UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES-
--- EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2003 OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 For the transition period from to
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Commission file number 1-3950
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FORD MOTOR COMPANY
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(Exact name of registrant as specified in its charter)
Incorporated in Delaware 38-0549190
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One American Road, Dearborn, Michigan 48126
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 313-322-3000
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Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X|. No .
---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |X|. No .
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APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date: As of April 29, 2003, the Registrant had outstanding 1,759,483,931 shares
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of Common Stock and 70,852,076 shares of Class B Stock.
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Exhibit index located on sequential page number 29
Item 1. Financial Statements
-----------------------------
Ford Motor Company and Subsidiaries
SECTOR STATEMENT OF INCOME
--------------------------
For the Periods Ended March 31, 2003 and 2002
(in millions, except per share amounts)
First Quarter
2003 2002
------------- -------------
(unaudited)
AUTOMOTIVE
Sales $34,200 $32,171
Costs and expenses (Note 2)
Cost of sales 31,084 29,923
Selling, administrative and other expenses 2,313 2,308
------- -------
Total costs and expenses 33,397 32,231
------- -------
Operating income/(loss) 803 (60)
Interest income 148 112
Interest expense 313 361
------- -------
Net interest income/(expense) (165) (249)
Equity in net income/(loss) of affiliated companies 21 (61)
------- -------
Income/(loss) before income taxes - Automotive 659 (370)
FINANCIAL SERVICES
Revenues 6,688 7,290
Costs and expenses
Interest expense 1,644 1,988
Depreciation 2,567 2,561
Operating and other expenses 1,206 1,438
Provision for credit and insurance losses 593 960
------- -------
Total costs and expenses 6,010 6,947
------- -------
Income/(loss) before income taxes - Financial Services 678 343
------- -------
TOTAL COMPANY
Income/(loss) before income taxes 1,337 (27)
Provision for/(benefit from) income taxes 336 (20)
------- -------
Income/(loss) before minority interests 1,001 (7)
Minority interests in net income of subsidiaries 102 73
------- -------
Income/(loss) from continuing operations 899 (80)
Income/(loss) from discontinued/held-for-sale operations (3) (12)
Cumulative effect of change in accounting principle - (1,002)
------- -------
Net income/(loss) $ 896 $(1,094)
======= =======
Income/(loss) attributable to Common and Class B Stock
after preferred stock dividends $ 896 $(1,098)
Average number of shares of Common and Class B
Stock outstanding 1,832 1,807
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK (Notes 3 and 7)
Basic income/(loss)
Income/(loss) from continuing operations $ 0.49 $ (0.05)
Income/(loss) from discontinued/held-for-sale operations - (0.01)
Cumulative effect of change in accounting principle - (0.55)
------- -------
Net income/(loss) $ 0.49 $ (0.61)
Diluted income/(loss)
Income/(loss) from continuing operations $ 0.45 $ (0.05)
Income/(loss) from discontinued/held-for-sale operations - (0.01)
Cumulative effect of change in accounting principle - (0.55)
------- -------
Net income/(loss) $ 0.45 $ (0.61)
Cash dividends $ 0.10 $ 0.10
The accompanying notes are part of the financial statements.
2
Item 1. Financial Statements (Continued)
-----------------------------
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
For the Periods Ended March 31, 2003 and 2002
(in millions, except per share amounts)
First Quarter
2003 2002
------------- ------------
(unaudited)
Sales and revenues
Sales $34,200 $32,171
Revenues and Automotive interest income 6,833 7,402
------- -------
Total sales and revenues 41,033 39,573
Costs and expenses
Cost of sales 31,084 29,923
Selling, administrative and other expenses 6,086 6,309
Interest expense 1,957 2,349
Provision for credit and insurance losses 593 960
-------- -------
Total costs and expenses 39,720 39,541
Equity in net income/(loss) of affiliated companies 24 (59)
-------- -------
Income/(loss) before income taxes 1,337 (27)
Provision for/(benefit from) income taxes 336 (20)
------- -------
Income/(loss) before minority interests 1,001 (7)
Minority interests in net income/(loss) of subsidiaries 102 73
------- -------
Income/(loss) from continuing operations 899 (80)
Income/(loss) from discontinued/held-for-sale operations (3) (12)
Cumulative effect of change in accounting principle - (1,002)
------- -------
Net income/(loss) $ 896 $(1,094)
======= =======
Income/(loss) attributable to Common and Class B Stock
after Preferred Stock dividends $ 896 $(1,098)
Average number of shares of Common and Class B
Stock outstanding 1,832 1,807
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
Basic income/(loss)
Income/(loss) from continuing operations $ 0.49 $ (0.05)
Income/(loss) from discontinued/held-for-sale operations - (0.01)
Cumulative effect of change in accounting principle - (0.55)
------- -------
Net income/(loss) $ 0.49 $ (0.61)
Diluted income/(loss)
Income/(loss) from continuing operations $ 0.45 $ (0.05)
Income/(loss) from discontinued/held-for-sale operations - (0.01)
Cumulative effect of change in accounting principle - (0.55)
------- -------
Net income/(loss) $ 0.45 $ (0.61)
Cash dividends $ 0.10 $ 0.10
The accompanying notes are part of the financial statements.
3
Item 1. Financial Statements (Continued)
-----------------------------
Ford Motor Company and Subsidiaries
SECTOR BALANCE SHEET
--------------------
(in millions)
March 31, December 31,
2003 2002
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(unaudited)
ASSETS
Automotive
Cash and cash equivalents $ 7,138 $ 5,180
Marketable securities 17,315 17,464
-------- --------
Total cash and marketable securities 24,453 22,644
Receivables 2,296 2,065
Inventories (Note 4) 7,953 6,980
Deferred income taxes 3,389 3,462
Other current assets 5,112 4,551
Current receivable from Financial Services 1,366 1,062
-------- --------
Total current assets 44,569 40,764
Equity in net assets of affiliated companies 2,479 2,470
Net property 36,556 36,364
Deferred income taxes 11,791 11,694
Goodwill (Note 5) 4,921 4,805
Other intangible assets (Note 5) 803 812
Assets of discontinued/held-for-sale operations 92 98
Other assets 11,536 10,783
-------- --------
Total Automotive assets 112,747 107,790
Financial Services
Cash and cash equivalents 12,099 7,070
Investments in securities 623 807
Finance receivables, net 92,765 97,030
Net investment in operating leases 37,540 40,055
Retained interest in sold receivables 18,092 17,618
Goodwill (Note 5) 756 752
Other intangible assets (Note 5) 246 248
Assets of discontinued/held-for-sale operations - 2,406
Other assets 15,822 16,643
Receivable from Automotive 4,503 4,803
-------- --------
Total Financial Services assets 182,446 187,432
-------- --------
Total assets $295,193 $295,222
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive
Trade payables $ 15,477 $ 14,606
Other payables 2,540 2,485
Accrued liabilities 29,734 27,644
Debt payable within one year 329 557
-------- --------
Total current liabilities 48,080 45,292
Long-term debt 13,643 13,607
Other liabilities 47,928 46,886
Deferred income taxes 231 303
Liabilities of discontinued/held-for-sale operations 89 138
Payable to Financial Services 4,503 4,803
-------- --------
Total Automotive liabilities 114,474 111,029
Financial Services
Payables 2,463 1,890
Debt 145,038 148,058
Deferred income taxes 11,502 11,644
Other liabilities and deferred income 7,948 9,448
Liabilities of discontinued/held-for-sale operations - 831
Payable to Automotive 1,366 1,062
-------- --------
Total Financial Services liabilities 168,317 172,933
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely
junior subordinated debentures of the Company 5,670 5,670
Stockholders' equity
Capital stock
Common Stock, par value $0.01 per share (1,837 million shares issued) 18 18
Class B Stock, par value $0.01 per share (71 million shares issued) 1 1
Capital in excess of par value of stock 5,435 5,420
Accumulated other comprehensive income/(loss) (Note 8) (6,119) (6,531)
Treasury stock (1,974) (1,977)
Earnings retained for use in business 9,371 8,659
-------- --------
Total stockholders' equity 6,732 5,590
-------- --------
Total liabilities and stockholders' equity $295,193 $295,222
======== ========
The accompanying notes are part of the financial statements.
4
Item 1. Financial Statements (Continued)
-----------------------------
Ford Motor Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
--------------------------
(in millions)
March 31, December 31,
2003 2002
--------------- ---------------
(unaudited)
ASSETS
Cash and cash equivalents $ 19,237 $ 12,250
Marketable securities 17,938 18,271
Receivables 2,296 2,065
Net investment in operating leases 37,540 40,055
Finance receivables, net 92,765 97,030
Retained interest in sold receivables 18,092 17,618
Inventories 7,953 6,980
Equity in net assets of affiliated companies 3,520 3,569
Net property 38,151 37,935
Deferred income taxes 15,204 15,213
Goodwill 5,677 5,557
Other intangible assets 1,049 1,060
Assets of discontinued/held-for-sale operations 92 2,504
Other assets 29,810 29,250
-------- --------
Total assets $289,324 $289,357
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Payables $ 20,480 $ 18,981
Accrued liabilities 27,276 25,088
Debt 159,010 162,222
Other liabilities and deferred income 55,697 56,276
Deferred income taxes 14,370 14,561
Liabilities of discontinued/held-for-sale operations 89 969
-------- --------
Total liabilities 276,922 278,097
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely
junior subordinated debentures of the Company 5,670 5,670
Stockholders' equity
Capital stock
Common Stock, par value $0.01 per share (1,837 million shares issued) 18 18
Class B Stock, par value $0.01 per share (71 million shares issued) 1 1
Capital in excess of par value of stock 5,435 5,420
Accumulated other comprehensive income/(loss) (6,119) (6,531)
Treasury stock (1,974) (1,977)
Earnings retained for use in business 9,371 8,659
-------- --------
Total stockholders' equity 6,732 5,590
-------- --------
Total liabilities and stockholders' equity $289,324 $289,357
======== ========
The accompanying notes are part of the financial statements.
5
Item 1. Financial Statements (Continued)
-----------------------------
Ford Motor Company and Subsidiaries
CONDENSED SECTOR STATEMENT OF CASH FLOWS
----------------------------------------
For the Periods Ended March 31, 2003 and 2002
(in millions)
First Quarter 2003 First Quarter 2002
---------------------------- -----------------------------
Financial Financial
Automotive Services Automotive Services
------------- -------------- ------------- ---------------
(unaudited) (unaudited)
Cash and cash equivalents at January 1 $ 5,180 $ 7,070 $ 4,064 $ 3,133
Cash flows from operating activities before
securities trading 2,953 4,662 2,333 3,746
Net sales/(purchases) of trading securities 230 (40) (437) (25)
------- -------- ------- --------
Net cash flows from operating activities 3,183 4,622 1,896 3,721
Cash flows from investing activities
Capital expenditures (1,416) (80) (1,536) (181)
Acquisitions of receivables and lease investments - (17,604) - (21,714)
Collections of receivables and lease investments - 10,749 - 14,855
Net acquisitions of daily rental vehicles - (385) - (794)
Purchases of securities (566) (149) (537) (185)
Sales and maturities of securities 474 207 452 139
Proceeds from sales of receivables and lease investments - 10,966 - 15,399
Proceeds from sale of businesses - 157 - -
Net investing activity with Financial Services 970 - (427) -
Cash paid for acquisitions (8) - (37) -
Other - 47 - 228
------- -------- ------- --------
Net cash (used in)/provided by investing activities (546) 3,908 (2,085) 7,747
Cash flows from financing activities
Cash dividends (183) - (184) -
Net purchases of Common Stock (22) - (57) -
Proceeds from mandatorily redeemable convertible
preferred securities - - 4,900 -
Changes in short-term debt (234) 2,424 (93) (6,729)
Proceeds from issuance of other debt 90 3,862 107 9,456
Principal payments on other debt (78) (10,640) (60) (10,233)
Repayment of debt from discontinued operations - 1,421 - -
Net financing activity with Automotive - (970) - 427
Other (3) 20 (5) 37
------- -------- ------- --------
Net cash (used in)/provided by financing activities (430) (3,883) 4,608 (7,042)
Effect of exchange rate changes on cash 55 78 (18) (31)
Net transactions with Automotive/Financial Services (304) 304 (411) 411
------- -------- ------- --------
Net increase/(decrease) in cash and cash equivalents 1,958 5,029 3,990 4,806
------- -------- ------- --------
Cash and cash equivalents at March 31 $ 7,138 $ 12,099 $ 8,054 $ 7,939
======= ======== ======= ========
The accompanying notes are part of the financial statements.
6
Item 1. Financial Statements (Continued)
-----------------------------
Ford Motor Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
For the Periods Ended March 31, 2003 and 2002
(in millions)
First Quarter
2003 2002
------------ ---------------
(unaudited)
Cash and cash equivalents at January 1 $ 12,250 $ 7,197
Cash flows from operating activities before
securities trading 7,615 6,079
Net sales/(purchases) of trading securities 190 (462)
-------- --------
Net cash flows from operating activities 7,805 5,617
Cash flows from investing activities
Capital expenditures (1,496) (1,717)
Acquisitions of receivables and lease investments (17,604) (21,714)
Collections of receivables and lease investments 10,749 14,855
Net acquisitions of daily rental vehicles (385) (794)
Purchases of securities (715) (722)
Sales and maturities of securities 681 591
Proceeds from sales of receivables and lease investments 10,966 15,399
Proceeds from sale of businesses 157 -
Cash paid for acquisitions (8) (37)
Other 47 228
-------- --------
Net cash (used in)/provided by investing activities 2,392 6,089
Cash flows from financing activities
Cash dividends (183) (184)
Net purchases of Common Stock (22) (57)
Proceeds from mandatorily redeemable convertible
preferred securities - 4,900
Changes in short-term debt 2,190 (6,822)
Proceeds from issuance of other debt 3,952 9,563
Principal payments on other debt (10,718) (10,293)
Repayment of debt from discontinued operations 1,421 -
Other 17 32
-------- --------
Net cash (used in)/provided by financing activities (3,343) (2,861)
Effect of exchange rate changes on cash 133 (49)
--------- --------
Net increase/(decrease) in cash and cash equivalents 6,987 8,796
-------- --------
Cash and cash equivalents at March 31 $ 19,237 $ 15,993
======== ========
The accompanying notes are part of the financial statements.
7
Item 1. Financial Statements (Continued)
-----------------------------
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
1. Financial Statements - The financial data presented herein are unaudited,
but in the opinion of management reflect those adjustments necessary for a
fair presentation of such information. Results for interim periods should
not be considered indicative of results for a full year. Reference should
be made to the financial statements contained in our Annual Report on Form
10-K for the year ended December 31, 2002 (the "10-K Report"). For purposes
of this report, "Ford", the "Company", "we", "our", "us" or similar
references means Ford Motor Company and its majority-owned subsidiaries
unless the context requires otherwise. Certain amounts for prior periods
were reclassified to conform with current period presentation consistent
with the presentation in the 10-K Report. Reclassifications include amounts
reported cumulatively in the first half of 2002 related to the adoption of
Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and
Other Intangible Assets, as described in Note 5 below and profits and
losses related to discontinued and held-for-sale operations.
2. Selected Automotive Costs and Expenses are summarized as follows (in
millions):
First Quarter
----------------------------
2003 2002
----------- ------------
Depreciation $693 $588
Amortization of special tools 685 572
Postretirement expense 798 488
3. Accounting Policy - Stock-based Compensation - During the first quarter of
2003, we adopted the fair value recognition provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, for stock-based employee
compensation, effective as of the beginning of the fiscal year. Under the
modified prospective method of adoption selected by the Company under the
provisions of SFAS No. 148, Accounting for Stock-Based Compensation -
Transition and Disclosure, stock-based employee compensation expense
recognized in 2003 is the same as that which would have been recognized had
the fair value recognition provisions of SFAS No. 123 been applied to all
awards from its original effective date. Results of prior years have not
been restated. The following table illustrates the effect on net income and
earnings per share if the fair value method had been applied to all
outstanding and unvested awards in each period (in millions):
First Quarter
-------------------------
2003 2002
------------ -----------
Net income/(loss) attributable to Common
and Class B Stock, as reported $ 896 $(1,098)
Add: Stock-based employee compensation
expense included in reported net income,
net of related tax effects 27 -
Deduct: Total stock-based employee compensation
expense determined under fair value method
for all awards, net of related tax effects (27) (29)
------- -------
Pro forma net income $ 896 $(1,127)
Earnings per share:
Basic - as reported $ 0.49 $ (0.61)
Basic - pro forma $ 0.49 $ (0.63)
Diluted - as reported $ 0.45 $ (0.61)
Diluted - pro forma $ 0.45 $ (0.63)
4. Automotive Inventories are summarized as follows (in millions):
March 31, December 31,
2003 2002
----------------- -----------------
Raw materials, work in process and supplies $3,483 $3,174
Finished products 5,434 4,763
------ ------
Total inventories at FIFO 8,917 7,937
Less LIFO adjustment (964) (957)
------ ------
Total inventories $7,953 $6,980
====== ======
5. Goodwill and Other Intangibles - Effective January 1, 2002, we adopted SFAS
No. 142, which eliminates amortization of goodwill and certain other
intangible assets, but requires annual testing for impairment (comparison
of estimated fair value to carrying value). Fair value is estimated using
the present value of expected future cash flows and other valuation
measures. Effective January 1, 2002, after-tax, non-cash transition charges
of $708 million and $294 million were taken in the Automotive and Financial
Services sectors, respectively. Our policy is to test annually for
impairment during the second quarter.
8
Item 1. Financial Statements (Continued)
-----------------------------
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
5. Goodwill and Other Intangibles (Continued)
Effective July 1, 2001, we adopted SFAS No. 141, Business Combinations,
which specifies the types of acquired intangible assets to be reported
separately from goodwill and those to be included in goodwill. Certain
intangible assets, primarily acquired distribution networks and technology,
continue to be amortized over their useful lives, with no significant
residual value.
Changes to Automotive sector goodwill and other intangible assets were as
follows (in millions):
First Quarter 2003 First Quarter 2002
--------------------------------------------------- ---------------------------------------------------
Goodwill Other Intangibles Goodwill Other Intangibles
------------ ------------------------------------ ------------ -----------------------------------
Amortizable Non-amortizable Amortizable Non-amortizable
---------------- ---------------- ---------------- ---------------
Beginning balance $4,805 $ 409 $ 403 $5,213 $ 1,125 $ -
Impairment (pre-tax) - - - (939) - -
Tradename
reclassification - - - - (618) 618
Workforce
reclassification - - - 126 (126) -
Currency translation 40 5 (8) (7) (11) -
Amortization
and other 76 (6) - 52 47 -
------ ------ ------ ------ ------- ------
Ending balance $4,921 $ 408 a/ $ 395 $4,445 $ 417 b/ $ 618
====== ====== ====== ====== ======= ======
- - - - -
a/ Gross balance of $483 million, net of accumulated amortization and other
adjustments of $75 million.
b/ Gross balance of $529 million, net of accumulated amortization and other
adjustments of $112 million.
Changes to Financial Services sector goodwill and other intangible assets
were as follows (in millions):
First Quarter 2003 First Quarter 2002
--------------------------------------------------- ---------------------------------------------------
Goodwill Other Intangibles Goodwill Other Intangibles
------------ ------------------------------------ ------------ -----------------------------------
Amortizable Non-amortizable Amortizable Non-amortizable
---------------- ---------------- ---------------- ----------------
Beginning balance $ 752 $ 59 $ 189 $1,042 $ 265 $ -
Impairment (pre-tax) - - - (294) - -
Tradename
reclassification - - - - (189) 189
Currency translation 4 - - (1) 2 -
Amortization
and other - (2) - - (3) -
------ ------ ------ ------ ------- ------
Ending balance $ 756 $ 57 a/ $ 189 $ 747 $ 75 b/ $ 189
====== ====== ====== ====== ======= ======
- - - - -
a/ Gross balance of $90 million, net of accumulated amortization and other
adjustments of $33 million.
b/ Gross balance of $88 million, net of accumulated amortization and other
adjustments of $13 million.
In addition, equity in net assets of affiliated companies included goodwill
of $413 million and $462 million at March 31, 2003 and March 31, 2002,
respectively. Pre-tax amortization expense for intangible assets, excluding
goodwill, for the quarter ended March 31, 2003 and 2002 was $7 million and
$6 million, respectively. Intangible asset amortization is forecasted to
range from about $15 to $25 million per year for the next 5 years.
6. Variable Interest Entities - In January 2003, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 46, Consolidation of
Variable Interest Entities ("FIN 46"), which clarifies the consolidation
accounting guidance of Accounting Research Bulletin No. 51, Consolidated
Financial Statements, to certain entities in which equity investors do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entities to finance their activities
without additional subordinated financial support from other parties. Such
entities are known as variable interest entities ("VIE").
Controlling financial interests of a VIE are identified by the exposure of
a party to the VIE to a majority of either the expected losses or residual
rewards of the VIE, or both. Such parties are primary beneficiaries of the
VIE and FIN 46 requires that the primary beneficiary of a VIE consolidate
the VIE. FIN 46 also requires new disclosures for significant relationships
with VIEs, whether or not consolidation accounting is either used or
anticipated.
9
Item 1. Financial Statements (Continued)
-----------------------------
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
6. Variable Interest Entities (Continued)
Ford Credit has activities with a limited purpose trust, FCAR Owner Trust
("FCAR"), owned by a Ford Credit subsidiary and outside investors. FCAR's
activities are limited to issuance of asset-backed commercial paper and
other securities and the purchase of highly rated asset-backed securities
issued by Ford Credit sponsored securitization special purpose entities
("SPEs"). At March 31, 2003, FCAR had gross assets of $10.7 billion and
gross liabilities of $10.3 billion. Ford Credit holds a subordinated
interest in FCAR that totaled about $6 million at March 31, 2003. Ford
Credit also retains interests related to receivables sold to Ford
Credit-sponsored securitization SPEs that sell asset-backed securities to
FCAR. These retained interests include subordinated securities,
interest-only strip assets and restricted cash, which totaled $1.64 billion
at March 31, 2003. These subordinated security interests and retained
interests are reflected on our balance sheet.
FIN 46 would require consolidation of FCAR, as presently structured, in our
financial results. Ford Credit intends to take certain actions that will
result in the consolidation of FCAR's assets, liabilities and results into
its financial statements during the second quarter of 2003. Ford Credit has
been advised that consolidation of FCAR will not change the
bankruptcy-remote status of FCAR or the Ford Credit sponsored
securitization SPEs, and the related receivables will continue to be
considered legally sold to the Ford Credit sponsored securitization SPEs.
We believe that consolidation of FCAR will not have a material adverse
impact on Ford Credit's earnings, back-up credit facilities, unsecured debt
funding programs or other securitization programs.
In addition, Ford Credit also sells receivables to bank-sponsored
asset-backed commercial paper issuers that are SPEs of the sponsor bank.
FIN 46 might also require the sponsor banks to consolidate the assets and
liabilities of these SPEs into their financial results or restructure these
SPEs. If this occurs, the sponsor banks may increase the program fees for
Ford Credit's use of these SPEs or fail to renew their commitment to
purchase additional receivables from Ford Credit. At March 31, 2003, these
SPEs held about $6 billion of retail installment sale contracts previously
owned by Ford Credit. We believe we would not be required to consolidate
any portion of these SPEs in our financial results. Ford Credit is
continuing to evaluate the impact of FIN 46 on the bank sponsors of these
SPEs and on the continued availability and costs of this program. No bank
sponsors have indicated to Ford Credit any intention to terminate their
SPEs or reduce their purchases of receivables as a result of FIN 46.
The Automotive sector has invested in and contracted with several joint
ventures to manufacture and/or assemble vehicles or components. We are in
the process of analyzing these joint ventures to determine if they are VIEs
and, if so, whether we are the primary beneficiary. As such, we cannot, at
this time, reliably estimate the future potential impact of consolidating
any VIEs with which we are involved. We believe additional liabilities
recognized as a result of consolidating VIEs would not represent additional
claims on the general assets of the Company; rather, they would represent
claims against additional assets recognized by the Company as a result of
consolidating the VIEs. Conversely, we believe additional assets recognized
as a result of consolidating these VIEs would not represent additional
assets of the Company that could be used to satisfy claims against its
general assets.
7. Income Per Share of Common and Class B Stock - The calculation of diluted
income per share of Common and Class B Stock takes into account the effect
of obligations, such as stock options, considered to be potentially
dilutive. Basic and diluted income per share were calculated using the
following (in millions):
First Quarter
-----------------------------------
2003 2002
---------------- ---------------
Diluted Income
--------------
Income/(loss) attributable to Common and Class B
Stock after preferred stock dividends $ 896 $(1,098)
Convertible preferred securities interest 53 -
------- -------
Diluted income/(loss) $ 949 $(1,098)
======= =======
Average shares outstanding 1,832 1,807
Issuable and uncommitted ESOP shares (2) (1)
------- -------
Basic shares 1,830 1,806
Reverse antidilutive contingently
issuable shares included above - (1)
Net dilutive effect of options 5 - *
Convertible preferred securities 282 - *
------- -------
Diluted shares 2,117 1,805
======= =======
- - - - -
* Not included in calculation of diluted earnings per share due to
their antidilutive effect (17 million shares related to options and
282 million shares related to convertible securities).
10
Item 1. Financial Statements (Continued)
-----------------------------
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
8. Comprehensive Income - Other comprehensive income primarily reflects
foreign currency translation adjustments and adjustments related to SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities.
Total comprehensive income is summarized as follows (in millions):
First Quarter
-------------------------------
2003 2002
-------------- ---------------
Net income/(loss) $ 896 $(1,094)
Other comprehensive income/(loss) 412 660
------- -------
Total comprehensive income/(loss) $ 1,308 $ (434)
======= =======
9. Guarantees - On November 26, 2002, FASB issued Interpretation No. 45 ("FIN
45"), Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. FIN 45 clarifies
the requirements of SFAS No. 5, Accounting for Contingencies, relating to a
guarantor's accounting for, and disclosure of, the issuance of certain
types of guarantees. For certain guarantees issued after December 31, 2002,
FIN 45 requires a guarantor to recognize, upon issuance of a guarantee, a
liability for the fair value of the obligations it assumes under the
guarantee. During the first quarter of 2003, we issued new guarantees and
indemnifications, which are included within the disclosures below.
Guarantees issued prior to January 1, 2003, are not subject to liability
recognition, but are subject to expanded disclosure requirements.
At March 31, 2003, the following guarantees were issued and outstanding:
Guarantees of unconsolidated affiliates and third parties: We guarantee
debt and lease obligations of certain joint ventures as well as certain
financial obligations of outside third parties to support business and
economic growth. Expiration dates vary, or guarantees will terminate on
payment and/or cancellation of the obligation. A payment would be triggered
by failure of the guaranteed party to fulfill its obligation covered by the
guarantee. In some circumstances, we are entitled to recover from the third
party amounts paid by us under the guarantee. However, our ability to
enforce these rights is sometimes stayed until the guaranteed party is paid
in full. The maximum potential payments under these guarantees total
approximately $480 million, the majority of which relates to the Automotive
sector.
Sales to third parties of Automotive receivables, with recourse: From time
to time, the Automotive sector sells receivables to third parties with
recourse. Receivables are sold on a rolling basis and individual sales
liquidate at different times. A payment would be triggered by failure of
the obligor to fulfill its obligations covered by the contract. The maximum
potential amount of future payments is approximately $27 million.
Indemnifications: In the ordinary course of business, we execute contracts
involving indemnifications standard in the industry and indemnifications
specific to a transaction such as sale of a business. These
indemnifications might include claims against any of the following:
environmental, tax and shareholder matters; intellectual property rights;
governmental regulations and employment-related matters; dealer, supplier,
and other commercial contractual relationships; and financial matters, such
as securitizations. Performance under these indemnities would generally be
triggered by a breach of terms of the contract or by a third party claim.
We regularly evaluate the probability of having to incur costs associated
with these indemnifications and have accrued for expected losses that are
probable. The primary types of indemnifications for which payments are
possible are as follows:
Environmental: We have indemnified various parties 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. The amount of any such costs or damages for
which we may be held responsible could be substantial. The contingent
losses that we expect to incur in connection with many of these sites
have been accrued and those losses are reflected in our financial
statements in accordance with generally accepted accounting
principles. The aggregate amount accrued for environmental
indemnification liabilities reflected in our financial statements is
$92 million. The accrual represents the estimated cost to study
potential environmental issues at sites deemed investigation or
cleanup activities, and the estimated cost to implement remediation
actions, including on-going maintenance, as required. Cost estimates
are developed by site. Initial cost estimates are based on historical
experience at similar sites and are refined over time on the basis of
in-depth studies of the site.
11
Item 1. Financial Statements (Continued)
-----------------------------
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
9. Guarantees (Continued)
For many sites, the remediation costs and other damages for which we
ultimately may be responsible are not reasonably estimable because of
uncertainties with respect to factors such as our connection to the
site, the 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, we are unable to estimate a maximum
amount for costs or other damages for which we are potentially
responsible in connection with these indemnifications, which are
generally uncapped.
Tax: We provide various tax-related indemnifications as part of
transactions. The indemnified party typically is protected from
certain events that result in a tax treatment different from that
originally anticipated. In some cases, tax indemnifications relate to
representations or warranties given by us. Our liability typically is
fixed when a final determination of the indemnified party's tax
liability is made. In some cases, a payment under a tax
indemnification may be offset in whole or in part by refunds from the
applicable governmental taxing authority. We are party to numerous tax
indemnifications and many of these indemnities do not limit potential
payment; therefore, we are unable to estimate a maximum amount of
potential future payments that could result from claims made under
these indemnities.
Product Performance:
Warranty: Estimated warranty costs and additional service actions are
accrued for at the time the vehicle is sold to a dealer. Included in
the warranty cost accruals are costs for basic warranties on vehicles
sold. Product recalls and other customer service actions are not
included in the warranty reconciliation below but are also accrued for
at the time of sale. Estimates for warranty costs are made based
primarily on historical warranty claim experience. The following is a
tabular reconciliation of the product warranty accrual (in millions):
January 1, 2003 beginning balance $5,401
Payments made in 2003 (834)
Changes in accrual related to warranties issued in 2003 841
Changes in accrual related to pre-existing warranties (23)
Foreign currency translation 61
------
March 31, 2003 ending balance $5,446
======
Extended Service Plan: Generally, extended service plans are separate
contracts with retail customers who pay fees to extend warranty
coverage beyond the base warranty period. Under these plans, contract
fees are recognized in income over the contract period in proportion
to the costs expected to be incurred in performing contracted
services.
The following is a tabular reconciliation of extended service plan
deferred revenue accounts (in millions):
January 1, 2003 beginning balance $2,998
Current period written revenue 334
Current period earned revenue (299)
Foreign currency translation 6
------
March 31, 2003 ending balance $3,039
======
10. Segment Information - The Company's operating activity consists of two
operating sectors, Automotive and Financial Services.
The Automotive sector consists of the design, development, manufacture,
sale and service of cars, trucks and service parts. Beginning in 2003, we
are reporting our Automotive sector results as two primary segments, North
America and International. The North America segment includes primarily the
sale of Ford, Lincoln and Mercury cars, trucks and service parts in the
U.S., Canada and Mexico, and the associated costs to design, develop,
manufacture and service these vehicles and parts. The International segment
includes primarily the sale of Ford brand vehicles and service parts
outside of North America and the sale of Premier Automotive Group brand
vehicles (i.e., Aston Martin, Jaguar, Land Rover and Volvo) and related
service parts throughout the world (including North America), together with
the associated costs to design, develop, manufacture and service these
vehicles and parts. Additionally, the International segment includes our
share of the results of Mazda Motor Corporation and Mazda-related joint
ventures. The Other Automotive component of the Automotive sector consists
primarily of net interest expense, which is not managed individually by the
two segments. Transactions among automotive segments are presented on an
absolute cost basis, eliminating the effect of legal entity transfer prices
within the Automotive sector for vehicles, components and product
engineering. Previously, the Automotive sector was reported as one segment.
Prior period information reflects the two reporting segments within the
Automotive sector.
12
Item 1. Financial Statements (Continued)
-----------------------------
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
10. Segment Information (Continued)
The Financial Services sector primarily includes two segments, Ford Credit
and Hertz. Ford Credit provides vehicle-related financing, leasing, and
insurance. Hertz rents cars, light trucks and industrial and construction
equipment.
Segment selection is based upon the organizational structure that we use to
evaluate performance and make decisions on resource allocation, as well as
availability and materiality of separate financial results consistent with
that structure.
13
Item 1. Financial Statements (Continued)
-----------------------------
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
10. Segment Information (Continued)
Automotive Sector Financial Services Sector a/
---------------------------------- -----------------------------------
North Inter- Ford Elims/ Elims/
America national Other Total Credit Hertz Other Total Other Total
------- -------- ----- ----- ------ ----- ----- ----- ----- -----
b/
FIRST QUARTER 2003
Revenues
External customer $22,215 $11,985 $ - $ 34,200 $ 5,470 $ 1,145 $ 73 $ 6,688 $ - $40,888
Intersegment 1,016 290 - 1,306 79 6 (1) 84 (1,390) -
Income
Income/(loss) before
income taxes 1,236 (353) (224) 659 727 (59) 10 678 - 1,337
Income/(loss) from
continuing operations 496 442 (40) 1 403 - 899
Other Disclosures
Total assets at March 31 112,747 165,752 11,762 4,932 182,446 - 295,193
FIRST QUARTER 2002
Revenues
External customer $21,473 $10,401 $297 $ 32,171 $ 5,857 $ 1,083 $ 350 $ 7,290 $ - $39,461
Intersegment 994 258 - 1,252 85 7 4 96 (1,348) -
Income
Income/(loss) before
income taxes 465 (469) (366) (370) 396 (59) 6 343 - (27)
Income/(loss) from
continuing operations (289) 249 (48) 8 209 - (80)
Other Disclosures
Total assets at March 31 94,417 165,356 10,650 4,931 180,937 - 275,354
- - - - -
a/ Financial Services sector's interest income is recorded as Revenues.
b/ Includes intersector transactions occurring in the ordinary course of
business.
14
Item 1. Financial Statements (Continued)
-----------------------------
Report of Independent Accountants
To the Board of Directors and Stockholders
Ford Motor Company:
We have reviewed the accompanying consolidated balance sheet of Ford Motor
Company and its subsidiaries as of March 31, 2003, and the related consolidated
statement of income for each of the three-month periods ended March 31, 2003 and
2002 and the consolidated statement of cash flows for the three-month periods
ended March 31, 2003 and 2002. In addition, we have reviewed the accompanying
sector balance sheet and the related sector statements of income and cash flows,
presented for purposes of additional analysis. The consolidated interim and
sector financial statements (collectively, the "financial statements") are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated interim financial statements for them
to be in conformity with accounting principles generally accepted in the United
States of America.
As discussed in Note 3 to the consolidated financial statements, on January 1,
2003, the Company adopted Statement of Financial Accounting Standards No.148,
"Accounting for Stock-Based Compensation - Transition and Disclosure", which
changed the method for accounting for stock-based employee compensation.
We previously audited in accordance with auditing standards generally accepted
in the United States of America, the consolidated and sector balance sheets as
of December 31, 2002, and the related consolidated statements of income,
stockholders' equity, and of cash flows for the year then ended (not presented
herein), and in our report dated January 17, 2003 we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated and sector balance sheets
as of December 31, 2002, is fairly stated in all material respects in relation
to the consolidated and sector balance sheets from which it has been derived.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
April 16, 2003
15
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations
-------------
FIRST QUARTER RESULTS OF OPERATIONS
Our worldwide earnings were $896 million in the first quarter of 2003, or
$0.45 per diluted share of Common and Class B Stock. In the first quarter of
2002, losses were $1,094 million, or $0.61 per share. Results in the first
quarter of 2002 included a charge of $1,002 million relating to the impairment
of goodwill in accordance with Statement of Financial Accounting Standards
("SFAS") No. 142, Goodwill and Other Intangible Assets. For further discussions
regarding SFAS No. 142, see Note 5 of the Notes to our Financial Statements.
Our worldwide Automotive sales and Financial Services revenues totaled
$40.9 billion in the first quarter of 2003, up $1.4 billion from a year ago.
Unit sales of cars and trucks were 1,726,000 units, up 51,000 units from a year
ago. In the first quarter of 2003, our total corporate market share was 21.2% in
the United States, up 0.5 percentage points from the same period a year ago. Our
European corporate market share increased to 11.3% in the first quarter of 2003,
compared with 11.2% in the first quarter of 2002.
Results by business sector for the first quarter of 2003 and 2002 are shown
below (in millions):
First Quarter Net Income/(Loss)
---------------------------------------
2003
Over/(Under)
2003 2002* 2002
----------- ------------ --------------
Income/(loss) before income taxes
Automotive sector $ 659 $ (370) $1,029
Financial Services sector 678 343 335
------ ------- ------
Total Company 1,337 (27) 1,364
Provision for/(benefit from) income taxes 336 (20) 356
Minority interests in net income/(loss) of subsidiaries 102 73 29
------ ------- ------
Income/(loss) from continuing operations 899 (80) 979
Income/(loss) from discontinued/held-for-sale operations (3) (12) 9
Cumulative effect of change in accounting principle - (1,002) 1,002
------ ------- ------
Net income/(loss) $ 896 $(1,094) $1,990
====== ======= ======
-------------
* Certain amounts were reclassified to conform with current period presentation
consistent with the presentation in our 10-K Report. Reclassifications include
amounts reported cumulatively in the first half of 2002 related to the adoption
of SFAS No. 142, Goodwill and Other Intangible Assets, as described in Note 5 of
the Notes to our Financial Statements and profits and losses related to
discontinued and held-for-sale operations.
Automotive Sector
-----------------
As discussed in our 10-K Report, beginning with the first quarter of 2003,
we are expanding the number of operating segments we present by reporting two
segments within our Automotive sector - North America and International.
The North America Automotive segment primarily includes the sale of Ford,
Lincoln and Mercury cars, trucks and service parts in the U.S., Canada and
Mexico, and the associated costs to design, develop, manufacture and service
these vehicles and parts. The International Automotive segment primarily
includes the sale of Ford brand vehicles and service parts outside of North
America and the sale of Premier Automotive Group ("PAG") brand vehicles (i.e.,
Aston Martin, Jaguar, Land Rover and Volvo) and related service parts throughout
the world (including North America), together with the associated costs to
design, develop, manufacture and service these vehicles and parts. We are
providing separate results for the business units within our International
Automotive segment (i.e., Ford-brand Europe, Ford-brand South America,
Ford-brand Asia Pacific and PAG).
Previously, we reported Automotive financial results on a geographic/legal
entity basis. The new segment reporting is on a business-unit basis consistent
with the way these two new segments are managed. Costs for each segment and
business unit within each segment reflect absolute corporate costs, eliminating
the effect of transfer prices within the Automotive sector for vehicles,
components and product engineering that were previously reported in geographic
results. Interest income and expense and results of non-core Automotive
businesses are reported in Other Automotive; these were previously included in
geographic results.
This change was made to reflect the evolution of our organizational
structure and the recent appointments of Executive Vice Presidents, Jim Padilla
and David Thursfield, to lead our North America and International (including
PAG) automotive operations, respectively. The organizational change became
operationally effective in the first quarter of this year.
16
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations (Continued)
-------------
Worldwide income before income taxes for our Automotive sector was $659
million in the first quarter of 2003 on sales of $34.2 billion compared with
losses before income taxes in the first quarter of 2002 of $370 million, on
sales of $32.2 billion.
Details of first quarter Automotive sector results before income taxes are
shown below (in millions):
First Quarter Income/(Loss)
Before Income Taxes
------------------------------------------
2003
Over/(Under)
2003 2002 2002
------------ ------------ ----------------
North America Automotive segment $1,236 $ 465 $ 771
International Automotive segment
- Ford Europe (249) (268) 19
- Ford South America (31) (85) 54
- Ford Asia Pacific (26) (39) 13
- Premier Automotive Group (88) (70) (18)
- Other International 41 (7) 48
------ ----- ------
Total International Automotive segment (353) (469) 116
Other Automotive (224) (366) 142
------ ----- ------
Total Automotive sector $ 659 $(370) $1,029
====== ===== ======
North America Automotive Segment
Income before income taxes for our North America Automotive segment was
$1.2 billion in the first quarter of 2003 on sales of $22.2 billion. Income
before income taxes in the first quarter of 2002 was $465 million on sales of
$21.5 billion. Cost reductions, a more favorable vehicle mix and higher market
share more than accounted for the improvement. These improvements were partially
offset by lower industry volume.
In the first quarter of 2003, unit sales were 1,023,000 down from 1,030,000
for the same period a year ago. Our U.S. market share for Ford, Lincoln, and
Mercury brand vehicles was 20.0% in the first quarter of 2003, up 0.5 percentage
points from a year ago, due in part to stronger sales of the Ford Taurus, Ford
Focus and Lincoln Navigator models.
International Automotive Segment
Losses before income taxes for our International Automotive segment were
$353 million in the first quarter of 2003 on sales of $12.0 billion. Losses
before income taxes in the first quarter of 2002 were $469 million on sales of
$10.4 billion.
Ford Europe. Our Ford Europe business unit consists of the sale of Ford
brand vehicles and service parts throughout the 19-market European region,
together with the costs associated with the design, development,
manufacture and servicing of those vehicles and parts. Losses before income
taxes for our Ford Europe business unit were $249 million in the first
quarter of 2003 on sales of $5.0 billion. Losses before income taxes in the
first quarter of 2002 were $268 million on sales of $4.1 billion. Higher
unit sales volume and improved cost performance were largely offset by
unfavorable vehicle mix and lower net pricing. European market share for
our Ford-brand vehicles improved to 9.2% in the first quarter of 2003, up
0.2 percentage points from the same period a year ago.
Ford South America. Our Ford South America business unit consists of the
sale of Ford brand vehicles and service parts in South America, principally
Brazil, Argentina and Venezuela, together with the costs associated with
the design, development, manufacture and servicing of those vehicles and
parts. Losses before income taxes for our Ford South America business unit
were $31 million in the first quarter of 2003, compared with losses before
income taxes of $85 million a year ago. The improvement was primarily due
to favorable cost performance, the absence of adverse exchange rate effects
and higher market share, partially offset by lower industry volumes. Market
share of Ford-brand vehicles sold in Brazil was 10.5% in the first quarter
of 2003, up 2.2 percentage points from a year ago, reflecting primarily
higher sales of the new Ford Fiesta model.
17
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations (Continued)
-------------
Ford Asia Pacific. Our Ford Asia Pacific business unit consists of the sale
of Ford brand vehicles and service parts principally in Australia, Taiwan,
Thailand and Japan, together with the costs associated with the design,
development, manufacture and servicing of those vehicles and parts. Losses
before income taxes for our Ford Asia Pacific business unit were $26
million on sales of $1.3 billion. Losses before income taxes in the first
quarter of 2002 were $39 million on sales of $1.0 billion. The improvement
reflects primarily higher unit sales volume following the launch of the new
Ford Falcon model in Australia. Our market share in Australia improved to
14.2% in the first quarter of 2003, up from 12.9% a year ago, primarily due
to the introduction of the new Ford Falcon model.
Premier Automotive Group. Our PAG business unit consists of the sale of PAG
brand vehicles (i.e., Aston Martin, Jaguar, Land Rover and Volvo) and
related service parts throughout the world (including North America),
together with the associated costs to design, develop, manufacture and
service these vehicles and parts. Losses before income taxes for our PAG
business unit were $88 million on sales of $5.4 billion. Losses before
income taxes in the first quarter of 2002 were $70 million on sales of $4.9
billion. The larger loss in the first quarter of 2003 compared with a year
ago reflects primarily the lower level of unit sales for the Jaguar XJ
model (a new version of which was in launch phase during the first quarter
of 2003), offset partially by improved vehicle mix resulting from the
all-new Volvo XC90 and Land Rover Range Rover. U.S. market share was
unchanged compared with the same period a year ago at 1.2% and European
market share was 2.1%, down 0.1 percentage points from the first quarter of
2002.
Other International. Other International consists primarily of our share of
the results of Mazda Motor Corporation, of which we own 33.4%, and of our
Mazda-related joint ventures. Other International had profits of $41
million and losses of $7 million for the first quarter of 2003 and first
quarter of 2002, respectively.
Other Automotive
Other Automotive, representing primarily interest income and expense
(including realized and unrealized gains and losses on marketable securities),
reduced earnings before income taxes by $224 million for the first quarter of
2003. The improvement of $142 million compared with the same period a year ago
is due to higher interest income and lower interest expense and the
non-recurrence of losses in non-core businesses that have since been disposed.
Financial Services Sector
-------------------------
Our Financial Services sector consists primarily of two segments, Ford
Credit and Hertz. Details of first quarter Financial Services sector
income/(loss) before income taxes for the first quarters of 2003 and 2002 are
shown below (in millions).
First Quarter Income/(Loss)
Before Income Taxes
----------------------------------------
2003
Over/(Under)
2003 2002 2002
---------- ----------- -------------
Ford Credit $727 $396 $331
Hertz* (59) (59) -
Minority interests and other 10 6 4
---- ---- ---
Total Financial Services sector $678 $343 $335
==== ==== ====
------------
* The Hertz results include amortization expense related to intangibles at
Ford FSG, Inc., Hertz' parent company.
Ford Credit
Ford Credit's consolidated income before income taxes for the first quarter
of 2003 was $727 million, up $331 million from the first quarter of 2002.
Compared with 2002, the increase reflected primarily a lower provision for
credit losses and the net favorable impact of sales of receivables, offset
partially by a lower amount of managed receivables. Credit losses on Ford
Credit's owned portfolio were $493 million, down $92 million from the first
quarter of 2002, reflecting largely a reduction in the amount of Ford Credit's
owned receivables. Managed credit losses were $685 million, about the same as a
year ago. On March 31, 2003, credit loss reserves were $3.1 billion or 2.6% of
owned receivables, up from 2.18% a year ago. In the first quarter of 2003, the
loss-to-receivables ratio (that is, actual net credit losses during a period as
a percentage of average outstanding net receivables for that period) for Ford
Credit's owned portfolio was 1.61% compared with 1.68% a year ago and 1.92% in
the fourth quarter of 2002.
18
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations (Continued)
-------------
Sales of receivables reduce Ford Credit's financing revenues in the year
the receivables are sold, as well as in future years, compared with what they
otherwise would be if Ford Credit continued to own the receivables. These
foregone revenues can reduce financing margins and offset any positive impact
associated with the gain on sales of receivables. The net impact of
securitizations on Ford Credit's revenues and earnings in a given period will
vary depending on the amount, type of receivable and timing of securitizations
in the current period and the preceding two to three year period, as well as the
interest rate environment at the times the finance receivables were originated
and securitized. The following table shows the calculations and amounts Ford
Credit uses to analyze the pre-tax impact of sales of receivables through
securitizations and whole-loan sale transactions for the first quarter of 2003
and 2002, net of the effect of reduced financing margins resulting from the
foregone revenue attributable to the sold receivables (in millions):
First Quarter
-----------------------
2003 2002
---------- ---------
Net gain on sales of receivables $ 233 $ 213
Servicing fees 197 158
Interest income from retained securities 210 152
Excess spread and other 251 115
----- -----
Total revenue related to receivables sales 891 638
Reduction in financing margin from current-year securitizations* (122) (107)
Reduction in financing margin from prior-year securitizations* (783) (644)
----- -----
Pre-tax impact of receivables sales $ (14) $(113)
===== =====
------------
* Calculated on a basis using a borrowing cost equal to the actual financing
rate paid to securitization investors, which was significantly lower than Ford
Credit's average borrowing cost for unsecured debt for the periods presented. If
calculated on a basis using Ford Credit's average borrowing cost for unsecured
debt, the reduction in financing margin from securitization would be
significantly lower and the pre-tax impact of sales of receivables would be
significantly higher than the amounts shown.
Hertz
In the first quarter of 2003, Hertz had losses before income taxes of $59
million, equal to the losses in the first quarter a year ago. The losses reflect
the seasonally lower demand in the car and equipment rental businesses during
the winter months and the continued impact of economic and geo-political
uncertainty on the travel industry.
LIQUIDITY AND CAPITAL RESOURCES
Automotive Sector
-----------------
For the Automotive sector, liquidity and capital resources include cash
generated from operations, gross cash balances, our ability to raise funds in
capital markets and committed credit lines.
Gross Cash - We consider Automotive gross cash to include cash and cash
equivalents, marketable securities and assets contained in a Voluntary Employee
Beneficiary Association ("VEBA") trust, which are financial assets available to
fund certain future employee benefit obligations in the near term, as summarized
below (in billions):
2003 2002
-------------------------- --------------------------
March 31 January 1 March 31 January 1
------------ ------------- ------------ ------------
Cash and cash equivalents $ 7.1 $ 5.2 $ 8.1 $ 4.1
Marketable securities 17.3 17.4 11.4 10.9
------ ------ ------ ------
Total cash and marketable securities 24.4 22.6 19.5 15.0
VEBA assets 2.2 2.7 2.0 2.7
------ ------ ------ ------
Gross cash $ 26.6 $ 25.3 $ 21.5 $ 17.7
====== ====== ====== ======
19
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations (Continued)
-------------
In managing our business, we classify changes in gross cash in three
categories: operating related (including capital expenditures and capital
transactions with the Financial Services sector), acquisitions and divestitures,
and financing related. Changes in Automotive gross cash for the first quarter of
2003 and 2002 are summarized below (in billions):
First Quarter
----------------------
2003 2002
---------- ----------
Gross cash at March 31 $26.6 $21.5
Gross cash at January 1 25.3 17.7
----- -----
March 31 over/(under) January 1 $ 1.3 $ 3.8
===== =====
Operating related cash flows
Automotive income/(loss) before income taxes $ 0.7 $(0.4)
Capital expenditures (1.4) (1.5)
Depreciation and special tools amortization 1.4 1.2
Changes in receivables, inventory and trade payables (0.3) (0.5)
U.S. pension fund contributions (1.0) -
Capital transactions with Financial Services sector * 0.8 (0.7)
All other 0.4 0.8
----- ----
Total operating related cash flows before tax refunds 0.6 (1.1)
Tax refunds 0.9 -
----- -----
Total operating related cash flows 1.5 (1.1)
Divestitures and asset sales 0.2 0.3
----- -----
Total acquisitions and divestitures 0.2 0.3
Financing related cash flows
Convertible preferred securities - 4.9
Dividends paid to shareholders (0.2) (0.2)
Net purchase of common stock - (0.1)
Changes in total Automotive sector debt (0.2) -
----- -----
Total financing related cash flows (0.4) 4.6
----- -----
Total change in gross cash $ 1.3 $ 3.8
===== =====
---------------
* Reflects operating related cash flows (i.e., dividends, capital
contributions, loans, and loan repayments).
Shown in the table below is a reconciliation between financial statement
cash flows from operating activities before securities trading and operating
related cash flows, calculated as shown in the table above, for the first
quarter of 2003 and 2002 (in billions):
First Quarter
----------------------------
2003 2002
------------- -------------
Cash flows from operating activities before securities trading* $ 3.0 $ 2.3
Items included in operating related cash flow
Capital transactions with Financial Services sector 0.8 (0.7)
Capital expenditures (1.4) (1.5)
Net transactions between Automotive and Financial Services sectors** (0.3) (0.4)
Other, primarily exclusion of cash in-flows from VEBA draw-down (0.6) (0.8)
----- -----
Total reconciling items (1.5) (3.4)
----- -----
Operating related cash flows $ 1.5 $(1.1)
===== =====
--------------
* As shown in our condensed sector statement of cash flows for the Automotive
sector.
** Primarily payables and receivables between the sectors in the normal course
of business, as shown in our sector statement of cash flows.
Capital transactions with the Financial Services sector improved operating
related cash flow by $800 million in the first quarter of 2003, compared to a
$700 million reduction in cash flow in the first quarter of 2002 related to a
capital contribution to Ford Credit. In addition, $200 million of dividends from
the Financial Services sector in the first quarter of 2003 have been recorded as
divestitures and asset sales as a result of the completion of the sale by Ford
Credit of its Axus vehicle fleet leasing unit.
Debt and Net Cash - At March 31, 2003, our Automotive sector had total debt
of $14.0 billion, down $200 million from December 31, 2002. At March 31, 2003,
our Automotive sector had net cash (defined as gross cash less total debt) of
$12.6 billion, compared with $11.1 billion at December 31, 2002.
20
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations (Continued)
-------------
Financial Services Sector
-------------------------
Ford Credit
Debt and Cash - Ford Credit's total debt was $137.3 billion at March 31,
2003, down $3.0 billion compared with December 31, 2002. Ford Credit's
outstanding commercial paper at March 31, 2003 totaled $7.8 billion. At March
31, 2003, the average remaining maturity of Ford Credit's commercial paper in
North America and Europe was 31 days. At March 31, 2003, Ford Credit had cash
and cash equivalents of $11.7 billion. In the normal course of its funding
activities, Ford Credit may generate more proceeds than are necessary for its
immediate funding needs. This excess funding is referred to as "overborrowings."
Of the $11.7 billion of cash and cash equivalents, $10.2 billion represented
overborrowings, while the remaining $1.5 billion was employed in operating
activities.
Funding - During the first quarter of 2003, Ford Credit's long-term debt
proceeds totaled $3.7 billion, and total securitization funding proceeds were
$9.0 billion.
Leverage - At March 31, 2003, Ford Credit's financial statement leverage
(debt-to-equity ratio) was 10.4 to 1. Ford Credit's managed leverage was 12.8 to
1. The following table illustrates the calculation of Ford Credit's financial
statement leverage (debt and stockholder's equity in billions):
March 31, December 31,
--------------------- ----------------------------------------
2003 2002 2002 2001 2000 1999
---- ---- ---- ---- ---- ----
Total debt $137.3 $137.4 $140.3 $145.8 $145.6 $132.1
Total stockholder's equity 13.2 13.1 13.6 12.0 12.2 10.9
Debt-to-equity ratio (to 1) 10.4 10.5 10.3 12.2 11.9 12.1
The following table illustrates the calculation of Ford Credit's managed
leverage (debt and stockholder's equity in billions):
March 31, December 31,
--------------------- ----------------------------------------
2003 2002 2002 2001 2000 1999
---- ---- ---- ---- ---- ----
Total debt $137.3 $137.4 $140.3 $145.8 $145.6 $132.1
Total securitized receivables outstanding 73.3 66.0 71.4 58.7 28.4 19.5
Retained interest in securitized receivables (18.1) (9.6) (17.6) (12.5) (3.7) (3.5)
Adjustments for cash and cash equivalents (11.7) (7.6) (6.8) (2.9) (1.1) (0.9)
Adjustments for SFAS No. 133 (6.1) (1.6) (6.2) (2.1) -- --
------ ------ ------ ------ ------ ------
Adjusted debt $174.7 $184.6 $181.1 $187.0 $169.2 $147.2
====== ====== ====== ====== ====== ======
Total stockholder's equity $ 13.2 $ 13.1 $ 13.6 $ 12.0 $ 12.2 $ 10.9
Adjustment for SFAS No. 133 0.5 0.4 0.5 0.6 -- --
Adjustment for minority interest * * * * * 0.4
------ ------ ------ ------ ------ ------
Adjusted equity $ 13.7 $ 13.5 $ 14.1 $ 12.6 $ 12.2 $ 11.3
====== ====== ====== ====== ====== ======
Managed debt-to-equity ratio (to 1) 12.8 13.7 12.8 14.8 13.9 13.0
--------
* Less than $50 million.
We believe that the use of the managed leverage measure, which is the
result of several adjustments to Ford Credit's financial statement leverage, is
useful to our investors because it reflects the way Ford Credit manages its
business. Ford Credit retains interests in receivables sold in securitization
transactions, and, with respect to subordinated retained interests, has credit
risk. Accordingly, it considers securitization as an alternative source of
funding and evaluates credit losses, receivables and leverage on a managed as
well as a financial statement basis. As a result, the managed leverage measure
provides our investors with meaningful information regarding management's
decision-making processes.
Hertz
Debt and Cash - Hertz' total debt was $7.2 billion at March 31, 2003, up
$200 million from December 31, 2002. Outstanding commercial paper at March 31,
2003 totaled $1.9 billion at Hertz, with an average remaining maturity of 31
days compared with $1.5 billion at December 31, 2002. At March 31, 2003, Hertz
had cash and cash equivalents of $238 million, up from $190 million at December
31, 2002.
During 2002, Hertz launched an asset-backed securitization program for its
domestic car rental fleet to reduce its borrowing costs and enhance its
financing resources. As of March 31, 2003, $700 million of asset-backed
commercial paper was outstanding under this program.
21
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations (Continued)
-------------
Total Company
-------------
Stockholders' Equity - Our stockholders' equity was $6.7 billion at March
31, 2003, up $1.1 billion compared with December 31, 2002. The increase reflects
primarily net income of $896 million and other comprehensive income of $412
million, less dividends of $183 million. See Note 8 of the Notes to our
Financial Statements for further discussion of other comprehensive income.
Debt Ratings - On March 7, 2003, Standard & Poor's Rating Services ("S&P")
affirmed its long-term debt ratings on Ford and Ford Credit at 'BBB', with a
negative outlook. It affirmed the short-term debt rating of Ford Credit at A2,
with a negative outlook. On April 9, 2003, S&P reaffirmed these ratings.
On March 7, 2003, Moody's Investors Service affirmed its long-term debt
rating on Ford of 'Baa1' and its long- and short-term debt ratings on Ford
Credit of 'A3' and 'Prime-2', respectively. Moody's stated that the outlook for
the long-term ratings remains negative.
On April 28, 2003, Fitch, Inc. ("Fitch") affirmed its long-term debt
ratings on Ford, Ford Credit and Hertz at 'BBB+' with a negative outlook. Fitch
also affirmed the commercial paper ratings for all entities at 'F2' with a
negative outlook.
OFF-BALANCE SHEET ARRANGEMENTS
Special Purpose Entities - At March 31, 2003, the total outstanding
principal amount of receivables sold by Ford Credit that was held by
securitization trusts was $73.2 billion, up $1.9 billion from December 31, 2002.
Ford Credit's retained interests in such sold receivables at March 31, 2003 were
$18.1 billion, up from $17.6 billion at December 31, 2002. This increase in
retained interests reflected primarily net increased wholesale receivables and
new retail securitization transactions.
Variable Interest Entities - For a discussion of variable interest
entities, see Note 6 of the Notes to our Financial Statements.
OUTLOOK
We previously communicated 2003 planning assumptions for industry vehicle
unit volumes in the U.S. and Europe of 16.5 million units and 17.0 million
units, respectively. We remain comfortable with the assumption of 16.5 million
units in the U.S., but are changing our assumption for Europe to 16.5 million
units.
We project our North American vehicle production for the second quarter of
2003 to be 990,000 units, which would represent a reduction of 42,000 units from
the first quarter of 2003. This reduction is largely explained by lower
production of the Ford F-150 model due to the changeover in the second quarter
to the all-new version of that model at our Norfolk and Kansas City plants.
Lower production of this profitable model also will result in a less favorable
mix of vehicles produced in the second quarter.
In April 2003, marketing incentive levels increased compared with first
quarter 2003 levels due to competitive actions in the industry. We expect
marketing incentives to remain high for the balance of the second quarter and
perhaps beyond. This will put at risk our 2003 planning assumptions of zero net
pricing for Ford, Lincoln and Mercury brand vehicles sold in the United States
and 1.0% net pricing for Ford-brand vehicles sold in Europe. The net pricing
metric measures the combined effect of changes in vehicle wholesale prices and
marketing incentives, while excluding the effects of changes in unit sales
volumes, product mix, and foreign currency exchange rates.
We expect to continue to accelerate our cost reduction efforts for the
remainder of the year and thereby mitigate the effect of any risk to our net
pricing assumptions for 2003.
Ford Credit's first quarter 2003 results reflected, in part, an
acceleration of planned sales of receivables to take advantage of favorable
market conditions. We expect net gains on sales of receivables will be lower in
the second quarter of 2003.
Based on the foregoing expectations and projections, we expect our earnings
in the second quarter of 2003 to be about $0.10 per share, which would result in
first half 2003 earnings of about $0.55 per share. Given the patterns of the
Ford F-150 production and the sales of receivables in the first and second
quarters, it is appropriate to view earnings for the first and second quarters
of 2003 in total. We continue to expect our full-year 2003 earnings to be about
$0.70 per share.
22
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations (Continued)
-------------
RISK FACTORS
Statements included or incorporated by reference herein may constitute
"forward looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements involve a number of risks,
uncertainties, and other factors that could cause actual results to differ
materially from those stated, including, without limitation:
o greater price competition in the U.S. and Europe resulting from currency
fluctuations, industry overcapacity or other factors;
o a significant decline in industry sales, particularly in the U.S. or
Europe, resulting from slowing economic growth, geo-political events or
other factors;
o lower-than-anticipated market acceptance of new or existing products;
o work stoppages at key Ford or supplier facilities or other interruptions of
supplies;
o the discovery of defects in vehicles resulting in delays in new model
launches, recall campaigns or increased warranty costs;
o increased safety, emissions, fuel economy or other regulation resulting in
higher costs and/or sales restrictions;
o unusual or significant litigation or governmental investigations arising
out of alleged defects in our products or otherwise;
o worse-than-assumed economic and demographic experience for our post
retirement benefit plans (e.g., investment returns, interest rates, health
care cost trends, benefit improvements);
o currency or commodity price fluctuations;
o a market shift from truck sales in the U.S.;
o economic difficulties in South America or Asia;
o reduced availability of or higher prices for fuel;
o labor or other constraints on our ability to restructure our business;
o a change in our requirements under long-term supply arrangements under
which we are obligated to purchase minimum quantities or pay minimum
amounts;
o a further credit rating downgrade;
o inability to access debt or securitization markets around the world at
competitive rates or in sufficient amounts;
o higher-than-expected credit losses;
o lower-than-anticipated residual values for leased vehicles;
o increased price competition in the rental car industry and/or a general
decline in business or leisure travel due to terrorist attacks, acts of war
or measures taken by governments in response thereto that negatively affect
the travel industry; and
o our inability to implement the Revitalization Plan.
OTHER FINANCIAL INFORMATION
The interim financial information included in this 10-Q Report has not been
audited by PricewaterhouseCoopers LLP ("PwC"). In reviewing such information,
PwC has applied limited procedures in accordance with professional standards for
reviews of interim financial information. Accordingly, you should restrict your
reliance on their reports on such information. PwC is not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
reports on the interim financial information because such reports do not
constitute "reports" or "parts" of the registration statements prepared or
certified by PwC within the meaning of Sections 7 and 11 of the Securities Act
of 1933.
23
Item 3. Quantitative and Qualitative Disclosures About Market Risks
--------------------------------------------------------------------
Except for the following discussion of Interest Rate Risk, there is no
material change in the information reported under Item 7A of the 10-K Report.
Interest Rate Risk
------------------
Interest rate risk relates to the gain or loss we could incur to our
investment portfolio in the event of a change in interest rates. At March 31,
2003, we had $26.6 billion in gross cash, which we invest in securities of
various types and maturities. Many of these securities are interest sensitive.
These securities are generally classified as Trading or Available for Sale. The
Trading portfolio gains and losses (unrealized and realized) are reported in the
income statement. The Available for Sale portfolio realized gains or losses are
reported in the income statement, and unrealized gains and losses are reported
in the Consolidated Statement of Stockholders' Equity in other comprehensive
income. The investment strategy is based on clearly defined risk and liquidity
guidelines to maintain liquidity, minimize risk, and earn a reasonable return on
the short-term investment.
At any time, a rise in interest rates could have a material adverse impact
on the fair value of our Trading and our Available for Sale portfolios. As of
March 31, 2003, the value of our Trading portfolio was $17.8 billion (including
assets contained in a VEBA trust), the value of our Available for Sale portfolio
was $1.7 billion, and the value of our cash and cash equivalents was $7.1
billion.
Assuming a hypothetical, instantaneous increase in interest rates of one
percentage point, the value of our Trading and Available for Sale portfolios
would be reduced by $178 million and $29 million, respectively. While this is
our best estimate of the impact of the specified interest rate scenario, actual
results could differ from those projected. The sensitivity analysis presented
assumes interest rate changes are instantaneous, parallel shifts in the yield
curve. In reality, interest rate changes are rarely instantaneous or parallel.
Item 4. Controls and Procedures
--------------------------------
Evaluation of disclosure controls and procedures. William Clay Ford, Jr.,
our Chief Executive Officer, and Allan D. Gilmour, our Chief Financial Officer,
have performed an evaluation of the Company's disclosure controls and
procedures, as that term is defined in Rule 13a-14 (c) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), within 90 days of the
date of this report and each has concluded that such disclosure controls and
procedures are effective to ensure that information required to be disclosed in
our periodic reports filed under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified by the Securities and
Exchange Commission's rules and regulations.
Changes in internal controls. No significant changes in the Company's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses, were
made as a result of the evaluation.
Part II. Other Information
Item 1. Legal Proceedings
--------------------------
Class Actions
-------------
F-150 Radiator Class Actions. (Previously discussed on pages 31 and 32 of
the 10-K Report.) The case filed in South Carolina has been remanded to state
court. The dismissal of the New York case has been affirmed by the appellate
court.
Crown Victoria Police Interceptor Class Actions. (Previously discussed on
page 32 of the 10-K Report). One additional purported class action relating to
non-police Ford Crown Victoria vehicles has been filed against us in California,
involving allegations and demands for relief similar to those described under
this caption in the 10-K Report.
Fifteen-Passenger Van Class Actions. (Previously discussed on page 33 of
the 10-K Report). The two cases in Texas have been remanded to state court. On
April 23, 2003, we received a summons and complaint in a third case, filed in
state court in Arkansas, involving allegations and demands for relief similar to
those described under this caption in the 10-K Report.
24
Item 1. Legal Proceedings (Continued)
-------------------------
Other Matters
-------------
Rouge Powerhouse Insurance Litigation. (Previously discussed on pages 33
and 34 of the 10-K Report). The decision of the arbitration panel was issued on
March 5, 2003. The panel's ruling included an award amount in favor of Factory
Mutual Insurance Company that was substantially less than the $340 million
claimed. This resolves the insurance subrogation litigation resulting from the
1999 Rouge Powerhouse explosion.
Antitrust Class Actions. (Previously discussed on page 34 of the 10-K
Report). A total of 14 cases have been served in federal courts in California
(three cases), Illinois, Florida, Massachusetts (three cases), New Jersey, and
New York (five cases), and a total of 13 cases have been served in state courts
in California (ten cases), New Mexico, New York and Tennessee. Each of these
cases involves allegations and demands for relief similar to those described
under this caption in the 10-K Report.
Item 2. Changes in Securities and Use of Proceeds
-------------------------------------------------
During the first quarter of 2003, we issued a total of 1,386,887 shares of
our common stock under the 1998 Long-Term Incentive Plan to certain directors,
officers and other employees as part of their total compensation package,
including the consulting agreement between us and Mr. Edsel B. Ford II, a
director of the Company, and the employment agreement between us and Mr. Carl E.
Reichardt, an officer and director of the Company. Such shares were not
registered pursuant to the Securities Act of 1933, as amended, in reliance on
Section 4(2) thereof.
Item 5. Other Information
--------------------------
Governmental Standards
----------------------
Mobile Source Emissions Control--U.S. Requirements
--------------------------------------------------
In April 2003, the California Air Resources Board voted to adopt
significant changes to the ZEV mandate as anticipated. These changes shift the
near-term focus of the regulation away from battery-electric vehicles to
advanced-technology vehicles (e.g., hybrid electric vehicles or compressed
natural gas vehicles) with extremely low--but not zero--tailpipe emissions. In
addition, the rules call on the industry to ramp up production of zero-emission
fuel cell vehicles over the longer term. In the aggregate, the industry must
produce 250 zero-emission fuel cell vehicles by the 2008 model year, and 2,500
more in the 2009-2011 model year period. A panel of independent experts will
review the feasibility of these requirements in 2006. While the changes appear
to reflect a welcome recognition that battery-electric vehicles simply do not
have the potential to achieve widespread customer acceptance, there are
substantial questions about the feasibility of producing the required number of
fuel-cell vehicles due to the substantial engineering challenges and high costs
associated with this technology.
Motor Vehicle Fuel Economy--U.S. Requirements
---------------------------------------------
In April 2003, the National Highway Traffic Safety Administration (the
"Safety Administration") issued a final rule increasing the corporate average
fuel economy ("CAFE") standard for light trucks to 21.0 mpg for model year 2005;
21.6 mpg for model year 2006; and 22.2 mpg for model year 2007. The Safety
Administration is preparing to start a new rulemaking process to increase CAFE
standards for passenger cars. It is also expected to seek public comment on the
possibility of changing the framework of the light truck CAFE standards,
possibly by creating a new truck classification scheme. There are a number of
CAFE-related bills under consideration in Congress, and there is some potential
for new legislation that overtakes the regulatory process and establishes new
standards by statute.
End-of-Life Vehicle Directive
-----------------------------
One additional country, Luxemburg, has adopted legislation implementing
the European Parliament's end-of-life vehicle directive (the "ELV Directive").
On April 16, 2003, ten countries signed an accession agreement with the European
Union to become new members of the European Union on May 1, 2004. Of those
states, only Slovenia has implemented the ELV Directive and the others are
expected to implement the ELV Directive during 2003 or 2004.
25
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
--------
Please refer to the Exhibit Index on Page 29.
(b) Reports on Form 8-K
-------------------
The Registrant filed the following Current Reports on Form 8-K during the
quarter ended March 31, 2003:
Current Report on Form 8-K dated January 3, 2003 included information
relating to U.S. retail sales of Ford vehicles in December 2002.
Current Report on Form 8-K dated January 10, 2003 included information
relating to Ford's 2003 financial milestones.
Current Report on Form 8-K dated January 21, 2003 included information
relating to Ford's fourth quarter 2002 and full year 2002 financial
results.
Current Report on Form 8-K dated February 3, 2003 included information
relating to U.S. retail sales of Ford vehicles in January 2003.
Current Report on Form 8-K dated March 3, 2003 included information
relating to U.S. retail sales of Ford vehicles in February 2003.
Current Report on Form 8-K dated March 13, 2003 included information
relating to Ford's second quarter 2003 North American production plan.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FORD MOTOR COMPANY
-----------------------------
(Registrant)
Date: May 8, 2003 By:
--------------- /s/Don R. Leclair
-----------------------------
Don R. Leclair
Vice President and Controller
(principal accounting officer)
26
CERTIFICATION
I, William Clay Ford, Jr., Chairman of the Board and Chief Executive
Officer of Ford Motor Company, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Ford Motor
Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 7, 2003
-----------
By /s/William Clay Ford, Jr.
----------------------------
William Clay Ford, Jr.
Chairman of the Board and
Chief Executive Officer
27
CERTIFICATION
I, Allan D. Gilmour, Vice Chairman and Chief Financial Officer of Ford
Motor Company, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Ford Motor
Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 7, 2003
----------------
By /s/Allan D. Gilmour
----------------------------
Allan D. Gilmour
Vice Chairman and
Chief Financial Officer
28
EXHIBIT INDEX
-------------
Designation Description Method of Filing
-------------------- --------------------------------------------------------- -----------------------------
Exhibit 10 Agreement between Ford Motor Company and John M. Filed with this Report
Rintamaki dated February 28, 2003
Exhibit 12 Ford Motor Company and Subsidiaries Calculation Filed with this Report
of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
Exhibit 15 Letter of PricewaterhouseCoopers LLP, Independent Filed with this Report
Accountants, dated May 7, 2003, relating to
Financial Information
Exhibit 99.1 CEO Certification Pursuant to Section 906 of the Filed with this Report
Sarbanes-Oxley Act of 2002
Exhibit 99.2 CFO Certification Pursuant to Section 906 of the Filed with this Report
Sarbanes-Oxley Act of 2002