New grants 9.5 7.1 9.6
Exercised b/ (2.6) (6.7) (1.0)
Surrendered upon exercise of stock appreciation rights (0.9) (3.9) (0.5)
Terminated and expired (0.1) (0.2) *
----- ----- ------
Outstanding at end of period 43.3 c/ 37.4 41.1
Outstanding but not exercisable (21.3) (19.3) (19.5)
----- ----- ------
Exercisable at end of period 22.0 18.1 21.6
===== ===== ======
Shares authorized for future grants (as of December 31)d/ 0 0 0
- - - - -
* Less than 50,000 shares.
a/ Fair market value of Common Stock at dates of grant.
b/ At option prices ranging from $9.09 to $28.84 during 1994, $9.09 to
$25.84 during 1993, from $3.52 to $15.34 during 1992.
c/ Including 10.0 and 33.3 million shares under the 1985 and 1990 Plans,
respectively, at option prices ranging from $9.09 to $29.06 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 709,800 shares in 1994, 2,327,200 shares in 1993, and
1,264,800 shares in 1992 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, as determined
by the Compensation and Option Committee of the Board of Directors.
FS-24
75
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, and the outcome of individual
litigated matters is not predictable with assurance. It is reasonably possible
that some of the matters discussed in the foregoing paragraph could be decided
unfavorably to the company or the subsidiary involved and could require the
company or such subsidiary to pay damages or make other expenditures in amounts
or a range of amounts that at December 31, 1994 cannot reasonably be estimated.
Although the final resolution of any such matters could have a material effect
on the company's consolidated financial results for a particular reporting
period, the company believes that, based on its analysis, any resulting
liability should not materially affect the company's consolidated financial
position at December 31, 1994.
NOTE 14. Commitments and Contingencies
At December 31, 1994, the company had the following minimum rental commitments
under non-cancelable operating leases (in millions): 1995 - $713; 1996 -
$610; 1997 - $538; 1998 - $250; 1999 - $222; thereafter - $653. These amounts
include rental commitments related to the sales and leasebacks of certain
Automotive machinery and equipment.
The company and certain of its subsidiaries have 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, 1994 and
1993 was $2.3 billion and $1.7 billion, respectively. The company has provided
for the estimated net cost of these programs as a sales incentive based on the
estimated number of participants who will ultimately purchase vehicles.
Certain Financial Services subsidiaries make credit lines available to holders
of their credit cards. At December 31, 1994 and 1993, the unused portion of
available credit was approximately $10.3 billion and $9.9 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.
FS-25
76
NOTE 15. Financial Instruments
The company adopted Statement of Financial Accounting Standards No. 119,
"Disclosure about Derivative Financial Instruments and Fair Value of Financial
Instruments" as of December 31, 1994. Estimated fair value amounts have been
determined using available market information and various valuation methods
depending on the type of instrument. In evaluating the fair value information,
considerable judgement is required to interpret the market data used to develop
the estimates. The use of different market assumptions and/or different
valuation techniques may have a material effect on the estimated fair value
amounts.
Balance Sheet Financial Instruments
Information about specific valuation techniques and related fair value detail
is provided throughout the footnotes. The table below provides book value and
fair value amounts (in millions) and a cross reference to the applicable Note.
December 31, 1994 December 31, 1993
----------------------- -----------------------
Book Fair Book Fair Fair Value
Value Value Value Value Reference
---------- -------- ---------- -------- ----------
Automotive
- ----------
Cash & cash equivalents $ 4,481 $ 4,481 $ 5,667 $ 5,667 Note 17
Marketable securities 7,602 7,602 4,085 4,085 Note 2
Receivables 2,548 2,548 2,302 2,302 Note 3
Debt 7,258 7,492 8,016 9,044 Note 9
Financial Services
- ------------------
Cash & cash equivalents $ 1,739 $ 1,739 $ 2,555 $ 2,555 Note 17
Marketable securities 5,781 5,746 7,559 7,635 Note 2
Receivables 98,432 99,609 96,789 98,505 Note 3
Debt 123,713 122,252 103,960 107,223 Note 9
Annuity contracts* 2,722 2,722 1,598 1,598 Note 10
- - - - - -
* Included in Financial Services other liabilities and deferred income on the
balance sheet.
Foreign Currency Instruments
The fair value of foreign currency instruments generally was estimated using
current market prices provided by outside quotation services. At December 31,
1994, the fair value of net receivable contracts was $298 million, and the fair
value of net payable contracts was $108 million. At December 31, 1993, the
fair value for all agreements was a net receivable of $149 million. At
December 31, 1994, foreign currency instruments had a deferred gain of $220
million. In the unlikely event that a counterparty fails to meet the terms of
a foreign currency agreement, the company's market risk is limited to the
exchange rate differential. In the case of currency swaps, the company's
market risk also may include an interest rate differential. At December 31,
1994 and 1993, the total amount of the company's foreign currency forward
contracts (contracts purchased and sold) and currency swaps and options
outstanding was $12.6 billion and $10.9 billion, respectively, maturing
primarily through 1997.
Interest-Rate Instruments
The fair value of interest-rate instruments is the estimated amount the company
would receive or pay to terminate the agreement. 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 parties.
At December 31, 1994, the fair value of net receivable contracts was $458
million, and the fair value of net payable contracts was $602 million. At
December 31, 1993, the fair value for all agreements was a net receivable of
$512 million. In the unlikely event that a counterparty fails to meet the
terms of an interest-rate agreement, the company's exposure is limited to the
interest rate differential. At December 31, 1994 and 1993, the underlying
principal amounts on which the company has interest-rate swap agreements
outstanding aggregated $53.8 billion and $36.1 billion, respectively, maturing
primarily through 1999.
FS-26
77
NOTE 15. Financial Instruments (Cont'd)
Other Instruments
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. Neither the amounts of these
agreements nor the potential risk of loss was considered to be significant at
December 31, 1994.
Note 16. Significant Acquisitions and Dispositions of Subsidiaries
Acquisition of 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%. On April 29, 1994, Ford acquired 20% of Hertz'
common stock from Park Ridge Limited Partnership, and Hertz redeemed the common
stock (26%) and preferred stock of Hertz owned by AB Volvo for $145 million.
These transactions resulted in Hertz becoming a wholly-owned subsidiary of
Ford. In addition, a $150 million subordinated promissory note of Hertz held
by Ford Credit was exchanged for $150 million of preferred stock of Hertz.
Prior to these transactions, Hertz had been accounted for on an equity basis as
part of the Automotive segment. Hertz' operating results, assets, liabilities
and cash flows are now consolidated as part of the Financial Services segment.
In 1994, Financial Services net income included $92 million for Hertz. In
1993, Automotive net income included $26 million for Hertz.
Sale of First Nationwide Bank
On September 30, 1994, substantially all of the assets of First Nationwide
Bank, a Federal Savings Bank, since known as Granite Savings Bank (the "Bank"),
were sold to, and substantially all of the Bank's liabilities were assumed by,
First Madison Bank, FSB ("First Madison"). The Bank is a wholly-owned
subsidiary of Granite Management Corporation (formerly First Nationwide
Financial Corporation) ("Granite"), which in turn is a wholly-owned subsidiary
of Ford.
The company recognized in First Quarter 1994 earnings a pre-tax charge of $475
million ($440 million after taxes) related to the disposition of the Bank,
reflecting the non-recovery of goodwill and reserves for estimated losses on
assets to be retained or repurchased by Granite. These assets will be
liquidated over time as market conditions permit. The tax effect of this
transaction takes into account differences between the book and tax basis of
certain assets for which deferred taxes were not required to be provided under
SFAS No. 109, "Accounting for Income Taxes". The company's income statement
includes the results of operations of Granite through March 31, 1994. The net
assets of Granite at December 31, 1994 are included in the balance sheet under
Financial Services - Other Assets. Historically, Granite (including the Bank)
has not had a significant effect on Ford's operating results.
FS-27
78
NOTE 17. Cash Flows
The reconciliation of net income/(loss) to cash flows from operating activities
is as follows (in millions):
1994 1993 1992
--------------------- --------------------- ---------------------
Financial Financial Financial
Automotive Services Automotive Services Automotive Services
---------- --------- ---------- --------- ---------- ---------
Net income/(loss) $3,824 $1,484 $ 940 $1,589 $(8,628) $1,243
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 4,426 4,910 4,404 3,064 4,666 2,089
(Earnings)/losses of affiliated
companies in excess of dividends
remitted (171) (2) (21) (9) 16 51
Provision for credit and
insurance losses - 1,539 - 1,523 - 1,795
Foreign currency adjustments (384) - (650) - (362) -
Net purchases of trading securities
(Note 2) (3,616) (41) - - - -
Provision/(credit) for deferred income
taxes 424 410 (796) 595 (447) 333
Changes in assets and liabilities:
(Increase)/decrease in accounts
receivable and other current assets (1,096) - 34 - 103 -
(Increase)/decrease in inventory (894) - (275) - 380 -
Increase in accounts payable and
accrued and other liabilities 4,949 1,077 3,735 594 2,617 295
Other 80 (290) (509) (211) 314 167
------ ------ ------ ------ ------- ------
Cash flows from operating activities $7,542 $9,087 $6,862 $7,145 $ 5,753 $5,762
====== ====== ====== ====== ======= ======
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. With the adoption of SFAS 115 in 1994, the
purchases and sales of trading securities are included in cash flows from
operating activities. The purchases and sales of available-for-sale and
held-to-maturity securities are included in cash flows from investing
activities.
Cash paid for interest and income taxes was as follows (in millions):
1994 1993 1992
------ ------ ------
Interest $7,718 $6,969 $8,255
Income taxes 2,042 1,522 31
NOTE 18. Segment Information
The company operates in two principal business segments: Automotive and
Financial Services. The Automotive segment consists of the design,
manufacture, assembly and sale of cars, trucks and related parts and
accessories. The Financial Services segment consists primarily of financing
operations, insurance 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 by agreement between the affected entities.
FS-28
79
NOTE 18. Segment Information (Cont'd)
Financial information segregated by major geographic area is as follows (in
millions):
Automotive
1994 1993 1992
--------- --------- ---------
Sales to unaffiliated customers
United States $ 73,008 $ 61,559 $ 51,918
Europe* 21,784 18,507 21,579
All other 12,345 11,502 10,910
-------- -------- --------
Total $107,137 $ 91,568 $ 84,407
======== ======== ========
Intercompany sales among geographic areas
United States $ 11,206 $ 8,721 $ 6,978
Europe* 1,709 1,690 1,717
All other 11,811 9,791 10,120
-------- -------- --------
Total $ 24,726 $ 20,202 $ 18,815
======== ======== ========
Total sales
United States $ 84,214 $ 70,280 $ 58,896
Europe* 23,493 20,197 23,296
All other 24,156 21,293 21,030
Elimination of intercompany sales (24,726) (20,202) (18,815)
-------- -------- --------
Total $107,137 $ 91,568 $ 84,407
======== ======== ========
Operating income/(loss)
United States $ 4,190 $ 1,677 $ (582)
Europe* 935 (402) (924)
All other 701 157 (269)
-------- -------- --------
Total $ 5,826 $ 1,432 $ (1,775)
======== ======== ========
Net income/(loss) before cumulative effects
of changes in accounting principles
United States $ 3,040 $ 1,482 $ (405)
Europe* 388 (407) (647)
All other 396 (135) (482)
-------- -------- --------
Total $ 3,824 $ 940 $ (1,534)
======== ======== ========
Assets at December 31
United States $ 45,554 $ 39,666 $ 34,334
Europe* 13,514 13,452 13,414
All other 20,231 18,248 17,534
Net receivables from Financial Services 677 910 1,437
Elimination of intercompany receivables (11,605) (10,539) (9,549)
-------- -------- --------
Total $ 68,371 $ 61,737 $ 57,170
======== ======== ========
Capital expenditures (facilities, machinery
and equipment and tooling)
United States $ 5,428 $ 4,289 $ 3,018
Europe* 1,236 1,376 1,857
All other 1,646 1,049 822
-------- -------- --------
Total $ 8,310 $ 6,714 $ 5,697
======== ======== ========
- - - - - -
*Excludes Jaguar
Financial Services
1994 1993 1992
--------- --------- ---------
Revenues
United States $ 17,356 $ 14,102 $ 12,514
Europe 2,336 1,673 2,051
All other 1,610 1,178 1,160
-------- -------- --------
Total $ 21,302 $ 16,953 $ 15,725
======== ======== ========
Income before income taxes and cumulative effects
of changes in accounting principles**
United States $ 2,185 $ 2,311 $ 1,452
Europe 419 285 266
All other 188 116 107
-------- -------- --------
Total $ 2,792 $ 2,712 $ 1,825
======== ======== ========
- - - - - -
** Financial Services activities do not report operating income; income before
income taxes is representative of operating income.
FS-29
80
NOTE 18. Segment Information (Cont'd)
Financial Services (Cont'd)
1994 1993 1992
--------- --------- ---------
Net income before cumulative effects of
changes in accounting principles
United States $ 1,119 $ 1,340 $ 919
Europe 277 187 68
All other 88 62 45
-------- -------- --------
Total $ 1,484 $ 1,589 $ 1,032
======== ======== ========
Assets at December 31
United States $124,118 $117,290 $104,749
Europe 16,507 12,132 11,512
All other 10,358 7,779 7,114
-------- -------- --------
Total $150,983 $137,201 $123,375
======== ======== ========
Note 19. Summary Quarterly Financial Data (Unaudited)
(in millions except amounts per share)
1994 1993
------------------------------------- -------------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- -------
Automotive
Sales $26,070 $28,375 $24,926 $27,766 $22,686 $25,264 $20,107 $23,511
Operating income/(loss) 1,559 1,966 989 1,312 505 787 (242) 382
Financial Services
Revenues 4,332 5,397 5,696 5,877 4,077 4,155 4,391 4,330
Income before income taxes 196 911 896 789 670 654 732 656
Total Company
Net income $ 904a/ $ 1,711 $ 1,124 $ 1,569 $ 572 $ 775 $ 463b/ $ 719c/
Preferred stock dividend
requirements 72 72 72 71 72 72 72 72
------- ------- ------- ------- ------- ------- ------- -------
Income attributable
to Common and Class B Stock $ 832 $ 1,639 $ 1,052 $ 1,498 $ 500 $ 703 $ 391 $ 647
======= ======= ======= ======= ======= ======= ======= =======
AMOUNTS PER SHARE OF COMMON
AND CLASS B STOCK AFTER
PREFERRED STOCK DIVIDENDSd/
Income $ 0.83 $ 1.63 $ 1.04 $ 1.47 $ 0.51 $ 0.72 $ 0.40 $ 0.65
======= ======= ======= ======= ======= ======= ======= =======
Income assuming full
dilution $ 0.75 $ 1.44 $ 0.93 $ 1.31 $ 0.48 $ 0.65 $ 0.38 $ 0.60
Dividends $ 0.20 $ 0.225 $ 0.225 $ 0.26 $ 0.20 $ 0.20 $ 0.20 $ 0.20
- - - - - -
a/ Includes a loss of $440 million related to the disposition of Granite
Savings Bank (formerly First Nationwide Bank)
b/ 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).
c/ 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).
d/ The sum of the per-share amounts in 1994 and 1993 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.
Share data have been restated to reflect the 2-for-1 stock split that became
effective June 6, 1994.
FS-30
81
[COOPERS & LYBRAND LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Ford Motor Company
We have audited the consolidated financial statements 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 and the supplemental schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements 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, 1994 and 1993 and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles. In addition, in our opinion, the supplemental schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information presented 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.
COOPERS & LYBRAND, L.L.P.
COOPERS & LYBRAND, L.L.P.
400 Renaissance Center
Detroit, Michigan 48243
313-446-7100
January 27, 1995
FS-31
82
Supplemental Schedule
Ford Motor Company
CONDENSED FINANCIAL INFORMATION OF SUBSIDIARY
(in millions)
December 31, December 31,
Ford Capital B.V. 1994 1993
- ----------------- ------------ ------------
Current assets $1,048 $ 919
Noncurrent assets 4,845 5,205
------ ------
Total assets $5,893 $6,124
====== ======
Current liabilities $ 486 $ 434
Noncurrent liabilities 4,909 5,245
Minority's interest in net
assets of subsidiaries 12 7
Stockholder's equity 486 438
------ ------
Total liabilities and
stockholder's equity $5,893 $6,124
====== ======
1994 1993 1992
------------ ------------ ------------
Sales and other revenue $2,355 $1,935 $2,141
Operating income/(loss) 164 2 (30)
Income/(loss) before income taxes
and cumulative effects of changes
in accounting principles 123 18 (33)
Net income/(loss) 97 14 (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-1
83
EXHIBIT INDEX
Designation Description Method of Filing
- ----------- ----------- ----------------
Exhibit 3-A Restated Certificate of Incorporation, Filed as Exhibit 4.1 to the Registrant's
of the Registrant dated June 6, 1994. Registration Statement No. 33-55171.*
Exhibit 3-B By-Laws of the Registrant as Filed as Exhibit 3-B to the Registrant's
amended through December 9, 1993. Annual Report on Form 10-K for the year
ended December 31, 1993.*
Exhibit 4-A Form of Deposit Agreement dated as of Filed as Exhibit 4-E to the Registrant's
November 20, 1991 among Ford Motor Registration Statement No. 33-43085.*
Company, Manufacturers Hanover Trust
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 Preferred Stock.
Exhibit 4-B Form of Deposit Agreement dated as of Filed as Exhibit 4-E to the Registrant's
October 29, 1992 among Ford Motor Registration Statement No. 33-53092.*
Company, Chemical Bank, as Depositary,
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 Agreement dated Filed as Exhibit 10-A to the Registrant's
as of July 1, 1993 between the Annual Report on Form 10-K for the year
Registrant and Ford Credit. ended December 31, 1993.*
Exhibit 10-B 1985 Stock Option Plan of the Registrant.** Filed as Exhibit 10-D to the Registrant's
Annual Report on Form 10-K for the year
ended December 31, 1985.*
Exhibit 10-B-1 Amendment dated as of March 8, 1990 Filed as Exhibit 10-C-1 to the Registrant's
to 1985 Stock Option Plan.** Annual Report on Form 10-K for the year
ended December 31, 1989.*
Exhibit 10-C Ford Motor Company Supplemental Filed as Exhibit 10-H to the Registrant's
Compensation Plan as amended through Annual Report on Form 10-K for the year
May 8, 1986.** ended December 31, 1986.*
84
EXHIBIT INDEX (continued)
Designation Description Method of Filing
- ----------- ----------- ----------------
Exhibit 10-C-1 Amendment to Ford Motor Company Filed as Exhibit 10-F-1 to the Registrant's
Supplemental Compensation Plan, dated Annual Report on Form 10-K for the year
May 12, 1988.** ended December 31,1988.*
Exhibit 10-C-2 Amendment to Ford Motor Company Filed as Exhibit 10-D-2 to the Registrant's
Supplemental Compensation Plan, dated Annual Report on Form 10-K for the year
July 8, 1992** ended December 31, 1992.*
Exhibit 10-D Ford Motor Company Executive Separation Filed with this Report.
Allowance Plan as amended through
December 9, 1993 for separations on
or after January 1, 1981.**
Exhibit 10-E Description of Company practices regarding Filed as Exhibit 10-I to the Registrant's
club memberships for executives.** Annual Report on Form 10-K for the year
ended December 31, 1981.*
Exhibit 10-F Description of Company practices regarding Filed as Exhibit 10-J to the Registrant's
travel expenses of spouses of certain Annual Report on Form 10-K for the year
executives.** ended December 31, 1980.*
Exhibit 10-G Ford Motor Company Deferred Compensation Filed as Exhibit 10-L to the Registrant's
Plan for Non-Employee Directors, adopted Annual Report on Form 10-K for the year
January 13, 1983.** ended December 31, 1982.*
Exhibit 10-G-1 Deferred Compensation Plan for Non- Filed as Exhibit 10-H-1 to the Registrant's
Employee Directors, as amended on Registrant's Annual Report on Form 10-K
July 11, 1991.** for the year ended December 31, 1991.*
Exhibit 10-H Ford Motor Company Benefit Equalization Filed with this Report.
Plan, as amended as of January 1,
1989.**
Exhibit 10-I Description of Financial Counseling Filed as Exhibit 10-N to the Registrant's
Services provided to certain executives.** Annual Report on Form 10-K for the year
ended December 31, 1983.*
Exhibit 10-J 1986 Long-Term Incentive Plan of the Filed as Exhibit 10-Q to the Registrant's
Registrant.** Annual Report on Form 10-K for the year
ended December 31, 1985.*
-2-
85
EXHIBIT INDEX (continued)
Designation Description Method of Filing
- ----------- ----------- ----------------
Exhibit 10-J-1 Amendment dated as of June 1, 1990 to Filed as Exhibit 10-N-1 to the Registrant's
1986 Long-Term Incentive Plan of the Annual Report on Form 10-K for the year
Registrant.** ended December 31, 1990.*
Exhibit 10-K Supplemental Executive Retirement Plan, Filed with this Report.
as restated and incorporating amendments
through December 9, 1993.**
Exhibit 10-L Ford Motor Company Restricted Stock Filed as Exhibit 10-P to the Registrant's
Plan for Non-Employee Directors adopted Annual Report on Form 10-K for the year
by the Board of Directors on November 10, ended December 31, 1988.*
1988, and approved by the stockholders at
the 1989 Annual Meeting.**
Exhibit 10-M 1990 Long-Term Incentive Plan, amended Filed as Exhibit 10-R to the Registrant's
as of June 1, 1990.** Annual Report on Form 10-K for the year
ended December 31, 1990.*
Exhibit 10-M-1 Amendment to 1990 Long-Term Incentive Filed as Exhibit 10-P-1 to the Registrant's
Plan, effective as of October 1, 1990.** Annual Report on Form 10-K for the year
ended December 31, 1991.*
Exhibit 10-N Description of Matching Gift Program for Filed as Exhibit 10-Q to the Registrant's
Non-Employee Directors.** Annual Report on Form 10-K for the year
ended December 31, 1991.*
Exhibit 10-O Non-Employee Directors Life Insurance Filed with this Report.
and Optional Retirement Plan (as
(amended as of January 1, 1993).**
Exhibit 10-P Description of Non-Employee Directors Filed as Exhibit 10-S to the Registrant's
Accidental Death, Dismemberment and Annual Report on Form 10-K for the year
Permanent Total Disablement Indemnity.** ended December 31, 1992.*
Exhibit 10-Q Agreement dated December 10, 1992 Filed as Exhibit 10-T to the Registrant's
between William C. Ford and the Annual Report on Form 10-K for the year
Registrant.** ended December 31, 1992.*
Exhibit 10-R Support Agreement dated as of October 1, Filed as Exhibit 10-T to the Registrant's
1993 between the Registrant and Ford Annual Report on Form 10-K for the year
Credit Europe. ended December 31, 1993.*
-3-
86
EXHIBIT INDEX (continued)
Designation Description Method of Filing
- ----------- ----------- ----------------
Exhibit 10-S Description of Select Retirement Plan Filed as Exhibit 10 to the Registrant's
adopted on June 9, 1994.** Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994.*
Exhibit 11 Computation of Primary and Fully Diluted Filed with this Report.
Earnings a Share.
Exhibit 12 Computation of Ratio of Earnings to Filed with this Report.
Combined Fixed Charges and Preferred
Stock Dividends.
Exhibit 21 List of Subsidiaries of the Registrant Filed with this Report.
as of December 31, 1994.
Exhibit 23 Consent of Independent Certified Public Filed with this Report.
Accountants.
Exhibit 24 Powers of Attorney. Filed with this Report.
__________________________
* Incorporated by reference as an exhibit hereto
** Management contract or compensatory plan or arrangement
-4-