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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 1995, 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 1-6368
FORD MOTOR CREDIT COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(State of incorporation)
THE AMERICAN ROAD, DEARBORN, MICHIGAN
(Address of principal executive offices)
38-1612444
(I.R.S. employer identification no.)
48121
(Zip code)
Registrant's telephone number, including area code (313) 322-3000
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS
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6 3/8% Notes due November 5, 2008
NAME OF EACH EXCHANGE
ON WHICH REGISTERED
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New York Stock Exchange
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 ____
As of February 29, 1996, the registrant had outstanding 250,000 shares of
Common Stock. No voting stock of the registrant is held by non-affiliates of the
registrant.
THE REGISTRANT MEETS THE CONDITION SET FORTH IN GENERAL INSTRUCTION J(1)(A)
AND (B) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
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PART I
ITEM 1. BUSINESS
The registrant, Ford Motor Credit Company, was incorporated in Delaware in
1959 and is an indirect wholly owned subsidiary of Ford Motor Company (the
"Company" or "Ford"). As used herein "Ford Credit" refers to Ford Motor Credit
Company and its subsidiaries unless the context otherwise requires.
Ford Credit provides wholesale financing and capital loans to franchised
Ford Motor Company vehicle 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. and
Canada to other vehicle dealers. Vehicle financing accounted for 97.5% of the
dollar volume of financing done by Ford Credit in 1995 and 97.9% in 1994. More
than 84% of all new vehicles financed by Ford Credit are manufactured by Ford or
its affiliates. Ford Credit also provides retail financing for used vehicles
built by Ford and other manufacturers, which accounted for 22% of the dollar
volume of retail vehicle financing done by Ford Credit in 1995 and 19% in 1994.
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 Corporation
(formerly United States Leasing International, Inc.) ("USL Capital"), a wholly
owned subsidiary of Ford Holdings, Inc. ("Ford Holdings").
In 1995 and 1994, United States operations, conducted in all 50 states, the
District of Columbia and Puerto Rico, accounted for 93.4% and 93.2%,
respectively, of the dollar volume of Ford Credit's financing business; Canadian
operations accounted for 4.8% and 5.1%, respectively, of such volume in these
periods. The balance was in Australia, Japan and Mexico. In addition, Ford
Credit manages the vehicle financing operations of Ford in other foreign
countries which are conducted through other subsidiaries of Ford.
Ford Credit manages the insurance business of The American Road Insurance
Company ("American Road"), a wholly owned subsidiary of Ford Holdings. At
December 31, 1995, 55% of the common stock of Ford Holdings was owned by Ford
and 45% was owned by Ford Credit. See, "Business of Ford -- Financial Services
Operations -- Ford Holdings, Inc. and Ford FSG, Inc." for a discussion of the
repurchase in February 1996 by Ford Holdings of substantially all of the Ford
Holdings common stock owned by Ford Credit and the expected contribution of
American Road common stock to Ford Credit.
The business of Ford Credit is substantially dependent upon Ford Motor
Company. See "Vehicle Financing" and "Borrowings and Other Sources of Funds"
under the caption "Business of Ford Credit". Also see Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations". Any
protracted reduction or suspension of Ford's production or sale of vehicles,
resulting from a decline in demand, a work stoppage, governmental action,
adverse publicity, or other event, could have a substantial adverse effect on
Ford Credit. For additional information concerning Ford's results of operations,
see Ford Motor Company's Annual Report on Form 10-K for the year ended December
31, 1995 filed with the Securities and Exchange Commission.
The mailing address of Ford Credit's executive offices is The American
Road, Dearborn, Michigan 48121. The telephone number of such offices is (313)
322-3000.
SEGMENT INFORMATION
Segment information called for by Item 1 is set forth in Note 15 of Notes
to Financial Statements and is incorporated herein by reference.
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BUSINESS OF FORD CREDIT
Ford Credit accounts for its financing business in four categories --
retail (which consists of vehicle installment sale financing and vehicle lease
financing), wholesale, diversified and other. Total gross finance receivables
and net investment in operating leases outstanding in these four categories were
as follows at the end of the years indicated:
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(IN MILLIONS)
Retail*............................. $68,584.0 $60,560.5 $51,210.2 $43,347.9 $37,647.5
Wholesale........................... 16,506.9 15,252.9 11,698.5 10,056.9 11,465.7
Diversified......................... 2,736.8 2,738.2 2,626.0 2,949.0 4,335.0
Other............................... 4,630.6 4,263.8 3,681.0 3,376.2 3,441.1
--------- --------- --------- --------- ---------
Total.......................... $92,458.3 $82,815.4 $69,215.7 $59,730.0 $56,889.3
========= ========= ========= ========= =========
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* Includes net investment in operating leases.
Dollar volume of financing by Ford Credit was as follows during the years
indicated:
1995 1994 1993 1992 1991
---------- ---------- ---------- --------- ---------
(IN MILLIONS)
Retail*.............................. $ 51,019.5 $ 45,402.5 $ 40,265.9 $32,302.0 $26,271.7
Wholesale............................ 110,220.9 107,253.0 86,776.8 65,772.9 65,146.6
Diversified.......................... 537.6 577.7 73.5 63.0 206.0
Other................................ 2,057.4 1,882.7 1,578.3 1,457.1 1,137.8
---------- ---------- ---------- --------- ---------
Total........................... $163,835.4 $155,115.9 $128,694.5 $99,595.0 $92,762.1
========== ========== ========== ========= =========
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* Includes operating lease volume.
VEHICLE FINANCING
Retail. Retail financing consists primarily of installment sale financing
and retail lease financing of vehicles and loans to vehicle leasing companies,
most of which are affiliated with franchised Ford Motor Company dealers. The
number of installment sale and lease vehicles financed by Ford Credit was as
follows during the years indicated:
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
(IN THOUSANDS)
New...................................................... 1,961 1,899 1,799 1,525 1,271
Used..................................................... 774 690 625 524 441
----- ----- ----- ----- -----
Total............................................... 2,735 2,589 2,424 2,049 1,712
===== ===== ===== ===== =====
The levels of Ford Credit's retail financing volume and outstanding
receivables and lease investments are dependent on several factors, including
new and used vehicle sales and leases, Ford Credit's share of those vehicle
sales and leases and the average cost of vehicles financed. See "Competition in
Vehicle Financing". In addition, receivables levels will vary depending on sales
of receivables.
Installment sale financing consists principally of purchasing and servicing
installment sale contracts covering sales of new and used vehicles by vehicle
dealers to retail customers. The purchase price paid by Ford Credit to the
dealer for an installment sale contract generally is the amount financed. In
addition, a portion of the finance charge is paid or credited to the dealer.
Ford Credit requires a retail customer to carry fire, theft and collision
insurance on the vehicle. In the U.S., the average repayment obligation for new
vehicles covered by installment sale contracts purchased by Ford Credit in 1995
was $19,743. The corresponding average monthly payment was $355 and the average
original term was 55 months.
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Retail lease financing consists principally of purchasing and servicing
lease contracts covering new and used vehicles leased to retail customers by
vehicle dealers. In recent years, vehicle leasing has increased in popularity by
offering the retail customer a lower initial cash outlay for the vehicle and
lower monthly payments when compared with conventional installment sale
financing for the same vehicle. Since 1991, retail lease financing has become a
larger percentage of Ford Credit's total retail financing dollar volume,
increasing from 17% in 1991 to 35% in 1995. The number of new and used vehicles
for which Ford Credit provided retail lease financing increased from
approximately 228,000 units in 1991 to approximately 815,000 units in 1995.
The amount paid by Ford Credit to the dealer for the vehicle and lease (the
"acquisition cost") represents a negotiated amount agreed to between the dealer
and the customer, less any trade-in or downpayment. The monthly lease payment
equals the acquisition cost of the vehicle less the residual value of the
vehicle established by Ford Credit, amortized over the lease term, plus the
lease charge. A retail lessee is required to carry fire, theft, collision and
liability insurance. The acquisition cost to Ford Credit of the vehicle, less
the residual value, is depreciated on a straight line basis over the life of the
lease. Residual values are determined by Ford Credit after analyzing residual
values published by the Automotive Lease Guide and Ford Credit's own historical
experience in the used car market. In addition, joint marketing programs with
Ford's vehicle divisions can affect established residual values. At lease
termination, Ford Credit either sells the vehicle to the dealer for the
established residual value or sells the vehicle at auction for the market price.
Retail lease terms range from 12 to 48 months with a 24 month term being by
far the most popular. The average monthly payment and the average original term
of new U.S. retail lease contracts purchased by Ford Credit in 1995 were $368
and 26 months compared with $359 and 28 months in 1994.
The average original term of the lease financing extended to leasing
companies and daily rental companies by Ford Credit in 1995 was 30 months and 15
months, respectively. Financing charges in connection with such lease financing
generally are fixed, or floating based on short-term interest rates in effect at
the time the financing is extended. These rates may be supplemented by payments
from Ford whenever the rate payable is less than the specified minimum rate
agreed upon between Ford Credit and Ford. At December 31, 1995, 26 leasing
companies and daily rental companies each accounted for more than $10 million of
such lease financing, three of which accounted for $589 million, $103 million
and $55 million of such lease financing, respectively.
Wholesale. Wholesale financing consists of loans, under approved lines of
credit, to dealers to assist them in carrying inventories of new and used
vehicles. Ford Credit generally finances 100% of the wholesale price. Vehicles
are insured against fire, theft and other risks under policies issued to Ford
Credit by American Road. Ford Credit's United States car and truck wholesale
receivables that liquidated were outstanding an average of about 77 days in 1995
and 68 days in 1994.
The levels of Ford Credit's wholesale financing volume and outstanding
wholesale receivables are dependent on several factors, including sales by Ford
to dealers, the level of dealer inventories, Ford Credit's share of Ford's sales
to dealers, vehicle prices and sales of wholesale receivables.
Competition In Vehicle Financing. The vehicle financing business is highly
competitive, particularly in the case of retail financing. Ford Credit's
principal competitors for retail financing are banks and credit unions. Banks
and other leasing companies are Ford Credit's principal competitors for
wholesale financing and lease financing.
Ford Credit financed the following percentages of new Ford and
Lincoln-Mercury cars and trucks sold or leased at retail and sold at wholesale
in the United States during each of the years indicated:
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Retail*.......................... 36.9% 36.6% 38.5% 37.7% 35.2%
Wholesale........................ 79.7 81.5 81.4 77.6 74.9
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* As a percentage of total sales and leases, including cash sales
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The general increase in the percentage of new Ford and Lincoln-Mercury cars
and trucks sold at wholesale in the United States since 1991 financed by Ford
Credit reflects competitive marketing programs and less competition.
DIVERSIFIED FINANCING
Diversified finance receivables consist primarily of leases and loans
secured by transportation equipment and facilities, some of which represent
tax-exempt financing for state and local governments, energy related equipment
and other equipment, real estate loans collateralized by first and second
mortgages on improved property and privately negotiated investments in preferred
stock. Diversified receivables outstanding at December 31, 1995 totaled $2,736.8
million. Most diversified finance receivables represent transactions in an
original amount in excess of $1 million each. Because of the relatively large
size of individual diversified financing transactions, any individual loss
arising out of such transactions could be substantial. Diversified finance
receivables generally are intermediate-term; at December 31, 1995 approximately
23.9% of the outstanding receivables were scheduled to mature within five years.
At December 31, 1995 diversified finance receivables outstanding represented
3.0% of Ford Credit's total gross finance receivables and net investment in
operating leases.
OTHER FINANCING ACTIVITIES
Ford Credit makes capital loans to vehicle dealers for facilities expansion
and working capital and to enable them to purchase dealership real estate. Such
loans totaled $2,097.0 million at December 31, 1995. From time to time, Ford
Credit purchases accounts receivable of certain divisions and affiliates of
Ford. The amount of such receivables as of the end of each month during 1995
fluctuated between $1,185.2 million and $1,334.8 million. At December 31, 1995,
such receivables totaled $1,288.6 million, all of which represent accounts
receivable purchased by Ford Credit from Ford pursuant to agreements under which
Ford Credit may purchase such receivables. In addition to the foregoing
receivables, Ford Credit held $1,245.0 million of other finance receivables at
December 31, 1995.
CREDIT LOSS EXPERIENCE
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:
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
(DOLLAR AMOUNTS IN MILLIONS)
Net losses/(recoveries)
Retail*.................................. $376.7 $220.2 $212.8 $298.2 $442.4
Wholesale................................ 7.9 1.3 (3.5) 14.5 40.2
Diversified.............................. 4.8 1.8 14.1 23.4 24.4
Other.................................... 4.5 5.4 5.0 6.5 21.9
------ ------ ------ ------ ------
$393.9 $228.7 $228.4 $342.6 $528.9
====== ====== ====== ====== ======
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* Includes net losses on operating leases
Net losses as a percent of average
receivables
Retail*.................................. 0.57% 0.38% 0.46% 0.75% 1.18%
Total finance receivables*............... 0.44 0.30 0.35 0.60 0.92
Provision for credit losses................ $437.9 $246.5 $270.2 $418.0 $577.9
Allowance for credit losses................ 927.3 915.5 915.5 915.5 825.4
As percent of net receivables*........... 1.07% 1.18% 1.42% 1.66% 1.60%
- -------------------------
* Includes net investment in operating leases
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The general improvement in credit losses since 1991 reflects fewer
repossessions and a decline in the loss per repossession. This improvement has
resulted from actions Ford Credit has taken over the past few years to improve
the quality of contracts purchased and collection procedures. In addition,
improvements in the economy and a low interest rate environment have helped to
reduce credit losses. For a discussion of the increase in credit losses in 1995
compared with 1994, see Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Results of Operations -- 1995
Compared with 1994."
Allowances for estimated credit losses are established as required based on
historical experience. Other factors that affect collectibility also are
evaluated and additional allowances may be provided. The provision for credit
losses generally varies with changes in the amount of loss exposure and the
absolute level of financing. Ford Credit's retail loss experience is dependent
upon the number of repossessions, the unpaid balance outstanding at the time of
repossession, and the net resale value of repossessed vehicles. Wholesale losses
generally reflect the financial condition of dealers. For additional information
regarding credit losses, see Notes 1 and 6 of Notes to Financial Statements.
SECURITY
Ford Credit generally either holds security interests in or is the title
owner of the vehicles which it finances or leases and generally is able to
repossess a vehicle in the event of a default. The right to repossess under a
security interest securing wholesale obligations generally is ineffectual, as a
matter of law, against a retail buyer of a vehicle from a dealer. Under the
wholesale installment sale plan, dealers are permitted to delay payment of up to
10% of a vehicle's financed balance for up to 60 days after the dealer sells the
vehicle. A portion of such delayed payments may, under certain circumstances, be
unsecured. Obligations arising from lease financing extended to leasing
companies are collateralized to the extent practicable by assignments of rentals
under the related leases and, in almost all instances, by liens on the vehicles
(which liens are not perfected against third parties in some cases). Diversified
finance receivables generally consist of leases and financings of personal
property or real estate in which Ford Credit has ownership or security
interests.
BORROWINGS AND OTHER SOURCES OF FUNDS
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, interest supplements and other support
costs from Ford for vehicles financed and leased by Ford Credit under Ford
sponsored special financing and leasing programs, and dividend payments, 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 outlook for, and financial condition
of, Ford, and the nature and availability of support facilities, such as
revolving credit and receivables sales agreements. In addition, Ford Credit from
time to time sells its receivables in public offerings or private placements.
For additional information regarding Ford Credit's association with Ford, see
"Certain Transactions with Ford and Affiliates".
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Ford Credit's outstanding debt at the end of each of the last five years
was as follows:
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
(IN MILLIONS)
Commercial paper and STBAs(a).................. $35,038 $33,300 $24,506 $21,210 $18,232
Other short-term debt(b)....................... 1,463 1,065 1,001 1,785 1,642
Long-term debt (including current
portion)(c).................................. 42,666 36,075 33,292 26,961 28,455
------- ------- ------- ------- -------
Total debt................................... $79,167 $70,440 $58,799 $49,956 $48,329
======= ======= ======= ======= =======
Memo:
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
Total support facilities (billions) as of
December 31, 1991-1995, respectively......... $27.4 $22.3 $16.9 $13.9 $13.8
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(a) Short-term borrowing agreements with bank trust departments
(b) Includes $36 million, $150 million and $800 million with an affiliated
company at December 31, 1995, December 31, 1993 and December 31, 1992,
respectively
(c) Includes $1,174 million with affiliated companies at December 31, 1995.
Outstanding commercial paper totaled $35.0 billion at December 31, 1995, up
$1.8 billion from a year earlier. In 1995, long-term debt placements were $11.8
billion compared with maturities and early redemptions of $5.2 billion.
Long-term debt placements in 1994 were $10.7 billion. In 1995, Ford Credit also
received $4.4 billion from sales of receivables and operating leases compared
with $3.1 billion in 1994.
Support facilities represent additional sources of funds, if required. At
December 31, 1995, Ford Credit had approximately $27.4 billion of contractually
committed facilities for use which included $7.6 billion of Ford bank lines that
may be used by Ford Credit at Ford's option. These facilities have various
maturity dates through June 2000. The entire $27.4 billion may be used, at Ford
Credit's option, by its subsidiaries in Canada, Australia, Mexico, Japan, and
Puerto Rico. Any such borrowing will be guaranteed by Ford Credit.
FORD HOLDINGS
For information concerning the businesses of Ford Holdings in 1995
conducted primarily through Associates First Capital Corporation ("The
Associates"), USL Capital and American Road, see "Business of Ford -- Financial
Services Operations". For a discussion of 1995 results of operations and
liquidity and capital resources of The Associates, USL Capital and American
Road, see "Financial Review of Ford Motor Company Results -- 1995 Results of
Operations -- Financial Services Operations" and "-- Liquidity and Capital
Resources -- Financial Services Operations".
FORD CREDIT EMPLOYEE RELATIONS
At December 31, 1995, Ford Credit and its subsidiaries had 10,253
employees. All such employees are salaried, and none is represented by a union.
Ford Credit considers its employee relations to be satisfactory.
FORD CREDIT GOVERNMENTAL REGULATIONS
Various aspects of Ford Credit's financing operations are regulated under
both Federal and state law. Various states require licenses to conduct retail
financing. Interest rates, particularly those with respect to consumer
financing, generally are limited by state law and, in periods of high interest
rates, these limitations can have a substantial adverse effect on operations in
certain states if Ford Credit is unable to pass on its increased interest costs
to its customers.
During the past several years, legislative, judicial, and administrative
authorities have evidenced a growing concern for the protection of the interest
of consumers, especially in connection with consumer
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financing transactions. As a result, significant changes have been made in the
methods by which Ford Credit and the financing industry conduct business, and
many proposals have been made which would require further changes. None of the
changes to date has had a substantial adverse effect on the operations of Ford
Credit.
CERTAIN TRANSACTIONS WITH FORD AND AFFILIATES
For information concerning transactions between Ford Credit and Ford or
affiliates, see Note 12 of Notes to Financial Statements, "Business of Ford
Credit -- Other Financing Activities", "Business of Ford Credit -- Borrowings
and Other Sources of Funds" and Item 6 -- "Selected Financial Data -- Selected
Income Statement Data." The profit maintenance agreement referred to in the
first paragraph of Note 12 of Notes to Financial Statements, under which Ford
has agreed to maintain the income of Ford Credit at certain minimum levels,
expires at the end of 1998.
BUSINESS OF FORD
Ford was incorporated in Delaware in 1919 and acquired the business of a
Michigan company, also known as Ford Motor Company, incorporated in 1903 to
produce automobiles designed and engineered by Henry Ford. Ford is the
second-largest producer of cars and trucks in the world, and ranks among the
largest providers of financial services in the United States.
GENERAL
The Company's two principal business segments are Automotive and Financial
Services. The activities of the Automotive segment consist of the manufacture,
assembly and sale of cars and trucks and related parts and accessories.
Substantially all of Ford's automotive products are marketed through retail
dealerships, most of which are privately owned and financed.
The primary activities of the Financial Services segment consist of
financing operations, vehicle and equipment leasing and insurance operations.
These activities are conducted through the Company's subsidiaries, Ford FSG,
Inc. ("FFSGI"), Ford Holdings, The Hertz Corporation ("Hertz") and Granite
Management Corporation ("Granite"). FFSGI is a holding company that owns
primarily Ford Credit, a majority of Ford Credit Europe plc ("Ford Credit
Europe"), and The Associates. Ford Holdings is a holding company that owns
primarily a portion of FFSGI and all of USL Capital and American Road.
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.
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.
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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 net corporate exposure, 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,
------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Cars.............................. 8.6 9.0 8.5 8.2 8.2
Trucks............................ 6.5 6.4 5.7 4.9 4.3
---- ---- ---- ---- ----
Total........................... 15.1 15.4 14.2 13.1 12.5
==== ==== ==== ==== ====
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
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by segment for the industry (including Japanese and other foreign-based
manufacturers) and Ford for the years indicated:
U.S. INDUSTRY VEHICLE SALES BY SEGMENT
YEARS ENDED DECEMBER 31
---------------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
Cars
Small.............................. 17.7% 18.4% 17.3% 18.3% 18.9%
Middle............................. 28.3 28.5 31.2 32.4 33.5
Large.............................. 4.3 4.8 5.1 5.8 6.3
Luxury............................. 6.8 6.6 6.4 6.1 6.5
----- ----- ----- ----- -----
Total U.S. Industry Car Sales... 57.1 58.3 60.0 62.6 65.2
----- ----- ----- ----- -----
Trucks
Compact Pickup..................... 6.8 7.7 7.6 7.8 7.8
Compact Van/Utility................ 18.0 16.9 16.5 15.0 13.5
Full-Size Pickup................... 11.5 11.0 9.9 9.0 8.7
Full-Size Van/Utility.............. 4.4 4.1 4.2 4.0 3.3
Medium/Heavy....................... 2.2 2.0 1.8 1.6 1.5
----- ----- ----- ----- -----
Total U.S. Industry Truck
Sales......................... 42.9 41.7 40.0 37.4 34.8
----- ----- ----- ----- -----
Total U.S. Industry Vehicle
Sales......................... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
FORD VEHICLE SALES BY SEGMENT IN U.S.
YEARS ENDED DECEMBER 31
---------------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
Cars
Small.............................. 15.1% 17.5% 15.1% 14.6% 17.6%
Middle............................. 22.3 22.7 26.9 29.4 26.7
Large.............................. 4.9 5.2 5.1 5.8 5.7
Luxury............................. 4.4 4.7 4.9 5.2 6.4
----- ----- ----- ----- -----
Total Ford U.S. Car Sales....... 46.7 50.1 52.0 55.0 56.4
----- ----- ----- ----- -----
Trucks
Compact Pickup..................... 8.0 8.9 9.5 7.6 8.1
Compact Van/Utility................ 20.1 16.7 15.6 15.1 13.7
Full-Size Pickup................... 17.9 16.7 15.6 15.1 15.6
Full-Size Van/Utility.............. 5.9 6.2 6.0 5.9 5.1
Medium/Heavy....................... 1.4 1.4 1.3 1.3 1.1
----- ----- ----- ----- -----
Total Ford U.S. Truck Sales..... 53.3 49.9 48.0 45.0 43.6
----- ----- ----- ----- -----
Total Ford U.S. Vehicle Sales... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
As shown in the tables above, since 1991 there has been a significant shift
from cars to trucks for both industry sales and Ford sales. Most of the shift
reflects fewer sales of cars in the middle and large segments for the industry
and in the middle, large and luxury segments for Ford and increased sales of
trucks in the compact van/utility (e.g., Windstar and Explorer) and full-size
pickup segments for both the industry and Ford. The increased sales of full-size
pickups reflects the increased use of such vehicles for personal (rather than
commercial) purposes.
9
11
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,
---------------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
U.S. Manufacturers (Including Imports)
Ford............................................. 20.9% 21.8% 22.3% 21.8% 20.1%
General Motors................................... 33.9 34.0 34.1 34.6 35.6
Chrysler......................................... 9.1 9.0 9.8 8.3 8.6
----- ----- ----- ----- -----
Total U.S. Manufacturers...................... 63.9 64.8 66.2 64.7 64.3
Foreign-Based Manufacturers**
Japanese......................................... 29.7 29.6 29.1 30.1 30.2
All Other........................................ 6.4 5.6 4.7 5.2 5.5
----- ----- ----- ----- -----
Total Foreign-Based Manufacturers............. 36.1 35.2 33.8 35.3 35.7
----- ----- ----- ----- -----
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,
---------------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
U.S. Manufacturers (Including Imports)
Ford............................................. 31.9% 30.1% 30.5% 29.7% 28.9%
General Motors................................... 29.9 30.9 31.4 32.2 32.9
Chrysler......................................... 21.3 21.7 21.4 21.1 18.5
Navistar International........................... 1.4 1.3 1.3 1.3 1.4
All Other........................................ 2.0 1.8 1.6 1.4 1.3
----- ----- ----- ----- -----
Total U.S. Manufacturers...................... 86.5 85.8 86.2 85.7 83.0
Foreign-Based Manufacturers**
Japanese......................................... 12.7 13.5 13.2 13.8 16.5
All Other........................................ 0.8 0.7 0.6 0.5 0.5
Total Foreign-Based Manufacturers............. 13.5 14.2 13.8 14.3 17.0
----- ----- ----- ----- -----
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,
---------------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
U.S. Manufacturers (Including Imports)
Ford............................................. 25.6% 25.2% 25.5% 24.7% 23.2%
General Motors................................... 32.2 32.7 33.1 33.7 34.6
Chrysler......................................... 14.3 14.3 14.4 13.1 12.0
Navistar International........................... 0.6 0.5 0.5 0.5 0.5
All Other.......................................... 0.9 0.8 0.7 0.5 0.5
----- ----- ----- ----- -----
Total U.S. Manufacturers...................... 73.6 73.5 74.2 72.5 70.8
Foreign-Based Manufacturers**
Japanese......................................... 22.6 22.9 22.8 24.0 25.5
All Other........................................ 3.8 3.6 3.0 3.5 3.7
----- ----- ----- ----- -----
Total Foreign-Based Manufacturers............. 26.4 26.5 25.8 27.5 29.2
----- ----- ----- ----- -----
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.
10
12
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 decreased from 25.5% in 1991 to 22.6% in
1995, reflecting in part the effects of the strengthening of the Japanese yen on
the prices of vehicles produced by the Japanese manufacturers, the overall
market shift from cars to trucks and improvements in the vehicles produced by
U.S. 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 2.3 million units in 1995 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 marketing costs in North America as a percentage of gross sales
revenue for each of 1995, 1994 and 1993 were: 7.5%, 7.3% and 8.7%, respectively.
During the 1983-1988 period, such costs as a percentage of sales revenue were in
the 3% to 5% range. In 1991, marketing costs peaked at 12% 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,
---------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
Units Sold.................................... 931,000 924,000 881,000 882,000 782,000
Percent of Ford's Total Car and Truck Sales... 24% 24% 25% 28% 27%
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 for defects in factory-supplied materials and workmanship on all
vehicles sold by it in the U.S that extends for at least 36 months or 36,000
miles (whichever occurs first) and covers all components of the vehicle, other
than tires which are warranted by the tire manufacturers. 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 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.
11
13
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 10.9% for 1995, increase their production capacity in Europe and import
restrictions on Japanese built-up vehicles gradually are removed in total by
December 31, 1999.
In 1995, European car industry sales were 11.8 million cars, equal to 1994
levels. Truck sales were 1.6 million units, up 7% from 1994 levels. Ford's
European car share for 1995 was 11.9%, the same as 1994, and its European truck
share for 1995 was a record 14.8%, compared with 14.7% for 1994.
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 1995 compared with 1994,
total industry sales were up 1% in Great Britain and up 3% 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 1995, industry sales of cars and trucks in Canada were down 7% from
1994 levels, somewhat worse than the decrease of 2% in the U.S. over the same
period. Mexico had been a growing market until late 1994. 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 was down 62% in 1995. Ongoing financial effects on
Ford of the devaluation are expected to be unfavorable; the magnitude of these
effects will be dependent in large part upon overall economic conditions.
South America. Brazil and Argentina 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 1995, Ford's results in the region
declined compared with 1994. The decrease reflected primarily losses for
operations in Brazil, where higher import duties and a market shift to small
cars resulted in excess dealer inventories and higher marketing costs. The lower
results are expected to continue into 1996. The Company is reestablishing
manufacturing capacity in Brazil for small cars, which should assist in
improving the Company's competitiveness in this region longer term. Industry
sales in 1995, compared with 1994, were up 19% in Brazil but down 35% in
Argentina. 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 and are expected to continue to be volatile and subject
to rapid change.
In November 1995, Ford and Volkswagen AG dissolved their Autolatina joint
venture in Brazil and Argentina. See "Financial Review of Ford Motor Company
Results" for more information concerning the effects of this dissolution.
Asia-Pacific. In the Asia-Pacific region, Australia, Taiwan and Japan are
the principal markets for Ford products. In 1995, Ford was the car market share
leader in Australia with a 21.5% combined car and truck market share. In Taiwan
(where sales of built-up vehicles manufactured in Japan are prohibited), Ford
was the market share leader with a combined car and truck market share in 1995
of 18.9%. 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.
The Asia Pacific region offers many important opportunities for the future.
Ford believes that China is strategically important to its long-term success in
the Asia Pacific region. In 1995, Ford purchased a 20% equity interest in a
Chinese light truck manufacturer, Jiangling Motors Corporation, Ltd.;
established a wholly
12
14
owned holding company in Beijing; and invested in an aluminum radiator joint
venture in China, in addition to the previously established automotive component
manufacturing joint ventures in China (automotive interior trim, automotive
glass and automotive electronic/audio components). In late 1995, Ford
established a joint venture in Thailand with Mazda Motor Corporation ("Mazda")
to manufacture pickup trucks designed by Mazda. In 1994, Ford purchased a 6.5%
equity interest in Mahindra and Mahindra Limited ("Mahindra"), an automotive and
tractor manufacturer in India. In 1995, Ford received governmental approval to
invest in an automobile manufacturing joint venture in India with Mahindra. 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 Explorer and Taurus models.
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.
FINANCIAL SERVICES OPERATIONS
FORD HOLDINGS, INC. AND FORD FSG, INC.
Ford Holdings was incorporated in 1989 for the principal purpose of
acquiring, owning and managing certain assets of Ford. In December 1995, Ford
Holdings merged with Ford Holdings Capital Corporation, a wholly owned
subsidiary of Ford Holdings, which resulted in the cancellation of all of the
voting preferred stock of Ford Holdings. All of the outstanding common stock of
Ford Holdings, representing 100% of the voting power in Ford Holdings, is owned
beneficially by Ford.
In late 1995, Ford began a reorganization of its Financial Services group
in order to align more closely under a single subsidiary legal ownership of the
Financial Services affiliates with management responsibility for such
affiliates. As part of the reorganization, Ford Holdings formed FFSGI to own
primarily all of the Financial Services affiliates. At the time, 55% of the
common stock of Ford Holdings was owned by Ford and 45% was owned by Ford
Credit.
After the formation of FFSGI, Ford Holdings contributed its interest in The
Associates to FFSGI in exchange for 100% of the common stock of FFSGI and the
assumption by FFSGI of certain debt of Ford Holdings. Thereafter, Ford
contributed to FFSGI all of its interest in Ford Credit Europe. In exchange for
this contribution, Ford received a class of common stock in FFSGI that has
controlling voting power of FFSGI but otherwise is equal to all other common
stock of FFSGI as to the payment of dividends, etc. (the "Class F Stock"). In
February 1996, substantially all of the shares of Ford Holdings common stock
owned by Ford Credit were repurchased by Ford Holdings in exchange for the
issuance of a promissory note by Ford Holdings. Thereafter, Ford contributed to
FFSGI all of its interest in Ford Credit in exchange for additional shares of
Class F Stock of FFSGI. In addition, Ford will contribute to FFSGI certain of
its international Financial Services affiliates managed by Ford Credit in
exchange for additional stock in FFSGI. It also is expected that Ford Holdings
will contribute American Road to FFSGI, which in turn is expected to contribute
it to Ford Credit. The percentages of economic interests of FFSGI held by Ford
and Ford Holdings are based on the relative value of the entities contributed to
FFSGI by Ford and Ford Holdings. Currently, those percentages are approximately
78% for Ford and 22% for Ford Holdings.
On February 9, 1996, The Associates filed a registration statement with the
Securities and Exchange Commission for an initial public offering of its common
stock representing up to a 19.8% economic interest in The Associates (the
"IPO"). Substantially all of the net proceeds from the IPO are expected to be
used to repay indebtedness of The Associates, which will be incurred to repay an
intercompany debt owed to FFSGI in the amount of $1.75 billion. Prior to
completion of the IPO, Ford expects to contribute to The Associates certain
international affiliates owned by Ford but managed by The Associates. Also, as
announced by Ford in the fourth quarter of 1995, Ford is investigating the sale
of all or a part of USL Capital.
13
15
FORD MOTOR CREDIT COMPANY
For information regarding the businesses of Ford Credit, see "Business of
Ford Credit".
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 now owned by FFSGI and Ford Werke AG. 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. 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 deposit 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,
-------------------
1995 1994
------- -------
Finance receivables
Retail................................................................. $10,638 $ 9,356
Wholesale.............................................................. 5,616 4,615
Other.................................................................. 246 234
------- -------
Total finance receivables........................................... 16,500 14,205
Loan origination costs, net.............................................. 107 85
Unearned income.......................................................... (1,390) (1,159)
Allowance for credit losses.............................................. (119) (162)
------- -------
Finance receivables, net............................................ $15,098 $12,969
======= =======
Investments in operating leases.......................................... $ 1,146 $ 1,010
Accumulated depreciation................................................. (268) (231)
Allowance for credit losses.............................................. (9) (7)
------- -------
Investments in operating leases, net................................ $ 869 $ 772
======= =======
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):
1995 1994 1993
---- ---- ----
Beginning balance....................................... $169 $ 90 $123
Additions............................................. 43 50 46
Net losses............................................ (92) 5 (72)
Other changes*........................................ 8 24 (7)
---- ---- ----
Ending balance.......................................... $128 $169 $ 90
==== ==== ====
- -------------------------
* The reported amounts reflect primarily foreign currency transaction
adjustments.
14
16
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 and commercial finance. The
consumer finance operation invests in home equity, personal lending and sales
finance receivables, and credit card receivables primarily through a wholly
owned credit card bank, in addition to providing financing in the foregoing
areas and in manufactured housing. The commercial finance operation is
principally engaged in financing and leasing transportation and industrial
equipment, and providing other services, including automobile fleet leasing and
management, relocation services and automobile club and roadside assistance
services. The Associates has an insurance operation which underwrites credit
life, credit accident and health, property, casualty and accidental death and
dismemberment insurance, principally for customers of the finance operations.
Such insurance activity is conducted by The Associates' licensed insurance
agents and is managed as a separate activity. Insurance sales are dependent on
the business activities and volumes of the consumer and commercial business. As
mentioned above, The Associates has filed a registration statement with the
Securities and Exchange Commission for an initial public offering of its common
stock representing up to a 19.8% economic interest in The Associates.
The Associates' net finance receivables were as follows at the dates
indicated (in millions):
DECEMBER 31,
------------------
1995 1994
------- -------
Consumer finance
Home equity lending..................................................... $13,190 $11,455
Personal lending and retail sales finance............................... 4,753 4,189
Credit card............................................................. 4,858 4,035
Manufactured housing.................................................... 2,049 1,681
------- -------
Total consumer finance............................................... 24,850 21,360
------- -------
Commercial finance
Truck and truck trailer................................................. 7,416 6,553
Equipment............................................................... 3,959 2,970
Other................................................................... 384 293
------- -------
Total commercial finance............................................. 11,759 9,816
------- -------
Net finance receivables................................................... $36,609 $31,176
======= =======
15
17
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
--------------------------
1995 1994 1993
------ ----- -----
Net Credit Losses
Consumer finance
Amount....................................................... $ 547 $ 456 $ 372
% of average net receivables................................. 2.36% 2.33% 2.19%
% of receivables liquidated.................................. 3.20 3.09 3.41
Commercial finance
Amount....................................................... $ 21 $ 8 $ 22
% of average net receivables................................. .19% .09% .30%
% of receivables liquidated.................................. .19 .08 .26
Total net credit losses
Amount....................................................... $ 568 $ 464 $ 394
% of average net receivables................................. 1.68% 1.62% 1.61%
% of receivables liquidated.................................. 2.03 1.84 2.03
Allowance For Losses
Balance at end of period........................................ $1,124 $ 944 $ 809
% of net receivables......................................... 3.07% 3.03% 3.07%
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,
1995....................... $622 2.25% $ 85 0.64% $707 1.73%
1994....................... 439 1.82 31 0.28 470 1.34
An analysis of The Associates' allowance for losses on finance receivables
is as follows for the years indicated (in millions):
1995 1994 1993
------ ----- -----
Beginning balance.................................................... $ 944 $ 809 $ 699
Additions.......................................................... 743 577 477
Recoveries......................................................... 116 101 88
Losses............................................................. (684) (565) (482)
Other adjustments, primarily reserves of acquired businesses....... 5 22 27
------ ---- ----
Ending balance....................................................... $1,124 $ 944 $ 809
====== ==== ====
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
16
18
instruments. Certain of these financing transactions are underwritten by Ford
Credit. As mentioned above, Ford is considering the sale of all or a part of USL
Capital.
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,
------------------------------
1995 1994 1993
------ ------ ------
Total earning assets
Investments in finance leases -- net......................... $2,549 $2,435 $2,364
Investments in operating leases -- net....................... 904 712 695
Investments in leveraged leases -- net....................... 438 266 191
Notes receivable............................................. 1,040 825 721
Investments in securities.................................... 1,065 700 563
Inventory held for sale or lease............................. 108 87 55
Investments in associated companies.......................... 17 18 18
------ ------ ------
Total..................................................... $6,121 $5,043 $4,607
====== ====== ======
Allowance for doubtful accounts
Beginning balance............................................ $ 58 $ 55 $ 40
Additions.................................................... 6 8 25
Deductions................................................... (4) (5) (10)
------ ------ ------
Ending balance............................................ $ 60 $ 58 $ 55
====== ====== ======
Allowance for doubtful accounts as a percent of earning
assets....................................................... 1.0% 1.2% 1.2%
Total balance over 90 days past due at year end................ $ 23 $ 37 $ 44
Percent of earning assets...................................... 0.4% 0.7% 1.0%
THE AMERICAN ROAD INSURANCE COMPANY
American Road was incorporated by Ford in 1959, became a wholly owned
subsidiary of Ford Credit in 1966, and was transferred to Ford Holdings in 1989.
It is expected that American Road will be transferred back to Ford Credit as
part of the reorganization of the Financial Services group. 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 late
1995, American Road agreed to sell all of its interest in Ford Life Insurance
Company ("Ford Life"), a wholly owned subsidiary of American Road, to SunAmerica
Inc. At the time of the sale, Ford Life's business consisted of offering
deferred annuities sold primarily through banks and brokerage firms; the
nonannuities portion of the business was transferred to another subsidiary of
American Road prior to the sale of Ford Life.
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
-------- ---------- --------------- ----- ------
1995....... $310 $ 72 $ 215 $ 597 $ 28
1994....... 376 41 159 576 58*
1993....... 465 141 130 736 79
1992....... 519 175 42 736 63**
1991....... 706 211 2 919 126
- -------------------------
* Includes an increase of $26 million for nonrecurring recovery of income taxes
in 1994 from prior years.
** Includes an increase of $16 million resulting from the cumulative effect of
adopting new accounting rules on income taxes.
17
19
The detail of premiums earned by American Road was as follows (in
millions):
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Extended service contracts........................ $ 92 $148 $211 $217 $318
Physical damage................................... 113 119 139 176 227
Credit life and disability........................ 105 109 115 126 161
---- ---- ---- ---- ----
Total........................................... $310 $376 $465 $519 $706
==== ==== ==== ==== ====
THE HERTZ CORPORATION
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.
During 1994, Ford entered into various transactions which resulted in Hertz
becoming a wholly owned subsidiary of Ford. Hertz, its affiliates and
independent licensees are engaged principally in the business of renting
automobiles and renting and leasing trucks, without drivers, in the U.S. and in
approximately 150 foreign countries. Collectively, they operate what Hertz
believes is the largest car rental 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 in Australia
and New Zealand and in Europe through an affiliate; 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 and the year ended December
31, 1995 (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
Additions.............................................. 7,255 804 6,451
Retirements and other.................................. (7,410) (869) (6,541)
------- ----- -------
Balance, December 31, 1995............................... $ 4,656 $ 486 $ 4,170
======= ===== =======
GRANITE MANAGEMENT CORPORATION
Granite, a savings and loan holding company organized in Delaware in 1959,
was acquired by Ford in December 1985. 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").
At the time of the sale, Ford retained, through Granite, approximately $1.2
billion of commercial real estate and other assets formerly owned by the Bank.
These retained assets generally were of lower quality than those included in the
sale and will be liquidated over time as market conditions permit. 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. Through December 31, 1995, approximately $387 million of such assets had
been repurchased by Granite. At December 31, 1995, approximately $875 million of
Granite's assets remained unsold.
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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 clean alternative fuels under a pilot test program to be
conducted in California beginning in the 1996 model year. Under this pilot
program, each manufacturer will be required to sell its pro rata share of
150,000 alternative fuel vehicles in each of the 1996, 1997 and 1998 model years
and its pro rata share of 300,000 alternative fuel vehicles in each model year
thereafter. The Act also authorizes certain states to establish programs to
encourage the purchase of such vehicles. Since the Act considers California's
already adopted reformulated (i.e., cleaner burning) gasoline to be an
alternative fuel, most manufacturers will be able to comply with this
requirement in California by selling vehicles certified to California standards.
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. In February 1996, CARB issued a notice for
eliminating the ZEV mandate applicable before the 2003 model year. Final action
on the proposed rule change is expected at the March 1996 board meeting. If CARB
eliminates the mandate, manufacturers have volunteered to provide air quality
benefits for California equivalent to a 49 state program (i.e., providing
vehicles certified to California LEV emissions standards nationwide beginning
with the 2001 model year), to continue research and development of EV technology
and to provide specific numbers of advanced technology battery vehicles through
demonstration programs in California.
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
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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. The proposed elimination of the ZEV mandate and the
manufacturers' voluntary program will better allow market forces to guide the
introduction of ZEVs into the market. If the mandate is not changed, compliance
may require manufacturers to offer substantial discounts on electric vehicles,
selling them well below cost, or increase the price or curtail the sale of
nonelectric vehicles.
The California LEV 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. Twelve northeastern states
and the District of Columbia organized under the provisions of the Act into a
group known as the Ozone Transport Commission (the "OTC") and 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 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 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. Connecticut also has adopted such
standards, but without the ZEV requirements.
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 early 1996 to include in their
State Implementation Plans a California LEV program or an acceptable
alternative.
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 may be required to recall vehicles for
such purposes from time to time. In addition, as it has from time to time in the
past, Ford may voluntarily recall vehicles to fix emissions-related concerns.
The costs of related repairs or inspections associated with such recalls can be
substantial.
The Act generally prohibits the introduction of new fuel additives unless a
waiver is granted by the EPA. In 1995, the U.S. Court of Appeals for the
District of Columbia ordered the EPA to grant such a waiver to Ethyl Corporation
for the additive MMT, over the objections of the EPA and U.S. automobile
manufacturers, including Ford. Ethyl Corporation can now market MMT for use in
unleaded gasoline. Ford and other manufacturers believe that the use of MMT will
impair the performance of current emissions systems and onboard diagnostics
systems. The introduction of MMT could increase Ford's future warranty costs and
necessitate changes in the Company's warranties for emission control devices.
European Requirements. Council Directive 70/220/EEC (as amended through
Council Directive 94/12/EEC) and related European legislation impose limits on
the amount of regulated pollutants that may be emitted by new motor vehicles and
engines sold in the European Union. Standards for vehicles
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homologated before January 1, 1996 are of generally equivalent stringency to
1983 model year U.S. standards for gasoline powered vehicles and to 1987 model
year U.S. standards for diesel powered vehicles. All passenger cars homologated
from January 1, 1996 and all new passenger cars registered from January 1, 1997
must comply with more stringent standards that are of generally equivalent
stringency to 1994 model year U.S. standards. Similarly, new more stringent
standards for light duty trucks ("LDTs") have been proposed but not yet finally
enacted by the European Union. These would apply to passenger-car derived LDTs
from January 1, 1997 for new homologations and October 1, 1997 for new
registrations and would apply to other classes of LDTs from January 1, 1998 for
new homologations and October 1, 1998 for new registrations. The European
Commission is presently preparing proposals for even more stringent emissions
standards and for new enforcement procedures for both passenger cars and trucks
(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.
Certain European countries are conducting in-use emissions testing to
ascertain compliance of motor vehicles with applicable emission standards. These
actions could lead to recalls of vehicles; the future costs of related repairs
or inspections could be substantial.
Motor Vehicle Safety -- Under the National Traffic and Motor Vehicle Safety
Act of 1966, as amended (the "Safety Act"), the National Highway Traffic Safety
Administration (the "Safety Administration") is required to establish
appropriate federal motor vehicle safety standards that are practicable, meet
the need for motor vehicle safety and are stated in objective terms. 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, would subject a manufacturer to the imposition of a civil
penalty of $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.,
trucks, domestic cars, or imported cars) 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
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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 a 20.7 mpg CAFE standard
applicable to light trucks (under 8,500 pounds gross vehicle weight on a
combined two-wheel drive/four-wheel drive basis) for model years 1996 and 1997
and has proposed the same for 1998.
The EPA issued proposed regulations pursuant to the Clean Air Act that
would change the test procedures for measuring motor vehicle emissions and fuel
economy. If adopted without adequate adjustments, these regulations may require
costly measures to reduce tailpipe emissions and to increase fuel economy.
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 carbon dioxide ("CO(2)") 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 1999-2006 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.
International concerns over global warming due to the emission of
"greenhouse gasses" have given rise to strong pressures to increase fuel economy
of motor vehicles as a means of limiting their emission of CO(2). For example,
the United Nations Climate Change Convention held in Brazil in 1992 (the "U.N.
Climate Change Convention") sought to stabilize greenhouse gas emissions at 1990
levels by the year 2000. A subsequent meeting of the parties to the U.N. Climate
Change Convention in Berlin in March 1995 resulted in an agreement to establish
goals by 1997 for reductions in greenhouse gas emissions after the year 2000.
In December 1994, the European Union Council of Environmental Ministers
directed the European Commission to develop proposals for reducing CO(2)
emissions from passenger cars to 120 grams per kilometer by 2005 (which equates
to 5 liters consumed per 100 kilometers for gasoline engines and 4.5 liters
consumed per 100 kilometers for diesel engines). Similar proposals have been
made within the European Parliament. In December 1995, the European Commission
issued a communication to the Council and the Parliament proposing a package of
potential measures for reducing CO(2) emissions from passenger cars. These
include fiscal measures (taxes and incentives), fuel economy labeling, increased
research and development efforts, and a negotiated agreement with industry for
reduction in CO(2) emissions from new cars of 25% from 1990 levels by 2005. The
proposed agreement may also include incremental targets and monitoring
provisions for the years before 2005. Some of these proposals, if adopted, could
require costly actions that could have substantial adverse effects on Ford's
sales volumes and profits in Europe.
On March 23, 1995, the German Automobile Manufacturers Association (of
which Ford Werke AG is a member) undertook an industry-wide voluntary agreement
with the German government to reduce the average fuel consumption of new cars
sold in Germany by 25% from 1990 levels by 2005, to review before the year 2000
the need for and feasibility of further reductions in average fuel consumption,
to make regular reports on fuel consumption, and to increase industry research
and development efforts. At the same time, the German government undertook to
improve traffic management systems, eliminate infrastructure bottlenecks,
integrate transport modes, promote alternative fuels and improved drive systems,
and introduce an emission-based road tax system.
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On January 26, 1996, French vehicle manufacturers made a voluntary pledge
to reduce the average fuel consumption of new vehicles to a sales-weighted
average of 150 grams of CO(2) per kilometer by 2005, to offer at least one
vehicle that emits less than 120 grams of CO(2) per kilometer by 2005, to
propose an objective by 2000 for further reducing CO(2) emissions by 2010, and
to promote alternative fuel technologies that result in reduced CO(2) emissions.
This pledge assumes a 50/50 mix of gasoline and diesel engined vehicles, no
change in the mix of vehicles by weight and engine size class, no new regulatory
requirement beyond those forecast in 1995 for the year 2000, and that oil
companies and tire producers will contribute to reduction in vehicle fuel
consumption. The pledge of the French vehicle manufacturers may create pressure
for similar pledges from automobile importers (such as Ford France S.A.).
Other initiatives for reducing CO(2) emissions from motor vehicles may be
proposed by other European countries. Taken together such proposals could have
substantial adverse effects on Ford's sales volumes and profits in Europe.
Japan has adopted automobile fuel consumption goals that manufacturers must
attempt to achieve by the 2000 model year. The consumption levels apply only to
gasoline-powered vehicles, vary by vehicle weight, and range from 5.8 km/l to
19.2 km/l. To achieve these target fuel consumption levels for the vehicles Ford
exports to Japan may require costly actions that could have substantial adverse
effects on Ford's sales volume and profits in Japan.
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.
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 adopted 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. These regulations may
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
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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 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 U.N.
Climate Change Convention, 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), such as
R-134a, and cleaning solvents.
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. Two sets of European vehicle regulations overlay those of
individual European countries: 1) European Union directives and regulations,
which member countries are obligated to implement; and 2) United Nations
Economic Commission for Europe (ECE) regulations, which member countries have
the option to implement. Although European Union directives and regulations and
ECE regulations generally are aligned (the European Union directives cover about
half of the 99 ECE regulations), 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 1996 through 2000, Ford
expects that approximately $700 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 $200 million will be spent in
1996 and $150 million will be spent in 1997.
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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 "Business of Ford --
Governmental Standards". Included among the foregoing matters are the following:
Product Liability 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 $782 million at December 31, 1995.
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 $1 billion
at December 31, 1995.
In most 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. It has been Ford's experience that in cases that allege
a specific amount of damages in excess of the jurisdictional minimum, such
amounts, on average, bear little relation to the actual amounts of damages paid
by Ford in such cases, which generally are, on average, substantially less than
the amounts originally claimed. 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
$977 million at December 31, 1995. (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 two notices from a government
environmental enforcement agency concerning a matter which potentially involve
monetary sanctions exceeding $100,000. The agency believes that Ford facilities
may have violated regulations relating to the management of certain materials or
relating to certain emissions from facility operation.
Ford has received notices under RCRA, the Superfund Act and applicable
state laws that it (along with others) may be a potentially responsible party
for the costs associated with remediating numerous hazardous substance storage,
recycling or disposal sites in many states and, in some instances, for natural
resource damages. Ford also may have been a generator of hazardous substances at
a number of other sites. The amount of any such costs or damages for which Ford
may be held responsible could be substantial. Contingent losses expected to be
incurred by Ford in connection with many of these sites have been accrued and
are reflected in Ford's financial statements in accordance with generally
accepted accounting principles. However, for many other of these sites the
remediation costs and other damages for which Ford ultimately may be responsible
are not reasonably estimable because of the uncertainties with respect to
factors such as Ford's connection to the site or to materials there, the
involvement of other potentially responsible parties, the application of laws
and other standards or regulations, site conditions, and the nature and scope of
investigations, studies and remediation to be undertaken (including the
technologies to be required and the extent, duration and success of
remediation). As a result, Ford is unable to determine or reasonably estimate
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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 (Lemelson) seeking damages and an injunction for alleged infringement of
four U.S. patents characterized by Lemelson as covering machine vision
inspection technologies, including bar code reading. Ford filed a declaratory
judgment action in the same court to have these four patents as well as others
of Lemelson's patents directed to machine vision and laser uses declared
invalid, unenforceable and not infringed. Lemelson filed a counterclaim,
alleging infringement of the patents added by Ford and several additional
patents. If Lemelson 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 use of any process or product found to be covered
by a valid patent. In June of 1995, the magistrate judge handling this case
recommended to the district court judge that he grant Ford's motion for summary
judgment and hold that Lemelson's patents pertaining to machine vision
inspection technology are unenforceable. The magistrate judge found that
Lemelson engaged in "undue delay" by taking 35 years to prosecute the numerous
patent applications for these patents and that he claimed the work of others as
he saw the technologies develop. In late July, after a period of time for the
filing of objections to the recommendation and replies to those objections, the
case was submitted to the district judge for review. Ford believes there is a
high probability that the district judge will adopt the magistrate judge's
recommendation and issue an order granting Ford's motion.
Currently, there are three purported class action lawsuits pending against
the Company that allege defects in the paint processes used with respect to
certain vehicles manufactured by Ford. Two lawsuits, Arnold and Landry, which
are nationwide in scope, have been consolidated for pretrial proceedings in the
U.S. District Court for the Eastern District of Louisiana. The other lawsuit,
Sheldon, is pending in Texas state court and is limited to Texas purchasers of
the subject vehicles. Ford is attempting to consolidate Sheldon with the Arnold
and Landry lawsuits. Three other nationwide lawsuits were dismissed pursuant to
plaintiffs' motion, since such lawsuits were duplicative of Arnold and Landry.
In each pending lawsuit, the plaintiffs seek unspecified compensatory damages,
as well as punitive damages, attorneys' fees and costs. The lawsuits appear to
focus on vehicles painted with a high-build electrocoat primer. The vehicles in
this class are: 1985 through 1991 F-Series/Broncos, 1984 through 1989 Mustangs,
1985 through 1991 Rangers, and 1985 Bronco IIs. E.I. DuPont De Nemours and
Company, PPG Industries, Inc. and BASF Corporation have been added as defendants
in the Landry action. If the plaintiffs were to prevail in these lawsuits, Ford
could be required to pay substantial damages.
Nine purported class action lawsuits seeking economic damages (including
damages for diminution in value and rescission of purchase agreements) have been
brought on behalf of all Bronco II owners in the United States and are currently
pending against Ford. 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. On Ford's motion,
the federal Judicial Panel on Multidistrict Litigation consolidated seven of
these cases for pretrial purposes before a federal judge in Louisiana. The other
two cases remain pending in state courts in Alabama and Texas. A tentative
settlement was reached in these matters in 1994, but was rejected by the federal
multidistrict judge. The federal plaintiffs subsequently moved for certification
of a nationwide class of Bronco II owners; Ford has vigorously opposed the
motion. The plaintiffs' motion is currently pending before the federal
multidistrict judge.
In early 1996, Ford was served with seven purported nationwide class action
lawsuits covering purchasers of numerous Ford vehicle lines, ranging in model
years from 1983 to 1993. Plaintiffs allege the ignition switch equipped on these
vehicles has a design defect that can cause the switch to short circuit,
resulting in smoke and fire damage to the vehicle. In 1995, Ford voluntarily
recalled 248,000 vehicles in Canada equipped with
26
28
the allegedly defective ignition switch. In the U.S., however, no recall
campaign has been instituted to date, in part, because the overall incident rate
is significantly lower in the U.S. than in Canada. Plaintiffs are seeking
unspecified compensatory damages, punitive damages, attorneys' fees and costs,
as well as injunctive relief requiring, among other things, that Ford replace
the allegedly defective ignition switch in all affected vehicles. If the
plaintiffs in the purported class actions were to prevail, Ford could be
required to pay substantial damages. Ford will attempt to consolidate all seven
lawsuits in one federal jurisdiction and vigorously oppose class certification.
In addition to the foregoing purported class action lawsuits, the Safety
Administration and Transport Canada are investigating ignition switch fires in
certain of the vehicles included in the lawsuit. If the Safety Administration
and Transport Canada order Ford to recall all or a substantial portion of the
affected vehicles and retrofit them with a redesigned ignition switch, the
aggregate cost would be substantial.
The Federal Trade Commission and the Department of Justice are continuing
their investigation, commenced in 1995, of the retail vehicle financing credit
practices of Ford Credit for compliance with the Equal Credit Opportunity Act
and Regulation B.
EMPLOYEE RELATIONS
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.
It is not known whether Ford will be able to reach new agreements without a
work stoppage. If there should be a protracted work stoppage, Ford's profits
could be substantially adversely affected.
27
29
SELECTED FINANCIAL DATA AND OTHER DATA OF FORD MOTOR COMPANY
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 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
AUTOMOTIVE
Sales...... $110,496 $107,137 $ 91,568 $ 84,407 $ 72,051 $ 81,844 $ 82,879 $ 82,193 $ 71,797 $ 62,868
Operating
income/
(loss)... 3,281 5,826 1,432 (1,775) (3,769) 316 4,252 6,612 6,256 4,142
Income/
(loss)
before
income
taxes and
cumulative
effects
of
changes
in
accounting
principles... 3,166 5,997 1,291 (1,952) (4,052) 275 5,156 7,312 6,499 4,299
Income/(loss)
before
cumulative
effects
of
changes
in
accounting
princ-
iples(a)... 2,056 3,913 1,008 (1,534) (3,186) 99 3,175 4,609 3,767 2,512
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net
income/
(loss)... 2,056 3,913 1,008 (8,628) (3,186) 99 3,175 4,609 3,767 2,512
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
FINANCIAL
SERVICES
Revenues... $ 26,641 $ 21,302 $ 16,953 $ 15,725 $ 16,235 $ 15,806 $ 13,267 $ 10,253 $ 8,096 $ 6,826
Income
before
income
taxes and
cumulative
effects
of
changes
in
accounting
principles... 3,539 2,792 2,712 1,825 1,465 1,220 874 1,031 1,386 1,321
Income
before
cumulative
effects
of
changes
in
accounting
prin-
ciples(b)... 2,083 1,395 1,521 1,032 928 761 660 691 858 773
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net
income... 2,083 1,395 1,521 1,243 928 761 660 691 858 773
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL
COMPANY
Income/(loss)
before
income
taxes and
cumulative
effects
of
changes
in
accounting
prin-
ciples... $ 6,705 $ 8,789 $ 4,003 $ (127) $ (2,587) $ 1,495 $ 6,030 $ 8,343 $ 7,885 $ 5,620
Provision/
(credit)
for income
taxes.... 2,379 3,329 1,350 295 (395) 530 2,113 2,999 3,226 2,323
Minority
interests
in net
income of
subsid-
iaries... 187 152 124 80 66 105 82 44 34 12
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income/
(loss)
before
cumulative
effects
of
changes
in
accounting
prin-
ciples
(a)(b)... 4,139 5,308 2,529 (502) (2,258) 860 3,835 5,300 4,625 3,285
Cumulative
effects
of
changes
in
accounting
principles... -- -- -- (6,883) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net
income/
(loss)... $ 4,139 $ 5,308 $ 2,529 $ (7,385) $ (2,258) $ 860 $ 3,835 $ 5,300 $ 4,625 $ 3,285
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL
COMPANY
DATA PER
SHARE OF
COMMON
AND CLASS
B
STOCK(C)
Income/(loss)
before
cumulative
effects
of
changes
in
accounting
principles... $ 3.58 $ 4.97 $ 2.27 (0.73) $ (2.40) $ 0.93 $ 4.11 $ 5.48 $ 4.53 $ 3.08
Income/(loss)
Assuming
no
dilution... 3.58 4.97 2.27 (7.81) (2.40) 0.93 4.11 5.48 4.53 3.08
Assuming
full
dilution... 3.33 4.44 2.10 (7.81) (2.40) 0.92 4.06 5.40 4.46 3.03
Cash
dividends... 1.23 0.91 0.80 0.80 0.98 1.50 1.50 1.15 0.79 0.56
Common
stock
price
range
(NYSE)
High..... 32 7/8 35 33 1/16 24 7/16 18 7/8 24 9/16 28 5/16 27 1/2 28 5/32 15 7/8
Low...... 24 3/4 25 5/8 21 1/2 13 7/8 11 11/16 12 1/2 20 11/16 19 1/32 14 7/32 9
Average
number of
shares of
Common
and
Class B
outstanding
(in
millions)... 1,071 1,010 986 972 952 926 934 968 1,022 1,066
TOTAL
COMPANY
BALANCE
SHEET
DATA
AT
YEAR-END
Assets
Automotive... $ 72,772 $ 68,639 $ 61,737 $ 57,170 $ 52,397 $ 50,824 $ 45,819 $ 43,128 $ 39,734 $ 34,021
Financial
Services... 170,511 150,983 137,201 123,375 122,032 122,839 115,074 100,239 76,260 59,211
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
assets... $243,283 $219,622 $198,938 $180,545 $174,429 $173,663 $160,893 $143,367 $115,994 $ 93,232
Long-term
debt
Automotive... $ 5,475 $ 7,103 $ 7,084 $ 7,068 $ 6,539 $ 4,553 $ 1,137 $ 1,336 $ 2,058 $ 2,467
Financial
Services... 68,259 58,104 47,900 42,369 43,680 40,779 37,784 30,777 26,009 19,128
Stockholders'
equity(d)... 24,547 21,659 15,574 14,753 22,690 23,238 22,728 21,529 18,493 14,860
- -------------------------
(a) 1989 includes an after-tax loss of $424 million from the sale of Rouge Steel
Company.
(b) 1994 includes an after-tax loss of $440 million from the sale of Granite
Savings Bank (formerly First Nationwide Bank).
(c) Share data have been adjusted to reflect stock dividends and stock splits.
(d) The cumulative effects of changes in accounting principles reduced equity by
$6,883 million in 1992.
28
30
SUMMARY OF
- ----------
OPERATIONS,
CONT. 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ---------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL
COMPANY
FACILITY
AND
TOOLING
DATA
Capital
expenditures
for
facilities
(excluding
special
tools)... $ 5,455 $ 5,236 $ 4,339 $ 3,613 $ 3,611 $ 4,702 $ 4,412 $ 3,148 $ 2,415 $ 2,179
Depreciation. 8,954 7,207 5,456 4,658 3,956 3,185 2,720 2,458 2,107 1,859
Expenditures
for
special
tools... 3,542 3,310 2,475 2,177 2,236 2,556 2,354 1,634 1,343 1,285
Amortization
of special
tools... 2,765 2,129 2,012 2,097 1,822 1,695 1,509 1,335 1,353 1,293
TOTAL
COMPANY
EMPLOYEE
DATA --
WORLDWIDE
Payroll... $ 16,572 $ 15,853 $ 13,750 $ 13,754 $ 12,850 $ 14,014 $ 13,327 $ 13,010 $ 11,670 $ 11,290
Total
labor
costs... 23,661 22,985 20,065 19,850 17,998 18,962 18,152 18,108 16,567 15,610
Average
number
of
employees...346,990 337,728 321,925 325,333 331,977 369,547 366,641 358,939 350,320 382,274
TOTAL
COMPANY
EMPLOYEE
DATA --
U.S.
OPERATIONS
Payroll... $ 10,482 $ 10,371 $ 8,888 $ 8,015 $ 7,389 $ 8,309 $ 8,650 $ 8,473 $ 7,762 $ 7,704
Average
number
of
employees...185,960 180,460 166,593 158,377 156,079 180,104 188,286 185,540 180,838 181,476
Average
hourly
labor
costs(e)
Earnings... $ 21.79 $ 21.81 $ 20.94 $ 19.92 $ 19.10 $ 18.44 $ 17.77 $ 17.39 $ 16.50 $ 16.12
Benefits... 18.66 19.13 18.12 19.24 17.97 14.12 13.21 13.07 12.38 11.01
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total
hourly
labor
costs... $ 40.45 $ 40.94 $ 39.06 $ 39.16 $ 37.07 $ 32.56 $ 30.98 $ 30.46 $ 28.88 $ 27.13
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
SUMMARY OF
VEHICLE
SALES(F)
(IN
THOUSANDS)
NORTH
AMERICA
United
States
Cars... 1,767 2,036 1,925 1,820 1,588 1,870 2,201 2,364 2,176 2,105
Trucks... 2,226 2,182 1,859 1,510 1,253 1,416 1,517 1,537 1,480 1,406
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total
United
States... 3,993 4,218 3,784 3,330 2,841 3,286 3,718 3,901 3,656 3,511
Canada... 254 281 256 237 259 257 326 349 349 321
Mexico... 32 92 91 126 112 89 87 63 35 44
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total
North
America... 4,279 4,591 4,131 3,693 3,212 3,632 4,131 4,313 4,040 3,876
EUROPE
Britain... 496 520 464 420 471 607 739 753 628 596
Germany.. 409 386 340 407 501 361 326 332 328 320
France... 165 180 150 194 190 185 192 168 162 151
Italy.... 193 179 172 266 301 219 153 98 93 85
Spain.... 160 163 117 165 128 155 173 158 159 112
Other
countries. 286 281 250 270 296 289 296 290 285 300
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total
Europe... 1,709 1,709 1,493 1,722 1,887 1,816 1,879 1,799 1,655 1,564
OTHER
INTERNATIONAL
Brazil... 201 164 151 117 137 137 157 154 129 177
Australia.. 139 125 120 105 104 134 154 132 128 139
Taiwan... 106 97 122 119 107 115 115 88 55 31
Japan... 57 50 53 64 83 99 82 60 49 40
Argentina.. 48 54 49 49 26 18 25 30 33 32
Other
countries.. 67 63 65 71 67 72 65 86 82 92
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total
other
interna-
tional... 618 553 560 525 524 575 598 550 476 511
TOTAL
WORLDWIDE
CARS AND
TRUCKS... 6,606 6,853 6,184 5,940 5,623 6,023 6,608 6,662 6,171 5,951
TOTAL
WORLDWIDE
TRACTORS(G)... -- -- -- -- 13 66 72 77 64 68
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL
WORLDWIDE
VEHICLE
UNIT
SALES... 6,606 6,853 6,184 5,940 5,636 6,089 6,680 6,739 6,235 6,019
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
- -------------------------
(e) Per hour worked (in dollars). Excludes data for subsidiary companies.
(f) Vehicle unit sales are reported worldwide on a "where sold" basis and
include sales of all Ford-badged units, as well as units manufactured by
Ford and sold to other manufacturers. Unit sales for 1986 through 1994 have
been restated to reflect the country where sold and to include sales of all
Ford-badged units. Previously, factory unit sales were reported in North
America on a "where sold" basis and overseas on a "where produced" basis.
Also, Ford-badged unit sales of certain unconsolidated subsidiaries
(primarily Autolatina -- Brazil and Argentina) were not previously reported.
(g) Ford's tractor operation, Ford New Holland, was sold on May 6, 1991.
29
31
FINANCIAL REVIEW OF FORD MOTOR COMPANY RESULTS
OVERVIEW
The Company's worldwide net income in 1995 was $4,139 million, or $3.58 per
share of Common and Class B stock, compared with $5,308 million, or $4.97 per
share in 1994. Fully diluted earnings per share were $3.33 in 1995, compared
with $4.44 a year ago. The Company's worldwide sales and revenues were $137.1
billion in 1995, up $8.7 billion, or 7% from 1994. Vehicle unit sales of cars
and trucks were 6,606,000, down 247,000 units, or 3.6%. Stockholders' equity was
$24.5 billion at December 31, 1995, up $2.9 billion from December 31, 1994.
The Company's earnings in 1995 were down from 1994, a record year, and
reflected the effects of lower volumes in the U.S., costs associated with
introducing new products and lower earnings at operations outside the U.S.,
primarily in Latin America. Earnings from Financial Services operations were up
$688 million compared with 1994. The improvement reflected record earnings at
Ford Credit, The Associates, USL Capital and Hertz and the nonrecurrence of a
$440 million charge to net income in the first quarter of 1994 for the
disposition of First Nationwide Bank.
In 1995, Automotive capital expenditures for new products and facilities
totaled $8.7 billion, up $366 million from 1994. Cash and marketable securities
of the Company's Automotive operations were $12.4 billion at December 31, 1995,
up $323 million from December 31, 1994. Automotive debt at December 31, 1995
totaled $7.3 billion, up $49 million from a year ago.
In 1994, the Company announced a reorganization of its Automotive
operations, called "Ford 2000." The reorganization 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 global
organization, Ford Automotive Operations. The new organization was implemented
during 1995. The major operations in Latin America and Asia Pacific will be
integrated into Ford Automotive Operations during 1996.
Ford is expanding its efforts in many new markets, particularly in the Asia
Pacific region including China, India and Thailand. New market development
encompasses a variety of business arrangements to establish component
manufacturing and vehicle assembly capabilities. Entry into new markets is an
integral part of the Company's long-term strategy to improve its global
competitive position.
FOURTH QUARTER OF 1995
In the fourth quarter of 1995, the Company's worldwide net income was $660
million, or $0.49 per share of Common and Class B stock, compared with $1,569
million, or $1.47 per share in the fourth quarter of 1994. Fully diluted
earnings per share were $0.48 in the fourth quarter of 1995, compared with $1.31
a year ago.
Worldwide Automotive operations earned $16 million in the fourth quarter of
1995, compared with $1,119 million a year ago. U.S. Automotive operations earned
$168 million in the fourth quarter of 1995, compared with $745 million a year
ago. The lower results for U.S. Automotive operations reflected lower unit
volume and costs associated with introducing new products. Automotive operations
outside the U.S. incurred a loss of $152 million in the fourth quarter of 1995,
compared with earnings of $374 million a year ago, reflecting primarily losses
in Latin America and the nonrecurrence of a one-time favorable effect from
devaluation of the Mexican Peso in 1994. Ford's European Automotive operations
incurred a loss of $48 million in the fourth quarter of 1995, compared with a
loss of $55 million a year ago.
Financial Services operations earned a record $644 million in the fourth
quarter of 1995, compared with $450 million a year ago. The improvement
reflected primarily record earnings at Ford Credit, The Associates, USL Capital
and Hertz.
30
32
1995 RESULTS OF OPERATIONS
AUTOMOTIVE OPERATIONS
Ford's worldwide Automotive operations earned $2,056 million in 1995 on
sales of $110.5 billion, compared with $3,913 million in 1994 on sales of $107.1
billion.
In the U.S., Ford's Automotive operations earned $1,843 million on sales of
$73.9 billion, compared with $3,002 million in 1994 on sales of $73.7 billion.
The decline in earnings reflected primarily lower unit volume (reflecting
nonrecurrence of a dealer inventory increase in 1994 and lower industry sales)
and costs associated with introducing new products (mainly the all-new Taurus,
Sable and F-150 pickup truck). U.S. Automotive after-tax return on sales was
2.5% in 1995, down 1.6 points from a year ago. It is expected that results in
the first half of 1996 will continue to be affected adversely by costs
associated with introducing new products (the F-150 pickup truck, Escort and
Tracer).
The U.S. economy grew at a moderate rate in 1995 with interest rates and
inflation at comparatively low levels. U.S. car and truck industry volumes,
however, decreased from 15.4 million units in 1994 to 15.1 million units in
1995. Most of the decrease in industry sales was attributable to cars. Ford's
share of the U.S. car market was 20.9%, down 9/10 of a point from 1994. Ford's
U.S. truck share was 31.9%, up 1.8 points from 1994. Ford's combined U.S. car
and truck share was 25.6%, up 4/10 of a point from 1994. The increase in share
reflected primarily higher sales of the Explorer and F-Series trucks, offset
partially by lower sales of specialty vehicles and lower availability of the
Taurus and Sable due to model changeover.
Outside the U.S., Automotive operations earned $213 million in 1995 on
sales of $36.6 billion, compared with $911 million in 1994 on sales of $33.4
billion. The decline reflected primarily lower results in Latin America.
Ford's European Automotive operations earned $116 million in 1995, compared
with $128 million in 1994. The decline reflected primarily costs associated with
introducing new products (the all-new Galaxy minivan and Fiesta) and the
unfavorable effect of foreign exchange rate changes.
Car and truck industry sales in Europe were 13.4 million units in 1995,
compared with 13.3 million units in 1994. Ford's share of the European car
market was 11.9%, equal to a year ago. Ford's European truck share was 14.8%, up
1/10 of a point from 1994. Ford's combined European car and truck share was
12.3%, up 1/10 of a point from 1994.
Outside the U.S. and Europe, Ford earned $97 million in 1995, compared with
$783 million in 1994. About half of the decrease reflected primarily unfavorable
results for operations in Brazil, where higher import duties and a market shift
to small cars resulted in excess dealer inventories and higher marketing costs.
These conditions are expected to continue into 1996; business conditions have
been and are expected to continue to be volatile and subject to rapid change,
which can affect Ford's future earnings. These factors were offset partially in
1995 by a one-time gain from the dissolution of Ford's Autolatina joint venture
(discussed below). The decline in earnings outside the U.S. and Europe also
reflected the nonrecurrence of a one-time favorable effect for devaluation of
the Mexican Peso in 1994 and lower results in Argentina.
During the fourth quarter of 1995, the Company's Autolatina joint venture
in Brazil and Argentina with Volkswagen AG was dissolved. The dissolution
resulted in a gain of $230 million, primarily from a one-time cash compensation
payment to Ford. Historically, earnings in Brazil and Argentina have represented
a significant portion of Ford's Automotive earnings outside the U.S. and Europe.
The long-term effect, if any, of the dissolution of Autolatina on the Company's
future results will depend on Ford's ability to compete on its own in these
markets. The Company is reestablishing manufacturing capacity in Brazil for
small cars, which should assist in improving Ford's competitiveness.
FINANCIAL SERVICES OPERATIONS
The Company's Financial Services operations earned a record $2,083 million
in 1995, up $688 million from 1994. The improvement reflected record earnings at
Ford Credit, The Associates, USL Capital and
31
33
Hertz and the nonrecurrence of a $440 million charge to net income in the first
quarter of 1994 for the disposition of First Nationwide Bank.
See Item 7. "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for the discussion of Ford Credit's 1995 results of
operations. International operations managed by Ford Credit, but not included in
its consolidated results, earned $265 million in 1995, up $24 million from 1994,
reflecting primarily higher levels of earning assets, offset partially by lower
net interest margins.
The Associates earned a record $632 million in the U.S. in 1995, up $84
million from 1994. The increase reflected higher levels of earning assets and
improved net interest margins. The international operations managed by The
Associates, but not included in its consolidated results, earned $114 million in
1995, up $38 million from 1994.
USL Capital earned a record $135 million in 1995, up $26 million from 1994.
The improvement resulted primarily from higher levels of earning assets, higher
gains on asset sales and lower operating costs. Hertz earned a record $105
million in 1995, up $13 million from 1994. The increase reflected primarily
higher volume in construction equipment rentals and sales, offset partially by
increased depreciation and borrowing costs. American Road earned $28 million in
1995, down $30 million from 1994. The decline reflected primarily the
nonrecurrence of prior year tax adjustments and a loss on disposition of the
annuity business.
In December 1995, Ford Holdings merged with Ford Holdings Capital
Corporation, a subsidiary of Ford Holdings, which resulted in the cancellation
of the voting preferred stock of Ford Holdings in exchange for payment by Ford
Holdings of the liquidation preference of the stock plus accrued dividends
(totaling about $2 billion). Ford Holdings funded the payment to the holders of
the preferred stock, which occurred in January 1996, primarily with bank loans.
In late 1995, Ford began a reorganization of its Financial Services group
in order to align management responsibility more closely with the legal
ownership of the Financial Services affiliates. As part of this reorganization,
substantially all of the common stock of Ford Holdings owned by Ford Credit was
repurchased by Ford Holdings in exchange for a promissory note. Also, in
February 1996, The Associates filed a registration statement with the Securities
and Exchange Commission for an initial public offering of its common stock
representing up to a 19.8% economic interest in The Associates. As previously
announced, Ford is investigating the sale of all or a part of USL Capital. A
fuller description of the reorganization is provided in "Business of Ford --
Financial Services Operations -- Ford Holdings, Inc. and Ford FSG, Inc."
LIQUIDITY AND CAPITAL RESOURCES
AUTOMOTIVE OPERATIONS
Cash and marketable securities of the Company's Automotive operations were
$12.4 billion at December 31, 1995, up $323 million from December 31, 1994. The
Company paid $1.6 billion in cash dividends on its Common Stock, Class B Stock
and Preferred Stock during 1995.
Automotive capital expenditures were $8.7 billion in 1995, up $366 million
from 1994. During the next several years, Ford's spending for product change is
expected to be at similar levels; however, as a percent of sales, such spending
is expected to be at lower levels.
At December 31, 1995, Automotive debt totaled $7.3 billion, which was 22%
of total capitalization (stockholders' equity and Automotive debt), compared
with $7.3 billion, or 25% of total capitalization, at December 31, 1994.
At December 31, 1995, Ford had long-term contractually committed global
credit agreements under which $8.4 billion is available from various banks at
least through June 30, 2000. The entire $8.4 billion may be used, at Ford's
option, by any affiliate of Ford; however, any borrowing by an affiliate will be
guaranteed by Ford. In addition, Ford has the ability to transfer on a
nonguaranteed basis the entire $8.4 billion in varying portions to Ford Credit
and Ford Credit Europe. These facilities were unused at December 31, 1995.
32
34
In addition, at December 31, 1995, Ford Brasil Ltda. had $276 million of
contractually committed credit facilities with various banks ranging in maturity
from June 1996 to December 1996. None of these facilities were in use at
December 31, 1995.
FINANCIAL SERVICES OPERATIONS
The Financial Services operations rely heavily on their ability to raise
substantial amounts of funds in the 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 $35 billion at December
31, 1995 with an average remaining maturity of 29 days. Support facilities
represent additional sources of funds, if required.
At December 31, 1995, Financial Services had a total of $48.5 billion of
contractually committed support facilities. Of these facilities, $23.8 billion
(excluding the $8.4 billion of Ford credit facilities) are contractually
committed global credit agreements under which $19.8 billion and $4 billion are
available to Ford Credit and Ford Credit Europe, respectively, from various
banks; 62% and 75%, respectively, of such facilities are available through June
30, 2000. The entire $19.8 billion may be used, at Ford Credit's option, by any
subsidiary of Ford Credit, and the entire $4 billion may be used, at Ford Credit
Europe's option, by any subsidiary of Ford Credit Europe. Any borrowings by such
subsidiaries will be guaranteed by Ford Credit or Ford Credit Europe, as the
case may be. At December 31, 1995, none of the Ford Credit global facilities
were in use; $742 million of the Ford Credit Europe global facilities were in
use. In addition to the Ford, Ford Credit and Ford Credit Europe global credit
agreements, at December 31, 1995, international subsidiaries and other credit
operations managed by Ford Credit had $1.1 billion of contractually committed
support facilities available outside the U.S. At December 31, 1995,
approximately 29% of these facilities were in use.
At December 31, 1995, Ford Holdings had outstanding long-term debt of $1.9
billion, of which $205 million matures in 1996. All of the Ford Holdings debt
held by nonaffiliated persons is guaranteed by Ford. Ford Holdings has a $1.5
billion term loan agreement available through December 13, 1996, none of which
was in use at December 31, 1995, but all of which has since been used to fund
the payment to the holders of Ford Holdings' preferred stock discussed above.
At December 31, 1995, The Associates had contractually committed lines of
credit with banks of $3.9 billion, with various maturities ranging from January
31, 1996 to December 30, 1996, none of which were utilized at December 31, 1995.
Also, at December 31, 1995, The Associates had $5.1 billion of contractually
committed revolving credit facilities with banks, with maturity dates ranging
from January 1, 1996 through April 1, 2001, and $1.3 billion of contractually
committed receivables sale facilities, $275 million of which are available
through April 24, 1996, $500 million of which are available through April 15,
1997, and $500 million of which are available through April 30, 1998; none of
these facilities were in use at December 31, 1995. At December 31, 1995,
international operations managed by The Associates, but not included in its
support facilities, had about $270 million of contractually committed support
facilities available outside the U.S., of which $50 million were in use at
December 31, 1995.
At December 31, 1995, USL Capital had $1.7 billion of contractually
committed credit facilities, of which 71% are available through September 2000.
These facilities included $46 million of contractually committed receivables
sale facilities, of which 100% were in use at December 31, 1995. At December 31,
1995, international operations managed by USL Capital, but not included in its
support facilities, had about $3 million of contractually committed support
facilities available outside the U.S., of which 50% were in use at December 31,
1995.
American Road's principal sources of funds are insurance premiums and
investment income. American Road had no debt and none of its own credit lines at
December 31, 1995.
33
35
At December 31, 1995, Hertz had $2 billion of contractually committed
credit facilities in the U.S., none of which were utilized at December 31, 1995.
These facilities included $751 million and $1 billion of agreements with banks
which mature June 27, 1996 and June 30, 2000, respectively, and a $250 million
revolving credit facility with Ford which matures June 30, 1999. In addition, at
December 31, 1995, international operations of Hertz had about $317 million of
contractually committed support facilities available outside the U.S., of which
about 53% were in use at December 31, 1995.
ITEM 2. FORD CREDIT PROPERTIES
Substantially all of Ford Credit's branch operations presently are being
conducted from leased properties. At December 31, 1995, Ford Credit's aggregate
obligation under leases of real property was $41.3 million.
ITEM 3. FORD CREDIT LEGAL PROCEEDINGS
Various legal actions, governmental proceedings, and other claims are
pending or may be instituted or asserted in the future against Ford Credit and
its subsidiaries.
Ford Credit is a defendant in actions asserting claims under the antitrust
laws and the Automobile Dealers' Day in Court Act resulting from Ford Credit's
termination of financing relationships with former automobile dealers, and
actions alleging violations of various state and federal regulatory laws
concerning financing and insurance, based upon technical interpretations of
their requirements. Some of these matters involve or may involve class actions,
compensatory, punitive or treble damage claims and attorneys fees in very large
amounts, or other requested relief which, if granted, would require very large
expenditures.
The Federal Trade Commission and the Department of Justice are continuing
their investigation, commenced in 1995, of the retail financing credit practices
of Ford Credit for compliance with the Equal Credit Opportunity Act and
Regulation B.
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All shares of the registrant's Common Stock at December 31, 1995 were owned
by Ford and, accordingly, there was no market for such stock. During 1995, Ford
Credit declared and paid to Ford cash dividends of $600 million. Dividends also
were paid to Ford in 1994, 1993, 1992 and 1991. Ford Credit may pay additional
dividends from time to time depending on Ford Credit's receivables levels,
capital requirements, and profitability. In February 1996, Ford contributed to
FFSGI all of its interest in Ford Credit.
34
36
ITEM 6. SELECTED FINANCIAL DATA
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
1995 1994 1993 1992 1991
------- ------- ------ ------ ------
SELECTED INCOME STATEMENT DATA (IN MILLIONS)
Financing revenue
Operating leases.................................................... $ 7,018 $ 5,343 $3,603 $2,353 $1,286
Retail.............................................................. 3,606 3,232 3,305 3,347 3,753
Wholesale........................................................... 1,408 964 679 713 1,102
Diversified......................................................... 152 120 144 200 271
Other............................................................... 332 268 221 221 289
------- ------- ------ ------ ------
Total finance revenue................................................. 12,516 9,927 7,952 6,834 6,701
Investment and other income........................................... 594 462 386 239 301
------- ------- ------ ------ ------
Total revenue......................................................... 13,110 10,389 8,338 7,073 7,002
Interest expense...................................................... 4,957 3,541 2,919 3,076 3,792
Depreciation on operating leases...................................... 5,041 3,910 2,676 1,653 1,030
Provision for credit losses........................................... 438 247 270 418 578
Operating expenses.................................................... 984 925 796 758 718
------- ------- ------ ------ ------
Total expenses........................................................ 11,420 8,623 6,661 5,905 6,118
Equity in net income of affiliated companies.......................... 255 233 198 155 191
------- ------- ------ ------ ------
Income before income taxes and cumulative effects of changes in
accounting principles............................................... 1,945 1,999 1,875 1,323 1,075
Provision for income taxes............................................ 536 675 673 425 324
Minority interest..................................................... 14 11 8 6 2
------- ------- ------ ------ ------
Income before cumulative effects of changes in accounting
principles.......................................................... 1,395 1,313 1,194 892 749
Cumulative effects of changes in accounting principles................ -- -- -- 147 --
------- ------- ------ ------ ------
Net income........................................................ $ 1,395 $ 1,313 $1,194 $1,039 $ 749
======= ======= ====== ====== ======
Net income from financing operations.................................. $ 1,140 $ 1,080 $ 996 $ 737 $ 558
Net income from affiliated companies.................................. 255 233 198 155 191
Cumulative effects of changes in accounting principles................ -- -- -- 147 --
Cash dividends........................................................ 600 364 250 600 650
Return on Equity...................................................... 19.2% 20.9% 22.0% 21.2% 15.8%
Earnings-to-fixed charges ratio....................................... 1.3 1.5 1.6 1.4 1.2
SELECTED BALANCE SHEET (IN BILLIONS)
Finance Receivables
Retail.............................................................. $ 43.8 $ 40.6 $ 38.6 $ 35.6 $ 33.3
Wholesale........................................................... 16.5 15.2 11.7 10.1 11.5
Diversified......................................................... 2.7 2.7 2.6 2.9 4.3
Other............................................................... 4.6 4.3 3.7 3.4 3.4
------- ------- ------ ------ ------
Total finance receivables............................................. 67.6 62.8 56.6 52.0 52.5
Deduct: Unearned income............................................. (5.9) (5.2) (5.1) (5.1) (5.0)
Allowance for credit losses................................. (0.7) (0.7) (0.7) (0.8) (0.7)
------- ------- ------ ------ ------
Finance receivables, net.............................................. $ 61.0 $ 56.9 $ 50.8 $ 46.1 $ 46.8
======= ======= ====== ====== ======
Operating leases, net................................................. $ 24.8 $ 20.0 $ 12.6 $ 7.7 $ 4.3
======= ======= ====== ====== ======
Assets
Financing operations................................................ $ 92.9 $ 81.9 $ 68.4 $ 58.0 $ 55.9
Equity in net assets of affiliated companies........................ 1.7 1.3 1.2 1.0 1.0
------- ------- ------ ------ ------
Total assets.......................................................... $ 94.6 $ 83.2 $ 69.6 $ 59.0 $ 56.9
======= ======= ====== ====== ======
CAPITALIZATION (IN BILLIONS)
Debt payable within one year.......................................... $ 43.1 $ 39.1 $ 33.4 $ 28.5 $ 25.3
Debt payable after one year
Senior.............................................................. 36.1 31.3 25.4 21.5 22.9
Subordinated and other.............................................. -- -- -- -- 0.1
------- ------- ------ ------ ------
Total debt payable after one year..................................... 36.1 31.3 25.4 21.5 23.0
------- ------- ------ ------ ------
Total debt............................................................ 79.2 70.4 58.8 50.0 48.3
Stockholder's equity.................................................. 7.6 6.7 5.8 4.9 4.7
------- ------- ------ ------ ------
Total capital......................................................... $ 86.8 $ 77.1 $ 64.6 $ 54.9 $ 53.0
======= ======= ====== ====== ======
Debt-to-equity ratio (to 1)........................................... 10.5 10.6 10.1 10.2 10.3
Debt payable within one year as percent of total capital.............. 49.7% 50.7% 51.7% 51.9% 47.7%
35
37
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The principal factors that influence the earnings of Ford Credit are
interest margins, the levels of finance receivables and net investment in
operating leases.
Net interest margins reflect the difference between interest rates earned
on finance receivables, including operating leases net of depreciation,
("yields") and the rates paid on borrowed funds. Yields on most receivables and
operating leases generally are fixed at the time the contracts are acquired. On
some receivables, primarily wholesale financing, yields vary with changes in
short-term interest rates. Borrowed funds include short-term debt, the cost of
which reflects changes in short-term interest rates, and long-term debt, the
cost of which generally is fixed at the time of the debt placement.
Interest-rate swap agreements are used to hedge movements in interest rates
related to borrowings and to manage the match between the interest rates of
assets and liabilities.
The levels of finance receivables and net investment in operating leases
depend primarily on the volume of Ford Motor Company vehicle sales, the extent
to which Ford Credit provides the wholesale and retail financing of those sales,
and sales of receivables. Ford periodically sponsors special financing programs
that are available exclusively through Ford Credit which provide payments to
Ford Credit for interest supplements and other support costs on certain
financing and leasing transactions. These programs can increase Ford Credit's
financing volume of Ford Motor Company vehicles.
RESULTS OF OPERATIONS
1995 COMPARED WITH 1994
Ford Credit's consolidated net income in 1995 was $1,395 million, up $82
million or 6% from 1994. Net income from financing operations in 1995 was $1,140
million, up $60 million or 6% from 1994. The increase in financing profits was
more than accounted for by higher financing volumes, lower 1995 taxes, higher
gains from sales of receivables, and improved operating cost performance. Lower
net interest margins, higher credit losses, and the non-recurrence of a one-time
gain from the sale of Ford Credit's investment in Manheim Auctions were a
partial offset.
Total gross finance receivables and net investment in operating leases at
December 31, 1995 were $92.5 billion, up $9.6 billion or 12% from a year
earlier. The higher financing volume reflects primarily an increase in operating
leases and retail installment sale receivables. Depreciation expense in 1995 was
$5,041 million, up $1,131 million or 29% from 1994. The increase reflected the
higher levels of operating leases and was more than offset by higher revenue
earned on the lease contracts.
For 1995, Ford Credit financed 36.9% of all new cars and trucks sold by
Ford Motor Company dealers in the U.S. compared with 36.6% in 1994. The increase
primarily resulted from higher levels of operating lease financing. Ford Credit
provided retail customers with financing for 2,499,000 new and used vehicles in
the United States. Ford Credit provided wholesale financing for 79.7% of Ford
Motor Company U.S. factory sales in 1995 compared with 81.5% in 1994.
The decline in net interest margins reflects an increase in net U.S.
portfolio borrowing rates from 5.4% in 1994 to 6.5% in 1995, partially offset by
higher portfolio yields on finance receivables and net investment in operating
leases.
Credit losses increased in 1995, reversing a general trend of improvement
that began in 1989. Credit losses as a percent of average finance receivables
including net investment in operating leases were 0.44% in 1995 ($394 million)
compared with 0.30% in 1994 ($229 million). The increased credit losses
reflected higher losses per repossessed unit and an increase in repossession
rates.
For 1995, equity in net income of affiliated companies (primarily Ford
Holdings) was $255 million compared with $233 million in 1994. The increase
reflected higher Ford Holdings net income available to
36
38
common shareholders. At December 31, 1995, Ford Credit owned about 45% of Ford
Holdings common stock.
1994 COMPARED WITH 1993
Ford Credit's consolidated net income in 1994 was $1,313 million, up $119
million or 10% from 1993. Net income from financing operations in 1994 was
$1,080 million, up $84 million or 8% from 1993. The increase in financing
profits was more than accounted for by higher financing volumes, a one-time gain
from the sale of Ford Credit's investment in Manheim Auctions, the
non-recurrence of the effect of the 1993 U.S. tax rate increase, gains on used
service vehicles and repurchased fleet-account vehicles sold at auction, and
improved credit loss and operating cost performance. Lower net interest margins
and lower gains from sales of receivables were a partial offset.
Total gross finance receivables and net investment in operating leases at
December 31, 1994 were $82.8 billion, up $13.6 billion or 20% from a year
earlier. The higher financing volume reflects primarily an increase in operating
leases and higher wholesale receivables. Depreciation expense in 1994 was $3,910
million, up $1,234 million or 46% from 1993. The increase reflected the higher
levels of operating leases and was more than offset by higher revenue earned on
the lease contracts.
For 1994, Ford Credit financed 36.6% of all new cars and trucks sold by
Ford Motor Company dealers in the U.S. compared with 38.5% in 1993. The decrease
primarily resulted from lower levels of daily rental car financing. Ford Credit
provided retail customers with financing for 2,347,000 new and used vehicles in
the United States. Ford Credit provided wholesale financing for a record 81.5%
of Ford Motor Company U.S. factory sales in 1994 compared with 81.4% in 1993.
Continuing the trend of favorable credit loss experience, credit losses as
a percent of average finance receivables including net investment in operating
leases were 0.30% in 1994 ($229 million) compared with 0.35% in 1993 ($228
million). The decline in net interest margins reflects the lower portfolio
yields on finance receivables and net investment in operating leases, and an
increase in net U.S. portfolio borrowing rates from 5.3% in 1993 to 5.4% in
1994.
For 1994, equity in net income of affiliated companies (primarily Ford
Holdings) was $233 million compared with $198 million in 1993. The increase
reflected higher Ford Holdings net income available to common shareholders. At
December 31, 1994, Ford Credit owned about 45% of Ford Holdings common stock.
Additional information called for by Item 7 is incorporated herein by
reference from Item 1 -- Business -- "Business of Ford Credit -- Credit Loss
Experience", "Business of Ford Credit -- Borrowings and Other Sources of Funds",
"Ford Holdings" and "Certain Transactions with Ford and Affiliates", and Item 8
- -- "Financial Statements and Supplementary Data".
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by Item 8 is set forth at pages FC-1 through
FC-22 of this Form 10-K Report, is incorporated herein by reference and is
listed in the Index to Financial Statements as set forth in Item 14(a)(1) and
14(a)(2).
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Report of Independent Accountants
Ford Motor Credit Company and Subsidiaries
37
39
Consolidated Statement of Income and of Earnings Retained for Use in the
Business for the Years Ended December 31, 1995, 1994 and 1993.
Consolidated Balance Sheet, December 31, 1995 and 1994.
Consolidated Statement of Cash Flows for the Years Ended December 31, 1995,
1994 and 1993.
Notes to Financial Statements.
The financial statements and notes to financial statements listed above and
the schedule listed below are incorporated by reference in Item 8 of this Report
from pages FC-1 through FC-22 of this Form 10-K Report.
Information regarding significant restrictions on the ability of
subsidiaries to transfer funds to the registrant, and condensed financial
information of the registrant are omitted because the amounts related to such
restrictions are not sufficient to require submission.
(a) 2. Financial Statement Schedules
Schedules have been omitted because the subject matter is disclosed
elsewhere in the financial statements and notes thereto, is not required,
is not present, or is not present in amounts sufficient to require
submission.
(a) 3. Exhibits
DESIGNATION DESCRIPTION METHOD OF FILING
- -------------- --------------------------------- -------------------------------------
Exhibit 3-A Restated Certificate of Filed as Exhibit 3-A to Ford Motor
Incorporation of Ford Motor Credit Company Report on Form 10-K
Credit Company. for the year ended December 31, 1987
and incorporated herein by reference.
File No. 1-6368.
Exhibit 3-B By-Laws of Ford Motor Credit Filed as Exhibit 3-B to Ford Motor
Company as amended through March Credit Company Report on Form 10-K
2, 1988. for the year ended December 31, 1987
and incorporated herein by reference.
File No. 1-6368.
Exhibit 4-A Form of Indenture dated as of Filed as Exhibit 4-A to Ford Motor
August 1, 1984 between Ford Motor Credit Company Registration Statement
Credit Company and The Chase No. 2-92561 and incorporated herein
Manhattan Bank (National by reference.
Association) relating to Debt
Securities.
Exhibit 4-A-1 Form of First Supplemental Filed as Exhibit 4-C to Ford Motor
Indenture dated August 15, 1986 Credit Company Registration Statement
between Ford Motor Credit Company No. 33-8126 and incorporated herein
and The Chase Manhattan Bank by reference.
(National Association)
supplementing the Indenture
designated as Exhibit 4-A.
38
40
DESIGNATION DESCRIPTION METHOD OF FILING
- -------------- --------------------------------- -------------------------------------
Exhibit 4-A-2 Form of Second Supplemental Filed as Exhibit 4-B to Ford Motor
Indenture dated as of October 15, Credit Company Current Report on Form
1986 between Ford Motor Credit 8-K dated October 17, 1986 and
Company and The Chase Manhattan incorporated herein by reference.
Bank (National Association) File No. 1-6368.
supplementing the Indenture
designated as Exhibit 4-A.
Exhibit 4-B Form of Indenture dated as of Filed as Exhibit 4-A to Ford Motor
February 1, 1985 between Ford Credit Company Registration Statement
Motor Credit Company and No. 2-95568 and incorporated herein
Manufacturers Hanover Trust by reference.
Company relating to Debt
Securities.
Exhibit 4-B-1 Form of First Supplemental Filed as Exhibit 4-B to Ford Motor
Indenture dated as of April 1, Credit Company Current Report on Form
1986 between Ford Motor Credit 8-K dated April 29, 1986 and
Company and Manufacturers Hanover incorporated herein by reference.
Trust Company supplementing the File No. 1-6368.
Indenture designated as Exhibit
4-B.
Exhibit 4-B-2 Form of Second Supplemental Filed as Exhibit 4-B to Ford Motor
Indenture dated as of September Credit Company Current Report on Form
1, 1986 between Ford Motor Credit 8-K dated August 28, 1986 and
Company and Manufacturers Hanover incorporated herein by reference.
Trust Company supplementing the File No. 1-6368.
Indenture designated as Exhibit
4-B.
Exhibit 4-B-3 Form of Third Supplemental Filed as Exhibit 4-E to Ford Motor
Indenture dated as of March 15, Credit Company Registration Statement
1987 between Ford Motor Credit No. 33-12928 and incorporated herein
Company and Manufacturers Hanover by reference.
Trust Company supplementing the
Indenture designated as Exhibit
4-B.
Exhibit 4-B-4 Form of Fourth Supplemental Filed as Exhibit 4-F to
Indenture dated as of April 15, Post-Effective Amendment No. 1 to
1988 between Ford Motor Credit Ford Motor Credit Company
Company and Manufacturers Hanover Registration No. 33-20081 and
Trust Company supplementing the incorporated herein by reference.
Indenture designated as Exhibit
4-B.
Exhibit 4-B-5 Form of Fifth Supplemental Filed as Exhibit 4-G to Ford Motor
Indenture dated as of September Credit Company Registration Statement
1, 1990 between Ford Motor Credit No. 33-36946 and incorporated hereby
Company and Manufacturers Hanover by reference.
Trust Company supplementing the
Indenture designated as Exhibit
4-B.
39
41
DESIGNATION DESCRIPTION METHOD OF FILING
- -------------- --------------------------------- -------------------------------------
Exhibit 4-C Indenture dated as of November 1, Filed as Exhibit 4-A to Ford Motor
1987 between Ford Motor Credit Credit Company Current Report on Form
Company and Continental Bank, 8-K dated December 10, 1990 and
National Association relating to incorporated herein by reference.
Debt Securities. File No. 1-6368.
Exhibit 4-D Indenture dated as of August 1, Filed as Exhibit 4-A to Ford Motor
1994 between Ford Motor Credit Credit Company Registration Statement
Company and First Fidelity Bank, No. 33-55237.
National Association relating to
Debt Securities.
Exhibit 10-J Copy of Amended and Restated Filed as Exhibit 10-J to Ford Motor
Profit Maintenance Agreement Credit Company Report on Form 10-K
dated as of July 1, 1993 between for the year ended December 31, 1993
Ford Motor Credit Company and and incorporated herein by reference.
Ford Motor Company. File No. 1-6368.
Exhibit 10-X Copy of Agreement dated as of Filed as Exhibit 10-X to Ford Motor
February 1, 1980 between Ford Credit Company Report on Form 10-K
Motor Company and Ford Motor for the year ended December 31, 1980
Credit Company. and incorporated herein by reference.
File No. 1-6368.
Exhibit 12-A Calculation of Ratio of Earnings Filed with this Report.
to Fixed Charges of Ford Credit.
Exhibit 12-B Calculation of Ratio of Earnings Filed with this Report.
to Combined Fixed Charges and
Preferred Stock Dividends to
Ford.
Exhibit 23 Consent of Independent Filed with this Report.
Accountants.
Exhibit 24 Powers of Attorney. Filed with this Report.
Instruments defining the rights of holders of certain issues of long-term
debt of the registrant 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. The registrant agrees to furnish a copy of
each of such instruments to the Commission upon request.
(b) Reports on Form 8-K
Ford Credit filed the following Reports on Form 8-K during the quarter
ended December 31, 1995, none of which contained financial statements:
DATE OF REPORT ITEM
------------------------------------------------------- ----------------------
October 5, 1995........................................ Item 5 -- Other Events
October 10, 1995....................................... Item 5 -- Other Events
October 17, 1995....................................... Item 5 -- Other Events
October 24, 1995....................................... Item 5 -- Other Events
November 6, 1995....................................... Item 5 -- Other Events
November 27, 1995...................................... Item 5 -- Other Events
December 7, 1995....................................... Item 5 -- Other Events
December 14, 1995...................................... Item 5 -- Other Events
40
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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 Credit Company
By WILLIAM E. ODOM*
------------------------------------
(William E. Odom, Chairman of the
Board of Directors)
Date: March 21, 1996
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
- ------------------------------------- -------------------------------------- ---------------
WILLIAM E. ODOM* Chairman of the Board of Directors and March 21, 1996
- ------------------------------------- Director (principal executive officer)
(William E. Odom)
KENNETH J. COATES* Director and Executive Vice President March 21, 1996
- ------------------------------------- -- Finance (principal financial
(Kenneth J. Coates) officer)
TERRENCE F. MARRS* Controller (principal accounting March 21, 1996
- ------------------------------------- officer)
(Terrence F. Marrs)
JOHN G. CLISSOLD* Director March 21, 1996
- -------------------------------------
(John G. Clissold)
EDSEL B. FORD II* Director March 21, 1996
- -------------------------------------
(Edsel B. Ford II)
DAVID N. MCCAMMON* Director March 21, 1996
- -------------------------------------
(David N. McCammon)
GREGORY C. SMITH* Director March 21, 1996
- -------------------------------------
(Gregory C. Smith)
KENNETH WHIPPLE* Director March 21, 1996
- -------------------------------------
(Kenneth Whipple)
*By HURLEY D. SMITH
- -------------------------------------
(Hurley D. Smith, Attorney-in-Fact)
41
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INDEX TO FINANCIAL STATEMENTS
Ford Motor Credit Company and Subsidiaries
Report of Independent Accountants.................................................... FC-1
Consolidated Statement of Income and of Earnings Retained for Use in the Business.... FC-2
Consolidated Balance Sheet........................................................... FC-3
Consolidated Statement of Cash Flows................................................. FC-4
Notes to Financial Statements........................................................ FC-5
44
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Ford Motor Credit Company:
We have audited the consolidated balance sheets of Ford Motor Credit
Company and Subsidiaries at December 31, 1995 and 1994, and the related
consolidated statements of income and of earnings retained for use in the
business and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements 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
Credit Company and Subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
January 26, 1996
FC-1
45
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND OF EARNINGS
RETAINED FOR USE IN THE BUSINESS
(IN MILLIONS)
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
--------- --------- --------
Financing revenue
Operating leases........................................... $ 7,018.4 $ 5,343.2 $3,602.6
Retail..................................................... 3,605.6 3,231.5 3,305.2
Wholesale.................................................. 1,407.7 964.8 679.6
Diversified................................................ 152.2 119.8 143.9
Other...................................................... 332.5 267.6 221.1
------- ------- ------
Total financing revenue................................. 12,516.4 9,926.9 7,952.4
Investment and other income.................................. 593.7 462.4 386.0
------- ------- ------
Total revenue........................................... 13,110.1 10,389.3 8,338.4
Expenses
Depreciation on operating leases........................... 5,040.9 3,910.0 2,675.7
Interest expense........................................... 4,957.2 3,540.8 2,919.3
Operating expenses......................................... 984.2 925.4 796.5
Provision for credit losses................................ 437.9 246.5 270.2
------- ------- ------
Total expenses.......................................... 11,420.2 8,622.7 6,661.7
------- ------- ------
Equity in net income of affiliated companies................. 255.4 232.5 198.3
------- ------- ------
Income before income taxes................................... 1,945.3 1,999.1 1,875.0
Provision for income taxes................................... 535.9 675.7 673.3
------- ------- ------
Income before minority interest.............................. 1,409.4 1,323.4 1,201.7
Minority interest in net income of subsidiaries.............. 14.2 10.7 7.9
------- ------- ------
Net income................................................... 1,395.2 1,312.7 1,193.8
Earnings retained for use in the business
Beginning of year.......................................... 5,848.6 4,899.9 3,956.1
Cash dividends............................................. (600.0) (364.0) (250.0)
------- ------- ------
End of year............................................. $ 6,643.8 $ 5,848.6 $4,899.9
======= ======= ======
The accompanying notes are part of the financial statements.
FC-2
46
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN MILLIONS)
DECEMBER 31
----------------------
1995 1994
--------- ---------
ASSETS
Cash and cash equivalents............................................ $ 1,355.9 $ 292.0
Investments in securities............................................ 1,914.1 1,596.3
Finance receivables, net............................................. 61,043.8 56,946.5
Net investment, operating leases..................................... 24,810.8 19,993.9
Notes and accounts receivable from affiliated companies.............. 420.7 250.3
Equity in net assets of affiliated companies......................... 1,728.0 1,346.5
Other assets......................................................... 3,293.4 2,799.0
--------- ---------
Total assets............................................... $94,566.7 $83,224.5
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable
Trade, customer deposits, and dealer reserves................... $ 1,579.4 $ 1,326.5
Affiliated companies............................................ 608.7 496.0
--------- ---------
Total accounts payable..................................... 2,188.1 1,822.5
Debt.............................................................. 79,167.1 70,440.4
Deferred income taxes............................................. 3,027.0 2,405.9
Other liabilities and deferred income............................. 1,913.6 1,495.6
--------- ---------
Total liabilities.......................................... 86,295.8 76,164.4
Minority interest in net assets of subsidiaries...................... 717.2 397.5
Stockholder's Equity
Capital stock, par value $100 a share, 250,000 shares authorized,
issued and outstanding........................................... 25.0 25.0
Paid-in surplus (contributions by stockholder).................... 917.3 917.3
Unrealized gain/(loss) on investments in securities available for
sale, net of taxes............................................... 30.9 (70.0)
Foreign currency translation adjustments.......................... (63.3) (58.3)
Earnings retained for use in the business......................... 6,643.8 5,848.6
--------- ---------
Total stockholder's equity................................. 7,553.7 6,662.6
--------- ---------
Total liabilities and stockholder's equity................. $94,566.7 $83,224.5
========= =========
The accompanying notes are part of the financial statements.
FC-3
47
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
---------- ---------- ----------
Cash flows from operating activities
Net income........................................... $ 1,395.2 $ 1,312.7 $ 1,193.8
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for credit losses....................... 437.9 246.5 270.2
Depreciation and amortization..................... 5,087.7 3,969.4 2,745.8
Gain on sales of finance receivables.............. (69.2) (11.4) (92.5)
Equity in net income of affiliates................ (255.4) (232.5) (198.3)
Deferred income taxes............................. 613.9 349.3 565.3
Changes in the following items
Other assets.................................... (582.3) (186.6) (327.0)
Other liabilities............................... 594.9 625.4 229.1
Other............................................. 211.8 (23.4) 27.4
---------- ---------- ----------
Net cash provided by operating activities.... 7,434.5 6,049.4 4,413.8
---------- ---------- ----------
Cash flows from investing activities
Purchase of finance receivables (other than
wholesale)........................................ (29,694.3) (29,666.3) (27,191.3)
Collection of finance receivables (other than
wholesale)........................................ 23,608.1 24,797.4 21,341.6
Net change in wholesale receivables.................. (2,254.9) (4,550.4) (1,641.6)
Proceeds from sales of finance receivables and
operating leases.................................. 4,360.3 3,105.1 2,521.3
Purchase of operating lease vehicles................. (17,136.6) (14,842.5) (9,908.0)
Liquidation of operating lease vehicles.............. 6,704.5 3,448.9 2,317.8
Other................................................ (347.7) (484.6) 53.9
---------- ---------- ----------
Net cash used in investing activities........ (14,760.6) (18,192.4) (12,506.3)
---------- ---------- ----------
Cash flows from financing activities
Proceeds from issuance of long-term debt............. 11,805.7 10,721.1 12,934.9
Principal payments on long-term debt................. (5,185.7) (8,035.7) (6,326.2)
Change in short-term debt, net....................... 2,028.5 8,898.0 2,568.4
Cash dividends paid.................................. (600.0) (364.0) (250.0)
Other................................................ 338.8 225.4 (132.8)
---------- ---------- ----------
Net cash provided by financing activities.... 8,387.3 11,444.8 8,794.3
Effect of exchange rate changes on cash and cash
equivalents.......................................... 2.7 (2.1) (4.5)
---------- ---------- ----------
Net change in cash and cash equivalents...... 1,063.9 (700.3) 697.3
Cash and cash equivalents, beginning of year........... 292.0 992.3 295.0
---------- ---------- ----------
Cash and cash equivalents, end of year................. $ 1,355.9 $ 292.0 $ 992.3
========== ========== ==========
Supplementary cash flow information
Interest paid........................................ $ 4,676.0 $ 3,494.2 $ 2,871.6
Taxes paid........................................... 66.0 341.2 101.2
The accompanying notes are part of the financial statements.
FC-4
48
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Ford Motor
Credit Company ("Ford Credit") and its majority owned domestic and foreign
subsidiaries and joint ventures. Use of estimates as determined by management is
required in the preparation of consolidated financial statements in conformity
with generally accepted accounting principles. Affiliates that are 20-50 percent
owned, principally Ford Holdings, Inc. ("Ford Holdings"), are included in the
consolidated financial statements on an equity basis. Ford Credit is a wholly
owned subsidiary of Ford Motor Company ("Ford").
NATURE OF OPERATIONS
Ford Credit, its subsidiaries and affiliates operate in two industry
segments -- financing and insurance. Financing operations primarily consist of:
the purchase from franchised Ford vehicle dealers of retail installment sale
contracts and retail leases; wholesale financing and capital loans to franchised
Ford vehicle dealers and other franchises associated with such dealers; loans to
vehicle leasing companies; and diversified financing. In addition, wholly owned
subsidiaries of Ford Credit provide these financing services in the United
States and Canada to other vehicle dealers. Insurance operations conducted
through Ford Credit's equity investment in Ford Holdings consist of: single
premium deferred annuities; property and casualty insurance relating to extended
service plan contracts for new and used vehicles manufactured by affiliated and
nonaffiliated companies, primarily originating from Ford dealers; credit life
and credit disability insurance for retail purchasers of vehicles and equipment;
and physical damage insurance covering vehicles and equipment financed at
wholesale by Ford Credit and its subsidiaries. See also Note 3 for information
regarding Ford Credit's ownership changes of Ford Holdings.
Ford Credit, through certain of its subsidiaries and joint ventures,
operates in several foreign countries, the most significant of which are Canada,
Australia, and Mexico.
REVENUE RECOGNITION
Revenue from finance receivables is recognized using the interest
(actuarial) method. Certain loan origination costs are deferred and amortized to
financing revenue over the life of the related loans using the interest method.
Rental revenue on operating leases is recognized on a straight-line basis over
the term of the lease. The recognition of revenue on loans is discontinued at
the time a loan is determined to be impaired. Any amounts collected are
recognized first as a reduction of principal. Subsequent amounts collected are
treated as a recovery.
Agreements with Ford and other affiliates provide for interest supplements
and other support payments to Ford Credit on certain financing and leasing
transactions. These payments are recognized as income over the period that the
related finance receivables and leases are outstanding.
SALE OF RECEIVABLES
Ford Credit periodically sells finance receivables through special purpose
subsidiaries, retains the servicing rights, and is paid a servicing fee. The
estimated fair value of the excess servicing fee is recorded as an asset at the
date of sale and is accounted for as an adjustment to the sales price of the
sold receivables.
Estimated gains or losses from the sale of finance receivables are
recognized in the period in which the sale occurs. In determining the gain or
loss on each qualifying sale of finance receivables, the investment in the sold
receivable pool is allocated between the portion sold and the portion retained
based on their relative fair values at the date of sale (see Note 7).
FC-5
49
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 1. ACCOUNTING POLICIES -- CONTINUED
Normal servicing fees are earned as collected over the remaining term of
the related sold finance receivables. The excess servicing asset is amortized
over the term of the sold receivables using the interest method.
DEPRECIATION
Depreciation expense on operating leases is provided on a straight-line
basis over the term of the lease in an amount necessary to reduce the leased
vehicle to its estimated residual value at the end of the lease term. Gains or
losses upon disposal and adjustments to reflect impairment of the vehicle's
residual value are also included in depreciation expense.
ALLOWANCE FOR CREDIT LOSSES
An allowance for estimated credit losses is established for impaired loans
based on the provisions of Statement of Financial Accounting Standards No. 114
("SFAS 114"). Additional amounts are provided as required based on historical
experience and other factors that affect collectibility. Finance receivables and
lease investments are charged to the allowance for credit losses when an account
is deemed to be uncollectible, taking into consideration the financial condition
of the borrower or lessee, the value of the collateral, recourse to guarantors
and other factors. Collateral held for resale included in other assets is
carried at its estimated fair value at the date of repossession net of estimated
disposal costs. Any difference between the estimated fair value of the
investment in the receivable or lease and the actual sales price of the
underlying collateral is charged to the allowance for credit losses. Recoveries
on finance receivables and lease investments previously charged off as
uncollectible are credited to the allowance for credit losses.
DERIVATIVE FINANCIAL INSTRUMENTS
Ford Credit has entered into agreements to manage exposures to fluctuations
in interest rates and foreign exchange. These agreements are used to hedge
exposure created by the difference in maturities of funding sources versus the
average maturities of finance receivables and operating leases and to hedge debt
denominated in foreign currencies. All such instruments are classified as "held
for purposes other than trading"; company policy specifically prohibits the use
of derivatives for speculative purposes.
Interest rate swap agreements are used to manage the effects of interest
rate fluctuations. The differential paid or received on interest rate swap
agreements is recognized on an accrual basis as an adjustment to interest
expense. Gains and losses on terminated interest rate swaps are amortized and
reflected in interest expense over the remaining term of the original agreement.
Foreign currency swap agreements are used to manage foreign exchange
exposure. The differential paid or received on currency swaps is recognized on
an accrual basis as an adjustment to interest expense. Gains and losses on the
foreign currency swap agreements are recognized during the period of the related
transactions.
FOREIGN CURRENCY TRANSLATION
Revenues, costs and expenses of foreign subsidiaries are translated to U.S.
dollars at average-period exchange rates. Assets and liabilities of foreign
subsidiaries are translated to U.S. dollars at year-end exchange rates with the
effects of these translation adjustments being reported in a separate component
of stockholder's equity. The change in this account results from translation
adjustments recorded during the year.
FC-6
50
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 1. ACCOUNTING POLICIES -- CONTINUED
CASH EQUIVALENTS
Ford Credit considers investments purchased with a maturity of three months
or less to be cash equivalents.
FINANCIAL STATEMENT RECLASSIFICATIONS
Certain amounts in prior years financial statements have been reclassified
to conform with current year presentation.
IMPAIRMENT OF LONG-LIVED ASSETS AND CERTAIN IDENTIFIABLE INTANGIBLES
Statement of Financial Accounting Standards No. 121 ("SFAS 121"),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," was issued in March 1995. The standard is required to be
adopted effective January 1, 1996. The effect of adopting SFAS 121 is not
expected to be material.
NOTE 2. MARKETABLE AND OTHER SECURITIES
Available-for-sale securities are recorded at fair value with unrealized
gains and losses excluded from income and reported, net of tax, in a separate
component of stockholder's equity. At December 31, 1995 and 1994, the amount
reported in stockholder's equity includes Ford Credit's equity interest in Ford
Holdings' investment portfolio. Held-to-maturity securities are recorded at
amortized cost. Equity securities which do not have readily determinable fair
values are recorded at cost. The basis of cost used in determining realized
gains and losses is specific identification.
The fair value of substantially all securities was estimated based on
quoted market prices for those securities. For 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. Investments in securities at
December 31, 1995 were as follows:
GROSS ESTIMATED MEMO:
AMORTIZED UNREALIZED FAIR BOOK
COST GAINS VALUE VALUE
--------- ---------- --------- --------
(IN MILLIONS)
AVAILABLE-FOR-SALE SECURITIES
Debt securities issued by the U.S. government and
agencies............................................ $ 9.1 $ 0.1 $ 9.2 $ 9.2
HELD-TO-MATURITY SECURITIES
Municipal securities.................................. 1,041.6 57.6 1,099.2 1,041.6
Corporate debt securities............................. 47.9 1.8 49.7 47.9
-------- ------ --------- --------
Total held-to-maturity securities................... 1,089.5 59.4 1,148.9 1,089.5
-------- ------ --------- --------
Total investments in securities with readily
determinable fair values......................... 1,098.6 59.5 1,158.1 1,098.7
Other non-marketable equity securities................ 815.4 -- 815.4 815.4
-------- ------ --------- --------
Total investments in securities..................... $1,914.0 $ 59.5 $ 1,973.5 $1,914.1
======== ====== ========= ========
FC-7
51
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 2. MARKETABLE AND OTHER SECURITIES -- CONTINUED
Investments in securities at December 31, 1994 were as follows:
GROSS ESTIMATED MEMO:
AMORTIZED UNREALIZED FAIR BOOK
COST LOSSES VALUE VALUE
--------- ---------- --------- --------
(IN MILLIONS)
AVAILABLE-FOR-SALE SECURITIES
Debt securities issued by the U.S. government and
agencies............................................ $ 4.8 $ -- $ 4.8 $ 4.8
HELD-TO-MATURITY SECURITIES
Municipal securities.................................. 687.5 5.7 681.8 687.5
Corporate debt securities............................. 52.1 0.4 51.7 52.1
Redeemable preferred stock............................ 40.0 0.1 39.9 40.0
-------- ---- --------- --------
Total held-to-maturity securities................ 779.6 6.2 773.4 779.6
-------- ---- --------- --------
Total investments in securities with readily
determinable fair values....................... 784.4 6.2 778.2 784.4
-------- ---- --------- --------
Other non-marketable equity securities................ 811.9 -- 811.9 811.9
-------- ---- --------- --------
Total investments in securities.................. $1,596.3 $6.2 $ 1,590.1 $1,596.3
======== ==== ========= ========
The amortized cost and fair value of investments in available-for-sale
securities and held-to-maturity securities at December 31, 1995, by contractual
maturity, were as follows:
AVAILABLE-FOR-SALE HELD-TO-MATURITY
------------------------------- ----------------------------------
ESTIMATED MEMO: ESTIMATED MEMO:
AMORTIZED FAIR BOOK AMORTIZED FAIR BOOK
COST VALUE VALUE COST VALUE VALUE
--------- --------- ----- --------- --------- --------
(IN MILLIONS)
Due in one year or less........... $ -- $ -- $ -- $ 39.9 $ 39.9 $ 39.9
Due after one year through five
years........................... 7.4 7.5 7.5 164.9 164.9 164.9
Due after five years through ten
years........................... 1.7 1.7 1.7 884.7 944.1 884.7
----- ---- - ---- -------- --------- --------
$ 9.1 $ 9.2 $9.2 $1,089.5 $ 1,148.9 $1,089.5
===== ===== ==== ======== ========= ========
Proceeds from sales of available-for-sale securities were $76.4 million and
$74.2 million in 1995 and 1994, respectively. Gross realized gains and losses
for the years 1995 and 1994 were not material.
NOTE 3. EQUITY INVESTMENT IN FORD HOLDINGS
Ford Holdings is a holding company owned by Ford Credit and Ford, the
primary activities of which consist of consumer and commercial financing
operations, insurance underwriting, and equipment leasing. These activities are
conducted through Ford Holdings' wholly owned subsidiaries, The American Road
Insurance Company ("TARIC") and USL Capital Corporation ("USL Capital"), and
through the subsidiaries of Ford FSG, Inc. ("FFSGI"), a holding company owned by
Ford and Ford Holdings, the primary subsidiaries of which are Associates First
Capital Corporation and Ford Credit Europe.
During 1995, TARIC agreed to sell its annuity business to SunAmerica, Inc.
for $172.5 million. The sale is expected to be completed in early 1996. TARIC
recognized a one-time charge to earnings in the fourth quarter related to the
sale. The charge was not material to Ford Holdings' 1995 financial results.
FC-8
52
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 3. EQUITY INVESTMENT IN FORD HOLDINGS -- CONTINUED
In addition, Ford Motor Company previously announced that it is reviewing
possible strategic actions with respect to its Financial Services Group which
could include the partial or complete sale of USL Capital. Any such sale could
include all or a portion of Ford Credit's diversified assets, which total about
$3.3 billion, managed by USL Capital.
At December 31, 1995 and 1994, Ford Credit owned 45% of Ford Holdings'
common stock. This represented 45% of the voting power in Ford Holdings at
December 31, 1995 and 33.8% of the voting power at December 31, 1994. Ford owns
the remaining common stock in Ford Holdings, representing 55% and 41.2% of the
voting power at December 31, 1995 and December 31, 1994, respectively. The
increase in voting power in 1995 resulted from a merger between Ford Holdings
and Ford Holdings Capital Corporation, effective December 31, 1995, which
resulted in the cash out of all of the outstanding voting preferred stock of
Ford Holdings.
Condensed financial information of Ford Holdings as of December 31 was as
follows:
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
INCOME STATEMENT
Revenue................................................... $ 7,047.4 $ 5,880.5 $ 5,291.8
Income before income taxes................................ 1,107.1 940.5 830.6
Net income................................................ 690.0 609.3 511.4
Preferred stock dividend requirements..................... 129.8 97.5 74.9
Income available for common stockholders.................. 560.2 511.8 436.5
BALANCE SHEET
Assets
Cash and investments in securities..................... $ 2,508.2 $ 5,947.0 $ 5,100.7
Finance receivables, net............................... 1,478.3 29,361.7 24,376.6
Investment in Ford FSG, Inc. .......................... 3,390.0 -- --
Accounts receivable (including affiliated companies)
and other assets..................................... 7,743.0 9,064.5 9,121.5
--------- --------- ---------
Total assets......................................... $15,119.5 $44,373.2 $38,598.8
========= ========= =========
Liabilities
Accounts payable (including affiliated companies) and
other liabilities.................................... $ 3,756.1 $ 5,537.8 $ 4,738.3
Debt payable within one year........................... 2,248.0 16,054.9 13,802.1
Long-term debt......................................... 4,486.8 17,765.1 15,767.7
--------- --------- ---------
Total liabilities.................................... 10,490.9 39,357.8 34,308.1
Stockholders' equity...................................... 4,628.6 5,015.4 4,290.7
--------- --------- ---------
Total liabilities and stockholders' equity........... $15,119.5 $44,373.2 $38,598.8
========= ========= =========
Ford Credit's equity in the net assets of Ford Holdings at December 31,
1995 and 1994 was $1,697 million and $1,342 million, respectively.
REORGANIZATION
In the Fourth Quarter of 1995, as part of a reorganization of Ford's
Financial Services Group, a merger between Ford Holdings and Ford Holdings
Capital Corporation resulted in the cash out of all of the outstanding voting
preferred stock of Ford Holdings (totaling about $2 billion). Ford Holdings
funded the
FC-9
53
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 3. EQUITY INVESTMENT IN FORD HOLDINGS -- CONTINUED
cash out of the voting preferred stock primarily with bank loans. As a result,
the common stock of Ford Holdings, which is owned by Ford and Ford Credit, is
the only class of voting stock outstanding at December 31, 1995. In the Fourth
Quarter 1995, Ford Holdings also contributed its ownership interest in
Associates First Capital Corporation to FFSGI in exchange for 100% of the common
stock of FFSGI and the assumption by FFSGI of certain debt of FHI. Thereafter,
Ford contributed to FFSGI all of its interest in Ford Credit Europe plc ("FCE"),
a public limited company incorporated under the laws of England. In exchange for
Ford's contribution of its interest in FCE to FFSGI, Ford received a class of
common stock in FFSGI that has controlling voting power of FFSGI but otherwise
is equal to all other common stock of FFSGI as to the payment of dividends, etc.
In 1996, it is expected that all or substantially all of Ford Credit's
interest in Ford Holdings will be redeemed for ownership of TARIC, cash, and
notes estimated to be approximately $3 billion. The actual amounts will be based
on a valuation of Ford Holdings at the redemption date.
Assuming the redemption had taken place on January 1, 1995, unaudited pro
forma net income would have been lower by approximately $136 million in 1995.
The pro forma effect of this transaction on Ford Credit's balance sheet would
not have been material. The pro forma results are not necessarily indicative of
future operating results or the results that might have occurred had the
transaction taken place on January 1, 1995.
NOTE 4. FINANCE RECEIVABLES
Finance receivables at December 31 were as follows:
1995 1994
--------- ---------
(IN MILLIONS)
Retail................................................................. $43,773.2 $40,566.6
Wholesale.............................................................. 16,506.9 15,252.9
Diversified............................................................ 2,736.8 2,738.2
Other.................................................................. 4,630.6 4,263.8
--------- ---------
Total finance receivables................................ 67,647.5 62,821.5
Add: Loan origination costs, net.............................. 220.5 155.6
Less: Unearned income.......................................... (6,155.1) (5,371.0)
Allowance for credit losses.............................. (669.1) (659.6)
--------- ---------
Finance receivables, net................................. $61,043.8 $56,946.5
========= =========
Included in finance receivables is a total of $1.3 billion owed by three
customers with the largest receivable balances. During 1995 and 1994, Ford
Credit issued irrevocable standby letters of credit in the amount of $267
million and $295 million, respectively, on behalf of one of these customers. A
major portion of these amounts are guaranteed by Ford.
Ford Credit periodically sells finance receivables under agreements which
contain recourse provisions. Reserves for estimated losses under the recourse
provisions are provided at the time of the sales based principally on historical
loss experience. Ford Credit continues to service the sold receivables for a
fee. Ford Credit's servicing portfolio relating to these finance receivables
sales amounted to $9.2 billion and $8.1 billion at December 31, 1995 and 1994,
respectively.
FC-10
54
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 4. FINANCE RECEIVABLES -- CONTINUED
The maturities of finance receivables outstanding at December 31, 1995 were
as follows:
DUE IN YEAR ENDING DECEMBER 31, DUE
---------------------------------- AFTER
1996 1997 1998 1998 TOTAL
--------- --------- -------- --------- ---------
Retail................................... $16,771.8 $11,844.2 $8,639.0 $ 6,518.2 $43,773.2
Wholesale................................ 15,968.5 275.9 218.4 44.1 16,506.9
Diversified.............................. 155.0 142.4 118.3 2,321.1 2,736.8
Other.................................... 2,913.2 147.7 146.6 1,423.1 4,630.6
--------- --------- -------- --------- ---------
Total............................... $35,808.5 $12,410.2 $9,122.3 $10,306.5 $67,647.5
========= ========= ======== ========= =========
It is Ford Credit's experience that a substantial portion of finance
receivables are repaid before contractual maturity dates. The above table,
therefore, is not to be regarded as a forecast of future cash collections.
Installments, including interest, past-due 60 days or more and the
aggregate receivable balances related to such past-due installments were as
follows:
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------ ------------------------
INSTALLMENTS BALANCES INSTALLMENTS BALANCES
------------ -------- ------------ --------
(IN MILLIONS)
Retail............................................... $ 65.4 $282.7 $ 26.7 $183.0
Diversified.......................................... -- 0.2 5.4 8.0
Other................................................ 10.3 38.4 1.0 6.9
------ ------ ------ ------
Total......................................... $ 75.7 $321.3 $ 33.1 $197.9
====== ====== ====== ======
Included in retail and diversified receivables are investments in direct
financing and leveraged leases related to the leasing of motor vehicles and
various types of transportation and other equipment:
1995 1994
-------- --------
(IN MILLIONS)
Investment in direct financing leases
Minimum lease rentals.................................................. $1,735.5 $1,843.7
Estimated residual values.............................................. 1,315.0 1,420.3
Lease origination costs................................................ 13.1 7.1
Less: Unearned income............................................... (456.7) (467.6)
Allowance for credit losses................................... (43.1) (43.5)
-------- --------
Net investment in direct financing leases......................... $2,563.8 $2,760.0
======== ========
Minimum direct financing lease rentals (including executory costs of $26.4
million) for each of the five succeeding years are as follows (in millions):
1996 -- $704.8; 1997 -- $526.5; 1998 -- $319.9; 1999 -- $174.9; 2000 -- $6.7;
thereafter -- $29.1.
FC-11
55
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 4. FINANCE RECEIVABLES -- CONTINUED
1995 1994
--------- ---------
(IN MILLIONS)
Investment in leveraged leases
Rentals receivable (net of principal and interest on nonrecourse
debt)............................................................. $ 1,540.0 $ 1,491.9
Estimated residual values............................................ 564.6 543.1
Lease origination costs.............................................. 3.0 3.5
Less: Unearned income............................................. (445.9) (427.7)
Allowance for credit losses.................................. (19.2) (22.8)
--------- ---------
Investment in leveraged leases............................... 1,642.5 1,588.0
Less deferred income taxes arising from leveraged leases.......... (1,490.1) (1,427.8)
--------- ---------
Net investment in leveraged leases.............................. $ 152.4 $ 160.2
========= =========
NOTE 5. NET INVESTMENT, OPERATING LEASES
Operating leases at December 31 were as follows:
1995 1994
--------- ---------
(IN MILLIONS)
Investment in operating leases
Vehicles and other equipment, at cost................................ $30,448.4 $24,817.8
Lease origination costs.............................................. 44.4 34.9
Less: Accumulated depreciation.................................... (5,423.8) (4,602.9)
Allowance for credit losses.................................. (258.2) (255.9)
--------- ---------
Net investment in operating leases.............................. $24,810.8 $19,993.9
========= =========
Future minimum rentals on operating leases are as follows (in millions):
1996 - $5,574.3; 1997 - $2,188.3; 1998 - $162.2; 1999 - $1.0.
FC-12
56
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 6. ALLOWANCE FOR CREDIT LOSSES
Following is an analysis of the allowance for credit losses relating to
finance receivables and operating leases for the past three years:
1995 1994 1993
------- ------- -------
(IN MILLIONS)
Balance, beginning of year....................................... $ 915.5 $ 915.5 $ 915.5
Additions...................................................... 437.9 246.5 270.2
Deductions
Losses...................................................... 557.0 377.8 391.8
Recoveries.................................................. (163.1) (149.1) (163.4)
------- ------- -------
Net losses................................................ 393.9 228.7 228.4
Other changes, principally amounts relating to finance
receivables and operating leases sold..................... 32.2 17.8 41.8
------- ------- -------
Net deductions............................................ 426.1 246.5 270.2
------- ------- -------
Balance, end of year............................................. $ 927.3 $ 915.5 $ 915.5
======= ======= =======
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 apply to loans individually evaluated and do not apply to small
dollar homogeneous loans, such as retail finance receivables, which are
evaluated collectively based on historical experience. 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 adopted
these standards as of January 1, 1995 and the effect was not material. The
amount of impaired loans outstanding at December 31, 1995 and the average
recorded investment in impaired loans during the year was immaterial.
Additionally, the amount included in the allowance for credit losses at December
31, 1995 pertaining to impaired loans is not material.
NOTE 7. OTHER ASSETS
Other assets consist of:
DECEMBER 31
--------------------
1995 1994
-------- --------
(IN MILLIONS)
Investment in used vehicles held for resale, at estimated fair value..... $1,199.3 $1,269.0
Retained interest in sold receivables.................................... 1,062.7 895.2
Deferred charges and other assets........................................ 602.3 254.0
Collateral held for resale............................................... 340.7 297.3
Property and equipment, net of accumulated depreciation of $55.7 in 1995
and $49.9 in 1994...................................................... 88.4 83.5
-------- --------
Total............................................................... $3,293.4 $2,799.0
======== ========
FC-13
57
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 8. DEBT
Debt at December 31 was as follows:
WEIGHTED
AVERAGE(A)
INTEREST RATES BOOK VALUE
-------------- ----------------------
1995 1994 1995 1994
----- ----- --------- ---------
(IN MILLIONS)
PAYABLE WITHIN ONE YEAR
Commercial paper(B)................................... $34,978.3 $33,228.9
Other short-term debt(C).............................. 1,523.1 1,136.0
--------- ---------
Total short-term debt............................ 5.87% 5.90% 36,501.4 34,364.9
Senior notes payable within one year.................. 7.69% 7.79% 6,626.9 4,712.7
--------- ---------
Total payable within one year.................... 6.15% 6.13% 43,128.3 39,077.6
--------- ---------
PAYABLE AFTER ONE YEAR
Unsecured senior indebtedness
Notes(D)........................................... 6.90% 7.02% 36,003.6 31,411.2
Debentures......................................... 2.04% -- 29.1 --
Unamortized premium/(discount)..................... 6.1 (48.4)
--------- ---------
Total payable after one year(B).................. 36,038.8 31,362.8
--------- ---------
Total debt....................................... 6.49% 6.53% $79,167.1 $70,440.4
========= =========
- -------------------------
(A) Excludes the effect of interest rate swap agreements.
(B) The average remaining maturities of commercial paper was 29 days at
December 31, 1995 and 27 days at December 31, 1994. Unsecured senior notes
and debentures mature at various dates through 2048. Maturities for the
next five years are as follows (in millions): 1996 - $6,626.9; 1997 -
$6,939.2; 1998 - $8,477.7; 1999 - $6,876.6; 2000 - $6,544.4; thereafter -
$7,194.8.
(C) Includes $35.9 million and $0 with an affiliated company at December 31,
1995 and 1994.
(D) Includes $1,174.4 million and $0 with affiliated companies at December 31,
1995 and 1994.
Debt payable after one year at December 31, 1995 and 1994 included
obligations of $24,620.3 million and $21,158.4 million, respectively, with fixed
interest rates and $11,418.5 million and $10,204.4 million, respectively, with
variable interest rates (generally based on LIBOR or other short-term rates).
Ford Credit and certain of its subsidiaries have entered into interest rate
swap agreements to manage exposures to fluctuations in interest rates. The
agreements had no material effect on the overall weighted-average interest rate
on total debt as of December 31, 1995 and decreased the overall weighted-average
interest rate on total debt to 6.17% from 6.53% as of December 31, 1994. The
agreements decreased the long-term obligations subject to variable interest
rates as of December 31, 1995 and 1994 to $8,607.7 and $6,857.4 million,
respectively. In addition, the agreements decreased the Company's overall
weighted-average effective interest rates for full year 1995 from 6.68% to 6.55%
and full year 1994 from 5.82% to 5.51%. The effect of these agreements is to
reduce the effect of interest rate changes on profitability. Approximately 27%
of Ford Credit's interest rate swaps mature in 1996 and approximately 89% mature
by 2000.
FC-14
58
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 8. DEBT -- CONTINUED
Debt at December 31 included obligations payable in foreign currencies and
translated to U.S. dollars as follows:
DECEMBER 31
--------------------
1995 1994
-------- --------
(IN MILLIONS)
Canadian dollar........................................... $4,099.8 $3,451.4
Australian dollar......................................... 1,416.8 1,192.8
Japanese yen.............................................. 1,726.4 655.1
German deutsche mark...................................... 139.7 257.9
Luxembourg franc.......................................... 68.0 125.5
Italian lira.............................................. 31.5 123.0
European currency unit.................................... 160.2 153.3
Swiss franc............................................... 108.7 95.3
Netherlands guilder....................................... 124.8 --
Indonesian rupiah......................................... 32.3 --
Mexican peso.............................................. 116.8 --
Certain of these obligations are denominated in currencies other than the
currency of the country of the issuer. Foreign currency swap agreements are used
to hedge exposure to changes in exchange rates of such obligations. These
obligations are translated to U.S. dollars in the financial statements at the
year-end rates of exchange.
NOTE 9. SUPPORT FACILITIES
Support facilities represent additional sources of funds, if required. At
December 31, 1995, Ford Credit had approximately $27.4 billion of contractually
committed facilities for use which included $7.6 billion of Ford bank lines that
may be used by Ford Credit at Ford's option. These facilities have various
maturity dates through June 2000. The entire $27.4 billion may be used, at Ford
Credit's option, by its subsidiaries in Canada, Australia, Mexico, Japan, and
Puerto Rico. Any such borrowing will be guaranteed by Ford Credit.
NOTE 10. INCOME TAXES
Ford Credit and certain of its domestic subsidiaries join Ford in filing
consolidated United States federal and state income tax returns. Pursuant to an
arrangement with Ford, United States income tax liabilities or credits are
allocated to Ford Credit in accordance with the contribution of Ford Credit and
its subsidiaries to Ford's consolidated tax position.
FC-15
59
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 10. INCOME TAXES -- CONTINUED
The provision for income taxes was estimated as follows:
1995 1994 1993
------ ------ ------
(IN MILLIONS)
Currently (refundable)/payable
U.S. federal................................ $(45.0) $286.4 $ 30.8
Foreign..................................... 22.3 41.9 33.0
State and local............................. (29.7) 1.5 39.7
------ ------ ------
Total currently (refundable)/payable..... (52.4) 329.8 103.5
Deferred tax liability/(benefit)
U.S. federal................................ 490.0 327.9 518.0
Foreign..................................... 5.5 (6.6) (6.5)
State and local............................. 92.8 24.6 58.3
------ ------ ------
Total deferred........................... 588.3 345.9 569.8
------ ------ ------
Total provision.......................... $535.9 $675.7 $673.3
====== ====== ======
A reconciliation of the provision for income taxes as a percentage of
income before income taxes, excluding equity in net income of affiliated
companies and minority interest in net income of subsidiaries, with the United
States statutory tax rate for the last three years is shown below:
1995 1994 1993
---- ---- ----
U.S. statutory tax rate.......................... 35.0% 35.0% 35.0%
Effect of (in percentage points)
State and local income taxes................... 2.4 2.4 3.6
U.S. taxes attributable to foreign source
income...................................... (2.4) 1.9 0.1
Investment income not subject to tax or subject
to tax at reduced rates..................... (1.6) (0.9) (1.0)
Rate adjustments on deferred taxes............. -- (1.7) 1.9
Other.......................................... (1.4) 1.8 0.7
---- ---- ----
Effective tax rate............................... 32.0% 38.5% 40.3%
==== ==== ====
FC-16
60
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 10. INCOME TAXES -- CONTINUED
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 as of December 31 were as follows:
1995 1994
-------- --------
(IN MILLIONS)
DEFERRED TAX LIABILITIES
Leasing transactions..................................................... $3,392.1 $2,851.8
Purchased tax benefits................................................... 298.9 296.9
Loan origination costs................................................... 96.7 69.1
Sales of receivables..................................................... 81.8 55.9
Interest supplements..................................................... 9.0 (40.5)
Other.................................................................... 105.5 57.6
-------- --------
Total deferred tax liabilities......................................... 3,984.0 3,290.8
DEFERRED TAX ASSETS
Provision for credit losses.............................................. 460.8 481.4
Alternative minimum tax.................................................. 289.9 227.3
Employee benefit plans................................................... 109.1 98.4
Retail contract earnings method.......................................... 49.4 49.4
Other.................................................................... 47.8 28.4
-------- --------
Total deferred tax assets.............................................. 957.0 884.9
-------- --------
Net deferred tax liabilities........................................ $3,027.0 $2,405.9
======== ========
NOTE 11. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
Ford Credit and certain of its subsidiaries provide selected health care
and life insurance benefits for retired employees under unfunded plans sponsored
by Ford and certain of its subsidiaries. Ford Credit's U.S. and Canadian
employees may become eligible for those benefits if they retire while working
for Ford Credit; however, benefits and eligibility rules may be modified from
time to time. The estimated cost for postretirement health care benefits is
accrued on an actuarially determined basis.
Net postretirement benefit expense included the following:
1995 1994
----- -----
(IN MILLIONS)
Benefits attributed to employees' service................... $ 7.3 $ 9.3
Interest on accumulated benefit obligation.................. 13.1 14.7
----- -----
Net postretirement benefit expense..................... $20.4 $24.0
===== =====
Retiree benefit payments.................................... $ 3.4 $ 3.3
FC-17
61
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 11. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS -- CONTINUED
The status of these plans, reconciled with the amounts recognized in Ford
Credit's balance sheet at December 31, was as follows:
1995 1994
------ ------
(IN MILLIONS)
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION
Retirees.................................................. $ 57.0 $ 45.8
Active employees eligible to retire....................... 26.7 20.8
Other active employees.................................... 137.8 100.4
------ ------
Total accumulated obligation......................... 221.5 167.0
Unamortized amendments.................................... 2.0 2.2
Unamortized net gain...................................... 3.9 39.5
------ ------
Accrued liability.................................... $227.4 $208.7
====== ======
Assumptions:
Discount rate at year-end............................... 7.25% 8.75%
Present health care cost trend rate..................... 9.5% 9.2%
Ultimate trend rate in ten years........................ 5.5% 5.5%
Weighted-average trend rate............................. 6.6% 6.6%
Changing the assumed health care cost trend rates by one percentage point
would change the aggregate service and interest cost components of net periodic
postretirement benefit cost for 1995 by $4 million and the accumulated
postretirement benefit obligation at December 31, 1995 by $34 million.
NOTE 12. TRANSACTIONS WITH AFFILIATED COMPANIES
An agreement with Ford provides for payments by Ford to Ford Credit that
would maintain Ford Credit's consolidated income before income taxes and net
income at specified minimum levels. No payments were required under the
agreement during 1995, 1994, or 1993.
Ford Credit and its subsidiaries, from time to time, purchase accounts
receivable of certain divisions and subsidiaries of Ford. The amount of such
receivables outstanding was $1,288.6 million at December 31, 1995 and $1,218.5
million at December 31, 1994. Ford has provided Ford Credit with certain
guarantees related to the purchase of these receivables. Agreements with Ford
and other affiliates also provide for payments to Ford Credit for interest
supplements and other support costs on certain financing and leasing
transactions. Amounts included in the income statement for these and other
transactions with Ford were as follows (in millions): 1995 - $856.3; 1994
- -$570.2; 1993 - $583.0. Ford Credit and its subsidiaries purchase from Ford and
affiliates certain vehicles which were previously acquired by Ford principally
from its fleet and rental car customers. The cost of these vehicles held for
resale and included in other assets at December 31 was as follows (in millions):
1995 - $532.9; 1994 - 556.8. Ford Credit also has entered into a sale/leaseback
agreement with Ford for vehicles leased to employees of Ford and its
subsidiaries. The net investment in these vehicles included in operating leases
at December 31 was as follows (in millions): 1995 - $704.6; 1994 -$592.4.
Investments in securities include preferred stock of a nonaffiliate ($324.0
million) and of an affiliate ($485.9 million) which were acquired from Ford.
Investments in these securities are recorded at cost. Ford has provided Ford
Credit with certain guarantees related to Ford Credit's investment and return on
investment in this preferred stock, and for certain related finance receivables.
Amounts related to these transactions included in investment and other income
were as follows (in millions): 1995 - $69.1; 1994 - $54.5; 1993 - $52.7.
FC-18
62
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 12. TRANSACTIONS WITH AFFILIATED COMPANIES -- CONTINUED
Ford Credit and its subsidiaries receive technical and administrative
advice and services from Ford and its subsidiaries, occupy office space
furnished by Ford and its subsidiaries and utilize data processing facilities
maintained by Ford. Payments to Ford and its subsidiaries for such advice and
services are charged to operating expenses and were as follows (in millions):
1995 - $60.6; 1994 - $61.9; 1993 - $57.1.
Retirement benefits are provided under defined benefit plans for employees
of Ford Credit and its subsidiaries in the United States by the Ford General
Retirement Plan and for employees of the foreign subsidiaries in Australia and
Canada by the respective Ford retirement plans. Employee retirement plan costs
allocated to Ford Credit and its subsidiaries from Ford and charged to operating
expenses were as follows (in millions): 1995-$14.5; 1994-$14.8; 1993-$5.8.
At December 31, 1995 and 1994, Ford Credit had guaranteed $196.2 million
and $155.2 million of debt outstanding of other subsidiaries of Ford.
See other notes for additional information regarding transactions with
affiliated companies.
NOTE 13. LITIGATION AND CLAIMS
Various legal actions, governmental proceedings and other claims are
pending or may be instituted or asserted in the future against Ford Credit and
its subsidiaries. Certain of the pending legal actions are, or purport to be,
class actions. Some of these matters involve or may involve compensatory,
punitive or antitrust or other treble damage claims in very significant amounts
or other relief which, if granted, would require very significant expenditures.
Litigation is subject to many uncertainties, the outcome of individual
litigated matters is not predictable with assurance and it is reasonably
possible that some of the foregoing matters could be decided unfavorably to Ford
Credit or the subsidiary involved. Although the amount of liability at December
31, 1995 with respect to these matters cannot be ascertained, Ford Credit
believes that any resulting liability should not materially affect the
consolidated financial position or results of operations of Ford Credit and its
subsidiaries.
FC-19
63
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 14. FINANCIAL INSTRUMENTS
BOOK AND ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments held by Ford Credit and
its subsidiaries at December 31, and the valuation techniques used to estimate
the fair value, were as follows:
1995 1994
----------------------- -----------------------
BOOK ESTIMATED BOOK ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
--------- ---------- --------- ----------
(IN MILLIONS)
ASSETS
Cash and cash equivalents $ 1,355.9 $ 1,355.9 $ 292.0 $ 292.0
Investments in securities 1,914.1 1,973.5 1,596.3 1,590.1
Finance receivables 56,886.2 56,341.4 52,015.0 51,470.3
Other assets 1,062.7 1,062.7 895.2 895.2
LIABILITIES
Debt payable within one year $43,128.3 $ 43,128.3 $39,077.6 $ 39,077.6
Debt payable after one year 36,038.8 37,274.4 31,362.8 30,282.6
Derivative Contracts:
Foreign exchange instruments
Contracts with unrealized gains (25.4) 136.2 (28.3) 187.2
Contracts with unrealized losses (14.0) (83.6) (0.5) (17.7)
Interest rate instruments
Contracts with unrealized gains 29.4 514.4 17.9 409.9
Contracts with unrealized losses (33.0) (230.9) 27.1 (576.4)
Cash and Cash Equivalents. The book value approximates fair value because
of the short maturity of these instruments.
Investments in Securities. The estimated fair value of investments in
marketable equity and debt securities are estimated based on market prices. Book
value of investments in non-marketable equity securities approximate fair value
(See Note 2.).
Finance Receivables. The fair value of substantially all receivables is
estimated by discounting future cash flows using an estimated discount rate
which reflects the current credit, interest rate and prepayment risks associated
with similar types of instruments. For receivables with short maturities, the
book values approximate fair values. Finance receivables excluded from fair
market valuation include direct financing and leveraged lease investments.
Other Assets. Included in other assets is the retained interest in sold
receivables and related amounts. These amounts are recorded at the present value
of estimated future cash flows discounted at rates commensurate with this type
of instrument, which approximates fair value.
Debt Payable Within One Year. The book value approximates fair value
because of the short maturity of these instruments.
Debt Payable After One Year. The fair value is estimated based on quoted
market prices or current rates for similar debt with the same remaining
maturities.
FC-20
64
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 14. FINANCIAL INSTRUMENTS -- CONTINUED
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The following sections describe the various off-balance-sheet financial
instruments that Ford Credit and its subsidiaries held as of December 31, 1995
and 1994. Also included is a brief discussion of the estimated fair value of
those contracts and certain risks associated with holding those contracts
through maturity.
Foreign Exchange Instruments. Ford Credit and certain of its subsidiaries
have entered into foreign currency swap agreements to manage exposure to foreign
exchange rate fluctuations. At December 31, 1995 and 1994, the total notional
amount of Ford Credit's foreign currency swaps outstanding was $2.2 billion and
$1.5 billion, respectively. These exchange agreements hedge principal and
interest payments on debt that are denominated in foreign currencies. The book
value of the foreign currency swap agreements represents the amount payable to
the counterparty since the last settlement date. The fair value of these foreign
exchange agreements was estimated using current market rates.
In the unlikely event that a counterparty fails to meet the terms of the
contract, Ford Credit's market risk is the fair value of the agreements.
Interest Rate Instruments. Ford Credit and certain of its subsidiaries have
entered into interest rate swap agreements to manage exposure to fluctuations in
interest rates. The underlying notional amount on which Ford Credit has interest
rate swaps outstanding aggregated $54.6 billion at December 31, 1995 and $46.3
billion at December 31, 1994.
Interest rate swap agreements involve the exchange of interest obligations
on fixed and floating interest rate debt without the exchange of the underlying
principal amounts. The differential paid or received on interest rate swap
agreements is recognized as an adjustment to interest expense over the term of
the underlying debt agreement. The book value of the interest rate swap
agreements represents the differential receivable or payable with a swap
counterparty since the last settlement date.
The fair value of interest rate instruments is the estimated amount Ford
Credit would receive or pay to terminate the agreement or contract. The fair
value is calculated using current market rates and the remaining terms of the
agreements or contracts. Unrealized gains and losses are netted for individual
counterparties. In the unlikely event that a counterparty fails to meet the
terms of an interest rate instrument, Ford Credit's exposure is the fair value
of the contracts.
CONCENTRATIONS OF CREDIT RISK
Ford Credit controls its credit risk through credit standards, limits on
exposure and by monitoring the financial condition of other parties. The
majority of Ford Credit's finance receivables are geographically diversified
throughout the United States. Foreign finance receivables are concentrated in
Canada, Australia, and Mexico.
FC-21
65
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 15. SEGMENTS INFORMATION
Total revenue and income before income taxes and assets identifiable with
United States and foreign operations were as follows:
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
Total revenue
United States operations.................................. $12,056.2 $ 9,624.1 $ 7,694.8
Foreign operations........................................ 1,053.9 765.2 643.6
--------- --------- ---------
Total revenue........................................ $13,110.1 $10,389.3 $ 8,338.4
========= ========= =========
Income before income taxes
United States operations.................................. $ 1,634.0 $ 1,689.1 $ 1,610.3
Foreign operations........................................ 55.9 77.5 66.4
Equity in net income of affiliated companies.............. 255.4 232.5 198.3
--------- --------- ---------
Total income before income taxes $ 1,945.3 $ 1,999.1 $ 1,875.0
========= ========= =========
Assets at December 31
United States operations.................................. $85,698.1 $76,310.5 $64,081.8
Foreign operations........................................ 7,140.6 5,567.5 4,371.1
Equity in net assets of affiliated companies.............. 1,728.0 1,346.5 1,201.9
--------- --------- ---------
Total assets......................................... $94,566.7 $83,224.5 $69,654.8
========= ========= =========
NOTE 16. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected financial data by calendar quarter for the past two years were as
follows:
TOTAL DEPRECIATION ON INTEREST PROVISION FOR NET
REVENUE OPERATING LEASES EXPENSE CREDIT LOSSES INCOME
--------- ---------------- -------- ------------- --------
(IN MILLIONS)
1995
First Quarter............ $ 3,058.9 $1,184.5 $1,156.6 $ 77.3 $ 287.9
Second Quarter........... 3,254.2 1,255.9 1,245.1 79.2 341.2
Third Quarter............ 3,330.6 1,303.8 1,222.2 132.9 357.4
Fourth Quarter........... 3,466.4 1,296.7 1,333.3 148.5 408.7
--------- -------- -------- ------- --------
Full Year............. $13,110.1 $5,040.9 $4,957.2 $ 437.9 $1,395.2
========= ======== ======== ======= ========
1994
First Quarter............ $ 2,257.2 $ 809.5 $ 760.2 $ 71.1 $ 298.8
Second Quarter........... 2,593.4 934.9 845.4 61.2 368.6
Third Quarter............ 2,649.9 1,039.3 905.0 39.3 314.8
Fourth Quarter........... 2,888.8 1,126.3 1,030.2 74.9 330.5
--------- -------- -------- ------- --------
Full Year............. $10,389.3 $3,910.0 $3,540.8 $ 246.5 $1,312.7
========= ======== ======== ======= ========
FC-22
66
EXHIBIT INDEX
DESIGNATION DESCRIPTION
- ------------------ ----------------------------------------------------------------
Exhibit 3-A* Restated Certificate of Incorporation of Ford Motor Credit
Company.
Exhibit 3-B* By-Laws of Ford Motor Credit Company as amended through March 2,
1988.
Exhibit 4-A* Form of Indenture dated as of August 1, 1984 between Ford Motor
Credit Company and The Chase Manhattan Bank (National
Association) relating to Debt Securities.
Exhibit 4-A-1* Form of First Supplemental Indenture dated August 15, 1986
between Ford Motor Credit Company and The Chase Manhattan Bank
(National Association) supplementing the Indenture designated as
Exhibit 4-A.
Exhibit 4-A-2* Form of Second Supplemental Indenture dated as of October 15,
1986 between Ford Motor Credit Company and The Chase Manhattan
Bank (National Association) supplementing the Indenture
designated as Exhibit 4-A.
Exhibit 4-B* Form of Indenture dated as of February 1, 1985 between Ford
Motor Credit Company and Manufacturers Hanover Trust Company
relating to Debt Securities.
Exhibit 4-B-1* Form of First Supplemental Indenture dated as of April 1, 1986
between Ford Motor Credit Company and Manufacturers Hanover
Trust Company supplementing the Indenture designated as Exhibit
4-B.
Exhibit 4-B-2* Form of Second Supplemental Indenture dated as of September 1,
1986 between Ford Motor Credit Company and Manufacturers Hanover
Trust Company supplementing Indenture designated as Exhibit 4-B.
Exhibit 4-B-3* Form of Third Supplemental Indenture dated as of March 15, 1987
between Ford Motor Credit Company and Manufacturers Hanover
Trust Company supplementing the Indenture designated as Exhibit
4-B.
Exhibit 4-B-4* Form of Fourth Supplemental Indenture dated as of April 15, 1988
between Ford Motor Credit Company and Manufacturers Hanover
Trust Company supplementing the Indenture designated as Exhibit
4-B.
Exhibit 4-B-5* Form of Fifth Supplemental Indenture dated as of September 1,
1990 between Ford Motor Credit Company and Manufacturers Hanover
Trust Company supplementing the Indenture designated as Exhibit
4-B.
Exhibit 4-C* Indenture dated as of November 1, 1987 between Ford Motor Credit
Company and Continental Bank, National Association relating to
Debt Securities.
Exhibit 4-D* Indenture dated as of August 1, 1994 between Ford Motor Credit
Company and First Fidelity Bank, National Association, relating
to Debt Securities.
Exhibit 10-J* Copy of Amended and Restated Profit Maintenance Agreement dated
as of July 1, 1993 between Ford Motor Credit Company and Ford
Motor Company.
Exhibit 10-X* Copy of Agreement dated as of February 1, 1980 between Ford
Motor Company and Ford Motor Credit Company.
Exhibit 12-A Calculation of Ratio of Earnings to Fixed Charges of Ford
Credit.
Exhibit 12-B Calculation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends of Ford.
Exhibit 23 Consent of Independent Accountants.
Exhibit 24 Powers of Attorney.
- -------------------------
* Previously filed.