form10q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
|
SECURITIES
EXCHANGE ACT OF 1934
|
|
|
|
For
the quarterly period ended March 31,
2009
|
|
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
|
SECURITIES
EXCHANGE ACT OF 1934
|
|
|
|
For
the transition period from ___________ to
____________
|
|
|
|
Commission
File Number: 1-3950
|
FORD
MOTOR COMPANY
(Exact
name of registrant as specified in its charter)
Delaware
|
38-0549190
|
(State
of Incorporation)
|
(IRS
Employer Identification No.)
|
|
|
One American Road, Dearborn,
Michigan
|
48126
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(313)
322-3000
(Registrant's
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
|
|
|
x
|
Yes
|
|
¨
|
No
|
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of "large accelerated filer,"
"accelerated filer" and "smaller reporting company in Rule 12b-2 of the
Exchange Act.
|
Large
accelerated filer
|
x
|
Accelerated
filer
|
¨
|
Non-accelerated
filer
|
¨
|
Smaller
reporting company
|
¨
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
|
|
|
¨
|
Yes
|
|
x
|
No
|
Indicate
by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post
such files).
|
|
|
¨
|
Yes
|
|
o
|
No
|
As of May
1, 2009, the registrant had outstanding 2,802,397,653 shares of Common Stock
and 70,852,076 shares of Class B Stock.
Exhibit
index located on page number 68.
PART
I. FINANCIAL INFORMATION
ITEM
1. Financial
Statements
FORD
MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF OPERATIONS
For
the Periods Ended March 31, 2009 and 2008
(in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
Sales
and revenues
|
|
|
|
|
|
|
Automotive
sales
|
|
$ |
21,368 |
|
|
$ |
39,117 |
|
Financial
Services revenues
|
|
|
3,410 |
|
|
|
4,175 |
|
Total
sales and revenues
|
|
|
24,778 |
|
|
|
43,292 |
|
|
|
|
|
|
|
|
|
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
Automotive
cost of sales
|
|
|
21,662 |
|
|
|
35,456 |
|
Selling,
administrative and other expenses
|
|
|
3,727 |
|
|
|
5,094 |
|
Interest
expense
|
|
|
1,936 |
|
|
|
2,575 |
|
Financial
Services provision for credit and insurance losses
|
|
|
402 |
|
|
|
344 |
|
Total
costs and expenses
|
|
|
27,727 |
|
|
|
43,469 |
|
|
|
|
|
|
|
|
|
|
Automotive
interest income and other non-operating income/(expense), net (Note
7)
|
|
|
1,343 |
|
|
|
92 |
|
Financial
Services other income/(loss), net (Note 7)
|
|
|
113 |
|
|
|
229 |
|
Equity
in net income/(loss) of affiliated companies
|
|
|
(127 |
) |
|
|
142 |
|
Income/(Loss)
before income taxes
|
|
|
(1,620 |
) |
|
|
286 |
|
Provision
for/(benefit from) income taxes
|
|
|
(204 |
) |
|
|
95 |
|
Income/(Loss)
from continuing operations
|
|
|
(1,416 |
) |
|
|
191 |
|
Income/(Loss)
from discontinued operations (Note 10)
|
|
|
— |
|
|
|
1 |
|
Net
income/(loss)
|
|
|
(1,416 |
) |
|
|
192 |
|
Less:
Income/(loss) attributable to noncontrolling interests
|
|
|
11 |
|
|
|
122 |
|
Net
income/(loss) attributable to Ford Motor Company
|
|
$ |
(1,427 |
) |
|
$ |
70 |
|
|
|
|
|
|
|
|
|
|
NET
INCOME/(LOSS) ATTRIBUTABLE TO FORD MOTOR COMPANY
|
|
|
|
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
(1,427 |
) |
|
$ |
69 |
|
Income/(Loss)
from discontinued operations (Note 10)
|
|
|
— |
|
|
|
1 |
|
Net
income/(loss)
|
|
$ |
(1,427 |
) |
|
$ |
70 |
|
|
|
|
|
|
|
|
|
|
AMOUNTS
PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK
(Note 11)
|
|
|
|
|
|
|
|
|
Basic
income/(loss)
|
|
|
|
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
(0.60 |
) |
|
$ |
0.03 |
|
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
— |
|
Net
income/(loss)
|
|
$ |
(0.60 |
) |
|
$ |
0.03 |
|
Diluted
income/(loss)
|
|
|
|
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
(0.60 |
) |
|
$ |
0.03 |
|
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
— |
|
Net
income/(loss)
|
|
$ |
(0.60 |
) |
|
$ |
0.03 |
|
The
accompanying notes are part of the financial statements
Item
1. Financial Statements (Continued)
FORD
MOTOR COMPANY AND SUBSIDIARIES
SECTOR
STATEMENT OF OPERATIONS
For
the Periods Ended March 31, 2009 and 2008
(in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
AUTOMOTIVE
|
|
|
|
|
|
|
Sales
|
|
$ |
21,368 |
|
|
$ |
39,117 |
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
21,662 |
|
|
|
35,456 |
|
Selling,
administrative and other expenses
|
|
|
2,044 |
|
|
|
3,109 |
|
Total
costs and expenses
|
|
|
23,706 |
|
|
|
38,565 |
|
Operating
income/(loss)
|
|
|
(2,338 |
) |
|
|
552 |
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
484 |
|
|
|
558 |
|
|
|
|
|
|
|
|
|
|
Interest
income and other non-operating income/(expense), net (Note
7)
|
|
|
1,343 |
|
|
|
92 |
|
Equity
in net income/(loss) of affiliated companies
|
|
|
11 |
|
|
|
136 |
|
Income/(Loss)
before income taxes — Automotive
|
|
|
(1,468 |
) |
|
|
222 |
|
|
|
|
|
|
|
|
|
|
FINANCIAL
SERVICES
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
3,410 |
|
|
|
4,175 |
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
1,452 |
|
|
|
2,017 |
|
Depreciation
|
|
|
1,435 |
|
|
|
1,836 |
|
Operating
and other expenses
|
|
|
248 |
|
|
|
149 |
|
Provision
for credit and insurance losses
|
|
|
402 |
|
|
|
344 |
|
Total
costs and expenses
|
|
|
3,537 |
|
|
|
4,346 |
|
|
|
|
|
|
|
|
|
|
Other
income/(loss), net (Note 7)
|
|
|
113 |
|
|
|
229 |
|
Equity
in net income/(loss) of affiliated companies
|
|
|
(138 |
) |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income
taxes — Financial Services
|
|
|
(152 |
) |
|
|
64 |
|
|
|
|
|
|
|
|
|
|
TOTAL
COMPANY
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
(1,620 |
) |
|
|
286 |
|
Provision
for/(Benefit from) income taxes
|
|
|
(204 |
) |
|
|
95 |
|
Income/(Loss)
from continuing operations
|
|
|
(1,416 |
) |
|
|
191 |
|
Income/(Loss)
from discontinued operations (Note 10)
|
|
|
— |
|
|
|
1 |
|
Net
income/(loss)
|
|
|
(1,416 |
) |
|
|
192 |
|
Less:
Income/(loss) attributable to noncontrolling interests
|
|
|
11 |
|
|
|
122 |
|
Net
income/(loss) attributable to Ford Motor Company
|
|
$ |
(1,427 |
) |
|
$ |
70 |
|
|
|
|
|
|
|
|
|
|
NET
INCOME/(LOSS) ATTRIBUTABLE TO FORD MOTOR COMPANY
|
|
|
|
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
(1,427 |
) |
|
$ |
69 |
|
Income/(Loss)
from discontinued operations (Note 10)
|
|
|
— |
|
|
|
1 |
|
Net
income/(loss)
|
|
$ |
(1,427 |
) |
|
$ |
70 |
|
|
|
|
|
|
|
|
|
|
AMOUNTS
PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK
(Note 11)
|
|
|
|
|
|
|
|
|
Basic
income/(loss)
|
|
|
|
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
(0.60 |
) |
|
$ |
0.03 |
|
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
— |
|
Net
income/(loss)
|
|
$ |
(0.60 |
) |
|
$ |
0.03 |
|
Diluted
income/(loss)
|
|
|
|
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
(0.60 |
) |
|
$ |
0.03 |
|
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
— |
|
Net
income/(loss)
|
|
$ |
(0.60 |
) |
|
$ |
0.03 |
|
The
accompanying notes are part of the financial statements
Item
1. Financial Statements (Continued)
FORD
MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEET
(in
millions)
|
|
March
31,
|
|
|
|
|
|
|
(unaudited)
|
|
ASSETS
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
21,093 |
|
|
$ |
22,049 |
|
Marketable
securities
|
|
|
20,363 |
|
|
|
17,411 |
|
Finance
receivables, net
|
|
|
84,008 |
|
|
|
93,484 |
|
Other
receivables, net
|
|
|
5,390 |
|
|
|
5,674 |
|
Net
investment in operating leases
|
|
|
21,912 |
|
|
|
25,250 |
|
Inventories
(Note 2)
|
|
|
6,575 |
|
|
|
6,988 |
|
Equity
in net assets of affiliated companies
|
|
|
1,736 |
|
|
|
1,599 |
|
Net
property
|
|
|
23,779 |
|
|
|
24,143 |
|
Deferred
income taxes
|
|
|
2,818 |
|
|
|
3,108 |
|
Goodwill
and other net intangible assets (Note 4)
|
|
|
227 |
|
|
|
246 |
|
Assets
of held-for-sale operations (Note 10)
|
|
|
7,273 |
|
|
|
8,612 |
|
Other
assets
|
|
|
7,960 |
|
|
|
9,734 |
|
Total
assets
|
|
$ |
203,134 |
|
|
$ |
218,298 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Payables
|
|
$ |
12,882 |
|
|
$ |
13,145 |
|
Accrued
liabilities and deferred revenue
|
|
|
54,429 |
|
|
|
59,526 |
|
Debt
(Note 5)
|
|
|
145,586 |
|
|
|
152,577 |
|
Deferred
income taxes
|
|
|
1,706 |
|
|
|
2,035 |
|
Liabilities
of held-for-sale operations (Note 10)
|
|
|
5,008 |
|
|
|
5,542 |
|
Total
liabilities
|
|
|
219,611 |
|
|
|
232,825 |
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
Capital
stock
|
|
|
|
|
|
|
|
|
Common
Stock, par value $0.01 per share (2,350 million
shares issued)
|
|
|
23 |
|
|
|
23 |
|
Class
B Stock, par value $0.01 per share (71 million shares
issued)
|
|
|
1 |
|
|
|
1 |
|
Capital
in excess of par value of stock
|
|
|
10,985 |
|
|
|
10,875 |
|
Accumulated
other comprehensive income/(loss)
|
|
|
(10,624 |
) |
|
|
(10,085 |
) |
Treasury
stock
|
|
|
(180 |
) |
|
|
(181 |
) |
Retained
earnings/(Accumulated deficit)
|
|
|
(17,782 |
) |
|
|
(16,355 |
) |
Total equity/(deficit)
attributable to Ford Motor Company
|
|
|
(17,577 |
) |
|
|
(15,722 |
) |
Equity/(Deficit)
attributable to noncontrolling interests
|
|
|
1,100 |
|
|
|
1,195 |
|
Total
equity/(deficit)
|
|
|
(16,477 |
) |
|
|
(14,527 |
) |
Total
liabilities and equity
|
|
$ |
203,134 |
|
|
$ |
218,298 |
|
The
accompanying notes are part of the financial statements
Item
1. Financial Statements (Continued)
FORD
MOTOR COMPANY AND SUBSIDIARIES
SECTOR
BALANCE SHEET
(in
millions)
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
ASSETS
|
|
|
|
|
|
|
Automotive
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
8,102 |
|
|
$ |
6,377 |
|
Marketable
securities
|
|
|
13,483 |
|
|
|
9,296 |
|
Total
cash and marketable securities
|
|
|
21,585 |
|
|
|
15,673 |
|
Receivables,
net
|
|
|
2,694 |
|
|
|
3,065 |
|
Inventories
(Note 2)
|
|
|
6,575 |
|
|
|
6,988 |
|
Deferred
income taxes
|
|
|
306 |
|
|
|
302 |
|
Other
current assets
|
|
|
2,099 |
|
|
|
3,450 |
|
Current
receivable from Financial Services
|
|
|
2,871 |
|
|
|
2,035 |
|
Total
current assets
|
|
|
36,130 |
|
|
|
31,513 |
|
Equity
in net assets of affiliated companies
|
|
|
1,376 |
|
|
|
1,076 |
|
Net
property
|
|
|
23,590 |
|
|
|
23,930 |
|
Deferred
income taxes
|
|
|
6,410 |
|
|
|
7,204 |
|
Goodwill
and other net intangible assets (Note 4)
|
|
|
219 |
|
|
|
237 |
|
Assets
of held-for-sale operations (Note 10)
|
|
|
7,273 |
|
|
|
8,414 |
|
Other
assets
|
|
|
1,454 |
|
|
|
1,441 |
|
Total
Automotive assets
|
|
|
76,452 |
|
|
|
73,815 |
|
Financial
Services
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
12,991 |
|
|
|
15,672 |
|
Marketable
securities
|
|
|
7,237 |
|
|
|
8,607 |
|
Finance
receivables, net
|
|
|
86,713 |
|
|
|
96,101 |
|
Net
investment in operating leases
|
|
|
20,765 |
|
|
|
23,120 |
|
Equity
in net assets of affiliated companies
|
|
|
360 |
|
|
|
523 |
|
Goodwill
and other net intangible assets (Note 4)
|
|
|
8 |
|
|
|
9 |
|
Assets
of held-for-sale operations (Note 10)
|
|
|
— |
|
|
|
198 |
|
Other
assets
|
|
|
5,981 |
|
|
|
7,437 |
|
Total
Financial Services assets
|
|
|
134,055 |
|
|
|
151,667 |
|
Intersector
elimination
|
|
|
(3,237 |
) |
|
|
(2,535 |
) |
Total
assets
|
|
$ |
207,270 |
|
|
$ |
222,947 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Automotive
|
|
|
|
|
|
|
|
|
Trade
payables
|
|
$ |
9,614 |
|
|
$ |
9,193 |
|
Other
payables
|
|
|
1,965 |
|
|
|
1,982 |
|
Accrued
liabilities and deferred revenue
|
|
|
26,561 |
|
|
|
29,584 |
|
Deferred
income taxes
|
|
|
2,856 |
|
|
|
2,790 |
|
Debt
payable within one year (Note 5)
|
|
|
1,428 |
|
|
|
1,191 |
|
Total
current liabilities
|
|
|
42,424 |
|
|
|
44,740 |
|
Long-term
debt (Note 5)
|
|
|
30,704 |
|
|
|
23,036 |
|
Other
liabilities
|
|
|
22,368 |
|
|
|
23,766 |
|
Deferred
income taxes
|
|
|
384 |
|
|
|
614 |
|
Liabilities
of held-for-sale operations (Note 10)
|
|
|
5,008 |
|
|
|
5,487 |
|
Total
Automotive liabilities
|
|
|
100,888 |
|
|
|
97,643 |
|
Financial
Services
|
|
|
|
|
|
|
|
|
Payables
|
|
|
1,303 |
|
|
|
1,970 |
|
Debt
(Note 5)
|
|
|
113,811 |
|
|
|
128,842 |
|
Deferred
income taxes
|
|
|
2,602 |
|
|
|
3,280 |
|
Other
liabilities and deferred income
|
|
|
5,509 |
|
|
|
6,184 |
|
Liabilities
of held-for-sale operations (Note 10)
|
|
|
— |
|
|
|
55 |
|
Payable
to Automotive
|
|
|
2,871 |
|
|
|
2,035 |
|
Total
Financial Services liabilities
|
|
|
126,096 |
|
|
|
142,366 |
|
Intersector
elimination
|
|
|
(3,237 |
) |
|
|
(2,535 |
) |
Total
liabilities
|
|
|
223,747 |
|
|
|
237,474 |
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
Capital
stock
|
|
|
|
|
|
|
|
|
Common
Stock, par value $0.01 per share (2,350 million
shares issued)
|
|
|
23 |
|
|
|
23 |
|
Class
B Stock, par value $0.01 per share (71 million shares
issued)
|
|
|
1 |
|
|
|
1 |
|
Capital
in excess of par value of stock
|
|
|
10,985 |
|
|
|
10,875 |
|
Accumulated
other comprehensive income/(loss)
|
|
|
(10,624 |
) |
|
|
(10,085 |
) |
Treasury
stock
|
|
|
(180 |
) |
|
|
(181 |
) |
Retained
earnings/(Accumulated deficit)
|
|
|
(17,782 |
) |
|
|
(16,355 |
) |
Total
equity/(deficit) attributable to Ford Motor Company
|
|
|
(17,577 |
) |
|
|
(15,722 |
) |
Equity/(Deficit)
attributable to noncontrolling interests
|
|
|
1,100 |
|
|
|
1,195 |
|
Total
equity/(deficit)
|
|
|
(16,477 |
) |
|
|
(14,527 |
) |
Total
liabilities and equity
|
|
$ |
207,270 |
|
|
$ |
222,947 |
|
The
accompanying notes are part of the financial statements.
Item
1. Financial Statements (Continued)
FORD
MOTOR COMPANY AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
For
the Periods Ended March 31, 2009 and 2008
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
Cash
flows from operating activities of continuing operations
|
|
|
|
Net
cash (used in)/provided by operating activities
|
|
$ |
4,161 |
|
|
$ |
1,027 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities of continuing operations
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(1,366 |
) |
|
|
(1,490 |
) |
Acquisitions
of retail and other finance receivables and operating
leases
|
|
|
(6,032 |
) |
|
|
(11,872 |
) |
Collections
of retail and other finance receivables and operating
leases
|
|
|
10,047 |
|
|
|
10,936 |
|
Purchases
of securities
|
|
|
(22,151 |
) |
|
|
(13,531 |
) |
Sales
and maturities of securities
|
|
|
19,217 |
|
|
|
13,527 |
|
Settlements
of derivatives
|
|
|
1,163 |
|
|
|
456 |
|
Proceeds
from sale of businesses
|
|
|
166 |
|
|
|
44 |
|
Other
|
|
|
(339 |
) |
|
|
165 |
|
Net
cash (used in)/provided by investing activities
|
|
|
705 |
|
|
|
(1,765 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities of continuing operations
|
|
|
|
|
|
|
|
|
Sales
of Common Stock
|
|
|
— |
|
|
|
63 |
|
Changes
in short-term debt
|
|
|
(3,863 |
) |
|
|
(678 |
) |
Proceeds
from issuance of other debt
|
|
|
15,458 |
|
|
|
11,150 |
|
Principal
payments on other debt
|
|
|
(16,395 |
) |
|
|
(11,107 |
) |
Other
|
|
|
(50 |
) |
|
|
(129 |
) |
Net
cash (used in)/provided by financing activities
|
|
|
(4,850 |
) |
|
|
(701 |
) |
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
(342 |
) |
|
|
316 |
|
Cumulative
correction of Financial Services prior period error (Note
1)
|
|
|
(630 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents from continuing
operations
|
|
|
(956 |
) |
|
|
(1,123 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from discontinued operations
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities of discontinued operations
|
|
|
— |
|
|
|
29 |
|
Cash
flows from investing activities of discontinued operations
|
|
|
— |
|
|
|
(94 |
) |
Cash
flows from financing activities of discontinued operations
|
|
|
— |
|
|
|
(344 |
) |
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents
|
|
$ |
(956 |
) |
|
$ |
(1,532 |
) |
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at January 1
|
|
$ |
22,049 |
|
|
$ |
35,283 |
|
Cash
and cash equivalents of discontinued/held-for-sale operations at January
1
|
|
|
— |
|
|
|
— |
|
Net
increase/(decrease) in cash and cash equivalents
|
|
|
(956 |
) |
|
|
(1,532 |
) |
Less:
cash and cash equivalents of discontinued/held-for-sale operations at
March 31
|
|
|
— |
|
|
|
— |
|
Cash
and cash equivalents at March 31
|
|
$ |
21,093 |
|
|
$ |
33,751 |
|
The
accompanying notes are part of the financial statements
Item
1. Financial Statements (Continued)
FORD
MOTOR COMPANY AND SUBSIDIARIES
CONDENSED
SECTOR STATEMENT OF CASH FLOWS
For
the Periods Ended March 31, 2009 and 2008
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Cash
flows from operating activities of continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash (used in)/provided by operating activities
|
|
$ |
(2,265 |
) |
|
$ |
1,911 |
|
|
$ |
685 |
|
|
$ |
2,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(1,361 |
) |
|
|
(5 |
) |
|
|
(1,449 |
) |
|
|
(41 |
) |
Acquisitions
of retail and other finance receivables and operating
leases
|
|
|
— |
|
|
|
(6,032 |
) |
|
|
— |
|
|
|
(12,166 |
) |
Collections
of retail and other finance receivables and operating
leases
|
|
|
— |
|
|
|
10,124 |
|
|
|
— |
|
|
|
10,936 |
|
Net
(increase)/decrease of wholesale receivables
|
|
|
— |
|
|
|
4,438 |
|
|
|
— |
|
|
|
(1,846 |
) |
Purchases
of securities
|
|
|
(17,662 |
) |
|
|
(5,544 |
) |
|
|
(12,509 |
) |
|
|
(1,022 |
) |
Sales
and maturities of securities
|
|
|
13,498 |
|
|
|
5,854 |
|
|
|
11,329 |
|
|
|
2,198 |
|
Settlements
of derivatives
|
|
|
242 |
|
|
|
921 |
|
|
|
282 |
|
|
|
174 |
|
Proceeds
from sale of businesses
|
|
|
1 |
|
|
|
165 |
|
|
|
44 |
|
|
|
— |
|
Investing
activity from Financial Services
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Investing
activity to Financial Services
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other
|
|
|
(330 |
) |
|
|
(9 |
) |
|
|
15 |
|
|
|
150 |
|
Net
cash (used in)/provided by investing activities
|
|
|
(5,612 |
) |
|
|
9,912 |
|
|
|
(2,288 |
) |
|
|
(1,617 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
of Common Stock
|
|
|
— |
|
|
|
— |
|
|
|
63 |
|
|
|
— |
|
Changes
in short-term debt
|
|
|
365 |
|
|
|
(4,228 |
) |
|
|
93 |
|
|
|
(771 |
) |
Proceeds
from issuance of other debt
|
|
|
10,186 |
|
|
|
5,272 |
|
|
|
57 |
|
|
|
11,093 |
|
Principal
payments on other debt
|
|
|
(190 |
) |
|
|
(15,285 |
) |
|
|
(90 |
) |
|
|
(11,017 |
) |
Other
|
|
|
(35 |
) |
|
|
(15 |
) |
|
|
(91 |
) |
|
|
(38 |
) |
Net
cash (used in)/provided by financing activities
|
|
|
10,326 |
|
|
|
(14,256 |
) |
|
|
32 |
|
|
|
(733 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
(134 |
) |
|
|
(208 |
) |
|
|
235 |
|
|
|
81 |
|
Net
change in intersector receivables/payables and other
liabilities
|
|
|
(590 |
) |
|
|
590 |
|
|
|
(679 |
) |
|
|
679 |
|
Cumulative
correction of prior period error (Note 1)
|
|
|
— |
|
|
|
(630 |
) |
|
|
— |
|
|
|
— |
|
Net
increase/(decrease) in cash and cash equivalents from continuing
operations
|
|
|
1,725 |
|
|
|
(2,681 |
) |
|
|
(2,015 |
) |
|
|
892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities of discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
29 |
|
Cash
flows from investing activities of discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(94 |
) |
Cash
flows from financing activities of discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(344 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents
|
|
$ |
1,725 |
|
|
$ |
(2,681 |
) |
|
$ |
(2,015 |
) |
|
$ |
483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at January 1
|
|
$ |
6,377 |
|
|
$ |
15,672 |
|
|
$ |
20,678 |
|
|
$ |
14,605 |
|
Cash
and cash equivalents of discontinued/held-for-sale operations at January
1
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net
increase/(decrease) in cash and cash equivalents
|
|
|
1,725 |
|
|
|
(2,681 |
) |
|
|
(2,015 |
) |
|
|
483 |
|
Less:
cash and cash equivalents of discontinued/held-for-sale operations at
March 31
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Cash
and cash equivalents at March 31
|
|
$ |
8,102 |
|
|
$ |
12,991 |
|
|
$ |
18,663 |
|
|
$ |
15,088 |
|
The
accompanying notes are part of the financial statements
Item
1. Financial Statements (Continued)
FORD
MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
For
the Periods Ended March 31, 2009 and 2008
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Net
income/(loss)
|
|
$ |
(1,416 |
) |
|
$ |
192 |
|
Other
comprehensive income/(loss), net of tax:
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
|
|
(515 |
) |
|
|
871 |
|
Net
gain/(loss) on derivative instruments
|
|
|
(87 |
) |
|
|
225 |
|
Employee
benefit-related
|
|
|
(5 |
) |
|
|
96 |
|
Net
holding gain/(loss)
|
|
|
(1 |
) |
|
|
(27 |
) |
Total
other comprehensive income/(loss), net of tax
|
|
|
(608 |
) |
|
|
1,165 |
|
Comprehensive
income/(loss)
|
|
|
(2,024 |
) |
|
|
1,357 |
|
Less:
Comprehensive income/(loss) attributable to noncontrolling interests (Note
17)
|
|
|
(58 |
) |
|
|
72 |
|
Comprehensive
income/(loss) attributable to Ford Motor Company
|
|
$ |
(1,966 |
) |
|
$ |
1,285 |
|
The
accompanying notes are part of the financial statements
Item
1. Financial Statements (Continued)
FORD
MOTOR COMPANY AND SUBSIDIARIES
NOTES
TO THE FINANCIAL STATEMENTS
Footnote
|
|
Page
|
Note
1
|
Principles
of Presentation and Consolidation
|
10
|
Note
2
|
Inventories
|
14
|
Note
3
|
Variable
Interest Entities
|
14
|
Note
4
|
Goodwill
and Other Net Intangibles
|
18
|
Note
5
|
Debt
and Commitments
|
19
|
Note
6
|
Impairments
|
24
|
Note
7
|
Other
Income/(Loss)
|
24
|
Note
8
|
Employee
Separation Actions and Exit and Disposal Activities
|
25
|
Note
9
|
Income
Taxes
|
25
|
Note
10
|
Discontinued
Operations, Held-For-Sale Operations, Other Dispositions, and
Acquisitions
|
26
|
Note
11
|
Amounts
Per Share Attributable to Ford Motor Company Common and Class B
Stock
|
28
|
Note
12
|
Derivative
Financial Instruments and Hedging Activities
|
28
|
Note
13
|
Retirement
Benefits
|
32
|
Note
14
|
Fair
Value Measurements
|
33
|
Note
15
|
Segment
Information
|
35
|
Note
16
|
Guarantees
|
36
|
Note
17
|
Equity/(Deficit)
Attributable to Ford Motor Company and Noncontrolling
Interests
|
37
|
Item
1. Financial Statements (Continued)
NOTE
1. PRINCIPLES OF PRESENTATION AND CONSOLIDATION
Our
financial statements are presented in accordance with generally accepted
accounting principles ("GAAP") in the United States for interim financial
information, and instructions to the Quarterly Report on Form 10-Q and
Rule 10-01 of Regulation S-X. We show certain of our financial
statements on both a consolidated and a sector basis for our Automotive and
Financial Services sectors. All intercompany items and transactions
have been eliminated in both the consolidated and sector basis financial
statements. Reconciliations of certain line items are explained below
in this Note, where the presentation of these intercompany eliminations or
consolidated adjustments differ between the consolidated and sector financial
statements.
In the
opinion of management, these unaudited financial statements reflect a fair
statement of the results of operations and financial condition of Ford Motor
Company and its consolidated subsidiaries and consolidated variable interest
entities ("VIEs") of which we are the primary beneficiary for the periods and at
the dates presented. The operating results for interim periods are
not necessarily indicative of results that may be expected for any other interim
period or for the 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, 2008 ("2008 Form 10-K Report"). For
purposes of this report, "Ford," the "Company," "we," "our," "us" or similar
references mean Ford Motor Company and our consolidated subsidiaries and our
consolidated VIEs of which we are the primary beneficiary, unless the context
requires otherwise. All held-for-sale assets and liabilities are
excluded from the footnotes unless otherwise noted. See Note 10 for
details of held-for-sale operations.
In the
first quarter of 2009, our wholly-owned subsidiary Ford Motor Credit Company LLC
("Ford Credit") recorded a $630 million cumulative adjustment to correct
for the overstatement of Financial Services sector cash and cash equivalents and
certain accounts payable that originated in prior periods. The impact
on previously-issued annual and interim financial statements was not
material.
Noncontrolling
Interests. We adopted Statement of Financial Accounting
Standards ("SFAS") No. 160, Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51
("SFAS No. 160") on January 1, 2009. This
standard establishes accounting and reporting requirements for the
noncontrolling interest (formerly "minority interest") in a subsidiary and for
the deconsolidation of a subsidiary. SFAS No. 160 clarifies
that a noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. The presentation and disclosure requirements of
this standard must be applied retrospectively for all periods. This
requirement changed the presentation of our consolidated and sector statements
of operations and our consolidated and sector balance sheets. It also
required us to incorporate a consolidated statement of comprehensive
income. Beginning with this quarter, footnote disclosures for our
interim financial periods will include separate reconciliations of our
beginning-of-period to end-of-period equity/(deficit) for Ford and the
noncontrolling interests.
Convertible Debt
Instruments. We adopted the Financial Accounting Standards
Board ("FASB") Staff Position ("FSP") No. APB 14-1, Accounting for Convertible Debt
Instruments that may be Settled in Cash upon Conversion (Including Partial Cash
Settlement) ("FSP APB 14-1") on January 1, 2009. FSP APB 14-1
applies to convertible debt securities that, upon conversion, may be settled in
cash. FSP APB 14-1 specifies that issuers of such instruments should
separately account for the liability and equity components in a manner that will
reflect the entity's nonconvertible debt borrowing rate resulting in higher
interest expense over the life of the instrument due to amortization of the
discount. This new pronouncement applies to our 4.25% Senior
Convertible Notes due December 15, 2036 ("Convertible Notes") issued in December
2006. We have applied the pronouncement retrospectively to all
periods presented.
Item
1. Financial Statements (Continued)
NOTE
1. PRINCIPLES OF PRESENTATION AND CONSOLIDATION (Continued)
The
following financial statement line items were affected by implementation of FSP
APB 14-1 (in millions, except per share information):
Statement
of Operations
|
|
Revised
|
|
|
As
Originally Reported
First
Quarter 2008
|
|
|
Effect
of
|
|
Automotive
interest expense
|
|
$ |
558 |
|
|
$ |
528 |
|
|
$ |
(30 |
) |
Income/(loss)
from continuing operations attributable to Ford Motor
Company
|
|
|
69 |
|
|
|
99 |
|
|
|
(30 |
) |
Net
income/(loss) attributable to Ford Motor Company
|
|
|
70 |
|
|
|
100 |
|
|
|
(30 |
) |
Earnings
per share attributable to Ford Motor Company
|
|
|
0.03 |
|
|
|
0.05 |
|
|
|
(0.02 |
) |
Balance
Sheet (a)
|
|
Revised
December
31,
|
|
|
As
Originally Reported
December
31,
|
|
|
Effect
of
|
|
Automotive
other assets – noncurrent (b)
|
|
$ |
1,441 |
|
|
$ |
1,512 |
|
|
$ |
71 |
|
Automotive
long-term debt
|
|
|
23,036 |
|
|
|
24,655 |
|
|
|
(1,619 |
) |
Capital
in excess of par value of stock (c)
|
|
|
10,875 |
|
|
|
9,076 |
|
|
|
1,799 |
|
Retained
earnings/(Accumulated deficit)
|
|
|
(16,355 |
) |
|
|
(16,145 |
) |
|
|
(210 |
) |
__________
|
(a)
|
As
a result of the retrospective application of FSP APB 14-1, the
December 31, 2008 column on our consolidated and sector balance
sheets is "unaudited."
|
|
(b)
|
Effect
of Change related to FSP APB 14-1 is $30 million; the remaining
$41 million relates to the assets of Volvo classified as
held-for-sale operations (see Note 10 for discussion of
Volvo).
|
|
(c)
|
Effect
of Change represents the equity component under FSP APB 14-1 (i.e., $1,864
million), less those amounts previously recorded on conversions prior to
adoption of the standard (i.e.,
$65 million).
|
The
following shows the effect on the per share amounts attributable to Ford Common
and Class B Stock for the first quarter of 2009 before and after the adoption of
FSP APB 14-1:
|
|
|
|
Basic
income/(loss)
|
|
|
|
|
After
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
(0.58 |
) |
|
$ |
(0.60 |
) |
|
$ |
(0.02 |
) |
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net
income/(loss)
|
|
$ |
(0.58 |
) |
|
$ |
(0.60 |
) |
|
$ |
(0.02 |
) |
Diluted
income/(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
(0.58 |
) |
|
$ |
(0.60 |
) |
|
$ |
(0.02 |
) |
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net
income/(loss)
|
|
$ |
(0.58 |
) |
|
$ |
(0.60 |
) |
|
$ |
(0.02 |
) |
Presentation
of Balance Sheet
Deferred Tax Assets and Liabilities.
The difference between the total assets and total liabilities as
presented in our sector balance sheet and consolidated balance sheet is the
result of netting of deferred income tax assets and liabilities. The
reconciliation between total sector and consolidated balance sheets is as
follows (in millions):
|
|
|
|
|
|
|
Sector
balance sheet presentation of deferred income tax assets:
|
|
|
|
|
|
|
Automotive
sector current deferred income tax assets
|
|
$ |
306 |
|
|
$ |
302 |
|
Automotive
sector non-current deferred income tax assets
|
|
|
6,410 |
|
|
|
7,204 |
|
Financial
Services sector deferred income tax assets*
|
|
|
238 |
|
|
|
251 |
|
Total
|
|
|
6,954 |
|
|
|
7,757 |
|
Reclassification
for netting of deferred income taxes
|
|
|
(4,136 |
) |
|
|
(4,649 |
) |
Consolidated
balance sheet presentation of deferred income tax assets
|
|
$ |
2,818 |
|
|
$ |
3,108 |
|
|
|
|
|
|
|
|
|
|
Sector
balance sheet presentation of deferred income tax
liabilities:
|
|
|
|
|
|
|
|
|
Automotive
sector current deferred income tax liabilities
|
|
$ |
2,856 |
|
|
$ |
2,790 |
|
Automotive
sector non-current deferred income tax liabilities
|
|
|
384 |
|
|
|
614 |
|
Financial
Services sector deferred income tax liabilities
|
|
|
2,602 |
|
|
|
3,280 |
|
Total
|
|
|
5,842 |
|
|
|
6,684 |
|
Reclassification
for netting of deferred income taxes
|
|
|
(4,136 |
) |
|
|
(4,649 |
) |
Consolidated
balance sheet presentation of deferred income tax
liabilities
|
|
$ |
1,706 |
|
|
$ |
2,035 |
|
__________
* Financial
Services deferred income tax assets are included in Financial Services other
assets on our sector balance sheet.
Item
1. Financial Statements (Continued)
NOTE
1. PRINCIPLES OF PRESENTATION AND CONSOLIDATION (Continued)
Ford Acquisition of Ford Credit
Debt. In connection with our Registration Statement (No.
333-151355) filed on Form S-3 and the related prospectus dated
June 2, 2008 and the prospectus supplements dated
August 14, 2008 and October 2, 2008, we issued shares of
Ford Common Stock from time to time in market transactions and used the proceeds
therefrom to purchase outstanding Ford Credit debt securities maturing prior to
2012. During 2008, we purchased $492 million of Ford Credit debt
securities for $424 million in cash. Debt securities with a face
and fair value of $135 million matured on
January 12, 2009.
On our
consolidated balance sheet, the remaining debt is no longer reported in our
Debt
balances. On our sector balance sheet, the debt is reported as
outstanding as it has not been retired or cancelled by Ford
Credit. Accordingly, on our sector balance sheet, $357 million
and $492 million of debt are reported as Financial Services debt at
March 31, 2009 and December 31, 2008, respectively. Likewise,
included in Automotive
marketable securities
are $357 million and $492 million at March 31, 2009
and December 31, 2008, respectively, related to Ford's purchase of the
Ford Credit debt securities. Consolidating elimination adjustments
for these debt securities and related accrued interest of $9 million and
$8 million at March 31, 2009 and December 31, 2008,
respectively, are included in the Intersector elimination lines
on the sector balance sheet.
Presentation
of Cash Flows
Wholesale and Other Finance
Receivables. The reconciliation between total sector and
consolidated cash flows from operating activities of continuing operations is as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Sum
of sector cash flows from operating activities of continuing
operations
|
|
$ |
(354 |
) |
|
$ |
3,167 |
|
Reclassification
of wholesale receivable cash flows from investing to operating for
consolidated presentation (a)
|
|
|
4,438 |
|
|
|
(1,846 |
) |
Reclassification
of finance receivable cash flows from investing to operating for
consolidated presentation (b)
|
|
|
77 |
|
|
|
(294 |
) |
Consolidated
cash flows from operating activities of continuing
operations
|
|
$ |
4,161 |
|
|
$ |
1,027 |
|
__________
(a)
|
In
addition to vehicles sold by us, the cash flows from wholesale finance
receivables being reclassified from investing to operating include
financing by Ford Credit of used and non-Ford vehicles. 100% of
cash flows from wholesale finance receivables have been reclassified for
consolidated presentation as the portion of these cash flows from used and
non-Ford vehicles is impracticable to
separate.
|
(b)
|
Includes
cash flows of finance receivables purchased/collected from certain
divisions and subsidiaries of the Automotive
sector.
|
Ford Credit Acquisition of Ford
Debt. During the first quarter of 2009, Ford Credit conducted
a cash tender offer for our secured term loan under the secured credit agreement
that we entered into with various banks and financial institutions on
December 15, 2006 (the "Credit Agreement"). Pursuant to
this offer, Ford Credit purchased from lenders thereof $2.2 billion
principal amount of term loan for an aggregate cost of $1.1 billion
(including transaction costs). This transaction settled on
March 27, 2009, following which Ford Credit distributed the term loan
to its immediate parent, Ford Holdings LLC ("Ford Holdings"), whereupon the debt
was forgiven. As a result, we recorded a gain on extinguishment of
debt in the amount of $1.1 billion, net of transaction costs, in Automotive interest income and other
non-operating income/(expense), net. Approximately
$4.6 billion aggregate principal amount of term loans remains
outstanding.
On our
consolidated statement of cash flows, the $1.1 billion cash outflow related
to Ford Credit's purchase of our secured term loan is presented as a principal
payment on debt within Cash
flows from financing activities of continuing operations. On
our sector statement of cash flows, the cash outflow is presented as a purchase
of securities by our Financial Services sector within Cash flows from investing
activities of
continuing operations.
Ford Acquisition of Ford
Credit Debt. On our
consolidated statement of cash flows, the $135 million cash payment from
Ford Credit to us related to the maturity of Ford Credit's debt securities
discussed in "Presentation of Balance Sheet" above is not shown as a cash
outflow because the debt was not reported as outstanding on our consolidated
balance sheet. On our sector statement of cash flows, the
$135 million cash payment is presented as a cash inflow from Automotive sales and maturities of
securities within Cash
flows from investing activities of continuing operations and
a cash outflow from Financial
Services principal payments on debt within Cash flows from financing activities
of continuing operations.
Item
1. Financial Statements (Continued)
NOTE
1. PRINCIPLES OF PRESENTATION AND CONSOLIDATION (Continued)
Liquidity
At March 31, 2009, our Automotive sector had total cash,
cash equivalents, and marketable securities of $21.6 billion (including
about $300 million of Temporary Asset Account securities
("TAA")).
We have experienced substantial negative cash flows in
recent periods, and had negative equity of $16.5 billion at
March 31, 2009. Based on our current planning assumptions,
we expect net Automotive operating cash flows in 2009 to be negative, but
significantly improved from 2008. The dramatic decline in industry
sales volume during 2008, and our reduced production to match demand, had a
substantial negative effect on cash flows. Trade payables and other
elements of working capital have improved in the first quarter of 2009 and
should continue to improve as industry sales volume stabilizes and begins to
grow, contributing to the expected improvement in operating cash
flow.
We
continue to face many risks and uncertainties, however, related to the global
economy, our industry in particular, and the credit environment which could
materially impact our plan. Of these potentialities, we believe that
the two risks that are reasonably possible to have a material impact on us are
(i) a decline in industry sales volume to levels below our current planning
assumptions, and (ii) actions necessary to ensure an uninterrupted supply of
materials and components.
Our current planning assumptions
forecast that industry sales volume will stabilize
in the first half of 2009 and begin to improve soon thereafter, culminating in
full-year 2009 U.S. industry sales volume in the lower end of the range of 10.5 million units to 12.5 million
units, and industry sales volume for the 19 markets we track in Europe in the
range of 13.5 million units to
14.5 million units. Based
on our analysis of the market, we believe that these assumptions are
reasonable. There is a risk, however, that industry sales volume may
not stabilize in the United States in the first half of 2009 or begin to improve
in the United States and Europe as soon thereafter as we
forecast.
In
addition to the risk related to industry sales volume, our plan also could be
negatively impacted by pressures affecting our supply base. Our
suppliers have experienced increased economic distress due to the sudden and
substantial drop in industry sales volume that affected all automobile
manufacturers. Dramatically lower industry sales volumes have made
existing debt obligations and fixed cost levels difficult for many suppliers to
manage, especially with the tight credit market, resulting in an increase in
distressed suppliers and supplier bankruptcies. As a result, it is
reasonably possible that our costs to ensure an uninterrupted supply of
materials and components could be higher than our present planning assumptions
by a material amount.
We
believe that even a combination of these two reasonably possible scenarios,
however, as measured by a decline to 9.2 million units in the United States
and 11.7 million units in Europe, combined with our assessment of the necessary
cost to ensure an uninterrupted supply of materials and components (absent a
significant industry event in 2009 such as an uncontrolled bankruptcy of a major
competitor or important suppliers to Ford which we believe is remote), would not
exceed our present available liquidity. We believe that the risk of
decline in industry sales volume below these levels (i.e., below
9.2 million units in the United States and 11.7 million units in
Europe) is remote. Therefore, we do not believe that these reasonably
possible scenarios cause substantial doubt about our ability to continue as a
going concern for the next year.
With
regard to our Financial Services sector, Ford Credit expects the majority of its
funding in 2009 will consist of eligible issuances pursuant to
government-sponsored programs. It is reasonably possible that credit
markets could continue to constrain Ford Credit's funding or that Ford Credit
will not be eligible for government-sponsored programs. In these
circumstances, Ford Credit could mitigate these funding risks by reducing the
amount of finance receivables and operating leases they purchase or
originate. At our current industry sales volume assumption, this
would not have a material impact on our going concern analysis. If
industry sales volume were to decline to the reduced levels described above, the
risk of Ford Credit not being able to support the sale of Ford products would be
remote.
Accordingly,
we have concluded that there is no substantial doubt about our ability to
continue as a going concern, and our financial statements have been prepared on
a going concern basis.
Notwithstanding
this conclusion, as previously disclosed in our 2008 Form 10-K Report and our
business plan submission to Congress in December 2008, in this environment
a number of scenarios could put severe pressure on our short- and long-term
Automotive liquidity, including a worsening of the scenarios described
above. We presently believe that the likelihood of such an event is
remote. In such a scenario, however, or in response to other
unanticipated circumstances, we could take additional mitigating actions or
require additional financing to improve our
liquidity.
Item
1. Financial Statements (Continued)
NOTE
2. INVENTORIES
Inventories
are summarized as follows (in millions):
|
|
March
31,
|
|
|
December
31,
|
|
|
|
|
|
|
|
|
Raw
materials, work-in-process and supplies
|
|
$ |
2,926 |
|
|
$ |
2,747 |
|
Finished
products
|
|
|
4,493 |
|
|
|
5,091 |
|
Total
inventories under first-in, first-out method ("FIFO")
|
|
|
7,419 |
|
|
|
7,838 |
|
Less:
Last-in, first-out method ("LIFO") adjustment
|
|
|
(844 |
) |
|
|
(850 |
) |
Total
inventories
|
|
$ |
6,575 |
|
|
$ |
6,988 |
|
Inventories
are stated at lower of cost or market. About one-fourth of
inventories were determined under the LIFO method.
NOTE
3. VARIABLE INTEREST ENTITIES
We
consolidate VIEs of which we are the primary beneficiary. The
liabilities recognized as a result of consolidating these VIEs do not
necessarily represent additional claims on our general assets; rather, they
represent claims against the specific assets of the consolidated
VIEs. Conversely, assets recognized as a result of consolidating
these VIEs do not necessarily represent additional assets that could be used to
satisfy claims against our general assets.
Automotive
Sector
VIEs
of which we are the primary beneficiary:
Activities
with the joint ventures described below include purchasing substantially all of
the joint ventures' output under a cost-plus-margin arrangement and/or volume
dependent pricing. These contractual arrangements may require us to
absorb joint venture losses when production volume targets are not met or allow
us, in some cases, to receive bonuses when production volume targets are
exceeded. Described below are the significant VIEs that we
consolidated as of March 31, 2009.
AutoAlliance
International, Inc. ("AAI") is a 50/50 joint venture with Mazda Motor
Corporation ("Mazda") in North America. AAI is engaged in the
manufacture of automobiles on behalf of Ford and Mazda, primarily for sale in
North America.
Ford
Otomotiv Sanayi Anonim Sirketi ("Ford Otosan") is a 41/41/18 joint venture in
Turkey with the Koc Group of Turkey and public investors. Ford Otosan
is the single-source supplier of the Ford Transit Connect model, and an assembly
supplier of the Ford Transit van model, both of which we sell primarily in
Europe.
Getrag
Ford Transmissions GmbH ("GFT") is a 50/50 joint venture with Getrag Deutsche
Venture GmbH and Co. KG. GFT is the primary supplier of manual
transmissions for use in our European vehicles.
Getrag
All Wheel Drive AB is a 40/60 joint venture between Volvo Cars and Getrag Dana
Holding GmbH. The joint venture produces all-wheel-drive
components. The assets and liabilities associated with this joint
venture that were classified during the first quarter of 2009 as held for sale
are shown in the table below and are included in the assets and liabilities of
Volvo classified as held-for-sale operations in Note 10.
Tekfor
Cologne GmbH ("Tekfor") is a 50/50 joint venture with Neumayer Tekfor
GmbH. Tekfor produces transmission and chassis components for use in
our vehicles.
Pininfarina
Sverige, AB is a 40/60 joint venture between Volvo Cars and Pininfarina,
S.p.A. The joint venture was established to engineer and manufacture
niche vehicles. The assets and liabilities associated with this joint
venture that were classified during the first quarter of 2009 as held for sale
are shown in the table below and are included in the assets and liabilities of
Volvo classified as held-for-sale operations in Note 10.
We also
hold interests in certain dealerships, and at March 31, 2009 there
were approximately 64 dealerships that were part of our Dealer Development
program that are consolidated. We supply and finance the majority of
vehicles and parts of these dealerships, and the operators have a contract to
buy our equity interest over a period of time. See Note 6 for
discussion of the impairment of our investment in these assets.
Item
1. Financial Statements (Continued)
NOTE
3. VARIABLE INTEREST ENTITIES (Continued)
The total
consolidated VIE assets and liabilities reflected on our
March 31, 2009 and December 31, 2008 balance sheets are as
follows (in millions):
|
|
March
31,
|
|
|
December
31,
|
|
Assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
519 |
|
|
$ |
665 |
|
Receivables
|
|
|
440 |
|
|
|
518 |
|
Inventories
|
|
|
910 |
|
|
|
1,117 |
|
Net
property
|
|
|
2,220 |
|
|
|
2,136 |
|
Assets
of held-for-sale operations
|
|
|
294 |
|
|
|
318 |
|
Other
assets
|
|
|
184 |
|
|
|
297 |
|
Total
assets
|
|
$ |
4,567 |
|
|
$ |
5,051 |
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Trade
payables
|
|
$ |
413 |
|
|
$ |
516 |
|
Accrued
liabilities
|
|
|
281 |
|
|
|
324 |
|
Debt
|
|
|
980 |
|
|
|
972 |
|
Liabilities
of held-for-sale operations
|
|
|
87 |
|
|
|
97 |
|
Other
liabilities
|
|
|
189 |
|
|
|
167 |
|
Total
liabilities
|
|
$ |
1,950 |
|
|
$ |
2,076 |
|
|
|
|
|
|
|
|
|
|
Equity
attributable to noncontrolling interests
|
|
$ |
1,073 |
|
|
$ |
1,168 |
|
The
financial performance of the consolidated VIEs reflected on our statements of
operations for the first quarters of 2009 and 2008 are as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ |
926 |
|
|
$ |
2,054 |
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
847 |
|
|
|
1,666 |
|
Selling,
administrative and other expenses
|
|
|
109 |
|
|
|
192 |
|
Total
costs and expenses
|
|
|
956 |
|
|
|
1,858 |
|
Operating
income/(loss)
|
|
|
(30 |
) |
|
|
196 |
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
15 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
Interest
income and other non-operating income/(expense), net
|
|
|
16 |
|
|
|
20 |
|
Equity
in net income/(loss) of affiliated companies
|
|
|
(3 |
) |
|
|
1 |
|
Income/(Loss)
before income taxes - Automotive
|
|
|
(32 |
) |
|
|
200 |
|
|
|
|
|
|
|
|
|
|
Provision
for/(Benefit from) income taxes
|
|
|
22 |
|
|
|
68 |
|
Income/(Loss)
from continuing operations
|
|
|
(54 |
) |
|
|
132 |
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
— |
|
Net
income/(loss)
|
|
|
(54 |
) |
|
|
132 |
|
|
|
|
|
|
|
|
|
|
Less:
Income/(loss) attributable to noncontrolling interests
|
|
|
12 |
|
|
|
120 |
|
Net
income/(loss) attributable to Ford Motor Company
|
|
$ |
(66 |
) |
|
$ |
12 |
|
VIEs
of which we are not the primary beneficiary:
In 2005,
as part of the transaction to sell our interest in The Hertz Corporation
("Hertz"), we provided cash-collateralized letters of credit to support the
payment obligations of Hertz Vehicle Financing LLC, a VIE which is wholly owned
by Hertz and of which we are not the primary beneficiary. The fair
value of our obligation related to these letters of credit, which will expire no
later than December 31, 2011, was approximately $12 million at
March 31, 2009. For additional discussion of these letters
of credit, see Note 16.
We also
have investments in unconsolidated subsidiaries determined to be VIEs of which
we are not the primary beneficiary. These investments, described
below, are accounted for as equity-method investments and are included in Equity in net assets of affiliated
companies.
Formed in
1995, AutoAlliance (Thailand) Co., Ltd ("AAT") is a 50/50 joint venture with
Mazda in Thailand. AAT is engaged in the manufacturing of automobiles
on behalf of Ford and Mazda for both the Thai domestic market and for export
markets through Ford and Mazda. Ford and Mazda share equally the
risks and rewards of the joint venture.
Item
1. Financial Statements (Continued)
NOTE
3. VARIABLE INTEREST ENTITIES (Continued)
In 2002,
we established the Ford Motor Company Capital Trust II ("Trust
II"). We own 100% of Trust II's common stock which is equal to 5% of
Trust II's total equity. The risks and rewards associated with our
interests in this entity are based primarily on ownership
percentage.
Our
maximum exposure to VIEs of which we are not the primary beneficiary is as
follows (in millions):
|
|
|
|
|
|
|
|
Change
in
|
|
|
|
March
31,
|
|
|
December
31,
|
|
|
Maximum
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
$ |
400 |
|
|
$ |
413 |
|
|
$ |
(13 |
) |
Liabilities
|
|
|
(35 |
) |
|
|
(38 |
) |
|
|
3 |
|
Guarantees
(off-balance sheet)
|
|
|
365 |
|
|
|
362 |
|
|
|
3 |
|
Total
maximum exposure
|
|
$ |
730 |
|
|
$ |
737 |
|
|
$ |
(7 |
) |
This
includes a guarantee of a line of credit on behalf of AAT for plant
expansion.
Financial
Services Sector
VIEs
of which Ford Credit is the primary beneficiary:
Ford
Credit uses special purpose entities to issue asset-backed securities in
securitization transactions to public and private investors, bank conduits, and
government programs. The asset-backed securities are backed by the
expected cash flows from finance receivables and our interest in net
investments in operating leases that have been legally sold but continue to be
recognized by us. Ford Credit retains interests in its securitization
transactions, including senior and subordinated securities issued by VIEs,
rights to cash held for the benefit of the securitization investors (e.g., a
reserve fund), and residual interests.
As
residual interest holder, Ford Credit is exposed to underlying residual and
credit risk of the collateral, and may be exposed to interest rate
risk. Ford Credit's exposure does not represent incremental risk to
Ford Credit, and was $18.9 billion and $21.1 billion at March 31, 2009
and December 31, 2008, respectively. The amount of risk absorbed by
Ford Credit's residual interests is generally represented by and limited to the
amount of overcollaterization of its assets securing the debt and any cash
reserves funded. For Ford Credit's wholesale transactions, this also
includes cash it has contributed to excess funding accounts and its
participation interests in VIEs.
Ford
Credit generally has no obligation to repurchase or replace any securitized
asset that subsequently becomes delinquent in payment or otherwise is in
default. Securitization investors have no recourse to Ford Credit or
its other assets for credit losses on the securitized assets, and have no right
to require Ford Credit to repurchase their investments. Ford Credit
does not guarantee any asset-backed securities and has no obligation to provide
liquidity or contribute cash or additional assets to the VIEs. In
certain instances in the first quarter of 2009, Ford Credit elected to provide
additional enhancements or repurchase specific subordinated notes in order to
address challenging market conditions.
In
certain transactions Ford Credit has dynamic enhancements, where it may elect to
support the performance and/or product mix of the transactions by purchasing
additional subordinated notes or increasing cash reserves. Ford
Credit's maximum contribution for these transactions was $491 million in the
first quarter of 2009.
Although
not contractually required, Ford Credit regularly supports its wholesale
securitization programs by repurchasing receivables of a dealer from the VIEs
when the dealer's performance is at risk, which transfers the corresponding risk
of loss from the VIE to Ford Credit. Ford Credit repurchased
$41 million of such receivables in the first quarter of 2009. In
addition, from time to time, Ford Credit supports its revolving wholesale
transactions by contributing cash to an excess funding account when receivables
fall below the required level in order to continue to finance the
receivables. These cash enhancements ranged from $0 to
$1.3 billion in the first quarter of 2009.
Ford
Credit's FCAR Owner Trust retail securitization program (“FCAR”) is a VIE that
issues commercial paper and Ford Credit may, on occasion, purchase the debt
issued by FCAR. In October 2008, Ford Credit registered to sell up to
$16 billion of FCAR asset-backed commercial paper to the U.S. Federal
Reserve's Commercial Paper Funding Facility ("CPFF"). Commercial
paper sold to the CPFF is for a term of 90 days and sales can be made
through October 30, 2009. At March 31, 2009, Ford Credit
had an outstanding balance of $7 billion of FCAR asset-backed commercial paper
issued to the CPFF. At March 31, 2009, the finance
receivables of FCAR supported $10 billion of FCAR's asset-backed commercial
paper.
Item
1. Financial Statements (Continued)
NOTE
3. VARIABLE INTEREST ENTITIES (Continued)
In
November 2008, the U.S. Federal Reserve announced the Term Asset-Backed
Securities Loan Facility ("TALF"), pursuant to which the Federal Reserve Bank of
New York was authorized to provide up to $200 billion of non-recourse loans
to investors in highly-rated asset-backed securities who pledge these securities
as collateral for the non-recourse loan. Asset-backed securities
backed by automotive retail, lease, and wholesale finance receivables qualify
for the TALF program. On February 10, 2009, this program
was further expanded to $1 trillion by the Consumer & Business Lending
Initiative as part of the Financial Stability Plan announced by the U.S.
Treasury. Ford Credit completed a TALF-eligible $3 billion
retail transaction in March 2009 through a VIE.
Finance
receivables and net investment in operating leases that collateralize the
secured debt of the VIE remain on Ford Credit's balance sheet and therefore are
not included in the VIE assets shown in the following table. As of
March 31, 2009, the carrying values of the assets were $39.5 billion
of retail receivables, $16.7 billion of wholesale receivables, and
$13.6 billion of net investment in operating leases. As of
December 31, 2008, the carrying values of the assets were $41.9 billion of
retail receivables, $19.6 billion of wholesale receivables, and $15.6 billion of
net investment in operating leases. The liabilities recognized as a
result of consolidating these VIEs do not represent additional claims on Ford
Credit's general assets; rather, they represent claims against only the specific
securitized assets. Conversely, these specific securitized assets do
not represent additional assets that could be used to satisfy claims against
Ford Credit's general assets.
The total
consolidated VIE assets and liabilities reflected on our
March 31, 2009 and December 31, 2008 balance sheets are as
follows (in millions):
|
|
|
|
|
|
|
|
|
Cash
& Cash Equivalents (a)
|
|
|
|
|
|
Cash
& Cash Equivalents (a)
|
|
|
|
|
VIEs
supporting transactions by asset class (c)
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$ |
2,690 |
|
|
$ |
32,660 |
|
|
$ |
2,673 |
|
|
$ |
34,507 |
|
Wholesale
|
|
|
788 |
|
|
|
11,916 |
|
|
|
1,029 |
|
|
|
15,537 |
|
Net
investment in operating leases
|
|
|
187 |
|
|
|
10,302 |
|
|
|
206 |
|
|
|
12,005 |
|
Total
|
|
$ |
3,665 |
|
|
$ |
54,878 |
|
|
$ |
3,908 |
|
|
$ |
62,049 |
|
__________
|
(a)
|
Additional cash and
cash equivalents available to support the obligations of the VIEs
that are not assets of the VIEs were $1 billion and $949 million
as of March 31, 2009 and December 31, 2008, respectively, and are
reflected in our consolidated financial
statements.
|
|
(b)
|
Certain notes issued
by the VIEs to affiliated companies served as collateral for
accessing the European Central Bank ("ECB)" facility. This
external funding of $246 million and $308 million at March 31, 2009
and December 31, 2008, respectively, was not reflected as a
liability of the VIEs, but was included in our consolidated
liabilities.
|
|
(c)
|
The
derivative assets of our consolidated VIEs were $59 million and $46
million at March 31, 2009 and December 31, 2008, respectively, and the
derivative liabilities were $673 million and $808 million at March 31,
2009 and December 31, 2008,
respectively.
|
The
financial performance of the consolidated VIEs reflected in our statements of
operations for the first quarters of 2009 and 2008 are as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
(Income)/
Expense
|
|
|
|
|
|
Derivative
(Income)/
Expense
|
|
|
|
|
VIEs
supporting transactions by asset class
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$ |
40 |
|
|
$ |
275 |
|
|
$ |
270 |
|
|
$ |
453 |
|
Wholesale
|
|
|
(3 |
) |
|
|
79 |
|
|
|
(22 |
) |
|
|
184 |
|
Net
investment in operating leases
|
|
|
27 |
|
|
|
124 |
|
|
|
96 |
|
|
|
178 |
|
Our
financial performance related to VIEs
|
|
$ |
64 |
|
|
$ |
478 |
|
|
$ |
344 |
|
|
$ |
815 |
|
VIEs
of which Ford Credit is not the primary beneficiary:
Ford
Credit has investments in certain joint ventures determined to be VIEs of which
it is not the primary beneficiary. These joint ventures provide
consumer and dealer financing in their respective markets. The joint
ventures are financed by external debt as well as subordinated financial support
provided by the joint venture partners. The risks and rewards
associated with Ford Credit's interests in these joint ventures are based
primarily on ownership percentages. Ford Credit's investments in
these joint ventures are accounted for as equity method investments and are
included in Other
assets. Ford Credit's maximum exposure to any potential losses
associated with these VIEs is limited to its equity investments, which amounted
to $137 million and $140 million at March 31, 2009 and
December 31, 2008, respectively.
Item
1. Financial Statements (Continued)
NOTE
4. GOODWILL AND OTHER NET INTANGIBLES
Goodwill
The total
carrying amount of goodwill was $38 million and $40 million at
March 31, 2009 and December 31, 2008,
respectively. At March 31, 2009, $30 million of the
goodwill balance related to Ford Europe, and $8 million related to
Ford Credit. At December 31, 2008, $31 million of
the goodwill balance related to Ford Europe, and $9 million related to Ford
Credit. Changes in the goodwill balance are attributable to the
impact of foreign currency translation. We also have goodwill
recorded within Equity in net
assets of affiliated companies of $34 million at March 31, 2009
and December 31, 2008.
Other
Net Intangibles
The
components of net identifiable intangible assets are as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Accumulated Amortization
|
|
|
|
|
|
|
|
|
Less:
Accumulated Amortization
|
|
|
|
|
Automotive
Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
and production incentive rights
|
|
$ |
229 |
|
|
|
(128 |
) |
|
|
101 |
|
|
|
227 |
|
|
|
(113 |
) |
|
|
114 |
|
License
and advertising agreements
|
|
|
85 |
|
|
|
(25 |
) |
|
|
60 |
|
|
|
85 |
|
|
|
(23 |
) |
|
|
62 |
|
Other
|
|
|
70 |
|
|
|
(42 |
) |
|
|
28 |
|
|
|
71 |
|
|
|
(41 |
) |
|
|
30 |
|
Total
Automotive sector
|
|
|
384 |
|
|
|
(195 |
) |
|
|
189 |
|
|
|
383 |
|
|
|
(177 |
) |
|
|
206 |
|
Total
Financial Services Sector
|
|
|
3 |
|
|
|
(3 |
) |
|
|
— |
|
|
|
4 |
|
|
|
(4 |
) |
|
|
— |
|
Total
Company
|
|
$ |
387 |
|
|
$ |
(198 |
) |
|
$ |
189 |
|
|
$ |
387 |
|
|
$ |
(181 |
) |
|
$ |
206 |
|
Our
identifiable intangible assets are comprised of manufacturing and production
incentive rights acquired in 2006 with a useful life of 4 years, license
and advertising agreements with amortization periods of 5 years to
25 years, and other intangibles with various amortization periods
(primarily patents, customer contracts, technology, and land
rights).
Pre-tax
amortization expense was as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
amortization expense
|
|
$ |
18 |
|
|
$ |
24 |
|
Intangible
asset amortization is forecasted to be approximately $70 million to
$80 million per year for the next two years, and $10 million
thereafter.
Item
1. Financial Statements (Continued)
NOTE
5. DEBT AND COMMITMENTS
Debt at
April 8, 2009 (pro
forma), March 31, 2009, and December 31, 2008 are
shown below. Pro
forma amounts below reflect debt repurchases that were completed on April
8, 2009; see "Subsequent Events" below for additional detail regarding these
transactions.
|
|
Amount
Outstanding
(in
millions)
|
|
|
|
(Pro Forma)
April
8, 2009
|
|
|
|
|
|
|
|
Automotive
Sector
|
|
|
|
|
|
|
|
|
|
Debt
payable within one year
|
|
|
|
|
|
|
|
|
|
Short-term
|
|
$ |
861 |
|
|
$ |
861 |
|
|
$ |
543 |
|
Long-term
payable within one year
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured
term loan
|
|
|
70 |
|
|
|
70 |
|
|
|
70 |
|
Other
debt
|
|
|
497 |
|
|
|
497 |
|
|
|
578 |
|
Total
debt payable within one year
|
|
|
1,428 |
|
|
|
1,428 |
|
|
|
1,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt payable after one year
|
|
|
|
|
|
|
|
|
|
|
|
|
Public
unsecured debt securities
|
|
|
5,594 |
|
|
|
8,983 |
|
|
|
9,148 |
|
Convertible
notes
|
|
|
579 |
|
|
|
4,883 |
|
|
|
4,883 |
|
Subordinated
convertible debentures
|
|
|
2,984 |
|
|
|
2,984 |
|
|
|
3,027 |
|
Secured
term loan
|
|
|
4,566 |
|
|
|
4,566 |
|
|
|
6,790 |
|
Secured
revolving loan
|
|
|
10,066 |
|
|
|
10,066 |
|
|
|
— |
|
Other
debt
|
|
|
950 |
|
|
|
950 |
|
|
|
951 |
|
Total
long-term debt payable after one year
|
|
|
24,739 |
|
|
|
32,432 |
|
|
|
24,799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized
discount (a)
|
|
|
(331 |
) |
|
|
(1,728 |
) |
|
|
(1,763 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
long-term debt payable after one year
|
|
|
24,408 |
|
|
|
30,704 |
|
|
|
23,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Automotive sector
|
|
$ |
25,836 |
|
|
$ |
32,132 |
|
|
$ |
24,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Services Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
debt
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed
commercial paper
|
|
$ |
10,010 |
|
|
$ |
10,010 |
|
|
$ |
11,503 |
|
Other
asset-backed short-term debt
|
|
|
3,034 |
|
|
|
3,034 |
|
|
|
5,569 |
|
Ford
Interest Advantage (b)
|
|
|
1,958 |
|
|
|
1,958 |
|
|
|
1,958 |
|
Other
short-term debt
|
|
|
1,285 |
|
|
|
1,285 |
|
|
|
1,538 |
|
Total
short-term debt
|
|
|
16,287 |
|
|
|
16,287 |
|
|
|
20,568 |
|
Long-term
debt
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured
debt
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
payable within one year
|
|
|
12,602 |
|
|
|
12,602 |
|
|
|
15,712 |
|
Notes
payable after one year
|
|
|
34,128 |
|
|
|
34,128 |
|
|
|
37,583 |
|
Unamortized
discount
|
|
|
(232 |
) |
|
|
(232 |
) |
|
|
(256 |
) |
Asset-backed
debt
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
payable within one year
|
|
|
24,696 |
|
|
|
24,696 |
|
|
|
26,501 |
|
Notes
payable after one year
|
|
|
26,330 |
|
|
|
26,330 |
|
|
|
28,734 |
|
Total
long-term debt
|
|
|
97,524 |
|
|
|
97,524 |
|
|
|
108,274 |
|
Total
Financial Services sector
|
|
$ |
113,811 |
|
|
$ |
113,811 |
|
|
$ |
128,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Automotive and Financial Services sectors
|
|
$ |
139,647 |
|
|
$ |
145,943 |
|
|
$ |
153,069 |
|
Intersector
elimination (c)
|
|
|
(357 |
) |
|
|
(357 |
) |
|
|
(492 |
) |
Total
Company
|
|
$ |
139,290 |
|
|
$ |
145,586 |
|
|
$ |
152,577 |
|
(a)
|
Includes
unamortized discount on convertible notes per FSP APB
14-1.
|
(b)
|
The
Ford Interest Advantage program consists of our floating rate demand
notes.
|
(c)
|
Debt
related to Ford's acquisition of Ford Credit debt securities; see Note 1
for additional detail.
|
Item
1. Financial Statements (Continued)
NOTE
5. DEBT AND COMMITMENTS (Continued)
Debt
maturities at March 31, 2009 were as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Debt Carrying Value
|
|
Automotive
Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public
unsecured debt securities
|
|
$ |
— |
|
|
$ |
490 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
8,493 |
|
|
$ |
8,983 |
|
|
$ |
— |
|
|
$ |
8,983 |
|
Convertible
notes (a)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,883 |
|
|
|
4,883 |
|
|
|
(1,585 |
) |
|
|
3,298 |
|
Subordinated
convertible debentures
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,984 |
|
|
|
2,984 |
|
|
|
— |
|
|
|
2,984 |
|
Secured
term loan
|
|
|
53 |
|
|
|
70 |
|
|
|
70 |
|
|
|
70 |
|
|
|
4,373 |
|
|
|
— |
|
|
|
4,636 |
|
|
|
— |
|
|
|
4,636 |
|
Secured
revolving loan
|
|
|
— |
|
|
|
— |
|
|
|
10,066 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,066 |
|
|
|
— |
|
|
|
10,066 |
|
Short
term and other debt (b)
|
|
|
1,058 |
|
|
|
476 |
|
|
|
146 |
|
|
|
128 |
|
|
|
71 |
|
|
|
429 |
|
|
|
2,308 |
|
|
|
— |
|
|
|
2,308 |
|
Unamortized
discount
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(143 |
) |
|
|
(143 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Automotive debt
|
|
|
1,111 |
|
|
|
1,036 |
|
|
|
10,282 |
|
|
|
198 |
|
|
|
4,444 |
|
|
|
16,789 |
|
|
|
33,860 |
|
|
|
(1,728 |
) |
|
|
32,132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Services Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured
debt
|
|
|
13,119 |
|
|
|
8,580 |
|
|
|
11,978 |
|
|
|
5,321 |
|
|
|
4,641 |
|
|
|
6,009 |
|
|
|
49,648 |
|
|
|
— |
|
|
|
49,648 |
|
Asset-backed
debt
|
|
|
34,132 |
|
|
|
14,294 |
|
|
|
12,924 |
|
|
|
2,403 |
|
|
|
98 |
|
|
|
219 |
|
|
|
64,070 |
|
|
|
— |
|
|
|
64,070 |
|
Unamortized
discount
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(232 |
) |
|
|
(232 |
) |
Other
(c)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
325 |
|
|
|
325 |
|
Total
Financial Services debt
|
|
|
47,251 |
|
|
|
22,874 |
|
|
|
24,902 |
|
|
|
7,724 |
|
|
|
4,739 |
|
|
|
6,228 |
|
|
|
113,718 |
|
|
|
93 |
|
|
|
113,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersector
elimination (d)
|
|
|
(175 |
) |
|
|
(182 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(357 |
) |
|
|
— |
|
|
|
(357 |
) |
Total
Company
|
|
$ |
48,187 |
|
|
$ |
23,728 |
|
|
$ |
35,184 |
|
|
$ |
7,922 |
|
|
$ |
9,183 |
|
|
$ |
23,017 |
|
|
$ |
147,221 |
|
|
$ |
(1,635 |
) |
|
$ |
145,586 |
|
|
(a)
|
Adjustment
reflects unamortized discount per FSP APB
14-1.
|
|
(b)
|
Primarily
non-U.S. affiliate debt.
|
|
(c)
|
Reflects
adjustment related to designated fair value hedges of
debt.
|
|
(d)
|
Debt
related to Ford's acquisition of Ford Credit debt securities; see Note 1
for additional detail.
|
Automotive
Sector
Public
Unsecured Debt Securities
Our
public unsecured debt securities outstanding at April 8, 2009 (pro forma) and
March 31, 2009 were as follows (in millions):
|
|
Aggregate
Principal Amount Outstanding
|
|
Title of Security
|
|
|
|
|
|
|
9.50%
Guaranteed Debentures due June 1, 2010
|
|
$ |
334 |
|
|
$ |
490 |
|
6
1/2% Debentures due August 1, 2018
|
|
|
361 |
|
|
|
482 |
|
8
7/8% Debentures due January 15, 2022
|
|
|
86 |
|
|
|
178 |
|
6.55%
Debentures due October 3, 2022 (a)
|
|
|
15 |
|
|
|
15 |
|
7
1/8% Debentures due November 15, 2025
|
|
|
209 |
|
|
|
295 |
|
7
1/2% Debentures due August 1, 2026
|
|
|
193 |
|
|
|
250 |
|
6
5/8% Debentures due February 15, 2028
|
|
|
104 |
|
|
|
124 |
|
6
5/8% Debentures due October 1, 2028 (b)
|
|
|
638 |
|
|
|
741 |
|
6
3/8% Debentures due February 1, 2029 (b)
|
|
|
260 |
|
|
|
432 |
|
5.95%
Debentures due September 3, 2029 (a)
|
|
|
8 |
|
|
|
8 |
|
6.15%
Debentures due June 3, 2030 (a)
|
|
|
10 |
|
|
|
10 |
|
7.45%
GLOBLS due July 16, 2031 (b)
|
|
|
1,794 |
|
|
|
3,699 |
|
8.900%
Debentures due January 15, 2032
|
|
|
151 |
|
|
|
383 |
|
9.95%
Debentures due February 15, 2032
|
|
|
4 |
|
|
|
11 |
|
5.75%
Debentures due April 2, 2035 (a)
|
|
|
40 |
|
|
|
40 |
|
7.50%
Debentures due June 10, 2043 (c)
|
|
|
593 |
|
|
|
690 |
|
7.75%
Debentures due June 15, 2043
|
|
|
73 |
|
|
|
150 |
|
7.40%
Debentures due November 1, 2046
|
|
|
398 |
|
|
|
438 |
|
9.980%
Debentures due February 15, 2047
|
|
|
181 |
|
|
|
208 |
|
7.70%
Debentures due May 15, 2097
|
|
|
142 |
|
|
|
339 |
|
Total
unsecured debt securities
|
|
$ |
5,594 |
|
|
$ |
8,983 |
|
_________
|
(a)
|
Unregistered
industrial revenue bonds.
|
|
(b)
|
Listed
on the Luxembourg Exchange and on the Singapore
Exchange.
|
|
(c)
|
Listed
on the New York Stock Exchange.
|
Item
1. Financial Statements (Continued)
NOTE
5. DEBT AND COMMITMENTS (Continued)
Debt for Equity
Exchanges. During the first quarter of 2008, we issued an
aggregate of 8,987,366 shares of Ford Common Stock, par value $0.01 per
share, in exchange for $71 million principal amount of our outstanding
publicly-issued unsecured, non-convertible debt securities. As a
result of the exchange, we recorded a pre-tax gain of $16 million, net of
unamortized discounts, premiums and fees, in Automotive interest income and other
non-operating income/(expense), net in the first quarter of
2008.
Debt
Repurchases. In January 2009, through a private market
transaction, we repurchased $165 million principal amount of our
outstanding publicly-issued unsecured non-convertible notes for $37 million
in cash. As a result, we recorded a pre-tax gain of
$127 million, net of unamortized discounts, premiums and fees, in Automotive interest income and other
non-operating income/(expense), net in the first quarter of
2009.
Convertible
Notes
At
March 31, 2009, we had outstanding $4.9 billion in principal
amount of unsecured Convertible Notes that mature in 2036. The
Convertible Notes pay interest semiannually at a rate of 4.25% per
annum. The Convertible Notes are convertible into shares of Ford
Common Stock, based on a conversion rate (subject to adjustment) of
108.6957 shares per $1,000 principal amount of Convertible Notes
(which is equal to a conversion price of $9.20 per share, representing a
25% conversion premium based on the closing price of $7.36 per share
on December 6, 2006). Holders may require us to purchase
all or a portion of the Convertible Notes for cash on
December 20, 2016 and December 15, 2026 or upon a change in
control of the Company, or for shares of Ford Common Stock upon a designated
event, in each case for a price equal to 100% of the principal amount of the
Convertible Notes being repurchased, plus any accrued and unpaid interest to,
but not including, the date of repurchase. We may redeem for cash all
or a portion of the Convertible Notes at our option at any time or from time to
time on or after December 20, 2016 at a price equal to 100% of the
principal amount of the Convertible Notes to be redeemed, plus accrued and
unpaid interest to, but not including, the redemption date. We also
may terminate the conversion rights at any time on or after
December 20, 2013 if the closing price of Ford Common Stock exceeds
140% of the then-prevailing conversion price for twenty trading days during any
consecutive 30 trading day period.
We
adopted FSP APB 14-1 on January 1, 2009. FSP APB 14-1
applies to convertible debt securities that, upon conversion, may be settled in
cash. FSP APB 14-1 requires an issuer to separately account for the
liability and equity components in a manner that reflects the issuer's
nonconvertible borrowing rate resulting in higher interest expense over the life
of the instrument due to amortization of the discount. We applied
this FSP retrospectively to all periods presented.
The
following table summarizes the liability and equity components of our
Convertible Notes (in millions):
|
|
(Pro Forma)
April
8, 2009
|
|
|
|
|
|
|
|
Liability
component
|
|
|
|
|
|
|
|
|
|
Principal
|
|
$ |
579 |
|
|
$ |
4,883 |
|
|
$ |
4,883 |
|
Unamortized
discount*
|
|
|
(188 |
) |
|
|
(1,585 |
) |
|
|
(1,619 |
) |
Net
carrying amount
|
|
$ |
391 |
|
|
$ |
3,298 |
|
|
$ |
3,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
component (recorded in Capital in excess of par value
of stock)
|
|
$ |
(3,207 |
) |
|
$ |
(1,864 |
) |
|
$ |
(1,864 |
) |
__________
|
*
|
The
discount on the liability component will amortize through December 20,
2016.
|
In
addition, we recognized interest cost related to the contractual interest coupon
of $52 million and $53 million for the first quarters of 2009 and
2008, respectively and we recognized interest cost related to the amortization
of the discount on the liability component of $34 million and
$31 million for the first quarters of 2009 and 2008,
respectively. The effective rate on the liability component was
10.5%.
Subordinated
Convertible Debentures
At
March 31, 2009, we had outstanding $3 billion of
6.50% Junior Subordinated Convertible Debentures due 2032 ("Subordinated
Convertible Debentures") to Trust II, a subsidiary trust. The
Subordinated Convertible Debentures are the sole assets of Trust
II. As of January 15, 2007, the Subordinated Convertible
Debentures had become redeemable at our option.
At
March 31, 2009, Trust II had outstanding 6.50% Cumulative
Convertible Trust Preferred Securities with an aggregate liquidation preference
of $2.8 billion (“Trust Preferred Securities”). We guarantee the
payment of all distribution and other payments of the Trust Preferred
Securities to the extent not paid by Trust II, but only if and to the
extent we have made a payment of interest or principal on the Subordinated
Convertible Debentures. Trust II is not consolidated by us as it
is a VIE in which we do not have a significant variable interest and of which we
are not the primary beneficiary.
Item
1. Financial Statements (Continued)
NOTE
5. DEBT AND COMMITMENTS (Continued)
During
the first quarter of 2009, pursuant to a request for conversion, we issued an
aggregate of 2,437,575 shares of Ford Common Stock, par value $0.01 per share,
in exchange for $43 million principal amount of our Subordinated
Convertible Debentures.
Secured
Term Loan and Revolving Loan
We
entered into the Credit Agreement on December 15, 2006
with various banks and financial institutions, which provided for a
$7 billion secured term-loan facility maturing on
December 15, 2013 and an $11.5 billion revolving credit facility
maturing on December 15, 2011. Due to concerns about the
instability in the capital markets and the uncertain state of the global
economy, on January 29, 2009, we gave notice to borrow the total
unused amount (i.e., $10.9 billion) under the $11.5 billion revolving
credit facility. On February 3, 2009, the requested
borrowing date, the lenders under that facility advanced to us
$10.1 billion. As expected, the $890 million commitment of
Lehman Commercial Paper Inc. ("LCPI"), one of the lenders under the facility,
was not advanced because of LCPI having filed for protection under
Chapter 11 of the U.S. Bankruptcy Code on
October 5, 2008. The $10.1 billion revolving loan will
bear interest at LIBOR plus a margin of 2.25% and will mature on
December 15, 2011.
Under the
Credit Agreement, we may designate certain of our domestic and foreign
subsidiaries, including Ford Credit, as borrowers under the revolving
facility. We and certain of our domestic subsidiaries that constitute
a substantial portion of our domestic Automotive assets (excluding cash) are
guarantors under the Credit Agreement, and future material domestic subsidiaries
will become guarantors when formed or acquired.
Collateral. The
borrowings of the Company, the subsidiary borrowers, and the guarantors under
the Credit Agreement are secured by a substantial portion of our domestic
Automotive assets (excluding cash). The collateral includes a
majority of our principal domestic manufacturing facilities, excluding
facilities to be closed, subject to limitations set forth in existing public
indentures and other unsecured credit agreements; domestic accounts receivable;
domestic inventory; up to $4 billion of marketable securities or cash
proceeds therefrom; 100% of the stock of our principal domestic subsidiaries,
including Ford Credit (but excluding the assets of Ford Credit); certain
intercompany notes of Volvo Holding Company Inc., a holding company for Volvo,
Ford Motor Company of Canada, Limited ("Ford Canada") and Grupo Ford S. de R.L.
de C.V. (a Mexican subsidiary); 66% to 100% of the stock of all major first tier
foreign subsidiaries (including Volvo); and certain domestic intellectual
property, including trademarks.
Covenants. The
Credit Agreement requires ongoing compliance with a borrowing base covenant and
contains other restrictive covenants, including a restriction on our ability to
pay dividends. The Credit Agreement prohibits the payment of
dividends (other than dividends payable solely in stock) on Ford Common and
Class B Stock, subject to certain limited exceptions. In
addition, the Credit Agreement contains a liquidity covenant requiring us to
maintain a minimum of $4 billion in the aggregate of domestic cash, cash
equivalents, loaned and marketable securities and short-term Voluntary Employee
Benefit Association ("VEBA") assets and/or availability under the revolving
credit facility.
With
respect to the borrowing base covenant, we are required to limit the outstanding
amount of debt under the Credit Agreement as well as certain permitted
additional indebtedness secured by the collateral described above such that the
total debt outstanding does not exceed the value of the collateral as calculated
in accordance with the Credit Agreement.
Events of
Default. In addition to customary payment, representation,
bankruptcy and judgment defaults, the Credit Agreement contains cross-payment
and cross-acceleration defaults with respect to other debt for borrowed money
and a change in control default.
Secured Term Loan
Offer. On March 27, 2009, Ford Credit purchased from
the lenders thereof $2.2 billion principal amount of our secured term loan under
the Credit Agreement for an aggregate cost of $1.1 billion (including
transaction costs). Consistent with previously announced plans to
return capital from Ford Credit to us, Ford Credit distributed the repurchased
secured term loan to its immediate parent, Ford Holdings, whereupon the debt was
forgiven. Approximately $4.6 billion aggregate principal amount
of the secured term loan remains outstanding. As a result of this
transaction, we recorded a pre-tax gain of $1.1 billion in Automotive interest income and other
non-operating income/(expense), net in the first quarter of
2009.
Item
1. Financial Statements (Continued)
NOTE
5. DEBT AND COMMITMENTS (Continued)
Subsequent
Events
Conversion
Offer. Pursuant to an exchange offer we conducted, on the
settlement date of April 8, 2009, $4.3 billion principal amount
of Convertible Notes was exchanged for an aggregate of 468 million shares of
Ford Common Stock, $344 million in cash ($80 in cash per $1,000 principal
amount of Convertible Notes exchanged) and the applicable accrued and unpaid
interest on such Convertible Notes. Upon settlement,
$579 million aggregate principal amount of Convertible Notes remains
outstanding with a carrying value of $391 million. As a result
of the conversion, we estimate that we will record a pre-tax gain of
approximately $1.2 billion to Automotive interest income and other
non-operating income/(expense), net in the second quarter 2009 financial
statements.
Unsecured Notes Tender
Offer. Pursuant to a cash tender offer conducted by Ford
Credit, on the settlement date of April 8, 2009, Ford Credit purchased
$3.4 billion principal amount of our public unsecured debt securities for
an aggregate cost of $1.1 billion cash (including transaction costs and
accrued and unpaid interest payments for such tendered debt
securities). Upon settlement, Ford Credit transferred the repurchased
debt securities to us in satisfaction of $1.1 billion of Ford Credit's tax
liabilities to us. Approximately $5.6 billion aggregate principal
amount of Ford's public unsecured debt securities (including about $100 million
of industrial revenue bonds) remains outstanding. As a result of the
transaction, we estimate that we will record a pre-tax gain of approximately
$2.2 billion, net of unamortized discounts, premiums and fees, to Automotive interest income and other
non-operating income/(expense), net in the second quarter of
2009.
As
previously announced, we also elected to defer future interest payments related
to the Trust Preferred Securities.
Financial
Services Sector
Unsecured
Debt
Debt
Repurchases. In the first quarter of 2009, through private
market transactions, our Financial Services sector repurchased an aggregate of
$341 million principal amount of its outstanding unsecured notes for
$279 million in cash. As a result, Financial Services sector
recorded a pre-tax gain of $65 million, net of unamortized discounts,
premiums, and fees, in Financial Services other
income/(loss), net in the first quarter of 2009 ($51 million related
to Ford Holdings and $14 million related to Ford Credit).
Asset-Backed
Debt
The
following table shows the assets and the associated liabilities related to Ford
Credit's secured debt arrangements that are included in our financial statements
for March 31, 2009 and December 31, 2008 (in billions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$ |
3.3 |
|
|
$ |
49.6 |
|
|
$ |
40.0 |
|
|
$ |
3.3 |
|
|
$ |
51.6 |
|
|
$ |
42.6 |
|
Wholesale
|
|
|
1.0 |
|
|
|
18.6 |
|
|
|
13.7 |
|
|
|
1.2 |
|
|
|
22.1 |
|
|
|
17.6 |
|
Net
investment in operating leases
|
|
|
1.1 |
|
|
|
13.6 |
|
|
|
10.3 |
|
|
|
1.0 |
|
|
|
15.6 |
|
|
|
12.0 |
|
Total
secured debt arrangements*
|
|
$ |
5.4 |
|
|
$ |
81.8 |
|
|
$ |
64.0 |
|
|
$ |
5.5 |
|
|
$ |
89.3 |
|
|
$ |
72.2 |
|
_________
*
|
Includes debt of $55.1 billion
and $62.3 billion as of March 31, 2009 and December 31, 2008,
respectively, issued by VIEs of which we are the primary beneficiary or an
affiliate whereby the debt is backed by the collateral of the VIE. The
carrying values of Ford Credit assets securing the debt issued by these
VIEs were $4.7 billion and $4.8 billion of cash and cash equivalents,
$39.5 billion and $41.9 billion of retail receivables, $16.7 billion and
$19.6 billion of wholesale receivables, and $13.6 billion and $15.6
billion of net investment in operating leases as of March 31, 2009 and
December 31, 2008, respectively. Refer to Note 3 for further
discussion regarding VIEs.
|
In
certain financing structures, Ford Credit issues asset-backed debt directly,
rather than through consolidated VIEs. For Ford Credit's
bank-sponsored conduit program, Ford Credit transfers finance receivables to
bank conduits or sponsor banks in which it retains a significant interest in the
transferred pools of receivables. The outstanding balance of the
transferred pools of finance receivables was $7.6 billion and
$8.4 billion and the associated secured debt was $6.3 billion and
$6.9 billion at March 31, 2009 and December 31, 2008,
respectively.
Item
1. Financial Statements (Continued)
NOTE
5. DEBT AND COMMITMENTS (Continued)
Ford
Credit's European Central Bank ("ECB") facility has pledged certain financial
assets as collateral and included the associated debt in secured debt
arrangements that did not use a VIE. Of the $700 million and
$773 million of debt secured by collateral at March 31, 2009 and
December 31, 2008, respectively, Ford Credit has issued
a majority through the ECB. The assets associated with this debt
included $94 million and $80 million of cash and cash equivalents and
$1.1 billion and $1.2 billion of receivables at
March 31, 2009 and December 31, 2008,
respectively.
Financial
Services sector asset-backed debt also includes $103 million and
$105 million at March 31, 2009 and December 31, 2008,
respectively, that is secured by property.
NOTE
6. IMPAIRMENTS
Automotive
Sector
Held-for-Sale
Impairments. See Note 10 for discussion of our held-for-sale
impairment of Volvo.
U.S. Consolidated
Dealerships. During the first quarter of 2009, we recorded an
other-than-temporary impairment of our investment in our consolidated
dealerships of $78 million in Automotive cost of
sales. The fair value measurement used to determine the
impairment was based on the market approach and reflects the expected proceeds
which are de
minimis. The fair value of our investment is classified in
Level 2 of our fair-value hierarchy.
Financial
Services Sector
DFO
Partnership. In March 2009, our Board approved a potential
sale of our investment in DFO Partnership. DFO Partnership holds a
portfolio of "non-core" diversified leveraged lease assets (e.g., railcars,
aircraft, energy facilities). We used information obtained from the
bids to assist in determining the $200 million fair value of the investment in
DFO Partnership. As a result, during the first quarter of 2009, we
recorded an other-than-temporary impairment of our investment in DFO Partnership
of $141 million in Equity in
net income/(loss) of affiliated companies. The fair value of
our investment is classified in Level 2 of our fair-value
hierarchy.
NOTE
7. OTHER INCOME/(LOSS)
Automotive
Sector. The following table summarizes the amounts included in
Automotive interest income and
other non-operating income/(expense), net for the periods ended March 31,
2009 and 2008 (in millions):
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$ |
62 |
|
|
$ |
344 |
|
Realized
and unrealized gains/(losses) on cash equivalents and marketable
securities
|
|
|
(6 |
) |
|
|
(271 |
) |
Gains/(Losses)
on the sale of held-for-sale operations, equity and cost investments, and
other dispositions
|
|
|
13 |
|
|
|
6 |
|
Gains/(Losses)
on extinguishment of debt
|
|
|
1,279 |
|
|
|
16 |
|
Other*
|
|
|
(5 |
) |
|
|
(3 |
) |
Total
|
|
$ |
1,343 |
|
|
$ |
92 |
|
_________
*
|
Includes
$9 million in other costs associated with the overall debt
restructuring discussed in Note 5.
|
Financial Services
Sector. The following table summarizes the amounts included in
Financial Services other
income/(loss), net for the periods ended March 31, 2009 and 2008 (in
millions):
|
|
|
|
|
|
|
|
|
|
|
Interest
income (non-financing related)
|
|
$ |
44 |
|
|
$ |
145 |
|
Realized
and unrealized gains/(losses) on cash equivalents and marketable
securities
|
|
|
(13 |
) |
|
|
(4 |
) |
Gains/(Losses)
on the sale of held-for-sale operations, equity and cost investments, and
other dispositions
|
|
|
2 |
|
|
|
6 |
|
Gains/(Losses)
on extinguishment of debt
|
|
|
65 |
|
|
|
— |
|
Investment
and other income related to sales of receivables
|
|
|
10 |
|
|
|
69 |
|
Insurance
premiums earned, net
|
|
|
29 |
|
|
|
40 |
|
Other
|
|
|
(24 |
) |
|
|
(27 |
) |
Total
|
|
$ |
113 |
|
|
$ |
229 |
|
Item
1. Financial Statements (Continued)
NOTE
8. EMPLOYEE SEPARATION ACTIONS AND EXIT AND DISPOSAL
ACTIVITIES
Automotive
Sector
Transitional
Benefits
During
the first quarter of 2009, we reached an agreement with the International Union,
United Automobile, Aerospace and Agricultural Implement Workers of America
("UAW") to modify the 2007 collective bargaining agreement between us and the
UAW. We renegotiated Job Security Benefits, modified Supplemental
Unemployment Benefits, and established a new Transition Assistance
Plan. We establish liabilities for expected employee benefits to be
provided under our collective bargaining agreements. At March
31, 2009 and December 31, 2008, the related liabilities were
$109 million and $411 million, respectively. During the
first quarter of 2009 and 2008, we recorded in Automotive cost of sales a
benefit of $292 million and $93 million, respectively, related to a
decrease in the liability.
Separation
Actions
The cost
of voluntary employee separation actions is recorded at the time of an
employee's acceptance, unless the acceptance requires explicit approval by the
Company. The costs of conditional voluntary separations are accrued
when all conditions are satisfied. The costs of involuntary
separation programs are accrued when management has approved the program and the
affected employees are identified.
UAW Voluntary
Separations. During the first quarter of 2009, we continued to
offer voluntary separation packages to our UAW hourly
workforce. These actions resulted in pre-tax charges of
$24 million and $148 million in the first quarter of 2009 and 2008,
respectively. We recorded the expense in Automotive cost of
sales. We have a separation
reserve established for these costs, and at March 31, 2009 and
December 31, 2008, the reserve was $89 million and
$162 million, respectively.
Other Employee Separation
Actions. The following table shows pre-tax charges for other
hourly and salaried employee separation actions for the first quarter of 2009
and 2008, respectively, which are reported in Automotive cost of sales and
Selling, administrative and
other expenses (in millions).
|
|
|
|
|
|
|
|
|
|
|
Ford
U.S. (salaried-related)
|
|
$ |
61 |
|
|
$ |
— |
|
Ford
Canada
|
|
|
38 |
|
|
|
1 |
|
Other
|
|
|
13 |
|
|
|
4 |
|
The
charges above exclude costs for pension and other postretirement employee
benefits ("OPEB").
Financial
Services Sector
Separation
Actions
In the
first quarter of 2009, Ford Credit announced plans to restructure its U.S.
operations to meet changing business conditions, including the decline in its
receivables. The restructuring affects its servicing, sales, and
central operations. Ford Credit recognized pre-tax charges of
$27 million in Selling,
administrative and other expenses for this and other employee separation
actions outside of the United States.
These
charges exclude costs for pension and OPEB.
NOTE
9. INCOME TAXES
Generally,
for interim tax reporting we estimate one single tax rate for tax jurisdictions
not subject to a valuation allowance, which is applied to the year-to-date
ordinary income/(loss). However, we manage our operations by
multi-jurisdictional business units and thus are unable to reasonably compute
one overall effective tax rate. Accordingly, our worldwide tax
provision is calculated pursuant to FASB Interpretation No. 18, Accounting for Income Taxes in
Interim Periods, which provides that tax (or benefit) in each foreign
jurisdiction not subject to valuation allowance be separately computed as
ordinary income/(loss) occurs within the jurisdiction.
The U.S.
and Canadian governments are progressing with terms of a negotiated settlement
of our transfer pricing methodologies, covering a number of years. It is
reasonably possible that a settlement could be completed within the near term,
resulting in a positive effect on our income tax provision.
Item
1. Financial Statements (Continued)
NOTE
10. DISCONTINUED OPERATIONS, HELD-FOR-SALE OPERATIONS, OTHER
DISPOSITIONS, AND ACQUISITIONS
Automotive
Sector
Held-for-Sale
Operations
Volvo. In the
fourth quarter of 2008, we performed annual goodwill impairment testing for our
Volvo reporting unit. We compared the carrying value of our Volvo
reporting unit to its fair value, and concluded that the goodwill was not
impaired. We performed this measurement relying primarily on the
income approach, applying a discounted cash flow methodology. Our
valuation was based on an in-use premise which considered a discount rate,
after-tax return on sales rate, growth rate, and terminal value consistent with
assumptions we believed principal market participants (i.e., other global
automotive manufacturers) would use. This methodology produced
appropriate valuations for entities we disposed of in recent years; in light of
worsening economic conditions, however, we also considered other valuations,
including a discounted cash flow analysis using more conservative assumptions
than we initially used. This alternative analysis incorporated a
significantly higher discount rate, offset partially by a higher growth rate; a
much lower after-tax return on sales rate; and a lower terminal
value. This alternative analysis reduced the valuation of our Volvo
reporting unit by about 50 percent. Even this more conservative
analysis, however, did not support an impairment of Volvo goodwill at
year-end.
As
previously disclosed, in recent years we have undertaken efforts to divest
non-core assets in order to allow us to focus exclusively on our global Ford
brand. Toward that end, in 2007 we sold our interest in Aston Martin;
in 2008, we sold our interest in Jaguar Land Rover, and a significant portion of
our ownership in Mazda. During the first quarter of 2009, based on
our strategic review of Volvo and in light of our goal to focus on the global
Ford brand, our Board of Directors committed to actively market Volvo for sale,
notwithstanding the current distressed market for automotive-related
assets. Accordingly, in the first quarter of 2009 we reported Volvo
as held for sale and we are ceasing depreciation of its long-lived assets in the
second quarter of 2009.
Our
commitment to actively market Volvo for sale also triggered a held-for-sale
impairment test in the first quarter of 2009. We received information
from our discussions with potential buyers that provided us a value for Volvo
using a market approach, rather than an income approach. We concluded
that the information we received from our discussions with potential buyers was
more representative of the value of Volvo given the current market conditions,
the characteristics of viable market participants, and our anticipation of a
more immediate transaction for Volvo. These inputs resulted in a
lower value for Volvo than the discounted cash flow method we had previously
used.
After
considering deferred gains reported in Accumulated other comprehensive
income/(loss), we recognized a pre-tax impairment charge of
$650 million related to our total investment in Volvo. The
impairment was recorded in Automotive cost of sales for
the first quarter of 2009.
Had we
not committed to actively market Volvo for sale, we would not have been afforded
the benefit of the new information obtained in discussions with potential
buyers. Rather, we would have continued to employ an in-use premise
to test Volvo's goodwill and long-lived assets, using a discounted cash flow
methodology with assumptions similar to those we used at year-end
2008.
Any
transaction that we enter into is expected to close within the next twelve
months.
The
assets and liabilities of Volvo classified as held-for-sale operations are as
follows:
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Receivables
|
|
$ |
497 |
|
|
$ |
399 |
|
Inventories
|
|
|
1,438 |
|
|
|
1,630 |
|
Net
property
|
|
|
4,125 |
|
|
|
4,422 |
|
Goodwill
|
|
|
1,099 |
|
|
|
1,150 |
|
Other
intangibles
|
|
|
188 |
|
|
|
198 |
|
Other
assets
|
|
|
576 |
|
|
|
615 |
|
Impairment
of carrying value
|
|
|
(650 |
) |
|
|
— |
|
Total
assets of the held-for-sale operations
|
|
$ |
7,273 |
|
|
$ |
8,414 |
|
Liabilities
|
|
|
|
|
|
|
|
|
Payables
|
|
$ |
1,519 |
|
|
$ |
1,626 |
|
Pension
liabilities
|
|
|
439 |
|
|
|
560 |
|
Warranty
liabilities
|
|
|
438 |
|
|
|
494 |
|
Other
liabilities
|
|
|
2,612 |
|
|
|
2,807 |
|
Total
liabilities of the held-for-sale operations
|
|
$ |
5,008 |
|
|
$ |
5,487 |
|
Item
1. Financial Statements (Continued)
NOTE
10. DISCONTINUED OPERATIONS, HELD-FOR-SALE OPERATIONS, OTHER
DISPOSITIONS, AND ACQUISITIONS
(Continued)
Jaguar Land
Rover. During 2008, we sold our Jaguar Land Rover
operations. In the first quarter of 2008, we recorded a pre-tax
impairment charge of $421 million reported in Automotive cost of
sales. There are no assets or liabilities remaining on our
balance sheet related to Jaguar Land Rover operations.
Other
Dispositions
Ballard. In the
first quarter of 2008, we reached an agreement with Ballard to exchange our
entire ownership interest of 12.9 million shares of Ballard stock for a 30%
equity interest in Automotive Fuel Cell Cooperation Corporation ("AFCC") along
with $22 million in cash. AFCC is a joint venture between Ford
(30%), Daimler AG (50.1%) and Ballard (19.9%). It was created for the
development of automotive fuel cells. We also have agreed to purchase from
Ballard its 19.9% equity interest for $65 million plus interest within five
years. As a result of the exchange, we recognized in Automotive cost of sales a
pre-tax loss of $70 million. Our investment in AFCC is reported in Equity in net assets of affiliated
companies.
Financial
Services Sector
Discontinued
Operations
First
quarter results for discontinued operations are shown in the table below
(in millions):
|
|
|
|
|
|
|
|
|
|
|
Operating
income/(loss) from discontinued operations
|
|
$ |
— |
|
|
$ |
— |
|
Gain/(Loss)
on discontinued operations
|
|
|
— |
|
|
|
1 |
|
(Provision
for)/Benefit from income taxes
|
|
|
— |
|
|
|
— |
|
Income/(Loss)
from discontinued operations
|
|
$ |
— |
|
|
$ |
1 |
|
Held-for-Sale
Operations
Primus Leasing Company Limited
("Primus Thailand"). In March 2009, Ford Credit completed the
sale of Primus Thailand, its operation in Thailand that offered automotive
retail and wholesale financing of Ford, Mazda and Volvo vehicles. As
a result of the sale, Ford Credit received $165 million in proceeds and
recognized a de minimis
pre-tax gain in Financial
Services other income/(loss), net.
The
assets and liabilities of Primus Thailand classified as held for sale at March
2, 2009 and December 31, 2008 are summarized as follows (in
millions):
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Finance
receivables, net
|
|
$ |
174 |
|
|
$ |
194 |
|
Other
assets
|
|
|
2 |
|
|
|
4 |
|
Total
assets of held-for-sale operations
|
|
$ |
176 |
|
|
$ |
198 |
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
10 |
|
|
$ |
13 |
|
Debt
|
|
|
— |
|
|
|
41 |
|
Other
liabilities
|
|
|
1 |
|
|
|
1 |
|
Total
liabilities of held-for-sale operations
|
|
$ |
11 |
|
|
$ |
55 |
|
Item
1. Financial Statements (Continued)
NOTE
11. AMOUNTS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND
CLASS B STOCK
The
calculation of diluted income/(loss) per share of Ford Common Stock and Class B
Stock takes into account the effect of obligations, such as RSU stock awards,
stock options, and convertible notes and securities, considered to be
potentially dilutive. Basic and diluted income/(loss) per share were
calculated using the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted Income/(Loss) Attributable to Ford Motor
Company
|
|
|
|
|
|
|
Basic
income/(loss) from continuing operations
|
|
$ |
(1,427 |
) |
|
$ |
69 |
|
Effect
of dilutive Convertible Notes (a)
|
|
|
— |
|
|
|
— |
|
Effect
of dilutive Trust Preferred Securities (b)
|
|
|
— |
|
|
|
— |
|
Diluted
income/(loss) from continuing operations
|
|
$ |
(1,427 |
) |
|
$ |
69 |
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted Shares
|
|
|
|
|
|
|
|
|
Average
shares outstanding
|
|
|
2,398 |
|
|
|
2,189 |
|
Restricted
and uncommitted-ESOP shares
|
|
|
(1 |
) |
|
|
(1 |
) |
Basic
shares
|
|
|
2,397 |
|
|
|
2,188 |
|
Net
dilutive options and restricted and uncommitted-ESOP shares
(c)
|
|
|
— |
|
|
|
20 |
|
Dilutive
Convertible Notes (a)
|
|
|
— |
|
|
|
— |
|
Dilutive
convertible Trust Preferred Securities (b)
|
|
|
— |
|
|
|
— |
|
Diluted
shares
|
|
|
2,397 |
|
|
|
2,208 |
|
__________
Not
included in calculation of diluted earnings per share due to their antidilutive
effect:
(a)
|
531
million shares and 538 million shares at March 31, 2009 and 2008,
respectively, and the related income effect for Convertible
Notes.
|
(b)
|
160 million
shares and 162 million shares at March 31, 2009 and 2008, respectively,
and the related income effect for Trust Preferred Securities.
|
(c)
|
35
million contingently-issuable shares for first quarter 2009.
|
NOTE
12. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING
ACTIVITIES
Derivative
Financial Instruments and Hedge Accounting
We
adopted Statement of Financial Accounting Standards No. 161, Disclosures about Derivative
Instruments and Hedging Activities ("SFAS No. 161"), on
January 1, 2009. SFAS No. 161 enhances the current
disclosure framework for derivative instruments and hedging
activities. In this initial year of adoption, we have elected not to
present earlier periods for comparative purposes.
In the
normal course of business, our operations are exposed to global market risks,
including the effect of changes in foreign currency exchange rates, certain
commodity prices, and interest rates. To manage these risks, we enter
into various derivatives contracts. Foreign currency exchange
contracts including forwards, options, and futures are used to manage foreign
exchange exposure. Commodity contracts including forwards and options
are used to manage commodity price risk. Interest rate contracts
including swaps, caps, and floors are used to manage the effects of interest
rate fluctuations. Cross-currency interest rate swap contracts are
used to manage foreign currency and interest rate exposures on
foreign-denominated debt. The vast majority of our derivatives are
over-the-counter customized derivative transactions and are not
exchange-traded. Management reviews our hedging program, derivative
positions, and overall risk management strategy on a regular
basis. We only enter into transactions that we believe will be highly
effective at offsetting the underlying risk.
Our use
of derivatives to manage market risks results in the risk that a counterparty
may default on a derivative contract. We establish exposure limits
for each counterparty to minimize this risk and provide counterparty
diversification. Substantially all of our derivative exposures are
with counterparties that have long-term credit ratings of single-A or
better. The aggregate fair value of derivative instruments in asset
positions on March 31, 2009 was $3 billion, representing the
maximum loss that would be recognized at that date if all counterparties failed
to perform as contracted. We enter into master agreements with
counterparties that generally allow for netting of certain exposures; therefore,
our actual loss that would be recognized if all counterparties failed to perform
as contracted would be significantly lower.
To ensure
consistency in our treatment of derivative and non-derivative exposures with
regard to our master agreements, we do not net our derivative position by
counterparty for purposes of balance sheet presentation and
disclosure.
All
derivatives are recognized on the balance sheet at fair value. We
have elected to apply hedge accounting to certain derivatives in both the
Automotive and Financial Services sectors. Derivatives that receive
designated hedge
Item
1. Financial Statements (Continued)
NOTE
12. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
accounting
treatment are documented and evaluated for effectiveness at the time they are
designated, as well as throughout the hedge period. Cash flows
associated with designated hedges are reported in the same category as the
underlying hedged item.
Some
derivatives do not qualify for hedge accounting; for others, we elect not to
apply hedge accounting. We report changes in the fair value of
derivatives not designated as hedging instruments through Automotive cost of sales,
Automotive interest income and
other non-operating income/(expense), net, or Financial Services other
income/(loss), net depending on the sector and underlying
exposure. Cash flows associated with non-designated or de-designated
derivatives are reported in Net cash (used in)/provided by
investing activities in our statements of cash flows.
Cash Flow
Hedges. Our Automotive sector has designated certain forward
and option contracts as cash flow hedges of forecasted transactions with
exposure to foreign currency exchange and commodity price
risks. During the second half of 2008, all foreign exchange forwards
and options previously designated as cash flow hedges of forecasted transactions
under critical terms match were de-designated and re-designated under the
"long-haul" method using regression analysis to assess hedge
effectiveness. Since 2007, we have had no commodity derivatives
designated as cash flow hedges.
The
effective portion of changes in the fair value of cash flow hedges is deferred
in Accumulated other
comprehensive income/(loss) and is recognized in Automotive cost of sales when
the hedged item affects earnings. The ineffective portion is reported
currently in Automotive cost
of sales. Our policy is to de-designate cash flow hedges prior
to the time forecasted transactions are recognized as assets or liabilities on
the balance sheet and report subsequent changes in fair value through Automotive cost of
sales. If it becomes probable that the originally-forecasted
transaction will not occur, the related amount is also reclassified from Accumulated other comprehensive
income/(loss) and recognized in earnings. Our cash flow hedges
mature within two years or less.
Fair Value
Hedges. Our Financial Services sector uses derivatives to
reduce the risk of changes in the fair value of liabilities. We have
designated certain receive-fixed, pay-float interest rate swaps as fair value
hedges of fixed-rate debt under the "long haul" method of assessing
effectiveness. The risk being hedged is the risk of changes in the
fair value of the hedged item attributable to changes in the benchmark interest
rate. We use regression analysis to assess hedge
effectiveness. If the hedge relationship is deemed to be highly
effective, we record the changes in the fair value of the hedged item related to
the risk being hedged in Financial Services debt with
the offset in Financial
Services other income/(loss), net. The change in fair
value of the related derivative is also recorded in Financial Services other
income/(loss), net. Hedge ineffectiveness, recorded directly
in earnings, is the difference between the change in fair value of the entire
derivative instrument and the change in fair value of the hedged item
attributable to changes in the benchmark interest rate.
When a
derivative is de-designated from a fair value hedge relationship, or when the
derivative in a fair value hedge relationship is terminated before maturity, the
fair value adjustment to the hedged item continues to be reported as part of the
basis of the item and is amortized over its remaining life.
Net Investment
Hedges. We have used foreign currency exchange derivatives to
hedge the net assets of certain foreign entities to offset the translation and
economic exposures related to our investment in these entities. The
effective portion of changes in the value of these derivative instruments is
included in Accumulated other
comprehensive income/(loss) as a foreign currency translation adjustment
until the hedged investment is sold or liquidated. When the
investment is sold or liquidated, the effective portion of the hedge is
recognized in Automotive
interest income and other non-operating income/(expense), net as part of
the gain or loss on sale. We have had no active
foreign currency derivatives classified as net investment hedges since the first
quarter of 2007.
Normal Purchases and Normal Sales
Classification. For physical supply contracts that are entered
into for the purpose of procuring commodities to be used in production over a
reasonable period in the normal course of our business, we have elected to apply
the normal purchases and normal sales classification.
Item
1. Financial Statements (Continued)
NOTE
12. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
Income
Effect of Derivative Instruments
The
following table summarizes the pre-tax gains/(losses) recognized in Other
comprehensive income/(loss) ("OCI"), reclassified from Accumulated other comprehensive
income/(loss) ("AOCI" ) to income and recognized directly
in income by hedge
designation for the period ended March 31, 2009
(in millions):
|
|
Gain/(Loss)
Recognized in OCI on Derivative (Effective Portion)
|
|
|
Gain/(Loss)
Reclassified from AOCI to Income on Derivative (Effective
Portion)
|
|
|
Gain/(Loss)
Recognized in Income on Derivative (Ineffective
Portion)
|
|
Automotive
Sector
|
|
|
|
|
|
|
|
|
|
Cash
flow hedges:
|
|
|
|
|
|
|
|
|
|
Foreign
exchange contracts
|
|
$ |
(55 |
) |
|
$ |
28 |
(a) |
|
$ |
(1 |
) |
Commodity
contracts
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
Total
|
|
$ |
(55 |
) |
|
$ |
32 |
|
|
$ |
(1 |
) |
|
|
|
|
|
|
|
Gain/(Loss)
Recognized in Income on Derivative
|
|
Derivatives
not designated as hedging instruments:
|
|
|
|
|
Foreign
exchange contracts – operating exposures (b)
|
|
$ |
75 |
|
Foreign
exchange contracts – investment portfolios
|
|
|
(1 |
) |
Commodity
contracts
|
|
|
(30 |
) |
Other
-- interest rate contracts and warrants
|
|
|
(5 |
) |
Total
|
|
$ |
39 |
|
|
|
|
|
|
|
|
Gain/(Loss)
Recognized in Income
|
|
Financial
Services Sector
|
|
|
|
|
Fair
value hedges:
|
|
|
|
|
Interest
rate contracts
|
|
|
|
|
Net
interest settlements and accruals excluded from the assessment
of hedge effectiveness
|
|
$ |
24 |
|
Ineffectiveness
(c)
|
|
|
(10 |
) |
Total
|
|
$ |
14 |
|
|
|
|
|
|
Derivatives
not designated as hedging instruments:
|
|
|
|
|
Interest
rate contracts
|
|
$ |
(95 |
) |
Foreign
exchange contracts (b)
|
|
|
177 |
|
Cross
currency interest rate swap contracts (b)
|
|
|
73 |
|
Other
-- warrants
|
|
|
(1 |
) |
Total
|
|
$ |
154 |
|
__________
|
(a)
|
Includes
$4 million gain reclassified from OCI to income attributable to
transactions no longer probable to occur, primarily related to
Volvo.
|
|
(b)
|
Gains/(losses)
related to foreign currency derivatives were partially offset by net
revaluation impacts on foreign denominated assets and liabilities, which
were recorded to the same statement of operations line item as the
derivative gains/(losses).
|
|
(c)
|
Hedge
ineffectiveness is the difference between the change in fair value on the
derivative of $1 million and the change in the fair value on the
hedged item attributable to the hedged risk of
$(11) million.
|
For our
Automotive sector, we report in Automotive cost of sales on
our consolidated statement of operations gains and losses on cash flow hedges
and foreign exchange contracts on operating exposures and commodity contracts
not designated as hedging instruments. Gains and losses on foreign
exchange contracts on investment portfolios and other contracts not designated
as hedging instruments are reported in Automotive interest income and other
non-operating income/(expense), net.
For our
Financial Services sector, we report net interest settlements and accruals
excluded from the assessment of hedge effectiveness in Interest expense on our
consolidated statement of operations. Hedge ineffectiveness, which is
the difference between the change in fair value included in the assessment of
hedge effectiveness on the derivative and on the hedged item, is reported in
Financial Services other
income/(loss), net. Gains and losses on derivatives not
designated as hedging instruments are reported in Financial Services other
income/(loss), net.
We expect
to reclassify existing net gains of $20 million from Accumulated other comprehensive
income/(loss) to Automotive cost of sales
during the next twelve months as the underlying exposures are
realized.
Item
1. Financial Statements (Continued)
NOTE
12. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
Balance
Sheet Effect of Derivative Instruments
The
following table summarizes the estimated fair value of our derivative financial
instruments at March 31, 2009 (in millions unless otherwise
noted):
|
|
Notionals
|
|
|
Fair
Value of
|
|
|
Fair
Value of
|
|
|
|
|
|
|
|
|
|
|
|
Automotive
Sector
|
|
|
|
|
|
|
|
|
|
Cash
flow hedges:
|
|
|
|
|
|
|
|
|
|
Foreign
exchange contracts
|
|
$ |
1.4 |
|
|
$ |
138 |
|
|
$ |
89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
exchange contracts – operating exposures
|
|
|
4.6 |
|
|
|
68 |
|
|
|
162 |
|
Foreign
exchange contracts – investment exposures
|
|
|
0.1 |
|
|
|
1 |
|
|
|
— |
|
Commodity
contracts
|
|
|
2.0 |
|
|
|
9 |
|
|
|
171 |
|
Other
-- interest rate contracts and warrants
|
|
|
0.2 |
|
|
|
1 |
|
|
|
16 |
|
Total
derivatives not designated as hedging instruments
|
|
|
6.9 |
|
|
|
79 |
|
|
|
349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Automotive sector derivative instruments
|
|
$ |
8.3 |
|
|
$ |
217 |
|
|
$ |
438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Services Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate contracts
|
|
$ |
3.3 |
|
|
$ |
339 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate contracts
|
|
|
113.9 |
|
|
|
1,951 |
|
|
|
1,611 |
|
Foreign
exchange contracts
|
|
|
9.4 |
|
|
|
74 |
|
|
|
193 |
|
Cross
currency interest rate swap contracts
|
|
|
3.3 |
|
|
|
469 |
|
|
|
138 |
|
Total
derivatives not designated as hedging instruments
|
|
|
126.6 |
|
|
|
2,494 |
|
|
|
1,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Financial Services sector derivative instruments
|
|
$ |
129.9 |
|
|
$ |
2,833 |
|
|
$ |
1,942 |
|
In our
consolidated balance sheet, we report derivative assets in Other assets, and derivative
liabilities in Payables
and Accrued liabilities
and deferred revenue for Automotive and Financial Services sectors,
respectively. Less than $1 million related to Financial Services
sector warrants is included in Other assets.
We
estimate the fair value of our derivatives using industry-standard valuation
models, including Black-Scholes and Curran's Approximation. These
models project future cash flows and discount the future amounts to a present
value using market-based expectations for interest rates, foreign exchange
rates, and commodity prices, taking into account the contractual terms of the
derivative instruments.
We
include an adjustment for non-performance risk in the recognized measure of fair
value of derivative instruments. The adjustment reflects the full
credit default swap (“CDS”) spread applied to a net exposure, by
counterparty. We use our counterparty's CDS spread when we are in a
net asset position and our own CDS spread when we are in a net liability
position. At March 31, 2009, our adjustment for non-performance
risk relative to a measure based on an unadjusted inter-bank deposit rate (e.g.,
LIBOR) reduced derivative assets by $47 million and $123 million for
Automotive and Financial Services sectors, respectively, and reduced derivative
liabilities by $103 million and $118 million for Automotive and
Financial Services sectors, respectively.
In
certain cases, market data are not available and we use management judgment
to develop assumptions which are used to determine fair value. This
includes situations where there is illiquidity for a particular currency or
commodity, or for longer-dated instruments. For longer-dated
instruments where observable interest rates or foreign exchange rates are not
available for all periods through maturity, we hold the last available data
point constant through maturity. For certain commodity contracts,
observable market data may be limited and, in those cases, we generally survey
brokers and use the average of the surveyed prices in estimating fair
value. See Note 14 for additional information on fair value
measurements of derivative instruments.
Item
1. Financial Statements (Continued)
NOTE
13. RETIREMENT BENEFITS
Pension
and OPEB expense is summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
$ |
86 |
|
|
$ |
94 |
|
|
$ |
68 |
|
|
$ |
123 |
|
|
$ |
102 |
|
|
$ |
78 |
|
Interest
cost
|
|
|
674 |
|
|
|
672 |
|
|
|
292 |
|
|
|
443 |
|
|
|
223 |
|
|
|
433 |
|
Expected
return on assets
|
|
|
(822 |
) |
|
|
(866 |
) |
|
|
(303 |
) |
|
|
(518 |
) |
|
|
(33 |
) |
|
|
(79 |
) |
Amortization
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior
service costs/(credits)
|
|
|
94 |
|
|
|
94 |
|
|
|
— |
|
|
|
27 |
|
|
|
(227 |
) |
|
|
(216 |
) |
(Gains)/Losses
and Other
|
|
|
4 |
|
|
|
4 |
|
|
|
58 |
|
|
|
51 |
|
|
|
21 |
|
|
|
89 |
|
Separation
programs
|
|
|
7 |
|
|
|
173 |
|
|
|
30 |
|
|
|
24 |
|
|
|
2 |
|
|
|
7 |
|
(Gain)/Loss
from curtailment
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
(11 |
) |
Net
expense/(income)
|
|
$ |
43 |
|
|
$ |
171 |
|
|
$ |
145 |
|
|
$ |
150 |
|
|
$ |
86 |
|
|
$ |
301 |
|
__________
* Includes
Volvo for 2008 and 2009, and Jaguar Land Rover for 2008.
Plan
Contributions and Drawdowns
Our
policy for funded plans is to contribute annually, at a minimum, amounts
required by applicable laws and regulations. From time to time, we
make contributions beyond those legally required.
Pension. In the
first quarter of 2009, we contributed about $500 million to our worldwide
pension plans, including benefit payments paid directly by the Company for
unfunded plans. We expect to contribute from Automotive cash and cash
equivalents an additional $1 billion in 2009, for a total of
$1.5 billion this year. Based on current assumptions and
regulations, we do not expect to have a legal requirement to fund our major U.S.
pension plans in 2009.
Item
1. Financial Statements (Continued)
NOTE
14. FAIR VALUE MEASUREMENTS
The
following table summarizes the fair values of financial instruments measured at
fair value on a recurring basis at March 31, 2009 (in
millions):
|
|
Items
Measured at Fair Value on a Recurring Basis
|
|
|
|
Quoted
Price in Active Markets for Identical Assets
(Level
1)
|
|
|
Significant
Other Observable Inputs
(Level
2)
|
|
|
Significant
Unobservable Inputs
(Level
3)
|
|
|
Balance
as of March 31, 2009
|
|
Automotive
Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
equivalents – financial instruments (a) (b)
|
|
$ |
747 |
|
|
$ |
3,170 |
|
|
$ |
— |
|
|
$ |
3,917 |
|
Marketable
securities (a) (c)
|
|
|
8,086 |
|
|
|
4,981 |
|
|
|
59 |
|
|
|
13,126 |
|
Derivative
financial instruments
|
|
|
— |
|
|
|
208 |
|
|
|
9 |
|
|
|
217 |
|
Total
assets at fair value
|
|
$ |
8,833 |
|
|
$ |
8,359 |
|
|
$ |
68 |
|
|
$ |
17,260 |
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
financial instruments
|
|
$ |
— |
|
|
$ |
415 |
|
|
$ |
23 |
|
|
$ |
438 |
|
Total
liabilities at fair value
|
|
$ |
— |
|
|
$ |
415 |
|
|
$ |
23 |
|
|
$ |
438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Services Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
equivalents – financial instruments (a) (b)
|
|
$ |
1,499 |
|
|
$ |
1,557 |
|
|
$ |
— |
|
|
$ |
3,056 |
|
Marketable
securities (a)
|
|
|
5,249 |
|
|
|
1,987 |
|
|
|
1 |
|
|
|
7,237 |
|
Derivative
financial instruments
|
|
|
— |
|
|
|
2,058 |
|
|
|
775 |
|
|
|
2,833 |
|
Retained
interest in securitized assets
|
|
|
— |
|
|
|
— |
|
|
|
87 |
|
|
|
87 |
|
Total
assets at fair value
|
|
$ |
6,748 |
|
|
$ |
5,602 |
|
|
$ |
863 |
|
|
$ |
13,213 |
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
financial instruments
|
|
$ |
— |
|
|
$ |
1,096 |
|
|
$ |
846 |
|
|
$ |
1,942 |
|
Total
liabilities at fair value
|
|
$ |
— |
|
|
$ |
1,096 |
|
|
$ |
846 |
|
|
$ |
1,942 |
|
__________
|
(a)
|
At
March 31, 2009, approximately 90% of our
financial instruments (including marketable securities and those
classified as cash equivalents) were government securities, federal agency
securities or equities for which active and liquid markets
exist. For all securities, we rely on market observable data
where available through our established pricing processes and believe
these data reflect the fair value of our investment
assets. Instruments presented in Level 1 include U.S.
Treasuries and equities. Instruments presented in Level 2
include federal agency securities, corporate obligations and asset-backed
securities. Instruments presented in Level 3 include certain
corporate obligations and asset-backed
securities.
|
|
(b)
|
Cash equivalents –
financial instruments in this table excludes time deposits,
certificates of deposit, money market accounts, and other cash equivalents
reported at par value of
$1.6 billion and $7.2 billion for Automotive and
Financial Services sectors, respectively, which approximates fair
value.
|
|
(c)
|
Marketable
securities excludes an investment in Ford Credit debt securities held by
the Automotive sector with a carrying value of $357 million
and an estimated fair value
of $309 million as of March 31, 2009; see Note 1 for
additional detail.
|
Item 1. Financial Statements
(Continued)
NOTE
14. FAIR VALUE MEASUREMENTS (Continued)
The
following table summarizes the changes in Level 3 financial instruments measured
at fair value on a recurring basis for the period ended March 31, 2009
(in millions):
|
|
Fair
Value Measurements Using Significant Unobservable
Inputs
|
|
|
|
|
|
|
Fair
Value at December 31, 2008
|
|
|
Total
Realized/
Unrealized
Gains/ (Losses)
|
|
|
Net
Purchases/ (Settlements) (a)
|
|
|
Net
Transfers Into/(Out of)
Level
3
|
|
|
Fair
Value at
March
31,
2009
|
|
|
Change
In Unrealized Gains/
(Losses)
on Instruments
Still
Held (b)
|
|
Automotive
Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable
securities (c)
|
|
$ |
150 |
|
|
$ |
(6 |
) |
|
$ |
(75 |
) |
|
$ |
(10 |
) |
|
$ |
59 |
|
|
$ |
(4 |
) |
Derivative
financial instruments, net (d)
|
|
|
(32 |
) |
|
|
(15 |
) |
|
|
33 |
|
|
|
— |
|
|
|
(14 |
) |
|
|
(2 |
) |
Total
Level 3 fair value
|
|
$ |
118 |
|
|
$ |
(21 |
) |
|
$ |
(42 |
) |
|
$ |
(10 |
) |
|
$ |
45 |
|
|
$ |
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Services Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable
securities (e)
|
|
$ |
5 |
|
|
$ |
(4 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1 |
|
|
$ |
(4 |
) |
Derivative
financial instruments, net (f)
|
|
|
(74 |
) |
|
|
(15 |
) |
|
|
18 |
|
|
|
— |
|
|
|
(71 |
) |
|
|
(1 |
) |
Retained
interest in securitized assets (g)
|
|
|
92 |
|
|
|
2 |
|
|
|
(7 |
) |
|
|
— |
|
|
|
87 |
|
|
|
(2 |
) |
Total
Level 3 fair value
|
|
$ |
23 |
|
|
$ |
(17 |
) |
|
$ |
11 |
|
|
$ |
— |
|
|
$ |
17 |
|
|
$ |
(7 |
) |
__________
|
(a)
|
Includes
option premiums (paid)/received on options traded during the
quarter.
|
|
(b)
|
For those assets and
liabilities still held at March 31, 2009.
|
|
(c)
|
Realized/unrealized
gains/(losses) on Automotive sector marketable securities for the period
presented are recorded in Automotive interest
income and other
non-operating income/(expenses), net ($6 million
loss).
|
|
(d)
|
Reflects
fair value of derivative assets, net of
liabilities. Realized/unrealized gains/(losses) on Automotive
sector derivative financial instruments for the period presented are
recorded to Automotive
cost of sales ($16 million loss), and Automotive interest income and
other non-operating income/(expense), net ($1 million gain).
|
|
(e)
|
Realized/unrealized
gains/(losses) on Financial Services sector marketable securities for the
period presented are recorded to Financial Services other
income/(loss), net ($4 million
loss).
|
|
(f)
|
Reflects
fair value of derivative assets, net of
liabilities. Realized/Unrealized gains/(losses) on derivative
financial instruments for the period presented are recorded to Financial Services other
income/(loss), net ($20 million loss), and Other comprehensive
income/(loss) reflecting foreign currency translation ($5 million
gain).
|
|
(g)
|
Realized/unrealized
gains/(losses) on the retained interests in securitized assets for the
period presented are recorded in Financial Services other
income/(loss), net ($4 million gain) and Other comprehensive
income/(loss) ($2 million
loss).
|
Item
1. Financial Statements (Continued)
NOTE
15. SEGMENT INFORMATION
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST
QUARTER 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales/Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
customer
|
|
$ |
10,161 |
|
|
$ |
1,404 |
|
|
$ |
5,993 |
|
|
$ |
2,645 |
|
|
$ |
1,165 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
21,368 |
|
Intersegment
|
|
|
146 |
|
|
|
— |
|
|
|
171 |
|
|
|
12 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
329 |
|
Income/(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
(775 |
) |
|
|
63 |
|
|
|
(555 |
) |
|
|
(921 |
) |
|
|
(103 |
) |
|
|
— |
|
|
|
(2 |
) |
|
|
825 |
|
|
|
(1,468 |
) |
Total
assets at March 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST
QUARTER 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales/Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
customer
|
|
$ |
17,110 |
|
|
$ |
1,842 |
|
|
$ |
10,155 |
|
|
$ |
4,197 |
|
|
$ |
1,668 |
|
|
$ |
— |
|
|
$ |
4,145 |
|
|
$ |
— |
|
|
$ |
39,117 |
|
Intersegment
|
|
|
218 |
|
|
|
— |
|
|
|
226 |
|
|
|
27 |
|
|
|
— |
|
|
|
— |
|
|
|
41 |
|
|
|
— |
|
|
|
512 |
|
Income/(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
(445 |
) |
|
|
257 |
|
|
|
728 |
|
|
|
(151 |
) |
|
|
(4 |
) |
|
|
49 |
|
|
|
— |
|
|
|
(212 |
) |
|
|
222 |
|
Total
assets at March 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,806 |
|
|
|
Financial
Services Sector
|
|
|
Total
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST
QUARTER 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales/Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
customer
|
|
$ |
3,318 |
|
|
$ |
92 |
|
|
$ |
— |
|
|
$ |
3,410 |
|
|
$ |
— |
|
|
$ |
24,778 |
|
Intersegment
|
|
|
117 |
|
|
|
5 |
|
|
|
(4 |
) |
|
|
118 |
|
|
|
(447 |
) |
|
|
— |
|
Income/(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
(36 |
) |
|
|
(116 |
) |
|
|
— |
|
|
|
(152 |
) |
|
|
— |
|
|
|
(1,620 |
) |
Total
assets at March 31
|
|
|
132,307 |
|
|
|
10,820 |
|
|
|
(9,072 |
) |
|
|
134,055 |
|
|
|
(3,237 |
) |
|
|
207,270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST
QUARTER 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales/Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
customer
|
|
$ |
4,086 |
|
|
$ |
89 |
|
|
$ |
— |
|
|
$ |
4,175 |
|
|
$ |
— |
|
|
$ |
43,292 |
|
Intersegment
|
|
|
238 |
|
|
|
6 |
|
|
|
(1 |
) |
|
|
243 |
|
|
|
(755 |
) |
|
|
— |
|
Income/(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
32 |
|
|
|
32 |
|
|
|
— |
|
|
|
64 |
|
|
|
— |
|
|
|
286 |
|
Total
assets at March 31
|
|
|
170,156 |
|
|
|
10,580 |
|
|
|
(10,478 |
) |
|
|
170,258 |
|
|
|
(2,228 |
) |
|
|
288,836 |
|
__________
*
|
Includes
intersector transactions occurring in the ordinary course of
business.
|
Item
1. Financial Statements (Continued)
NOTE
16. GUARANTEES
At
March 31, 2009, the following guarantees were issued and
outstanding:
Guarantees related to affiliates and
third parties. We guarantee debt and lease obligations of
certain joint ventures, as well as certain financial obligations of outside
third parties to support our business and economic growth. Expiration
dates vary through 2017, and guarantees will terminate on payment and/or
cancellation of the obligation. A payment by us 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, and may be limited in the event of insolvency of the third
party or other circumstances. Maximum potential payments under
guarantees total $206 million at March 31, 2009 and
December 31, 2008. The carrying value of our recorded
liabilities related to guarantees was $23 million and $24 million at
March 31, 2009 and December 31, 2008,
respectively.
In
December 2005, we completed the sale of Hertz. As part of this
transaction, we provided cash-collateralized letters of credit in an aggregate
amount of $200 million to support the asset-backed portion of the buyer's
financing for the transaction. Our commitment to provide the letters
of credit expires no later than December 21, 2011 and supports the
payment obligations of Hertz Vehicle Finance LLC under one or more series of
asset-backed notes. The letters of credit can be drawn upon on any
date funds allocated to pay interest on the asset-backed notes are insufficient
to pay scheduled interest payments, principal amounts due on the legal final
maturity date, or when the balance of assets supporting the asset-backed notes
is less than the outstanding balance of the asset-backed notes. As of
March 31, 2009 and December 31, 2008, the deferred gain
related to the letters of credit was $12 million and $14 million,
respectively.
Indemnifications. In
the ordinary course of business, we execute contracts involving indemnifications
standard in the industry and indemnifications specific to a transaction, such as
the sale of a business. These indemnifications might include claims
regarding any of the following, among others: environmental, tax, and
shareholder matters; intellectual property rights; power generation contracts;
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. As part
of the sale of Jaguar Land Rover we provided the buyer a customary set of
indemnifications, some of which are subject to an aggregate limit of
$805 million and some of which (e.g., warranties related to our capacity
and authority to enter into the transaction, our ownership of the companies sold
and the shares of those companies being free from encumbrances, and certain tax
covenants) are unlimited in amount. We believe that the probability
of payment under either type of indemnification is remote. We also
are party to numerous indemnifications which 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. During the first quarter of 2009, there were no
significant changes to our indemnifications.
Product
Performance
Warranty. Included
in the warranty cost accruals are costs for basic warranty coverages on vehicles
sold. Additional service actions, such as product recalls and other
customer service actions, are not included in the warranty reconciliation below,
but are also accrued for at the time of sale. Estimates for warranty
costs are made based primarily on historical warranty claim
experience. The following is a tabular reconciliation of the product
warranty accruals accounted for in Accrued liabilities and deferred
revenue (in millions):
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$ |
3,346 |
|
|
$ |
4,209 |
|
Payments
made during the period
|
|
|
(635 |
) |
|
|
(724 |
) |
Changes
in accrual related to warranties issued during the period
|
|
|
337 |
|
|
|
596 |
|
Changes
in accrual related to pre-existing warranties
|
|
|
167 |
|
|
|
(65 |
) |
Foreign
currency translation and other
|
|
|
(54 |
) |
|
|
75 |
|
Ending
balance
|
|
$ |
3,161 |
|
|
$ |
4,091 |
|
Item
1. Financial Statements (Continued)
NOTE
17. EQUITY/(DEFICIT) ATTRIBUTABLE TO FORD MOTOR COMPANY AND
NONCONTROLLING INTERESTS
We
adopted SFAS No. 160 on January 1, 2009, pursuant to which noncontrolling
interests are now considered a component of equity. In addition, SFAS
No. 160 changes the presentation and accounting for noncontrolling interests,
and requires that equity/(deficit) presented in our consolidated financial
statements include amounts attributable to Ford Motor Company stockholders and
the noncontrolling interests. The following schedule presents changes
in consolidated equity/(deficit) attributable to Ford Motor Company and the
noncontrolling interests for the periods ended March 31, 2009 and 2008 (in
millions):
|
|
|
|
|
|
|
|
|
Equity/(Deficit)
Attributable to Ford Motor Company
|
|
|
Equity/(Deficit)
Attributable to Noncontrolling Interests
|
|
|
|
|
|
Equity/(Deficit)
Attributable to Ford Motor Company
|
|
|
Equity/(Deficit)
Attributable to Noncontrolling Interests
|
|
|
|
|
Beginning
balance, December 31
|
|
$ |
(15,722 |
) |
|
$ |
1,195 |
|
|
$ |
(14,527 |
) |
|
$ |
7,363 |
|
|
$ |
1,421 |
|
|
$ |
8,784 |
|
Total
comprehensive income/(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income/(loss)
|
|
|
(1,427 |
) |
|
|
11 |
|
|
|
(1,416 |
) |
|
|
70 |
|
|
|
122 |
|
|
|
192 |
|
Other
comprehensive income/(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
|
|
(446 |
) |
|
|
(69 |
) |
|
|
(515 |
) |
|
|
921 |
|
|
|
(50 |
) |
|
|
871 |
|
Net
gain/(loss) on derivative instruments
|
|
|
(87 |
) |
|
|
— |
|
|
|
(87 |
) |
|
|
225 |
|
|
|
— |
|
|
|
225 |
|
Employee
benefit-related
|
|
|
(5 |
) |
|
|
— |
|
|
|
(5 |
) |
|
|
96 |
|
|
|
— |
|
|
|
96 |
|
Net
holding gain/(loss)
|
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
|
|
(27 |
) |
|
|
— |
|
|
|
(27 |
) |
Total
other comprehensive income/(loss)
|
|
|
(539 |
) |
|
|
(69 |
) |
|
|
(608 |
) |
|
|
1,215 |
|
|
|
(50 |
) |
|
|
1,165 |
|
Total
comprehensive income/(loss)
|
|
|
(1,966 |
) |
|
|
(58 |
) |
|
|
(2,024 |
) |
|
|
1,285 |
|
|
|
72 |
|
|
|
1,357 |
|
Other
changes in equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
in excess of par value for debt conversion, employee benefit plans, and
other
|
|
|
110 |
|
|
|
— |
|
|
|
110 |
|
|
|
154 |
|
|
|
— |
|
|
|
154 |
|
Adoption
of SFAS No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities –
including an amendment of FASB Statement No. 115 ("SFAS No.
159")
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
12 |
|
|
|
— |
|
|
|
12 |
|
Dividends
|
|
|
— |
|
|
|
(32 |
) |
|
|
(32 |
) |
|
|
— |
|
|
|
(9 |
) |
|
|
(9 |
) |
Other
|
|
|
1 |
|
|
|
(5 |
) |
|
|
(4 |
) |
|
|
2 |
|
|
|
(18 |
) |
|
|
(16 |
) |
Ending
balance, March 31
|
|
$ |
(17,577 |
) |
|
$ |
1,100 |
|
|
$ |
(16,477 |
) |
|
$ |
8,816 |
|
|
$ |
1,466 |
|
|
$ |
10,282 |
|
Report
of Independent Registered Public Accounting Firm
To 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, 2009 and the related consolidated statements of
operations for each of the three-month periods ended March 31, 2009 and
2008, the consolidated statement of comprehensive income for the three-month
periods ended March 31, 2009 and 2008 and the condensed consolidated statement
of cash flows for the three-month periods ended March 31, 2009 and
2008. These interim financial statements are the responsibility of
the Company’s management.
The
accompanying sector balance sheets and the related sector statements of
operations and of cash flows are presented for purposes of additional analysis
and are not a required part of the basic financial statements. Such
information has been subjected to the review procedures applied in the review of
the basic financial statements.
We
conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), 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.
We
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet as of
December 31, 2008, and the related consolidated statements of operations, of
cash flows and of stockholders’ equity for the year then ended (not presented
herein), and in our report dated February 26, 2009, we expressed an
unqualified opinion (with an explanatory paragraph relating to changes in the
method of accounting for defined benefit pension and other postretirement plans
in 2006 and the method of accounting for uncertain tax positions in 2007) on
those consolidated financial statements. As discussed in Note 1 to
the accompanying consolidated financial statements, the Company adopted Statement of Financial
Accounting Standards No. 160, Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51, and
Financial Accounting Standards Board Staff Position No. APB 14-1, Accounting for Convertible Debt
Instruments that may be Settled in Cash upon Conversion (Including Partial Cash
Settlement) on January 1, 2009. As discussed in Note 10, the
Company classified the assets and liabilities of the Volvo operations as held
for sale during the three-month period ended
March 31, 2009. The accompanying December 31, 2008
consolidated balance sheet reflects these changes.
/s/
PricewaterhouseCoopers LLP
PricewaterhouseCoopers
LLP
Detroit,
Michigan
May 8,
2009
ITEM
2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
FIRST
QUARTER RESULTS OF OPERATIONS
Our
worldwide net loss attributable to Ford Motor Company was $1.4 billion or
$0.60 per share of
Common and Class B Stock in
the first quarter of 2009, a decline of $1.5 billion from net income
attributable to Ford Motor Company of $70 million or
$0.03 per share of Common and Class B Stock in the first quarter of
2008.
Results
by sector for the first quarter of 2009 and 2008 are shown below (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
|
|
|
|
|
|
|
Automotive
sector
|
|
$ |
(1,468 |
) |
|
$ |
222 |
|
|
$ |
(1,690 |
) |
Financial
Services sector
|
|
|
(152 |
) |
|
|
64 |
|
|
|
(216 |
) |
Total
Company
|
|
|
(1,620 |
) |
|
|
286 |
|
|
|
(1,906 |
) |
Provision
for/(Benefit from) income taxes
|
|
|
(204 |
) |
|
|
95 |
|
|
|
(299 |
) |
Income/(Loss)
from continuing operations
|
|
|
(1,416 |
) |
|
|
191 |
|
|
|
(1,607 |
) |
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
1 |
|
|
|
(1 |
) |
Net
income/(loss)
|
|
|
(1,416 |
) |
|
|
192 |
|
|
|
(1,608 |
) |
Less:
Income/(loss) attributable to noncontrolling interests (b)
|
|
|
11 |
|
|
|
122 |
|
|
|
(111 |
) |
Net income/(loss) attributable
to Ford Motor Company (c)
|
|
$ |
(1,427 |
) |
|
$ |
70 |
|
|
$ |
(1,497 |
) |
__________
|
(a)
|
Adjusted
for the effect of FSP APB 14-1 on our convertible debt; see Note 1 of the
Notes to the Financial Statements for additional
detail.
|
|
(b)
|
Formerly
labeled "Minority interests in net income/(loss)," reflects new
presentation under SFAS No. 160. Primarily related to Ford
Europe's consolidated 41% owned affiliate, Ford Otosan. The
pre-tax results for Ford Otosan were $40 million and
$214 million in the first quarter of 2009 and 2008,
respectively.
|
|
(c)
|
Formerly
labeled "Net income/(loss)," reflects new presentation under SFAS No.
160.
|
Benefit
from income taxes includes the favorable impact of approximately
$294 million in refunds of prior period tax and related
interest.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Income/(Loss) before income taxes
includes certain items ("special items") that we have grouped into
“Personnel and Dealer-Related Items” and “Other Items” to provide useful
information to investors about the nature of the special items. The
first category includes items related to our efforts to match production
capacity and cost structure to market demand and changing model mix and
therefore helps investors track amounts related to those
activities. The second category includes items that we do not
generally consider to be indicative of our ongoing operating activities, and
therefore allows investors analyzing our pre-tax results to identify certain
infrequent significant items that they may wish to exclude when considering the
trend of ongoing operating results.
The
following table details first quarter 2009 and 2008 special items in each
category by segment or business unit (in millions):
|
|
First
Quarter – Income/(Loss)
|
|
Personnel and Dealer-Related
Items:
|
|
|
|
|
|
|
Automotive
Sector
|
|
|
|
|
|
|
Ford
North America
|
|
|
|
|
|
|
Personnel-reduction
programs
|
|
$ |
(171 |
) |
|
$ |
(324 |
) |
Retiree
health care and related charges
|
|
|
(178 |
) |
|
|
11 |
|
U.S.
dealer actions (primarily dealership impairments)
|
|
|
(81 |
) |
|
|
(108 |
) |
Job
Security Benefits
|
|
|
292 |
|
|
|
93 |
|
Total
Ford North America
|
|
|
(138 |
) |
|
|
(328 |
) |
Ford
Europe
|
|
|
|
|
|
|
|
|
Personnel-reduction
programs
|
|
|
(5 |
) |
|
|
(11 |
) |
Volvo
|
|
|
|
|
|
|
|
|
Personnel-reduction
programs
|
|
|
(2 |
) |
|
|
— |
|
Ford
Asia Pacific Africa
|
|
|
|
|
|
|
|
|
Personnel-reduction
programs
|
|
|
(7 |
) |
|
|
(5 |
) |
Total
Personnel and Dealer-Related Items - Automotive sector
|
|
|
(152 |
) |
|
|
(344 |
) |
Other Items:
|
|
|
|
|
|
|
|
|
Automotive
Sector
|
|
|
|
|
|
|
|
|
Ford
North America
|
|
|
|
|
|
|
|
|
Ballard
restructuring/Other
|
|
|
— |
|
|
|
(72 |
) |
Volvo
|
|
|
|
|
|
|
|
|
Held-for-sale
impairment and related costs
|
|
|
(664 |
) |
|
|
— |
|
Other
Automotive
|
|
|
|
|
|
|
|
|
Gain
on debt securities exchanged for equity
|
|
|
— |
|
|
|
16 |
|
Gain
on debt restructuring and related costs
|
|
|
1,270 |
|
|
|
— |
|
Total
Other Automotive
|
|
|
1,270 |
|
|
|
16 |
|
Jaguar
Land Rover
|
|
|
|
|
|
|
|
|
Jaguar
Land Rover operating profits for 2008/Other
|
|
|
(2 |
) |
|
|
439 |
|
Held-for-sale
impairment and related costs
|
|
|
— |
|
|
|
(439 |
) |
Total
Jaguar Land Rover
|
|
|
(2 |
) |
|
|
— |
|
Total
Other Items – Automotive sector
|
|
|
604 |
|
|
|
(56 |
) |
Financial
Services Sector
|
|
|
|
|
|
|
|
|
DFO
Partnership impairment
|
|
|
(141 |
) |
|
|
— |
|
Gain
on purchase of Ford Holdings debt securities
|
|
|
51 |
|
|
|
— |
|
Total
Other Items – Financial Services sector
|
|
|
(90 |
) |
|
|
— |
|
Total
|
|
$ |
362 |
|
|
$ |
(400 |
) |
Included
in Provision for/(Benefit
from) income taxes are tax benefits of $3 million and tax expenses
of $8 million for the first quarter of 2009 and 2008, respectively, that we
consider to be special items.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
The
discussion below of Automotive and Financial Services sector results of
operations is on a pre-tax basis.
AUTOMOTIVE
SECTOR
Results
of Operations
Details
by segment or business unit of Income/(Loss) before income taxes
are shown below for the first quarter of 2009 and 2008 (in millions),
with Mazda and Jaguar Land Rover separated out from "ongoing"
subtotals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
North America *
|
|
$ |
(775 |
) |
|
$ |
(445 |
) |
|
$ |
(330 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
South America
|
|
|
63 |
|
|
|
257 |
|
|
|
(194 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
Europe
|
|
|
(555 |
) |
|
|
728 |
|
|
|
(1,283 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Volvo
|
|
|
(921 |
) |
|
|
(151 |
) |
|
|
(770 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
Asia Pacific Africa
|
|
|
(103 |
) |
|
|
(4 |
) |
|
|
(99 |
) |
Total
ongoing Automotive operations
|
|
|
(2,291 |
) |
|
|
385 |
|
|
|
(2,676 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Automotive
|
|
|
825 |
|
|
|
(212 |
) |
|
|
1,037 |
|
Total
ongoing Automotive
|
|
|
(1,466 |
) |
|
|
173 |
|
|
|
(1,639 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mazda
|
|
|
— |
|
|
|
49 |
|
|
|
(49 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Jaguar
Land Rover
|
|
|
(2 |
) |
|
|
— |
|
|
|
(2 |
) |
Total
Automotive sector
|
|
$ |
(1,468 |
) |
|
$ |
222 |
|
|
$ |
(1,690 |
) |
|
*
|
Includes
the sales of Mazda6 by our consolidated subsidiary,
AAI.
|
Details
by segment of Automotive revenues ("sales") and wholesale unit volumes for the
first quarter of 2009 and 2008 are shown below:
|
|
|
|
|
|
|
|
|
Wholesales
(b)
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
North America (c)
|
|
$ |
10.2 |
|
|
$ |
17.1 |
|
|
$ |
(6.9 |
) |
|
|
(41 |
)% |
|
|
354 |
|
|
|
704 |
|
|
|
(350 |
) |
|
|
(50 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
South America
|
|
|
1.4 |
|
|
|
1.8 |
|
|
|
(0.4 |
) |
|
|
(24 |
) |
|
|
93 |
|
|
|
92 |
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
Europe
|
|
|
6.0 |
|
|
|
10.2 |
|
|
|
(4.2 |
) |
|
|
(41 |
) |
|
|
343 |
|
|
|
500 |
|
|
|
(157 |
) |
|
|
(31 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volvo
|
|
|
2.6 |
|
|
|
4.2 |
|
|
|
(1.6 |
) |
|
|
(37 |
) |
|
|
69 |
|
|
|
106 |
|
|
|
(37 |
) |
|
|
(35 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
Asia Pacific Africa (d)
|
|
|
1.2 |
|
|
|
1.7 |
|
|
|
(0.5 |
) |
|
|
(30 |
) |
|
|
114 |
|
|
|
129 |
|
|
|
(15 |
) |
|
|
(12 |
) |
Total
ongoing Automotive operations
|
|
|
21.4 |
|
|
|
35.0 |
|
|
|
(13.6 |
) |
|
|
(39 |
) |
|
|
973 |
|
|
|
1,531 |
|
|
|
(558 |
) |
|
|
(36 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jaguar
Land Rover
|
|
|
— |
|
|
|
4.1 |
|
|
|
(4.1 |
) |
|
|
(100 |
) |
|
|
— |
|
|
|
74 |
|
|
|
(74 |
) |
|
|
(100 |
) |
Total
Automotive sector
|
|
$ |
21.4 |
|
|
$ |
39.1 |
|
|
$ |
(17.7 |
) |
|
|
(45 |
) |
|
|
973 |
|
|
|
1,605 |
|
|
|
(632 |
) |
|
|
(39 |
) |
______
|
(a)
|
2009
over/(under) 2008 sales percentages are computed using unrounded sales
numbers.
|
|
(b)
|
Wholesale
unit volumes generally are reported on a where-sold basis, and include all
Ford-badged units and units manufactured by Ford that are sold to other
manufacturers, as well as units distributed for other
manufacturers. Vehicles sold to daily rental car companies that
are subject to a guaranteed repurchase option, as well as other sales of
finished vehicles for which the recognition of revenue is deferred (e.g.,
consignments), are included in wholesale unit
volumes.
|
|
(c)
|
Includes
sales of Mazda6 by our consolidated subsidiary,
AAI.
|
|
(d)
|
Included
in wholesale unit volumes of Ford Asia Pacific Africa are Ford-badged
vehicles sold in China and Malaysia by certain unconsolidated affiliates
totaling about 51,000 and 55,000 units in the first quarters of 2009 and
2008, respectively. "Sales" above does not include revenue from
these units.
|
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Details
of Automotive sector market share for selected markets for the first quarter of
2009 and 2008, along with the level of dealer stocks as of
March 31, 2009 and 2008, are shown below:
|
|
|
|
Dealer-Owned
Stocks (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
Over/(Under)
|
|
United
States (b)
|
|
|
13.9 |
% |
|
|
15.0 |
% |
|
|
(1.1 |
) |
pts.
|
|
|
410 |
|
|
|
565 |
|
|
|
(155 |
) |
South
America (b) (c)
|
|
|
10.9 |
|
|
|
9.5 |
|
|
|
1.4 |
|
|
|
|
37 |
|
|
|
28 |
|
|
|
9 |
|
Europe
(b) (d)
|
|
|
9.4 |
|
|
|
8.9 |
|
|
|
0.5 |
|
|
|
|
282 |
|
|
|
329 |
|
|
|
(47 |
) |
Volvo
– United States/Europe (d)
|
|
|
0.6/1.3 |
|
|
|
0.7/1.4 |
|
|
|
(0.1)/(0.1) |
|
|
|
|
15/33 |
|
|
|
21/41 |
|
|
|
(6)/(8) |
|
Asia
Pacific Africa (b) (e) (f)
|
|
|
1.8 |
|
|
|
1.9 |
|
|
|
(0.1 |
) |
|
|
|
46 |
|
|
|
57 |
|
|
|
(11 |
) |
_________
(a)
|
Dealer-owned
stocks represent our estimate of vehicles shipped to our customers
(dealers) and not yet sold by the dealers to their retail customers,
including some vehicles reflected in our
inventory.
|
(b)
|
Includes
only Ford and, in certain markets (primarily United States), Lincoln and
Mercury brands.
|
(c)
|
South
America market share is based, in part, on estimated vehicle registrations
for our six major markets (Argentina, Brazil, Chile, Colombia, Ecuador and
Venezuela).
|
(d)
|
Europe
market share is based, in part, on estimated vehicle registrations for the
19 European markets we track (described in "Item 1. Business" of our
2008 Form 10-K Report).
|
(e)
|
Asia
Pacific Africa market share is based, in part, on estimated vehicle sales
for our 12 major markets (Australia, China, Japan, India, Indonesia,
Malaysia, New Zealand, Philippines, South Africa, Taiwan, Thailand and
Vietnam).
|
(f)
|
Dealer-owned
stocks for Asia Pacific Africa include primarily Ford-brand vehicles as
well as a small number of units distributed for other
manufacturers.
|
Overall
Automotive Sector
The
decline in results primarily reflects unfavorable volume and mix ($3.5 billion), a
held-for-sale impairment of Volvo in the first quarter 2009 (about $700 million), and
the non-recurrence of mark-to-market adjustments for changes in exchange rates
on intercompany loans and related loan hedges (about $300 million), offset
partially by a gain on debt restructuring ($1.1 billion), favorable cost
changes ($1 billion), and favorable net pricing (about
$700 million). The favorable cost changes are more than
explained by lower structural costs, offset partially by higher net product
costs.
The
decrease in revenues is more than explained by unfavorable volume, the
non-recurrence of Jaguar Land Rover revenues, and unfavorable currency exchange
rates.
The table
below details our Automotive sector first quarter 2009 structural cost changes
at constant volume, mix and exchange, excluding special items and discontinued
operations (in billions):
Explanation
of Structural Cost Changes
|
|
2009
Better/(Worse) Than 2008
|
|
Manufacturing
and engineering
|
Primarily
hourly and salaried personnel reductions and efficiencies in our plants
and processes
|
|
$ |
0.8 |
|
Overhead
|
Primarily
salaried personnel reductions
|
|
|
0.3 |
|
Pension
and OPEB
|
Primarily
the effect of the UAW Retiree Health Care VEBA agreement
|
|
|
0.3 |
|
Advertising
& sales promotions
|
Primarily
reduced costs
|
|
|
0.3 |
|
Spending-related
|
Primarily
lower depreciation and amortization related to the North America asset
impairment at the end of second quarter 2008
|
|
|
0.2 |
|
|
Total
|
|
$ |
1.9 |
|
Ford North America
Segment. The decline in earnings is more than explained by
unfavorable volume and mix (including a decline in industry volume and dealer
stocks), offset partially by favorable cost changes, favorable net pricing, and
favorable adjustment to reserves for Job Security Benefits. The
favorable cost changes primarily reflect lower structural costs (including lower
manufacturing and engineering, pension and
OPEB,
overhead,
spending-related, and advertising and sales promotion costs), offset partially
by higher net product costs (including higher product content and the
non-recurrence of favorable mark-to-market adjustments on commodity hedges).
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Ford South America
Segment. The decrease in earnings is more than explained by
unfavorable changes in currency exchange rates and unfavorable cost changes,
offset partially by favorable net pricing. The unfavorable cost
changes are more than explained by higher net product costs.
Ford Europe Segment. The
decline in results primarily reflects unfavorable volume and mix (including a
decline in industry volume and dealer stocks), lower earnings due to lower
volumes at our consolidated joint ventures, unfavorable cost changes, and
unfavorable changes in currency exchange rates, offset partially by favorable
net pricing. The unfavorable cost changes are explained by higher net
product (including increased distressed supplier costs, the non-recurrence of
favorable mark-to-market adjustments on commodity hedges, and higher product
content), warranty (primarily the non-recurrence of warranty reserve changes),
and freight costs, offset partially by lower structural costs (including lower
manufacturing and engineering and advertising and sales promotion costs).
Volvo Segment. The
decline in earnings is more than explained by a held-for-sale impairment in the
first quarter of 2009 and unfavorable volume and mix, offset partially by
favorable cost changes. The favorable cost changes are more than
explained by lower structural costs (including lower manufacturing and
engineering, advertising and sales promotion, and overhead costs). Beginning
with the second quarter of 2009, we will cease depreciation of Volvo's
long-lived assets reflecting the held-for-sale status of Volvo.
Ford Asia Pacific Africa
Segment. The decline in earnings primarily reflects
unfavorable volume and mix and unfavorable changes in currency exchange rates,
offset partially by favorable cost changes. The favorable cost
changes are more than explained by lower structural costs (including lower
manufacturing and engineering, advertising and sales promotion, and spending
related costs).
Other
Automotive. The improvement in results is primarily explained
by the gain on the secured term loan restructuring (discussed in more detail in
"Liquidity and Capital Resources" and Note 5 of the Notes to the Financial
Statements) and the gain on debt securities purchased. These gains
were offset partially by the non-recurrence of mark-to-market
adjustments for changes in exchange rates on intercompany loans and related loan
hedges.
Mazda Segment. In
the fourth quarter of 2008, we sold a significant portion of our investment in
Mazda. Our remaining ownership interest is treated as marketable
securities, with mark-to-market adjustments reported in Other
Automotive.
Jaguar Land Rover
Segment. During the second quarter of 2008, we sold our Jaguar
Land Rover operations.
FINANCIAL
SERVICES SECTOR
Results
of Operations
Details
of the Financial Services sector Revenues and Income/(Loss) before income taxes
for the first quarter of 2009 and 2008 are shown below:
|
|
|
|
|
|
|
|
|
Income/(Loss)
Before Income Taxes
(in
millions)
|
|
|
|
|
|
|
|
|
|
2009
Over/(Under) 2008
|
|
|
|
|
|
|
|
|
2009
Over/(Under) 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
Credit
|
|
$ |
3.3 |
|
|
$ |
4.1 |
|
|
$ |
(0.8 |
) |
|
$ |
(36 |
) |
|
$ |
32 |
|
|
$ |
(68 |
) |
Other
Financial Services
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
— |
|
|
|
(116 |
) |
|
|
32 |
|
|
|
(148 |
) |
Total
|
|
$ |
3.4 |
|
|
$ |
4.2 |
|
|
$ |
(0.8 |
) |
|
$ |
(152 |
) |
|
$ |
64 |
|
|
$ |
(216 |
) |
Ford
Credit
The
decline in results primarily reflects lower volume mainly due to lower
receivables (primarily reflecting lower industry volumes, lower dealer stocks,
changes in currency exchange rates, and the impact of divestitures and
alternative business arrangements) (about $280 million). The
decline in results also reflects a higher provision for credit losses that is
more than explained by higher repossessions, higher severity, lower recoveries,
and higher wholesale and dealer loan losses in the United States and higher
credit losses in Europe (about $60 million). Lower
volume and higher provision for credit losses were offset partially by lower
depreciation expense for leased vehicles and lower residual losses on vehicles
returned in the first quarter of 2009 (about $150
million), and lower net losses related to market valuation adjustments to
derivatives ($138 million). In
addition, lower operating costs were offset partially by other expenses
including restructuring costs.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Results
of Ford Credit's operations and unallocated risk management for the first
quarter of 2009 and 2008 are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
|
|
|
|
|
|
|
North
America operations
|
|
$ |
(45 |
) |
|
$ |
38 |
|
|
$ |
(83 |
) |
International
operations
|
|
|
33 |
|
|
|
156 |
|
|
|
(123 |
) |
Unallocated
risk management*
|
|
|
(24 |
) |
|
|
(162 |
) |
|
|
138 |
|
Income/(Loss)
before income taxes
|
|
|
(36 |
) |
|
|
32 |
|
|
|
(68 |
) |
Provision
for/(Benefit from) income taxes and Gain on disposal of discontinued
operations
|
|
|
(23 |
) |
|
|
8 |
|
|
|
(31 |
) |
Net
income/(loss)
|
|
$ |
(13 |
) |
|
$ |
24 |
|
|
$ |
(37 |
) |
________
* Consists
of gains and losses related to market valuation adjustments to derivatives
primarily related to movements in interest rates.
The
decline in results for Ford Credit's North America operations primarily reflects
lower volume and a higher provision for credit losses, offset partially by lower
depreciation expense for leased vehicles. The decrease in earnings
for Ford Credit's international operations primarily reflects a higher provision
for credit losses, changes in currency exchange rates, and lower
volume. The change in unallocated risk management reflects lower net
losses related to market valuation adjustments to derivatives primarily related
to movements in interest rates.
Ford
Credit's net finance receivables and net investment in operating leases are
shown below (in billions):
|
|
March
31,
|
|
|
December
31,
|
|
|
2009
Over/(Under)
|
|
Receivables
– On-Balance Sheet
|
|
|
|
|
|
|
|
|
|
Finance
receivables
|
|
|
|
|
|
|
|
|
|
Retail
installment
|
|
$ |
61.3 |
|
|
$ |
65.5 |
|
|
$ |
(4.2 |
) |
Wholesale
|
|
|
22.8 |
|
|
|
27.7 |
|
|
|
(4.9 |
) |
Other
|
|
|
2.7 |
|
|
|
2.8 |
|
|
|
(0.1 |
) |
Unearned
interest supplements
|
|
|
(1.3 |
) |
|
|
(1.3 |
) |
|
|
— |
|
Allowance
for credit losses
|
|
|
(1.5 |
) |
|
|
(1.4 |
) |
|
|
(0.1 |
) |
Finance
receivables, net
|
|
|
84.0 |
|
|
|
93.3 |
|
|
|
(9.3 |
) |
Net
investment in operating leases
|
|
|
20.2 |
|
|
|
22.5 |
|
|
|
(2.3 |
) |
Total
receivables – on-balance sheet (a)(b)
|
|
$ |
104.2 |
|
|
$ |
115.8 |
|
|
$ |
(11.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Memo:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
receivables – managed (c)
|
|
$ |
106.0 |
|
|
$ |
117.7 |
|
|
$ |
(11.7 |
) |
Total
receivables – serviced (d)
|
|
|
106.1 |
|
|
|
118.0 |
|
|
|
(11.9 |
) |
__________
(a)
|
At
March 31, 2009
and December 31, 2008,
includes finance receivables of $68.2 billion
and $73.7 billion,
respectively, that have been sold for legal purposes in securitizations
that do not satisfy the requirements for accounting sale
treatment. In addition, at March 31, 2009
and December 31, 2008,
includes net investment in operating leases of $13.6 billion
and $15.6 billion,
respectively, that have been included in securitizations that do not
satisfy the requirements for accounting sale treatment. These
underlying securitized assets are available only for payment of the debt
or other obligations issued or arising in the securitization transactions;
they are not available to pay Ford Credit's other obligations or the
claims of Ford Credit's other creditors until the associated debt or other
obligations are satisfied.
|
(b)
|
Includes
allowance for credit losses of $1.7 billion at
March 31, 2009
and
December 31, 2008.
|
(c)
|
Includes on-balance
sheet receivables, excluding unearned interest supplements related to
finance receivables of $1.3 billion at March 31, 2009 and December
31, 2008; and includes off-balance sheet retail receivables of about $500
million and about $600 million at March 31, 2009 and
December 31, 2008,
respectively.
|
(d)
|
Includes
managed receivables and receivables sold in whole-loan sale transactions
where Ford Credit retains no interest, but which it continues to service
of about
$100 million and about $300 million at March 31, 2009
and December 31, 2008,
respectively.
|
Receivables
decreased from year-end 2008, primarily in North America and Europe, mainly due
to lower industry volumes, lower dealer stocks, and the transition of Jaguar,
Land Rover, and Mazda financing to other finance providers.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
The
following table shows worldwide charge-offs (credit losses, net of recoveries),
for Ford Credit during the periods indicated. The loss-to-receivables
ratios, which equal charge-offs on an annualized basis divided by the average
amount of receivables outstanding for the period, excluding the allowance for
credit losses and unearned interest supplements related to finance receivables,
are shown below.
|
|
|
|
|
|
|
|
|
|
|
2009
Over/(Under) 2008
|
On-Balance
Sheet
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
(in millions)
|
|
$ |
332 |
|
|
$ |
229 |
|
|
$ |
103 |
|
|
Loss-to-receivables
ratio
|
|
|
1.21 |
% |
|
|
0.64 |
% |
|
|
0.57 |
|
pts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Memo:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
– managed (in millions)
|
|
$ |
335 |
|
|
$ |
243 |
|
|
$ |
92 |
|
|
Loss-to-receivables
– managed
|
|
|
1.22 |
% |
|
|
0.66 |
% |
|
|
0.56 |
|
pts.
|
The
increase in charge-offs and loss-to-receivables ratios primarily reflects higher
repossessions, higher severity, lower recoveries, and higher wholesale and
dealer loan losses in the United States and higher credit losses in
Europe. The higher severity reflects a higher mix of 72-month
contracts. Wholesale and dealer loan charge-offs increased from a
year ago, primarily reflecting an increase in dealer defaults.
Shown
below is Ford Credit's allowance for credit losses and its allowance for credit
losses as a percentage of end-of-period receivables (finance receivables,
excluding unearned interest supplements, and net investment in operating leases,
excluding the allowance for credit losses) for its on-balance sheet
portfolio:
|
|
|
|
|
December
31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for credit losses (in millions)
|
|
$ |
1,712 |
|
|
$ |
1,668 |
|
|
$ |
44 |
|
|
Allowance
as a percentage of end-of-period receivables
|
|
|
1.60 |
% |
|
|
1.40 |
% |
|
|
0.20 |
|
pts.
|
The
allowance for credit losses is primarily a function of portfolio quality,
historical loss performance, and receivable levels. The increase in
allowance for credit losses is consistent with the increase in charge-offs, and
includes about $160 million primarily reflecting higher severity
assumptions compared to historical trends used in Ford Credit's models and
higher wholesale and dealer loan losses.
In
purchasing retail finance and lease contracts, Ford Credit uses a proprietary
scoring system that classifies contracts using several factors, such as credit
bureau information, FICO score, customer characteristics, and contract
characteristics. In
addition to Ford Credit's proprietary scoring system, it considers other
factors, such as employment history, financial stability, and capacity to
pay. As of March 31, 2009, about 4% of the outstanding U.S.
retail finance and lease contracts in Ford Credit's serviced portfolio were
classified as high risk at contract inception, about the same as year-end
2008.
Other
Financial Services
The
decline in results primarily reflects the impairment of our investment in DFO
Partnership and the non-recurrence of gains related to real estate transactions,
offset partially by a gain by Ford Holdings related to the purchase of
$69 million principal amount of outstanding unsecured notes for
$18 million in cash.
Residual
Risk
Ford
Credit is exposed to residual risk on operating leases and similar balloon
payment products where the customer may return the financed vehicle to Ford
Credit. Residual risk is the possibility that the amount Ford Credit
obtains from returned vehicles will be less than Ford Credit's estimate of the
expected residual value for the vehicle. Ford Credit estimates the
expected residual value by evaluating recent auction values, return volumes for
its leased vehicles, industry-wide used vehicle prices, marketing incentive
plans, and vehicle quality data.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
North America Retail Operating Lease
Experience. Ford Credit uses various statistics to monitor its
residual risk:
|
•
|
Placement
volume measures the number of leases Ford Credit purchases in a given
period;
|
|
•
|
Termination
volume measures the number of vehicles for which the lease has ended in
the given period; and
|
|
•
|
Return
volume reflects the number of vehicles returned to Ford Credit by
customers at lease-end.
|
The
following table shows operating lease placement, termination, and return volumes
for Ford Credit's North America operations, which accounted for about 98% of
Ford Credit's total investment in operating leases at March 31, 2009
(in thousands, except for percentages):
|
|
|
|
|
|
|
|
|
|
|
Placements
|
|
|
20 |
|
|
|
113 |
|
Terminations
|
|
|
84 |
|
|
|
94 |
|
Returns
|
|
|
75 |
|
|
|
79 |
|
|
|
|
|
|
|
|
|
|
Memo:
|
|
|
|
|
|
|
|
|
Return
rates
|
|
|
89 |
% |
|
|
84 |
% |
In the
first quarter of 2009, placement volumes were down 93,000 units compared with
the same period a year ago, primarily reflecting lower industry volumes, the
transition of Jaguar, Land Rover, and Mazda financing to other finance
providers, and changes in our marketing programs which emphasized retail
installment sale contracts. While Ford Credit continues to offer
leasing to customers who prefer this product, lower auction values compared with
Ford Credit's estimate of the expected residual values and the present funding
environment have made leasing less economical for Ford Credit and for
consumers. This has contributed to a reduction in Ford Credit's lease
originations and over time will reduce its residual risk exposure.
In the
first quarter of 2009, termination and return volumes were lower compared with
the same period a year ago consistent with a shift away from 24-month leases and
toward longer-term leases in 2007. Higher return rates reflect the
decrease in auction values relative to Ford Credit's expectations at the time of
contract purchase.
U.S. Ford, Lincoln, and Mercury
Brand Retail Operating Lease Experience. The following table
shows return volumes for Ford Credit's Ford, Lincoln, and Mercury brand U.S.
operating lease portfolio. Also included are auction values at
constant first quarter 2009 vehicle mix for lease terms comprising about 63% of
Ford Credit's active Ford, Lincoln, and Mercury brand U.S. operating lease
portfolio (in thousands, except for percentages):
|
|
|
|
|
|
|
|
|
|
|
Returns
|
|
|
|
|
|
|
24-Month
term
|
|
|
16 |
|
|
|
29 |
|
36-Month
term
|
|
|
22 |
|
|
|
14 |
|
39-Month
term/Other term
|
|
|
6 |
|
|
|
5 |
|
Total
returns
|
|
|
44 |
|
|
|
48 |
|
|
|
|
|
|
|
|
|
|
Memo:
|
|
|
|
|
|
|
|
|
Return
rates
|
|
|
89 |
% |
|
|
86 |
% |
|
|
|
|
|
|
|
|
|
Auction
Values at Constant First Quarter 2009 Vehicle Mix
|
|
|
|
|
|
|
|
|
24-Month
term
|
|
$ |
16,185 |
|
|
$ |
16,495 |
|
36-Month
term
|
|
|
12,820 |
|
|
|
13,205 |
|
In the
first quarter of 2009, Ford, Lincoln, and Mercury brand U.S. return volumes were
down 4,000 units compared with the same period a year ago. However,
the return rate increased to 89%, consistent with a decrease in auction values
compared to Ford Credit's expectations of lease-end values at the time of
contract purchase. Auction values at constant first quarter 2009 mix
were down $310 per unit from year-ago levels for vehicles under 24-month leases,
and down $385 for vehicles under 36-month leases, primarily reflecting the
overall auction value deterioration in the used vehicle
market. Auction values, at constant first quarter 2009 mix, improved
compared with the fourth quarter of 2008 for vehicles under 24-month and
36-month leases by $2,070 per unit and $1,475 per unit,
respectively.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
LIQUIDITY
AND CAPITAL RESOURCES
Automotive
Sector
Our
industry has been heavily impacted by the global economic crisis, which has
included a sudden and substantial decline in global industry sales
volume. The dramatic decline in industry sales volume, combined with
tight credit markets, other economic factors, and the costs associated with
transforming our business, have put significant pressure on our Automotive
liquidity. While the economic environment remains difficult, we
believe that our continued focus on delivering on our plan is the right strategy
to achieve our objectives. Our Automotive liquidity strategy includes
ensuring that we have sufficient funding available with a high degree of
certainty throughout the business cycle; our long-term goal is to improve our
core Automotive operations so that we have a high degree of certainty about our
capability to generate cash from our operations.
Gross
Cash. Automotive gross cash includes cash and cash
equivalents, net marketable securities, and loaned securities. Prior
to 2008, we included in Automotive gross cash those assets contained in a VEBA
trust which may be used to pre-fund certain types of company-paid benefits for
U.S. employees and retirees, that were invested in shorter-duration fixed income
investments and could be used within 18 months to pay for benefits
("short-term VEBA assets"). Consistent with our UAW agreement, in
2008 we reclassified out of our Automotive gross cash calculation the short-term
VEBA assets and Temporary Asset Account securities ("TAA"). Gross
cash is detailed below as of the dates shown (in billions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
8.1 |
|
|
$ |
6.4 |
|
|
$ |
18.7 |
|
|
$ |
20.7 |
|
Marketable
securities (a)
|
|
|
13.5 |
|
|
|
9.3 |
|
|
|
6.6 |
|
|
|
2.0 |
|
Loaned
securities
|
|
|
— |
|
|
|
— |
|
|
|
6.7 |
|
|
|
10.3 |
|
Total
cash, marketable securities, and loaned securities
|
|
|
21.6 |
|
|
|
15.7 |
|
|
|
32.0 |
|
|
|
33.0 |
|
Securities-in-transit
(b)
|
|
|
— |
|
|
|
— |
|
|
|
(0.7 |
) |
|
|
(0.3 |
) |
UAW-Ford
TAA
|
|
|
(0.3 |
) |
|
|
(2.3 |
) |
|
|
(2.6 |
) |
|
|
— |
|
Short-term
VEBA assets
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.9 |
|
Gross
cash
|
|
$ |
21.3 |
|
|
$ |
13.4 |
|
|
$ |
28.7 |
|
|
$ |
34.6 |
|
________
|
(a)
|
Included at
March 31, 2009 and December 31, 2008 are Ford Credit debt securities that
we purchased, which are reflected in the table at a carrying value of
$357 million and $492 million, respectively; the estimated fair
value is $309 million and $437 million, respectively.
|
|
(b)
|
The
purchase or sale of marketable securities for which the cash settlement
was not made by period-end and for which there was a payable or receivable
recorded on the balance sheet at
period-end.
|
In
managing our business, we classify changes in Automotive gross cash into two
categories: operating-related and other (which includes the impact of
certain special items, contributions to funded pension plans, the net effect of
the change in the TAA and VEBA on gross cash, tax-related transactions,
acquisitions and divestitures, capital transactions with the Financial Services
sector, dividends paid to shareholders, and other – primarily
financing-related). Our key liquidity metrics are operating-related
cash flow, which best represents the ability of our Automotive operations to
generate cash, and Automotive gross cash. We believe the cash flow
analysis reflected in the table below is useful to investors because it includes
in operating-related cash flow elements that we consider to be related to our
Automotive operating activities (e.g., capital spending) and excludes cash flow
elements that we do not consider to be related to the ability of our operations
to generate cash (e.g., tax refunds). This differs from a cash flow
statement presented in accordance with GAAP and differs from Cash flows from operating activities
of continuing operations, the most directly comparable GAAP financial
measure.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Changes
in Automotive gross cash for the first quarter of 2009 and 2008 are summarized
below (in billions):
|
|
|
|
|
|
|
|
|
|
|
Gross
cash at end of period (b)
|
|
$ |
21.3 |
|
|
$ |
28.7 |
|
Gross
cash at beginning of period (b)
|
|
|
13.4 |
|
|
|
34.6 |
|
Total
change in gross cash (b)
|
|
$ |
7.9 |
|
|
$ |
(5.9 |
) |
|
|
|
|
|
|
|
|
|
Operating-related
cash flows
|
|
|
|
|
|
|
|
|
Automotive
income/(loss) before income taxes (excluding special
items)
|
|
$ |
(1.9 |
) |
|
$ |
0.6 |
|
Capital
expenditures
|
|
|
(1.4 |
) |
|
|
(1.4 |
) |
Depreciation
and special tools amortization
|
|
|
1.1 |
|
|
|
1.5 |
|
Changes
in receivables, inventories and trade payables
|
|
|
1.3 |
|
|
|
0.6 |
|
Other
(c)
|
|
|
(2.3 |
) |
|
|
(1.5 |
) |
Subtotal
|
|
|
(3.2 |
) |
|
|
(0.2 |
) |
Up-front
subvention payments to Ford Credit (b)
|
|
|
(0.5 |
) |
|
|
(1.0 |
) |
Total
operating-related cash flows
|
|
|
(3.7 |
) |
|
|
(1.2 |
) |
|
|
|
|
|
|
|
|
|
Other
changes in gross cash
|
|
|
|
|
|
|
|
|
Cash
impact of personnel-reduction programs and Job Security Benefits
accrual
|
|
|
(0.3 |
) |
|
|
(0.1 |
) |
Contributions
to funded pension plans
|
|
|
(0.4 |
) |
|
|
(0.6 |
) |
Net
effect of TAA/VEBA on gross cash (d)
|
|
|
2.0 |
|
|
|
(4.5 |
) |
Tax
refunds and tax payments from affiliates
|
|
|
0.3 |
|
|
|
0.9 |
|
Acquisitions
and divestitures
|
|
|
— |
|
|
|
0.1 |
|
Net
proceeds from/(Payments on) Automotive sector debt (e)
|
|
|
10.4 |
|
|
|
— |
|
Other
(b)
|
|
|
(0.4 |
) |
|
|
(0.5 |
) |
Total
change in gross cash
|
|
$ |
7.9 |
|
|
$ |
(5.9 |
) |
__________
|
(a)
|
Except
as noted (see note (b) below), 2008 data exclude Jaguar Land
Rover.
|
|
(b)
|
2008
data include Jaguar Land Rover.
|
|
(c)
|
In
the first quarter of 2009, Other Operating-related cash flows were
primarily driven by timing differences between the expensing of marketing,
warranty, retiree health care payments, and in-transit
receivables and the payment of those
expenses.
|
|
(d)
|
As
previously disclosed in "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our 2008 Form 10-K
Report, in January 2009 we liquidated the assets in the TAA established
pursuant to the Retiree Health Care Settlement Agreement, and replaced the
assets with a promissory note owing by Ford to Ford-UAW Holdings LLC,
allowing us access to the TAA assets as another available source of
liquidity for use in our operations during
2009.
|
|
(e)
|
Primarily
reflects $10.1 billion in proceeds from a revolving loan under our
secured Credit Agreement, as discussed
below.
|
Shown in
the table below is a reconciliation between financial statement Cash flows from operating activities
of continuing operations and operating-related cash flows (calculated as
shown in the table above) for the first quarter of 2009 and 2008 (in
billions):
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities of continuing operations
(b)
|
|
$ |
(2.3 |
) |
|
$ |
0.7 |
|
Items
included in operating-related cash flows
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(1.4 |
) |
|
|
(1.4 |
) |
Net
transactions between Automotive and Financial Services sectors
(c)
|
|
|
(0.6 |
) |
|
|
(0.7 |
) |
Net
cash flows from non-designated derivatives
|
|
|
0.2 |
|
|
|
0.3 |
|
Items
not included in operating-related cash flows
|
|
|
|
|
|
|
|
|
Cash
impact of personnel-reduction programs and Job Security Benefits
accrual
|
|
|
0.3 |
|
|
|
0.1 |
|
Contributions
to funded pension plans
|
|
|
0.4 |
|
|
|
0.6 |
|
Tax
refunds, tax payments, and tax receipts from affiliates
|
|
|
(0.3 |
) |
|
|
(0.9 |
) |
Other
(b)
|
|
|
— |
|
|
|
0.1 |
|
Operating-related
cash flows
|
|
$ |
(3.7 |
) |
|
$ |
(1.2 |
) |
__________
|
(a)
|
Except
as noted (see note (b) below), 2008 data exclude Jaguar Land
Rover.
|
|
(b)
|
2008
data include Jaguar Land Rover.
|
|
(c)
|
Primarily
payables and receivables between the Automotive and Financial Services
sectors in the normal course of business. For example, vehicle
wholesale loans that are made by Ford Credit to Ford-owned
dealers.
|
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Secured Credit
Agreement. On December 15, 2006, we entered into a
secured credit agreement (the "Credit Agreement") with various banks and
financial institutions, which provided for a $7 billion secured term loan
facility maturing on December 15, 2013 and an $11.5 billion
revolving credit facility maturing on December 15, 2011. We
established the revolving credit facility under the Credit Agreement to provide
available liquidity that could be used, as needed, on a revolving
basis. As disclosed in our 2008 Form 10-K Report, due to concerns
about the instability in the capital markets and the uncertain state of the
global economy, we borrowed $10.1 billion under the revolving credit
facility of the Credit Agreement during the first quarter of 2009 to ensure
access to these funds. Based on our current planning assumptions for
the period 2009 - 2011, we do not anticipate using these funds for operational
requirements; it is possible, however, that we will use some of the funds on a
short-term basis (e.g., during our annual summer shutdown periods) in accordance
with our intended purpose in establishing this revolving line of
credit.
In
addition, under the Credit Agreement we had $499 million of outstanding
Letters of Credit at March 31, 2009. For a more detailed
discussion of the Credit Agreement, see "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations –
Liquidity and Capital Resources – Automotive Sector" in our 2008 Form 10-K
Report and for additional discussion of risks related to our Automotive
liquidity and cash flows, see the discussion in "Item 1A. Risk Factors" in
our 2008 Form 10-K Report.
Other Credit
Facilities.* Excluding the Credit Agreement, at
March 31, 2009 we had $655 million of other
contractually-committed Automotive credit facilities with financial
institutions, including $141 million of worldwide unsecured credit
facilities and $514 million of local credit facilities to foreign
affiliates. Of the $655 million of contractually-committed
credit facilities, $156 million has been drawn under these
lines. Of the $499 million available for use, $129 million
will expire in 2009, $27 million will expire in 2010, $281 million
will expire in 2012, and $62 million will expire in 2013. For
further discussion of our committed credit facilities, see Note 16 of the
Notes to the Financial Statements in our 2008 Form
10-K Report.
Net
Cash/(Debt). Automotive sector net debt calculation is
detailed below (in billions):
|
|
|
|
|
|
|
Gross
cash
|
|
$ |
21.3 |
|
|
$ |
13.4 |
|
Less:
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
30.7 |
|
|
|
23.0 |
|
Debt
payable within one year
|
|
|
1.4 |
|
|
|
1.2 |
|
Total
debt
|
|
|
32.1 |
|
|
|
24.2 |
|
Net
cash/(debt)
|
|
$ |
(10.8 |
) |
|
$ |
(10.8 |
) |
The
changes in total debt reflect the $10.1 billion draw on our revolving line
of credit pursuant to the Credit Agreement discussed above and debt reduction
transactions, discussed below, that were completed in the first quarter of
2009.
Our
domestic competitors have been required, pursuant to the terms of
government-funded restructurings, to seek to reduce their public unsecured debt
by two-thirds, reduce the cash expense associated with their retiree health care
VEBA by half, and achieve parity in their labor costs with the U.S. operations
of non-domestic automobile manufacturers. Although we are not engaged
in a government-funded restructuring, we are committed to remaining competitive
and to improving our capital structure. Toward this end, during the
first quarter of 2009 we entered into modifications to our collective bargaining
agreement with the UAW that will lower our overall labor costs in the United
States by about $500 million annually.
As
discussed in greater detail below, we also reached an agreement in principle
with the UAW which, subject to final court approval and other conditions, would
allow us to settle up to half of our future cash VEBA obligations with Ford
Common Stock. These agreements with the UAW were conditioned on,
among other things, our pursuing restructuring actions with other stakeholders,
including meaningful debt reduction over time consistent with requirements
applicable to our domestic competitors under their government-funded
restructurings. Accordingly, during the first quarter of 2009, we and
Ford Credit initiated a series of transactions to reduce Automotive
debt. We undertook the following transactions (the last two of which
were completed on April 8, 2009), reducing our Automotive debt by a total of
$10.1 billion principal amount:
|
·
|
A
private market transaction, completed in January 2009, pursuant to
which we purchased $165 million principal amount of our outstanding
unsecured notes for $37 million in
cash.
|
|
·
|
A
cash tender offer by Ford Credit for our secured term loan under the
Credit Agreement, pursuant to which Ford Credit purchased from lenders
thereof $2.2 billion principal amount of the secured term loan for an
aggregate cost of $1.1 billion (including transaction
costs). This transaction settled on March 27, 2009,
following which, consistent with previously announced plans to return
capital from Ford Credit to us, Ford Credit distributed the repurchased
secured term loan to its immediate parent, Ford Holdings, whereupon the
repurchased secured term loan was forgiven. Approximately
$4.6 billion aggregate principal amount of the secured term loan
remains outstanding.
|
* Credit
facilities of our VIEs are excluded as we do not control their
use.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
|
·
|
A
cash tender offer by Ford Credit for our unsecured notes, pursuant to
which Ford Credit purchased $3.4 billion principal amount of debt
securities for an aggregate cost of $1.1 billion (including
transaction costs). This transaction settled on
April 8, 2009, following which Ford Credit transferred the
repurchased debt securities to us in satisfaction of $1.1 billion of
Ford Credit's tax liabilities to us. Approximately
$5.6 billion aggregate principal amount of our unsecured notes
(including about $100 million of industrial revenue bonds) remains
outstanding.
|
|
·
|
An
exchange offer by us for our 4.25% Senior Convertible Notes due December
15, 2036 ("Convertible Notes"), pursuant to which $4.3 billion
principal amount of Convertible Notes was exchanged for an aggregate of
468 million shares of Ford Common Stock and $344 million in cash
($80 in cash per $1,000 principal amount of Convertible Notes
exchanged). This transaction settled on
April 8, 2009. An aggregate principal amount of
$579 million of Convertible Notes remains outstanding with a carrying
value of approximately
$400 million.
|
The table
below shows the carrying value (in billions) of our outstanding
Automotive debt (i) as originally reported at December 31, 2008, (ii)
at December 31, 2008, adjusted for the impact of FSP APB 14-1
(described in Notes 1 and 5 of the Notes to the Financial Statements), (iii) at
March 31, 2009, and (iv) at March 31, 2009 on a pro forma basis adjusted for
the two transactions described above that settled on April 8, 2009
(for additional discussion of our debt and commitments, see Note 5 of the Notes
to the Financial Statements).
|
|
As
Originally Reported December 31, 2008
|
|
|
|
|
|
Revised
December 31, 2008
|
|
|
|
|
|
Pro Forma March 31
Adjusted for April Actions
|
|
|
Pro Forma March 31
Over/(Under) Original December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public
unsecured debt securities (a)
|
|
$ |
9.1 |
|
|
$ |
— |
|
|
$ |
9.1 |
|
|
$ |
9.0 |
|
|
$ |
5.6 |
|
|
$ |
(3.5 |
) |
Convertible
notes
|
|
|
4.9 |
|
|
|
(1.6 |
) |
|
|
3.3 |
|
|
|
3.3 |
|
|
|
0.4 |
|
|
|
(4.5 |
) |
Total
unsecured notes
|
|
|
14.0 |
|
|
|
(1.6 |
) |
|
|
12.4 |
|
|
|
12.3 |
|
|
|
6.0 |
|
|
|
(8.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated
convertible debentures
|
|
|
3.0 |
|
|
|
— |
|
|
|
3.0 |
|
|
|
3.0 |
|
|
|
3.0 |
|
|
|
— |
|
Total
unsecured debt
|
|
|
17.0 |
|
|
|
(1.6 |
) |
|
|
15.4 |
|
|
|
15.3 |
|
|
|
9.0 |
|
|
|
(8.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured
term loan (b)
|
|
|
6.9 |
|
|
|
— |
|
|
|
6.9 |
|
|
|
4.6 |
|
|
|
4.6 |
|
|
|
(2.3 |
) |
Secured
revolving loan
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10.1 |
|
|
|
10.1 |
|
|
|
10.1 |
|
Total
secured debt
|
|
|
6.9 |
|
|
|
— |
|
|
|
6.9 |
|
|
|
14.7 |
|
|
|
14.7 |
|
|
|
7.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International/Other
U.S. debt
|
|
|
1.9 |
|
|
|
— |
|
|
|
1.9 |
|
|
|
2.1 |
|
|
|
2.1 |
|
|
|
0.2 |
|
Total
Automotive debt
|
|
$ |
25.8 |
|
|
$ |
(1.6 |
) |
|
$ |
24.2 |
|
|
$ |
32.1 |
|
|
$ |
25.8 |
|
|
$ |
— |
|
_____
(a) Includes
about $100 million of industrial revenue bonds.
(b) "Pro Forma March 31
Over/(Under) Original December 31" unrounded is
$2.224 billion.
See Note
5 of the Notes to the Financial Statements for our debt maturity table as of
March 31, 2009.
Modification to UAW Retiree Health
Care Settlement Agreement. As we disclosed in our Current
Report on Form 8-K filed March 13, 2009, we have agreed in principle
with the UAW to modify the UAW Retiree Health Care Settlement Agreement (the
"Settlement Agreement") described in Note 23 of the Notes to the Financial
Statements in our 2008 Form 10-K Report. The Settlement Agreement
established a new Voluntary Employee Beneficiary Association trust (the "New
VEBA") that on December 31, 2009 would assume the obligation to
provide retiree health care to eligible active and retired UAW Ford hourly
employees and their eligible spouses, surviving spouses and
dependents. A term sheet describing the modification to the
Settlement Agreement (the "Modification") is filed as Exhibit 10-A
hereto.
The
Modification smoothes out the payment obligations under the Settlement Agreement
and provides us the option to use Ford Common Stock to pay up to 50% of our
future payment obligations to the New VEBA pursuant to the Settlement
Agreement. The Modification, which was ratified by the UAW membership
on March 9, 2009, is subject to final court approval and other
conditions.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
In the
event that the Modification is approved by the court and the other conditions to
its implementation are met, we would issue to the New VEBA two notes, Note A and
Note B. These notes would be issued to the New VEBA in lieu
of: (i) the notes contemplated to be issued under the Settlement
Agreement (i.e., a 5.75% Senior Convertible Note due January 1, 2013
in the principal amount of $3,334 million, a 9.5% Guaranteed Secured Note
due January 1, 2018 in the principal amount of $3 billion, and a
9% Short Term Note due December 31, 2009 in the principal amount of
$2,281.91 million, which represented the value of the assets at
December 31, 2008 in the TAA established under the Settlement
Agreement (together, the "Old Notes")), and (ii) the base amount payments
consisting of annual installments of $52.3 million payable through 2022
under the Settlement Agreement.
Note A, a
non-interest bearing note in the principal amount of $6,630.47 million,
would require us to make cash payments to the New VEBA according to the schedule
set forth in the term sheet filed as Exhibit 10-A hereto beginning on
December 31, 2009, and thereafter on June 30 of each year in the
period 2010 through 2022. Note B, a non-interest bearing note in
the principal amount of $6,511.85 million, also would require us to make
payments to the New VEBA starting on December 31, 2009, and thereafter
on June 30 of each year in the period 2010 through
2022. Note B, however, gives us the option of making each
payment in cash, Ford Common Stock, or a combination of cash and Ford Common
Stock. The aggregate principal amount of Note A and Note B (i.e.,
$13.1 billion), and the amortization thereof reflected in the schedule set
forth in the term sheet filed as Exhibit 10-A hereto, represent the equivalent
value of: (i) the principal amounts of and interest payments on the
Old Notes, (ii) the annual $52.3 million base payment amounts, and
(iii) an additional $25 million per year during the period 2012
through 2018, which is intended to cover transaction costs the New VEBA incurs
in selling any shares of Ford Common Stock delivered pursuant to the terms of
Note B. Note A and Note B do not include or represent
amounts constituting assets in the existing internal VEBA ($2.7 billion at
December 31, 2008) or interest payments on the Old Notes and base
amount payments made since January 1, 2009 and prior to
December 31, 2009 into the TAA. These assets or amounts
will be transferred in accordance with the original terms of the Settlement
Agreement. For additional detail, see the term sheet describing the
Modification filed as Exhibit 10-A hereto.
Notwithstanding
our option to pay our VEBA obligations in stock in lieu of cash, we will use our
discretion in determining which form of payment makes sense at the time of each
required payment, balancing liquidity needs and preservation of shareholder
value. In making such a determination, we will consider facts and
circumstances existing at the time of each required payment, including market
and economic conditions, our available liquidity, and the price of Ford Common
Stock.
Liquidity
Sufficiency. One of the four key priorities of our business
plan is to finance our plan and improve our balance sheet. The
actions described above are consistent with this priority. Based on
our current planning assumptions, including those discussed in "Outlook" below,
and subject to the risks set forth in "Risk Factors" below, we believe we have
sufficient liquidity and capital resources to continue to transform our
business, invest in new products that customers want and value, pay our debts
and obligations as and when they come due (including the $10.1 billion
revolving loan discussed above that matures on December 15, 2011), and provide
us a cushion against the uncertain global economic
environment. Accordingly, we do not expect to require a bridge loan
from the U.S. government – barring, as we have stated previously, a
significantly deeper economic downturn or a significant industry event, such as
the uncontrolled bankruptcy of a major competitor or important suppliers to
Ford, that causes major disruption to our supply base, dealers or creditors and
cannot be funded by other forms of capital. We are continuing to work
on cash improvement actions and continuing to pursue opportunities to improve
our balance sheet and enhance our liquidity.
Financial
Services Sector
Ford
Credit
Debt. At
March 31, 2009,
unsecured long-term debt (including notes payable within one year) was down
about $7 billion from year-end 2008, primarily reflecting about $6 billion of
debt maturities and about a $1 billion
decrease in the debt balance due to changes in currency exchange
rates. Unsecured long-term debt maturities were as follows: 2009 —
$10 billion; 2010 — $8 billion; 2011
— $12 billion; and
the remainder thereafter. At March 31, 2009,
asset-backed long-term debt (including notes payable within one year) was down
about $4 billion from
year-end 2008, reflecting amortization of asset-backed debt in excess of
asset-backed long-term debt issuance.
Funding Strategy. Ford
Credit's funding strategy is to maintain liquidity to meet short-term funding
obligations by having a substantial cash balance and committed funding
capacity. As a result of lower unsecured credit ratings assigned to
Ford Credit over the past few years, its unsecured funding costs have increased
over time. While Ford Credit has accessed the unsecured debt market
when available and it makes sense to do so, Ford Credit has increased its use of
securitization funding as it has been more cost effective than unsecured funding
and has allowed Ford Credit access to a broad investor base. Ford
Credit plans to meet most of its 2009 funding requirements through
securitizations, the majority of which will consist of eligible issuances
pursuant to government-sponsored funding programs. In addition, Ford
Credit has various alternative business arrangements for select products and
markets that reduce its funding requirements while allowing it to support us
(e.g., Ford Credit's partnering in Brazil for retail financing and FCE Bank
plc's ("FCE") partnering with various institutions in Europe for full service
leasing and retail and wholesale financing). Ford Credit is continuing to
explore and execute such alternative business arrangements. Ford
Credit has applied for Federal Deposit Insurance
Corporation ("FDIC") and State of Utah approval for an industrial loan
corporation, which if approved will allow Ford Credit to obtain funding by
issuing FDIC-insured certificates of deposit.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Consistent
with the overall market, Ford Credit has been impacted by volatility and
disruptions in the asset-backed securities markets since August
2007. Ford Credit continues to face the challenges of the global
credit crisis, including reduced access to public and private unsecured and
securitization markets, a significant increase in the credit spreads associated
with both asset-backed and unsecured funding, higher renewal costs on its
committed liquidity programs, higher enhancements resulting in reduced net
proceeds from securitizations, shorter maturities in Ford Credit's public and
private securitization issuances in certain circumstances, and a reduction in
its capacity to obtain derivatives to manage market risk, including interest
rate risk, in its securitization programs.
Ford
Credit's funding plan is subject to risks and uncertainties, many of which are
beyond its control, including:
|
·
|
Continued
disruption in the market for the types of asset-backed
securities used in Ford Credit's asset-backed
funding;
|
|
·
|
Reduction
in Ford Credit's planned access to government-sponsored funding programs;
or
|
|
·
|
Potential
impact of industry events on Ford Credit's ability to access debt and
derivative markets or renew its committed liquidity programs in sufficient
amounts and at competitive rates.
|
As a
result, Ford Credit may need to further reduce the amount of finance receivables
and operating leases it purchases or originates, thereby reducing its
ongoing profits and adversely affecting its ability to support the sale of Ford
vehicles.
Government-Sponsored Funding
Programs. Ford Credit's near-term funding sources include
government-sponsored funding programs. In October 2008, Ford Credit
registered to sell up to $16 billion of FCAR asset-backed commercial paper
to the U.S. Federal Reserve's Commercial Paper Funding Facility
("CPFF"). Commercial paper sold to the CPFF is for a term of 90
days and sales can be made through October 30, 2009. At
March 31, 2009, Ford Credit had an outstanding balance of
$7 billion of FCAR asset-backed commercial paper issued to the
CPFF. In addition, FCE had about $900 million of outstanding
short-term funding under the European Central Bank's ("ECB") open market
operations program as of March 31, 2009, and issued an additional
$650 million in April 2009, under which these obligations are backed
by either notes or receivables.
In
November 2008, the U.S. Federal Reserve announced the Term Asset-Backed
Securities Loan Facility ("TALF") pursuant to which the Federal Reserve Bank of
New York was authorized to provide up to $200 billion of non-recourse loans
to investors in highly-rated asset-backed securities who pledge these securities
as collateral for the non-recourse loan. Asset-backed securities
backed by automotive retail, lease, and wholesale finance receivables qualify
for the TALF program. On February 10, 2009, this program
was further expanded to $1 trillion by the Consumer & Business Lending
Initiative as part of the Financial Stability Plan announced by the U.S.
Treasury.
To be
eligible for TALF, asset-backed securities must be issued after
January 1, 2009 and all or substantially all of the underlying
automotive finance receivables or leases must have been originated on or after
October 1, 2007. In addition, TALF-eligible securities
must have a credit rating in the highest long-term or short-term investment
grade credit rating category from two or more major Nationally Recognized
Statistical Rating Organizations ("NRSROs") (as designated by the U.S. Federal
Reserve) and not have a credit rating below the highest investment grade credit
rating category from any major NRSRO. Wholesale securitization under
the TALF program is limited to the amount of an issuer's wholesale
securitizations maturing in 2009, which for Ford Credit would limit its
TALF-eligible wholesale issuances to $6.5 billion, assuming the relevant
credit rating requirements are met.
To appeal
to a broad investor base for its asset-backed securities, Ford Credit plans to
make the majority of its 2009 public U.S asset-backed auto loan and lease
securitizations eligible for TALF. In March 2009, Ford Credit
completed a TALF-eligible $3 billion retail auto loan securitization
transaction. At this time, Ford Credit does not meet the credit rating
requirements under TALF and the ECB program for its wholesale securitizations,
but Ford Credit is working toward gaining eligibility under these programs for
wholesale assets. Ford Credit's continued inability to obtain access
to these government-sponsored programs for Ford Credit's issuances would require
reliance on private funding sources and/or would limit Ford Credit's ability to
finance future receivables.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Due to
the present global credit crisis and its limited access to public and private
unsecured and securitization markets, Ford Credit expects the majority of its
funding in 2009 will consist of eligible issuances pursuant to these
government-sponsored programs.
In
January 2009, the Canadian government announced the C$12 billion Canadian
Secured Credit facility which is intended to provide asset-backed funding for
automotive and commercial loans and leases. Ford Credit plans to
pursue funding under this program and any other global government-sponsored
programs for which it is eligible.
Term Funding
Plan. The following table shows Ford Credit's public and
private term funding issuances in 2008 and through April 30, 2009, and
its planned issuances for full-year 2009 (in billions):
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public
Term Funding
|
|
|
|
|
|
|
|
|
|
Unsecured
|
|
$ |
0
–2 |
|
|
$ |
— |
|
|
$ |
2 |
|
Securitizations
(a)
|
|
|
8–
13 |
|
|
|
4 |
|
|
|
11 |
|
Total
public term funding
|
|
$ |
10 –
15 |
|
|
$ |
4 |
|
|
$ |
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Term Funding
(b)
|
|
$ |
5–
10 |
|
|
$ |
1 |
|
|
$ |
29 |
|
__________
(a)
|
Reflects
new issuance; excludes other structured
financings.
|
(b)
|
Includes
private term debt, securitizations, other structured financings, and other
term funding; excludes sales to Ford Credit's on-balance sheet
asset-backed commercial paper
programs.
|
Through
April 30, 2009,
Ford Credit completed about $4 billion of public term funding transactions,
including about $3 billion from a retail asset-backed securitization
in the United States and about $650 million from a lease asset-backed
securitization in Germany. Ford Credit expects its full-year 2009
public term funding requirements to be between $10 billion and $15
billion.
Through
April 30, 2009,
Ford Credit completed about $1 billion of private term funding transactions
(excluding its on-balance sheet asset-backed commercial paper program) in
several markets. These private transactions included retail, lease,
and wholesale asset-backed securitizations. Ford Credit expects its
full-year 2009 private term funding to be between $5 billion and
$10 billion.
Through
April 30, 2009, Ford
Credit completed about $5 billion of public and private term funding, which
is about 25% of its full-year plan.
Liquidity. The
following table illustrates the various sources of Ford Credit's liquidity as of
the dates shown (in billions):
|
|
|
|
|
|
|
Cash,
cash equivalents, and marketable securities*
|
|
$ |
19.4 |
|
|
$ |
23.6 |
|
|
|
|
|
|
|
|
|
|
Committed
liquidity programs
|
|
|
26.0 |
|
|
|
28.0 |
|
Asset-backed
commercial paper ("FCAR")
|
|
|
15.7 |
|
|
|
15.7 |
|
Credit
facilities
|
|
|
1.9 |
|
|
|
2.0 |
|
Committed
capacity
|
|
|
43.6 |
|
|
|
45.7 |
|
Committed
capacity and cash
|
|
|
63.0 |
|
|
|
69.3 |
|
Less:
Capacity in excess of eligible receivables
|
|
|
(10.2 |
) |
|
|
(4.8 |
) |
Less:
Cash and cash equivalents to support on-balance sheet
securitizations
|
|
|
(5.4 |
) |
|
|
(5.5 |
) |
Liquidity
|
|
|
47.4 |
|
|
|
59.0 |
|
Less:
Utilization
|
|
|
(30.2 |
) |
|
|
(37.6 |
) |
Liquidity
available for use
|
|
$ |
17.2 |
|
|
$ |
21.4 |
|
__________
*
|
Excludes
marketable securities related to insurance
activities.
|
At March
31, 2009, the capacity of Ford Credit's liquidity sources, cash, cash
equivalents, and marketable securities (excluding marketable securities related
to insurance activities) totaled $63 billion, of which $47.4 billion
could be utilized (after adjusting for capacity in excess of eligible
receivables of $10.2 billion and
cash required to support on-balance sheet securitizations of $5.4 billion). At
March 31, 2009, $30.2 billion was
utilized, leaving $17.2 billion available for use (including $14 billion of cash, cash
equivalents, and marketable securities and excluding marketable securities
related to insurance activities), or about 16% of managed receivables, compared
with 18% at year-end 2008. At March 31, 2009, Ford Credit's liquidity
available for use was lower than year-end 2008 by $4.2 billion, primarily
reflecting debt maturities and cash payments under the tender offer to purchase
a portion of our outstanding secured term loan, offset partially by the impact
of lower receivables. The decline in liquidity available for use from
December 31, 2008 also reflected a $630 million
cumulative adjustment to correct for the overstatement of Financial Services
sector cash and cash equivalents and certain accounts payable that originated in
prior periods. In addition to the $17.2 billion of liquidity
available for use, the $10.2 billion of capacity in excess of eligible
receivables provides Ford Credit with an alternative to uncommitted sources for
funding future purchases or originations and gives Ford Credit flexibility to
shift capacity to markets and asset classes where it can be used or absorb
reductions in committed capacity.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Cash, Cash Equivalents and
Marketable Securities. At March 31, 2009, Ford
Credit's cash, cash equivalents, and marketable securities (excluding marketable
securities related to insurance activities) totaled $19.4 billion, compared with
$23.6 billion at year-end 2008. In the normal course of its
funding activities, Ford Credit may generate more proceeds than are required for
its immediate funding needs. These excess amounts are maintained
primarily as highly liquid investments, which provide liquidity for Ford
Credit’s short-term funding needs and give Ford Credit flexibility in the use of
its other funding programs.
Committed Liquidity
Programs. Ford Credit and its subsidiaries, including FCE,
have entered into agreements with a number of bank-sponsored asset-backed
commercial paper conduits ("conduits") and other financial institutions whereby
such parties are contractually committed, at Ford Credit's option, to purchase
from Ford Credit eligible retail or wholesale assets or to purchase or make
advances under asset-backed securities backed by retail or wholesale assets for
proceeds of up to $22 billion at March 31, 2009 ($12 billion
retail and $10 billion wholesale) of which $7.7 billion are
commitments to FCE. These committed liquidity programs have varying
maturity dates, with $19.9 billion having maturities within the next twelve
months (of which $7 billion relates to FCE commitments), and the balance
having maturities between November 2010 and October 2011. As a
result of the continued asset-backed securities market volatility that began in
August 2007 and significantly worsened in the second half of 2008, there is a
risk of non-renewal of some of these committed liquidity programs, which could
lead to a reduction in the size of these programs and/or higher
costs. Ford Credit's ability to obtain funding under these programs
is subject to having a sufficient amount of assets eligible for these programs
as well as Ford Credit's ability to obtain interest rate hedging arrangements
for securitizations. At March 31, 2009, $16.1 billion
of these commitments were in use. These programs are free of material
adverse change clauses, restrictive financial covenants, and credit rating
triggers that could limit Ford Credit's ability to obtain
funding. However, the unused portion of these commitments may be
terminated if the performance of the underlying assets deteriorates beyond
specified levels. Based on Ford Credit's experience and knowledge as
servicer of the related assets, Ford Credit does not expect any of these
programs to be terminated due to such events.
In
addition, Ford Credit has a committed liquidity program for the purchase of up
to $4 billion of asset-backed securities which is committed until December
2010 and at Ford Credit's option can be supported with various retail,
wholesale, or lease assets. Ford Credit's ability to obtain funding
under this program is subject to having a sufficient amount of assets available
to issue the securities. This program is also free of material
adverse change clauses, restrictive financial covenants and credit rating
triggers that could limit Ford Credit's ability to obtain funding. At
March 31, 2009, Ford Credit had $3.4 billion of outstanding
funding in this program.
Asset-Backed Commercial
Paper. At March 31, 2009, Ford Credit had
$15.7 billion of contractually-committed liquidity facilities provided by
banks to support Ford Credit's retail securitization program
("FCAR"). Included in this total was a $238 million
contractually-committed liquidity facility provided by Lehman Brothers Bank, FSB
("Lehman Brothers Bank"). As disclosed in our Current Report on Form
8-K dated September 16, 2008, the contractually-committed liquidity
facilities provided by Lehman Brothers Bank are guaranteed by Lehman Brothers
Holdings Inc. ("Lehman"), the parent company of Lehman Brothers
Bank. On September 15, 2008, Lehman filed for protection
under Chapter 11 of the U.S. Bankruptcy Code.
Of the
$15.7 billion of contractually-committed liquidity facilities,
$9.2 billion are committed through June 29, 2009,
$174 million are committed through June 30, 2011, and
$6.3 billion are committed through
June 29, 2012. Utilization of these facilities is subject
to conditions specific to the FCAR program and Ford Credit having a sufficient
amount of eligible assets for securitization. The FCAR program must
be supported by liquidity facilities equal to at least 100% of its outstanding
balance. At March 31, 2009, $15.3 billion of FCAR’s
bank liquidity facilities were available to support FCAR’s asset-backed
commercial paper, subordinated debt or FCAR’s purchase of Ford Credit's
asset-backed securities, and the remaining FCAR bank liquidity facilities of
$412 million were available to support FCAR’s purchase of Ford Credit's
asset-backed securities. At March 31, 2009, the outstanding
commercial paper balance for the FCAR program was
$10.1 billion. Ford Credit is registered to sell up to
$16 billion of asset-backed commercial paper under the CPFF. At
March 31, 2009, Ford Credit had an outstanding balance of
$7 billion of FCAR asset-backed commercial paper issued to the
CPFF.
Credit
Facilities. At March 31, 2009, Ford Credit and its
subsidiaries, including FCE, had $1.9 billion of contractually-committed
unsecured credit facilities with financial institutions, of which
$1.3 billion were available for use. Of the lines available for
use, $788 million expire in 2009, $114 million expire in 2010, and
$426 million expire in 2011. Of the $1.9 billion of
contractually-committed credit facilities, $273 million constitute Ford
Credit credit facilities (of which $70 million are worldwide),
$1.6 billion are FCE worldwide credit facilities, and $33 million are
local credit facilities. Ford Credit's worldwide credit facilities
may be used, at Ford Credit's option, by any of its direct or indirect majority
owned subsidiaries. Similarly, the FCE worldwide credit facilities
may be used, at FCE’s option, by any of FCE’s direct or indirect majority owned
subsidiaries. Ford Credit or FCE, as the case may be, will guarantee
any such borrowings. All of the worldwide credit facilities are free
of material adverse change clauses, restrictive financial covenants (for
example, debt-to-equity limitations and minimum net worth requirements) and
credit rating triggers that could limit Ford Credit's ability to obtain
funding.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Leverage. Ford
Credit uses leverage, or the debt-to-equity ratio, to make various business
decisions, including evaluating and establishing pricing for retail,
wholesale,
and lease financing, and assessing its capital structure. Ford Credit
refers to its shareholder's interest as equity. Ford Credit
calculates leverage on a financial statement basis and on a managed
basis.
The
following table illustrates the calculation of Ford Credit’s financial statement
leverage (in billions, except for ratios):
|
|
March
31,
|
|
|
December
31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
debt
|
|
$ |
111.4 |
|
|
$ |
126.5 |
|
Equity
|
|
|
9.3 |
|
|
|
10.6 |
|
Financial
statement leverage (to 1)
|
|
|
12.0 |
|
|
|
12.0 |
|
The
following table illustrates the calculation of Ford Credit’s managed leverage
(in billions, except for ratios):
|
|
March
31,
|
|
|
December
31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
debt
|
|
$ |
111.4 |
|
|
$ |
126.5 |
|
Securitized
off-balance sheet receivables outstanding
|
|
|
0.5 |
|
|
|
0.6 |
|
Retained
interest in securitized off-balance sheet receivables
|
|
|
(0.1 |
) |
|
|
(0.1 |
) |
Adjustments
for cash, cash equivalents, and marketable securities (a)
|
|
|
(19.4 |
) |
|
|
(23.6 |
) |
Adjustments
for derivative accounting (b)
|
|
|
(0.3 |
) |
|
|
(0.4 |
) |
Total
adjusted debt
|
|
$ |
92.1 |
|
|
$ |
103.0 |
|
|
|
|
|
|
|
|
|
|
Equity
|
|
$ |
9.3 |
|
|
$ |
10.6 |
|
Adjustments
for derivative accounting (b)
|
|
|
(0.1 |
) |
|
|
(0.2 |
) |
Total
adjusted equity
|
|
$ |
9.2 |
|
|
$ |
10.4 |
|
|
|
|
|
|
|
|
|
|
Managed
leverage (to 1)
|
|
|
10.0 |
|
|
|
9.9 |
|
__________
(a)
|
Excludes
marketable securities related to insurance
activities.
|
(b)
|
Primarily
related to market valuation adjustments to derivatives due to movements in
interest rates. Adjustments to debt are related to designated
fair value hedges and adjustments to equity are related to retained
earnings.
|
Ford
Credit plans its managed leverage by considering prevailing market conditions
and the risk characteristics of its business. At
March 31, 2009, Ford Credit's managed leverage was 10 to 1, compared
with 9.9 to 1 at December 31, 2008. In the first quarter of
2009, Ford Credit made a non-cash distribution to its parent of
about $1.1 billion related to the secured term loan tender offer
described in “Liquidity and
Capital Resources - Automotive Sector”
above.
On-Balance
Sheet Arrangements
Most of
Ford Credit’s securitization programs do not satisfy the requirements for
accounting sale treatment and, therefore, the securitized assets and related
debt are included in Ford Credit’s financial statements. Ford Credit
expects its future securitizations to be on-balance
sheet. Securitized assets are only available to repay the related
asset-backed debt and to pay other securitization investors and other
participants. These assets are not available to pay Ford Credit’s
other obligations or the claims of its other creditors until the associated debt
or other obligations are satisfied. This debt is not Ford Credit’s
legal obligation or the legal obligation of its other
subsidiaries. Assets and associated liabilities related to Ford
Credit's on-balance sheet securitizations are as follows (in
billions):
|
|
March
31,
|
|
|
December
31,
|
|
|
|
|
|
|
|
|
Total
outstanding principal amount of finance receivables and net investment in
operating leases included in on-balance sheet
securitizations
|
|
$ |
81.8 |
|
|
$ |
89.3 |
|
Cash
and cash equivalents balances to be used only to support the on-balance
sheet securitizations
|
|
|
5.4 |
|
|
|
5.5 |
|
Debt
payable only out of collections on the underlying securitized assets and
related enhancements
|
|
|
64.0 |
|
|
|
72.2 |
|
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Off-Balance Sheet
Arrangements
Ford
Credit has not entered into any off-balance sheet arrangements (off-balance
sheet securitization transactions and whole-loan sale transactions) since
January 2007, which is consistent with Ford Credit's plan to fund
securitizations through on-balance sheet transactions.
Total
Company
Total Equity/(Deficit) Attributable
to Ford Motor Company. Total equity/(deficit)
attributable to Ford Motor Company was negative $17.6 billion at
March 31, 2009, a decline of $1.9 billion compared with
December 31, 2008. The decline is more than explained by
the net loss attributable to Ford Motor Company for the first quarter of 2009
and unfavorable changes in Accumulated other comprehensive
income/(loss) (see Note 17 of the Notes to the Financial Statements
for details of Other comprehensive income/(loss) attributable to Ford Motor
Company).
Credit
Ratings. Our short- and long-term debt is rated by four credit
rating agencies designated as NRSROs by the Securities and Exchange Commission
("SEC"):
|
·
|
Moody’s
Investors Service, Inc. ("Moody’s");
and
|
|
·
|
Standard
& Poor’s Rating Services, a division of McGraw-Hill Companies, Inc.
("S&P").
|
The
following rating actions were taken since the filing of our 2008 Form
10-K Report.
Ford
|
|
|
|
§ Moody's
|
In
March 2009, Moody's lowered the ratings on Ford's secured revolving
facility to Caa1 from B2 and its secured term loan to Ca from Caa3 while
maintaining a Negative outlook. In April 2009, Moody's raised
the rating on Ford's secured term loan to Caa1 from Ca while maintaining a
Negative outlook.
|
§ S&P
|
In
March 2009, S&P lowered Ford's corporate credit rating and senior
secured rating to CC from CCC+, and its senior unsecured rating to C from
CCC- while maintaining a Negative outlook. In April 2009,
S&P lowered Ford's corporate credit rating to SD (selective default)
and its senior secured and senior unsecured ratings to D upon completion
of Ford's corporate debt restructuring. Also in April 2009,
following the debt restructuring, S&P raised Ford's corporate credit
rating and senior secured rating to CCC+ and raised its senior unsecured
rating to CCC-.
|
Ford Credit
|
|
|
No
rating actions were taken.
|
The
following chart summarizes certain of the credit ratings and the outlook
presently assigned to Ford and Ford Credit by these four NRSROs:
|
|
|
|
|
|
|
Issuer
Default/ Corporate/ Issuer Rating
|
|
Long-Term
Senior Unsecured
|
|
|
|
|
|
Long-Term
Senior Unsecured
|
|
|
|
|
DBRS
|
CCC
(high)
|
|
CCC
|
|
B
(low)
|
|
Negative
|
|
B
(low)
|
|
R-5
|
|
Negative
|
Fitch
|
CCC
|
|
CC
|
|
B
|
|
Negative
|
|
B-
|
|
C
|
|
Negative
|
Moody's
|
Caa3
|
|
Ca
|
|
Caa1
|
|
Negative
|
|
Caa1
|
|
NP
|
|
Negative
|
S&P
|
CCC+
|
|
CCC-
|
|
CCC+
|
|
Negative
|
|
CCC+*
|
|
NR
|
|
Negative
|
__________
* S&P
rates FCE's long-term senior unsecured rating as B-, maintaining a one notch
differential versus Ford Credit.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
OUTLOOK
Although
the economic environment remains challenging, we believe that our plan – to
aggressively restructure our business to operate profitably, accelerate
development of new products customers want and value, finance our plan and
improve our balance sheet, and work together effectively as one team to leverage
our global resources – provides the right tools to achieve our
objectives. For additional discussion of the economic environment and
discussion and assessment of the risks and opportunities to our current planning
assumptions, see "Item 1A. Risk Factors," "Overview," "Outlook," and "Critical
Accounting Estimates" in our Form 2008 10-K Report, as well as updates thereto
in this Report.
Our
current projection of upcoming vehicle production for certain segments is as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Ford
North America
|
|
|
435 |
|
|
|
(250 |
) |
Ford
Europe
|
|
|
385 |
|
|
|
(180 |
) |
Volvo
|
|
|
81 |
|
|
|
(31 |
) |
Our
reduced planned production in the second quarter of 2009, compared with the same
period in 2008, reflects the significant decline in global industry demand this
year compared with last year. We currently estimate
that the first quarter 2009 seasonally adjusted annual sales rate for
the major markets we track was down about 20% from the same period a year ago,
and we expect global industry volumes to decline by about 15% for full-year 2009
compared with 2008. Our projected production levels for the second
quarter of 2009 do reflect, however, an increase from our actual first quarter
2009 production levels.
Our
current planning assumptions for 2009 include the following:
Industry Volume (a)
|
Full-Year Plan
|
First Quarter Results
|
Full-Year Outlook
|
(million
units)
|
|
|
|
–United
States
|
10.5
– 12.5
|
9.8
|
Lower
End of Range
|
–Europe
(b)
|
12.5
– 13.5
|
14.8
|
13.5
– 14.5
|
|
|
|
|
Operational Metrics
|
|
|
|
Compared
with 2008:
|
|
|
|
–Quality
– United States
|
Improve
|
Improved
|
On
Track
|
–Quality
– International
|
Improve
|
Mixed
|
Mixed
|
–Automotive
Structural Costs (c)
|
Improve
by
About
$4 Billion
|
Improved
by
$1.9 Billion
|
Improve
by
More Than
$4 Billion
|
–U.S.
Market Share (Ford Lincoln Mercury)
|
Stabilize
|
13.9%
|
On
Track
|
–U.S.
Share of Retail Market (d)
|
Stabilize
|
12.7%
|
On
Track
|
–Europe
Market Share (b)
|
Equal
/ Improve
|
9.4%
|
On
Track
|
–Automotive
Operating-Related Cash Flow (e)
|
Negative
but Significantly Improved
|
$(3.7) Billion
|
On
Track
|
Absolute
Amount:
|
|
|
|
–Capital
Spending
|
$5 Billion
– $5.5 Billion
|
$1.4 Billion
|
On
Track
|
__________
(a)
|
Seasonally
adjusted annual rate; includes medium and heavy
vehicles.
|
(b)
|
For the 19 markets
we track in Europe as defined in "Item 1. Business" of our
2008 Form 10-K Report.
|
(c)
|
At
constant volume, mix and exchange; excluding special
items.
|
(d)
|
Compared
with full-year 2008 share of retail market of about 12%; first quarter
2009 results are a preliminary estimate.
|
(e)
|
See
"Liquidity and Capital Resources" above for reconciliation to U.S.
GAAP.
|
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Consistent with our current planning
assumptions, we expect Automotive operating-related cash flow to improve
sequentially in each quarter of 2009, with full-year operating-related cash flow
being negative but significantly improved from 2008.
Subject
to Ford Credit's funding plan risks, described above under "Liquidity and
Capital Resources – Financial Services Sector – Ford Credit," at year-end 2009
Ford Credit anticipates managed receivables to be in the range of
$85 billion to $95 billion, compared with $106 billion at
March 31, 2009. The decrease, which primarily reflects
lower industry volumes and the transition of Jaguar, Land Rover, and Mazda
financing to other finance providers, will reduce Ford Credit's funding
requirements.
In the
first quarter of 2009, Ford Credit completed a cash tender offer for a portion
of the secured term loan under our Credit Agreement for an aggregate cost of
$1.1 billion (including transaction costs). The secured term loan
Ford Credit acquired was distributed to its parent, Ford Holdings, whereupon the
debt was forgiven. This non-cash distribution of about
$1.1 billion is consistent with Ford Credit's previously announced plans to
pay total distributions of about $2 billion
through 2010; Ford Credit will balance future distributions with the successful
execution of its funding plan.
Our current planning assumptions now
project U.S. industry sales volumes of about 12.5 million and
14.5 million units for 2010 and 2011, respectively, which is lower than
those reflected in our business plan submitted to Congress that was filed as an
exhibit to our Current Report on Form 8-K dated
December 1, 2008.
Based on
our current planning assumptions, and subject to the risks set forth under "Risk
Factors" below, we believe we are on track for total Company and Ford North
America pre-tax results and Automotive operating-related cash flow to be at or
above breakeven in 2011, excluding special items (such as expenses related to
our planned facility closures in 2011).
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. Forward-looking statements are based on expectations,
forecasts and assumptions by our management and involve a number of risks,
uncertainties, and other factors that could cause actual results to differ
materially from those stated, including, without limitation:
·
|
Continued
or worsening financial crisis;
|
·
|
Further
declines in industry sales volume, particularly in the United States or
Europe, due to financial crisis, deepening recessions, geo-political
events, or other factors;
|
·
|
Decline
in market share;
|
·
|
Continued
or increased price competition resulting from industry overcapacity,
currency fluctuations, or other
factors;
|
·
|
A
further increase in or acceleration of market shift away from sales of
trucks, SUVs, or other more profitable vehicles, particularly in the
United States;
|
·
|
A
return to elevated gasoline prices, as well as the potential for volatile
prices or reduced availability;
|
·
|
Lower-than-anticipated
market acceptance of new or existing
products;
|
·
|
Fluctuations
in foreign currency exchange rates, commodity prices, and interest
rates;
|
·
|
Adverse
effects from the bankruptcy, insolvency, or government-funded
restructuring of, change in ownership or control of, or alliances entered
into by a major competitor;
|
·
|
Restriction
on use of tax attributes from tax law "ownership
change";
|
·
|
Economic
distress of suppliers that may require us to provide financial support or
take other measures to ensure supplies of components or materials and
could increase our costs, affect our liquidity, or cause production
disruptions;
|
·
|
Single-source
supply of components or materials;
|
·
|
Labor
or other constraints on our ability to restructure our
business;
|
·
|
Work
stoppages at Ford or supplier facilities or other interruptions of
supplies;
|
·
|
Pension
and postretirement health care and life insurance liabilities impairing
our liquidity or financial
condition;
|
·
|
Inability
to implement the Retiree Health Care Settlement Agreement regarding UAW
hourly retiree health care;
|
·
|
Worse-than-assumed
economic and demographic experience for our postretirement benefit plans
(e.g., discount rates or investment
returns);
|
·
|
Discovery
of defects in vehicles resulting in delays in new model launches, recall
campaigns or increased warranty
costs;
|
·
|
Increased
safety, emissions, fuel economy, or other regulation resulting in higher
costs, cash expenditures, or sales
restrictions;
|
·
|
Unusual
or significant litigation or governmental investigations arising out of
alleged defects in our products or
otherwise;
|
·
|
A
change in our requirements for parts or materials subject to long-term
supply arrangements that commit us to purchase minimum or fixed quantities
of parts or materials, or to pay a minimum amount to the seller
("take-or-pay" contracts);
|
·
|
Adverse
effects on our results from a decrease in or cessation of government
incentives;
|
·
|
Adverse
effects on our operations resulting from certain geo-political or other
events;
|
·
|
Substantial
negative Automotive operating-related cash flows for the near- to
medium-term affecting our ability to meet our obligations, invest in our
business, or refinance our debt;
|
·
|
Substantial
levels of Automotive indebtedness adversely affecting our financial
condition or preventing us from fulfilling our debt obligations (which may
grow because we are able to incur substantially more debt, including
secured debt);
|
·
|
Failure
of financial institutions to fulfill commitments under committed credit
facilities;
|
·
|
Ford
Credit's need for substantial liquidity to finance its
business;
|
·
|
Inability
of Ford Credit to obtain competitive
funding;
|
·
|
Inability
of Ford Credit to access debt, securitization, or derivative markets
around the world at competitive rates or in sufficient amounts due to
additional credit rating downgrades, market volatility, market disruption,
or other factors;
|
·
|
A
prolonged disruption of the debt and securitization
markets;
|
·
|
Higher-than-expected
credit losses;
|
·
|
Increased
competition from banks or other financial institutions seeking to increase
their share of financing Ford
vehicles;
|
·
|
Collection
and servicing problems related to finance receivables and net investment
in operating leases;
|
·
|
Lower-than-anticipated
residual values or higher-than-expected return volumes for leased
vehicles;
|
·
|
New
or increased credit, consumer, data protection, or other regulation
resulting in greater costs or financing
restrictions;
|
·
|
Inability
to implement our plans to further reduce structural costs and increase
liquidity.
|
We cannot
be certain that any expectation, forecast or assumption made by management in
preparing forward-looking statements will prove accurate, or that any projection
will be realized. It is to be expected that there may be differences
between projected and actual results. Our forward-looking statements
speak only as of the date of their initial issuance, and we do not undertake any
obligation to update or revise publicly any forward-looking statement, whether
as a result of new information, future events or otherwise. For
additional discussion of these risks, see "Item 1A. Risk Factors" in our
2008 Form 10-K Report, and "Item 1A. Risk Factors" below.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
CRITICAL
ACCOUNTING ESTIMATES
Based on
events occurring subsequent to December 31, 2008, we are updating certain of the
Critical Accounting Estimates disclosed in our 2008 Form 10-K
Report.
Impairments
of Goodwill and Long-Lived Assets
Nature of Estimates Required –
Held-for-Sale Operations. We perform an impairment test on an
asset group to be discontinued, held for sale, or otherwise disposed of when
management has committed to the action and the action is expected to be
completed within one year. We estimate fair value to approximate the
expected proceeds to be received, less transaction costs, and compare it to the
carrying value of the asset group. An impairment charge is recognized
when the carrying value exceeds the estimated fair value.
Assumptions and Approach
Used. In the fourth quarter of 2008, we performed annual
goodwill impairment testing for our Volvo reporting unit. We compared
the carrying value of our Volvo reporting unit to its fair value, and concluded
that the goodwill was not impaired. We performed this measurement
relying primarily on the income approach, applying a discounted cash flow
methodology. Our valuation was based on an in-use premise which
considered a discount rate, after-tax return on sales rate, growth rate, and
terminal value consistent with assumptions we believed principal market
participants (i.e., other global automotive manufacturers) would
use. This methodology produced appropriate valuations for entities we
disposed of in recent years; in light of worsening economic conditions, however,
we also considered other valuations, including a discounted cash flow analysis
using more conservative assumptions than we initially used. This
alternative analysis incorporated a significantly higher discount rate, offset
partially by a higher growth rate; a much lower after-tax return on sales rate;
and a lower terminal value. This alternative analysis reduced the
valuation of our Volvo reporting unit by about 50 percent. Even this
more conservative analysis, however, did not support an impairment of Volvo
goodwill at year-end.
As
previously disclosed, in recent years we have undertaken efforts to divest
non-core assets in order to allow us to focus exclusively on our global Ford
brand. Toward that end, in 2007 we sold our interest in Aston Martin;
in 2008, we sold our interest in Jaguar Land Rover, and a significant portion of
our ownership in Mazda. During the first quarter of 2009, based on
our strategic review of Volvo and in light of our goal to focus on the global
Ford brand, our Board of Directors committed to actively market Volvo for sale,
notwithstanding the current distressed market for automotive-related
assets. Accordingly, in the first quarter of 2009 we reported Volvo
as held for sale and we are ceasing depreciation of its long-lived assets in the
second quarter of 2009.
Our
commitment to actively market Volvo for sale also triggered a held-for-sale
impairment test in the first quarter of 2009. We received information
from our discussions with potential buyers that provided us a value for Volvo
using a market approach, rather than an income approach. We concluded
that the information we received from our discussions with potential buyers was
more representative of the value of Volvo given the current market conditions,
the characteristics of viable market participants, and our anticipation of a
more immediate transaction for Volvo. These inputs resulted in a
lower value for Volvo than the discounted cash flow method we had previously
used.
After
considering deferred gains reported in Accumulated other comprehensive
income/(loss), we recognized a pre-tax impairment charge of
$650 million related to our total investment in Volvo. The impairment was
recorded in Automotive cost of
sales for the first quarter of 2009.
Had we
not committed to actively market Volvo for sale, we would not have been afforded
the benefit of the new information obtained in discussions with potential
buyers. Rather, we would have continued to employ an in-use premise
to test Volvo's goodwill and long-lived assets, using a discounted cash flow
methodology with assumptions similar to those we used at year-end
2008. Such a discounted cash flow methodology would not have resulted
in an impairment of goodwill or long-lived assets at March 31,
2009.
Valuation
of Deferred Tax Assets
Nature of Estimates
Required. Deferred tax assets and liabilities are recognized
based on the future tax consequences attributable to temporary differences that
exist between the financial statement carrying value of assets and liabilities
and their respective tax bases, and operating loss and tax credit carryforwards
on a taxing jurisdiction basis. We measure deferred tax assets and
liabilities using enacted tax rates that will apply in the years in which we
expect the temporary differences to be recovered or paid.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Statement
of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes
("SFAS No. 109") requires a reduction of the carrying amounts of
deferred tax assets by recording a valuation allowance if, based on the
available evidence, it is more likely than not (defined by SFAS No. 109 as
a likelihood of more than 50%) such assets will not be realized. The
valuation of deferred tax assets requires judgment in assessing the likely
future tax consequences of events that have been recognized in our financial
statements or tax returns and future profitability. Our accounting
for deferred tax consequences represents our best estimate of those future
events. Changes in our current estimates, due to unanticipated events
or otherwise, could have a material impact on our financial condition and
results of operations.
Assumptions and Approach
Used. In assessing the need for a valuation allowance, we
consider both positive and negative evidence related to the likelihood of
realization of the deferred tax assets. If, based on the weight of
available evidence, it is more likely than not the deferred tax assets will not
be realized, we record a valuation allowance. The weight given to the
positive and negative evidence is commensurate with the extent to which the
evidence may be objectively verified. As such, it is generally
difficult for positive evidence regarding projected future taxable income
exclusive of reversing taxable temporary differences to outweigh objective
negative evidence of recent financial reporting losses. SFAS No. 109
states that a cumulative loss in recent years is a significant piece of negative
evidence that is difficult to overcome in determining that a valuation allowance
is not needed against deferred tax assets.
This
assessment, which is completed on a taxing jurisdiction basis, takes into
account a number of types of evidence, including the following:
|
·
|
Nature, frequency, and
severity of current and cumulative financial reporting
losses. A pattern of objectively measured recent
financial reporting losses is heavily weighted as a source of negative
evidence. In certain circumstances, historical information may
not be as relevant due to changed
circumstances;
|
|
·
|
Sources of future taxable
income. Future reversals of existing temporary differences are
heavily-weighted sources of objectively verifiable positive
evidence. Projections of future taxable income exclusive of
reversing temporary differences are a source of positive evidence only
when the projections are combined with a history of recent profits and can
be reasonably estimated. Otherwise, these projections are
considered inherently subjective and generally will not be sufficient to
overcome negative evidence that includes relevant cumulative losses in
recent years, particularly if the projected future taxable income is
dependent on an anticipated turnaround to profitability that has not yet
been achieved. In such cases, we generally give these
projections of future taxable income no weight for the purposes of our
valuation allowance assessment pursuant to SFAS No. 109;
and
|
|
·
|
Tax planning strategies.
If necessary and available, tax planning strategies would be
implemented to accelerate taxable amounts to utilize expiring
carryforwards. These strategies would be a source of additional
positive evidence and, depending on their nature, could be heavily
weighted.
|
See
Note 19 of the Notes to the Financial Statements in our 2008 Form 10-K
Report for more information regarding deferred tax assets.
Sensitivity
Analysis. In 2006, our net deferred tax position in the United
States changed from a net deferred tax liability position to a net deferred tax
asset position. In our assessment of the need for a valuation
allowance, and as required by SFAS No. 109, we heavily weighted the
negative evidence of cumulative financial reporting losses in recent periods and
the positive evidence of future reversals of existing temporary
differences. Although a sizable portion of our North American losses
in recent years were the result of charges incurred for restructuring actions,
impairments, and other special items, even without these charges we still would
have incurred significant operating losses. Accordingly, we
considered our pattern of recent losses to be relevant to our
analysis. Considering this pattern of recent relevant losses and the
uncertainties associated with projected future taxable income exclusive of
reversing temporary differences, we gave no weight to projections showing future
U.S. taxable income for purposes of assessing the need for a valuation
allowance. As a result of our assessment, we concluded that the net
deferred tax assets of our U.S. entities required a full valuation
allowance. We also recorded a full valuation allowance on the net
deferred tax assets of certain foreign entities, such as Germany, Canada, and
Spain, as the realization of these foreign deferred tax assets are reliant upon
U.S.-source taxable income.
At
December 31, 2006, we reported a $7.2 billion valuation allowance against
our deferred tax assets (including $2.7 billion resulting from the adoption
of SFAS No. 158, Employers'
Accounting for Defined Benefit Pension and Other Postretirement Plans – an
amendment of FASB Statements No. 87, 88, 106, and 132(R)
("SFAS No. 158")). During 2007, we recorded an
additional valuation allowance of $1.4 billion (including about
$700 million resulting from the adoption of Interpretation No. 48,
Accounting for Uncertainty in
Income Taxes – an interpretation of FASB Statement No. 109
("FIN 48")). Taxable losses during 2008, primarily in the
United States, increased the valuation allowance by $9.3 billion to a
balance of $17.8 billion at December 31, 2008. Upon
adoption of FSP APB 14-1, the December 31, 2008 valuation allowance was reduced
by about $600 million to $17.2 billion. Taxable losses during the first
quarter of 2009, primarily in the United States, increased the valuation
allowance by about $400 million to a balance of $17.6 billion at March 31,
2009.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
A return
to profitability in our North America operations would result in a reversal of a
portion of the valuation allowance relating to realized deferred tax assets, but
we may not change our judgment of the need for a full valuation allowance on our
remaining deferred tax assets. A sustained period of North America
profitability could cause a change in our judgment about the realizability of
the remaining deferred tax assets. In that case, it is likely that we
would reverse some or all of the remaining deferred tax asset valuation
allowance. As discussed above, however, we have heavily weighted the
objectively-measured recent financial reporting losses and, for these purposes,
given no weight to subjectively determined projections of future taxable income
exclusive of reversing temporary differences, and concluded as of March
31, 2009 that it is more likely than not such deferred tax assets will not
be realized (in whole or in part), and accordingly, we have recorded a full
valuation allowance against the net deferred tax assets.
At March
31, 2009 and December 31, 2008 our net deferred tax assets, net of the valuation
allowances of $17.6 billion and $17.2 billion, respectively, were
$1.1 billion in each period. Unlike our U.S. operations where,
considering the pattern of recent relevant losses and the uncertainties
associated with projected future taxable income exclusive of reversing temporary
differences, we gave no weight to projections showing future taxable income,
these net deferred tax assets relate to certain operations outside North America
where we generally have had a long history of profitability and believe it is
more likely than not that the net deferred tax assets will be realized through
future taxable earnings. Accordingly, we have not established a
valuation allowance on our remaining net deferred tax assets. Most
notably, at March 31, 2009 and December 31, 2008, we continued to recognize a
net deferred tax asset of $1.4 billion in our U.K. Automotive operations,
primarily based upon the tax return consolidation of our Automotive operations
with our U.K. FCE operation. Our U.K. FCE operation has a long
history of profitability, and we believe it will provide a source of future
taxable income that can be reasonably estimated. As discussed in
"Results of Operations" above, even with lower volumes and higher credit losses
in the recent past, Ford Credit's international operations remain
profitable. If, in the future, we are not able to consolidate FCE
profits in the United Kingdom, additional valuation allowances may be
required. We will continue to assess the need for a valuation
allowance in the future.
ACCOUNTING
STANDARDS ISSUED BUT NOT YET ADOPTED
In April
2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly ("FSP FAS
157-4"). The
FSP provides further guidance for estimating fair value in accordance with FASB
Statement No. 157, Fair Value
Measurements, when there has been a significant decrease in market
activity for a financial asset, and also identifies circumstances that indicate
a transaction is not orderly. This FSP is effective for interim and
annual reporting periods ending after June 15, 2009, and is applied
prospectively and early adoption is permitted. We will be adopting
the FSP for the quarter ending June 30, 2009. We are
assessing the potential impact of this FSP on our financial condition and
results of operations.
In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments ("FSP FAS 115-2 and FAS
124-2"). The FSP amends the other-than-temporary impairment guidance
in U.S. GAAP for debt securities to make the guidance more operational and to
improve the presentation and disclosure of other-than-temporary impairments on
debt and equity securities in the financial statements. This FSP does
not amend existing recognition and measurement guidance related to
other-than-temporary impairments of equity securities. FSP FAS 115-2
and FAS 124-2 is effective for interim and annual reporting periods ending after
June 15, 2009, and early adoption is permitted. We will be
adopting the FSP for the quarter ending
June 30, 2009. Presently, we do not expect FSP FAS 115-2
and FAS 124-2 to impact our financial condition, results of operations, or
financial statement disclosures.
In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments ("FSP FAS 107-1 and APB 28-1"). The
FSP amends FASB Statement No. 107, Disclosures about Fair Value of
Financial Instruments, to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This FSP also amends APB
Opinion No. 28, Interim
Financial Reporting, to require disclosures in summarized financial
information at interim reporting periods. FSP FAS 107-1 and APB 28-1
is effective for interim and annual reporting periods ending after
June 15, 2009, and early adoption is permitted. We will be
adopting the FSP for the quarter ending June 30, 2009. FSP
FAS 107-1 and APB 28-1 requires fair value disclosures for interim reporting
periods and will have no impact on our financial condition and results of
operations.
We have
not yet adopted FSP FAS 132(R)-1, Employer's Disclosures about
Postretirement Benefit Plan Assets. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our
2008 Form 10-K Report for further discussion.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
OTHER
FINANCIAL INFORMATION
The
interim financial information included in this Quarterly Report on Form 10-Q for
the periods ended March 31, 2009 and 2008 has not been audited by
PricewaterhouseCoopers LLP ("PricewaterhouseCoopers"). In reviewing
such information, PricewaterhouseCoopers has applied limited procedures in
accordance with professional standards for reviews of interim financial
information. Readers should restrict reliance on
PricewaterhouseCoopers' reports on such information
accordingly. PricewaterhouseCoopers is not subject to the liability
provisions of Section 11 of the Securities Act of 1933 for its reports on
interim financial information, because such reports do not constitute "reports"
or "parts" of the registration statements prepared or certified by
PricewaterhouseCoopers within the meaning of Sections 7 and 11 of the Securities
Act of 1933.
ITEM
3. Quantitative and
Qualitative Disclosures About Market Risk.
Automotive
Sector
Foreign Currency
Risk. The net fair value of foreign exchange forward and
option contracts at March 31, 2009 was a liability of approximately
$61 million compared to a net fair value asset of $249 million at
December 31, 2008. The potential decrease in fair value of
foreign exchange forward and option contracts, assuming a 10% adverse change in
the underlying foreign currency exchange rates, would be approximately
$650 million at March, 31 2009 and was $600 million at
December 31, 2008.
The
global credit crisis and the deterioration of our credit ratings have
significantly reduced our ability to obtain derivatives to manage market
risks. Although we are evaluating alternatives to improve capacity,
which may include bilateral collateral agreements, currently we are not able to
hedge certain currency exposures from cross-border intercompany
lending. At March 31, 2009, about $194 million of
intercompany loans that we might otherwise have hedged remained unhedged,
substantially all of which were denominated in British
pound. Consequently, strengthening of the British pound would have an
adverse effect on our financial condition and results of
operations.
Commodity Price
Risk. The net fair value of commodity forward and option
contracts at March 31, 2009 was a liability of $162 million,
compared to a liability of $212 million at
December 31, 2008. The potential decrease in fair value of
commodity forward and option contracts, assuming a 10% decrease in the
underlying commodity prices, would be approximately $24 million at
March 31, 2009, compared with a decrease of $26 million at
December 31, 2008.
Financial
Services Sector
Foreign Currency
Risk. Ford Credit's ability to obtain foreign currency
derivatives continued to deteriorate in the first quarter of 2009 and as a
result, Ford Credit was not able to fully hedge its currency exposure from
cross-border intercompany lending. At March 31, 2009, about
$1.5 billion of intercompany loans were unhedged, substantially all of
which were denominated in Canadian dollars. Consequently, substantial
weakening of the Canadian dollar could have an adverse effect on Ford Credit's
financial condition and results of operations. Ford Credit's ability
to hedge currency exposure will improve as it develops and implements alternate
hedging structures. Overall currency exposure will reduce as Ford
Credit continues to work on funding its operations locally and explore
alternative business arrangements and divestitures in markets where local
funding is not available.
Interest Rate
Risk. To provide a quantitative measure of the sensitivity of
Ford Credit's pre-tax cash flow to changes in interest rates, Ford Credit uses
interest rate scenarios that assume a hypothetical, instantaneous increase or
decrease in interest rates of 100 basis points (or 1%) across all maturities, as
well as a base case that assumes that interest rates remain constant at existing
levels. These interest rate scenarios are purely hypothetical and do
not represent Ford Credit's view of future interest rate
movements. The differences in pre-tax cash flow between these
scenarios and the base case over a twelve-month period represent an estimate of
the sensitivity of Ford Credit's pre-tax cash flow. Under this model,
Ford Credit estimates that at March 31, 2009, all else constant, such
an increase in interest rates would reduce Ford Credit's pre-tax cash flow by
$11 million over the next twelve months, compared with $28 million at
December 31, 2008. The sensitivity analysis presented above
assumes a one-percentage point interest rate change to the yield curve that is
both instantaneous and parallel. In reality, interest rate changes
are rarely instantaneous or parallel and rates could move more or less than the
one percentage point assumed in Ford Credit's analysis. As a result,
the actual impact to pre-tax cash flow could be higher or lower than the results
detailed above.
ITEM
4. Controls and
Procedures.
Evaluation of Disclosure Controls
and Procedures. Alan Mulally, our Chief Executive Officer
("CEO"), and Lewis Booth, our Chief Financial Officer ("CFO"), have performed an
evaluation of the Company’s disclosure controls and procedures, as that term is
defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended
(“Exchange Act”), as of March 31, 2009, 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 SEC rules and forms, and that such information is accumulated and
communicated to the CEO and CFO to allow timely decisions regarding required
disclosures.
Changes in Internal Control over
Financial Reporting. We had the following changes in business processes
or practices during the quarter that resulted in or likely will result in
significant changes in our internal control over financial
reporting:
Automotive Components Holdings, LLC
("ACH"). Since its inception in 2005, ACH has purchased
certain information technology, finance, accounting, and other commercial
services from Visteon Corporation. During the first quarter of 2009,
we began migrating the remaining services in-house.
Volvo Held-for-Sale
Status. Also during the first quarter of 2009, we began
restructuring Volvo, including changes to legal entity structures and the
separation of other business processes and systems shared by Ford and Volvo, in
preparation for the likely sale of Volvo.
PART
II. OTHER INFORMATION
ITEM
1. Legal
Proceedings.
Class
Actions
Canadian Export Antitrust Class
Actions (previously reported on p. 34 of our 2008 Form 10-K
Report). As previously reported, purported class actions on
behalf of all purchasers of new motor vehicles in the United States since
January 1, 2001 have been filed in various state and federal courts
against numerous defendants alleging, among other things, that the vehicle
manufacturers, aided by dealer associations, conspired to prevent the sale to
U.S. citizens of vehicles produced for the Canadian market and sold by dealers
in Canada at lower prices than vehicles sold in the United States. On
April 23, 2009, the state court judge presiding over the purported
class action in California ruled from the bench that he would certify a class of
all California purchasers of motor vehicles; we intend to appeal this
ruling.
Environmental
Matters
Edison Assembly Plant Concrete
Disposal (previously reported on p. 34 of our 2008 Form 10-K
Report). As previously reported, during demolition of our
Edison Assembly Plant we discovered very low levels of contaminants in the
concrete slab. The concrete was crushed and reused by several
developers as fill material at ten different off-site locations. The
New Jersey Department of Environmental Protection ("DEP") asserted that some of
these locations may not have been authorized to receive the waste. In
March 2006, the DEP ordered Ford, its supplier MIG-Alberici, Inc., and the
developer Edgewood Properties, Inc. ("Edgewood"), to investigate, and, if
appropriate, remove contaminated materials. We have substantially
completed the work at a number of locations, and Edgewood is completing the
investigation and remediation at several locations that it owns. We
have resolved the matter with DEP through an administrative consent order
("Order"), pursuant to which we paid approximately $460,000 for oversight costs,
penalties, and environmental education projects and donated emissions reduction
credits to the State of New Jersey. After reviewing comments
submitted by Edgewood, the DEP finalized the Order in February
2009. Edgewood has appealed issuance of the Order to the Appellate
Division of the New Jersey Superior Court. Separately, the New Jersey
Attorney General's office has closed its investigation of us.
Sterling Axle Plant (previously
reported on p. 34 of our 2008 Form 10-K Report). As
previously reported, the Michigan Department of Environmental Quality ("MDEQ")
issued four Letters of Violation to the Sterling Axle Plant between
April 17, 2008 and October 7, 2008, and has commenced a
civil administrative enforcement proceeding against the Company. The
Letters of Violation arise from the plant's disclosure of several potential
violations of its air permits. We have agreed to resolve the enforcement
proceeding through a civil administrative settlement with the
MDEQ. The settlement includes a penalty of $129,920. We also
recently learned that the U.S. Environmental Protection Agency ("EPA") and the
U.S. Department of Justice have opened a criminal investigation into the
potential violations. We are cooperating fully in the
investigation.
Item
1. Legal Proceedings (Continued)
Tax
Matters
Government Transfer Pricing
Dispute. As discussed in Note 9 of the Notes to the Financial
Statements, the U.S. and Canadian governments are progressing with terms of a
negotiated settlement of our transfer pricing methodologies, covering a number
of years. While the terms of the negotiated settlement are still
pending, we are not anticipating audit adjustments that would result in any cash
payments by us.
ITEM
1A. Risk
Factors.
In
addition to the risk factors applicable to us that are disclosed in
"Item 1A. Risk Factors" of our 2008 Form 10-K Report, we have
identified the following changes to the reported risks:
Inability of Ford
Credit to obtain competitive funding. As disclosed in "Item
1A. Risk Factors" of our 2008 Form 10-K Report, Ford Credit is pursuing an
industrial bank charter from the State of Utah that would provide it with a
limited amount of relatively low-cost funding. Other institutions that
provide automotive financing to certain of our competitors have access to
relatively low-cost government-insured or other funding. For example,
GMAC LLC ("GMAC") is a bank holding company that provides financing to
General Motors Corporation's dealers and their customers. Bank holding
company status and ownership changes planned by GMAC may over time give
GMAC access to additional government-insured deposit funding, as well as
access to other lower cost funding sources. Recently, GMAC reported
that it had entered into a term sheet pursuant to which it also would provide
financing to Chrysler LLC's dealers and their customers based on additional
support from government sources. Access by our competitors' dealer
networks to financing provided by financial institutions with relatively
low-cost funding, such as GMAC, that is not available to Ford Credit could
adversely affect Ford Credit's ability to support the sale of Ford vehicles at
competitive cost and rates. This in turn would adversely affect
the marketability of Ford vehicles in comparison to certain competitive
brands.
Restriction on
use of tax attributes from tax law "ownership change." As
disclosed in "Item 1A. Risk Factors" of our 2008 Form 10-K Report, we face
the risk that our ability to use our tax attributes, such as net operating
losses and tax credits ("Tax Attributes"), will be substantially restricted if
we undergo an "ownership change" as defined in Section 382 of the U.S. Internal
Revenue Code ("Section 382"). At December 31, 2008, we
had Tax Attributes that would offset $19 billion of taxable
income. An ownership change under Section 382 would occur if
"5-percent shareholders" within the meaning of Section 382 collectively
increased their ownership in Ford by more than fifty percentage points over
a rolling three-year period. The exchange offer we completed on
April 8, 2009 for $4.3 billion principal amount of our
Convertible Notes, discussed above, contributed significantly to the collective
increase in ownership by such holders. At present, 5-percent
shareholders may have collectively increased their ownership in Ford by more
than 25 percentage points. Also, any shares of Common Stock we
issue to the New VEBA in settlement of our payment obligations under Note B, as
discussed above, would contribute significantly to the collective increase in
ownership by 5-percent shareholders. We may consider actions in the
future to reduce the risk of an ownership change under Section 382, and
such actions may have the effect of causing significant dilution to the
ownership interest of any person or group of persons defined with reference to
Section 382 and the rules thereunder, that were to acquire 4.99% or more of the
outstanding shares of Ford Common Stock. A person or group will be
considered to have acquired 4.99% of Ford stock only if such person or group is
the beneficial owner. For example, an investment manager that becomes
the legal titleholder to 4.99% of Ford stock might not be considered to have
acquired 4.99% within Section 382 if the manager holds such shares on behalf of
several mutual funds, pension plans or other groups of
investors.
ITEM
2. Unregistered
Sales of Equity Securities and Use of Proceeds.
During
the first quarter of 2009, we purchased shares of Ford Common Stock as
follows:
|
|
Total
Number
of
Shares
Purchased*
|
|
|
Average
Price
Paid
per
Share
|
|
|
Total
Number of
Shares
Purchased
as
Part of Publicly-
Announced
Plans
or
Programs
|
|
|
Maximum
Number
(or
Approximate Dollar Value)
of
Shares that May Yet Be
Purchased
Under the
Plans
or Programs
|
|
January
1, 2009 through January 31, 2009
|
|
|
— |
|
|
$ |
— |
|
|
|
0 |
|
|
|
** |
|
February
1, 2009 through February 28, 2009
|
|
|
53,741 |
|
|
|
1.76 |
|
|
|
0 |
|
|
|
** |
|
March
1, 2009 through March 31, 2009
|
|
|
10,334 |
|
|
|
2.63 |
|
|
|
0 |
|
|
|
** |
|
Total/Average
|
|
|
64,075 |
|
|
|
1.90 |
|
|
|
0 |
|
|
|
** |
|
*
|
We
presently have no publicly-announced repurchase program in
place. Shares were acquired from our employees or directors in
accordance with our various compensation plans as a result of share
withholdings to pay income taxes with respect to: (i) the lapse
of restrictions on restricted
stock, (ii) the issuance of unrestricted stock, or (iii) to
pay the exercise price and related income taxes with respect to certain
exercises of stock options.
|
**
|
No
publicly-announced repurchase program in
place.
|
ITEM
5. Other
Information.
Governmental
Standards
Mobile Source Emissions
Control. As previously reported in our 2008 Form 10-K Report,
the Engine Manufacturers Association ("EMA"), of which we are a member, has
successfully challenged regulations issued by the California Air Resources Board
("CARB") regarding warranty reporting and field actions. Although
CARB did not appeal the ruling, an aftermarket trade association has appealed
one aspect of the ruling (specifically, the finding that CARB has authority to
order extended warranties as an alternative to motor vehicle
recalls). No timetable has been set for the appellate
process.
Motor Vehicle Fuel
Economy. The EPA has received public comments in connection
with reconsideration of its previous denial of a Clean Air Act ("CAA") waiver
for California's motor vehicle greenhouse gas ("GHG")
regulations. Congress has directed the EPA to make a decision on the
waiver reconsideration by June 30, 2009. Meanwhile, litigation over
the prior waiver decision has been suspended pending the outcome of the
reconsideration process.
In April 2009, the EPA published a
proposed rule regarding mandatory reporting requirements for GHG
emissions. The rule would apply to both mobile and stationary
sources; the first annual report would be due in 2011 for the 2010 calendar
year. Comments on the proposed rule are due in June 2009; the
Alliance of Automobile Manufacturers, of which we are a member, plans to file
comments.
The EPA also issued a proposed finding
under the CAA that six GHGs (including carbon dioxide) endanger the public
health and welfare. The EPA also proposed to determine that motor
vehicle emissions contribute to GHG pollution. If and when these
proposed findings are finalized, such findings would allow the EPA to proceed
with rulemaking under the CAA to establish GHG emission standards for motor
vehicles. As disclosed previously, this would be functionally
equivalent to imposing fuel economy standards because the amount of carbon
dioxide emitted by a vehicle is directly proportional to the amount of fuel
consumed. Such an endangerment finding also would be likely to have
far-reaching impacts beyond mobile source emissions, as this finding would also
trigger a number of stationary source regulatory provisions under the
CAA. Comments on the proposed findings are due in June
2009.
In March 2009, the U.S. Court of
Appeals for the Second Circuit heard oral argument in the appeal of the Vermont
District Court's ruling that Vermont's state GHG standards are not preempted by
the federal Corporate Average Fuel Economy ("CAFE") law. The Court of
Appeals has not yet issued a ruling on this appeal.
Also in March 2009, the National
Highway Transportation Safety Administration ("NHTSA") issued final CAFE
standards for the 2011 model year. NHTSA also issued a request to
each automobile manufacturer for information about its future product plans, to
assist NHTSA in developing CAFE standards beyond 2011. The Obama
Administration has indicated that NHTSA is likely to issue a regulation in March
2010 setting CAFE standards for multiple model years, beginning with the 2012
model year.
Item
5. Other Information (Continued)
The
recent developments with respect to anticipated new CAFE standards, potential
EPA GHG standards for motor vehicles, and state-level attempts to impose GHG
standards on automobiles pose very significant concerns for us. These
regulatory initiatives have the potential to impose three different competing
and conflicting regimes of fuel economy standards. Compliance with
all three, or even two, of these regimes would at best add enormous complexity
to our planning processes, and at worst be virtually impossible. The
CAFE standards proposed by NHTSA in 2008 represented a significant challenge in
and of themselves, but if NHTSA builds upon its history of setting tough but
reasonable CAFE standards based on a consideration of technological feasibility
and economic practicability, we believe it is likely that the new federal CAFE
standards can be workable, albeit costly, within our business
limitations. It is highly questionable whether we could accommodate
an additional layer of GHG regulations imposed by EPA under the CAA, which has a
much more onerous certification and enforcement regime than the CAFE
law. Finally, California's AB 1493 rules seek to impose stringent,
state-specific requirements that are not workable within our current business
limitations.
If any one of these regulatory regimes,
or a combination of them, impose and enforce extreme fuel economy or GHG
standards, we likely would be forced to take various actions that could have
substantial adverse effects on our sales volume and profits. Such
actions likely would include restricting offerings of selected engines and
popular options; increasing market support programs for our most fuel-efficient
cars and light trucks in order to maintain compliance; and ultimately curtailing
the production and sale of certain vehicles such as family-size, luxury, and
high-performance cars, SUVs and "crossover" vehicles, and full-size light
trucks, in order to maintain compliance. These actions might need to
occur on a state-by-state basis, in response to the AB 1493 rules, or they may
need to be taken at the national level if either the CAFE standards or the EPA
GHG standards are excessively stringent. We believe it is critical
that policymakers work toward a single, nationwide set of fuel economy/GHG
standards that achieve desired levels of fuel economy improvement and GHG
reductions in a workable fashion.
Motor Vehicle
Safety. In April 2009, NHTSA issued the final regulation
modifying the roof strength requirements of Federal Motor Vehicle Safety
Standard 216, which will come into force between 2012 and 2017. The
revised standard significantly increases the stringency of roof-strength testing
and applies testing to heavier vehicles, including trucks under 10,000 pounds,
that previously were not subject to roof strength
regulations. Compliance with the new standard could be
costly.
ITEM
6. Exhibits.
Please see exhibit index
below.
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.
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FORD
MOTOR COMPANY
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(Registrant)
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Date:
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May 8, 2009
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By:
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/s/
Peter J. Daniel
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Peter
J. Daniel
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Senior
Vice President and
Controller
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EXHIBIT
INDEX
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Agreement
in Principle between Ford Motor Company and United Auto Workers union to
modify the Retiree Health Care Settlement Agreement
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Filed
with this Report*
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Employment
Arrangement dated as of October 3, 2007 between Ford Motor
Company and James Farley
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Filed
with this Report*
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Employment
Arrangement Amendment dated as of December 31, 2008 between Ford
Motor Company and James Farley
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Filed
with this Report*
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Employment
Arrangement dated as of March 22, 2005 between Ford Motor
Company and David Leitch
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Filed
with this Report*
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Employment
Arrangement Amendment dated as of January 1, 2009 between Ford
Motor Company and David Leitch
|
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Filed
with this Report*
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Ford
Motor Company and Subsidiaries Calculation of Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends
|
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Filed
with this Report
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Letter
of PricewaterhouseCoopers LLP, Independent Registered Public Accounting
Firm, dated May 8, 2009 relating to Financial
Information
|
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Filed
with this Report
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Rule
15d-14(a) Certification of CEO
|
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Filed
with this Report
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Rule
15d-14(a) Certification of CFO
|
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Filed
with this Report
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Section
1350 Certification of CEO
|
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Furnished
with this Report
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Section
1350 Certification of CFO
|
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Furnished
with this Report
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* Management
contract or compensatory plan or arrangement.