form10q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
T
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
the quarterly period ended September 30,
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.
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 T
|
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).
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).
As of
October 29, 2009, the registrant had outstanding 3,236,248,800 shares of Common Stock
and 70,852,076 shares of Class B Stock.
Exhibit
index located on page number 83.
PART I.
FINANCIAL INFORMATION
ITEM
1. Financial
Statements.
FORD
MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF OPERATIONS
For
the Periods Ended September 30, 2009 and
2008
(in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Sales
and revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive
sales
|
|
$ |
27,870 |
|
|
$ |
27,733 |
|
|
$ |
73,227 |
|
|
$ |
103,907 |
|
Financial
Services revenues
|
|
|
3,022 |
|
|
|
4,013 |
|
|
|
9,632 |
|
|
|
12,233 |
|
Total
sales and revenues
|
|
|
30,892 |
|
|
|
31,746 |
|
|
|
82,859 |
|
|
|
116,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive
cost of sales
|
|
|
25,176 |
|
|
|
25,001 |
|
|
|
70,284 |
|
|
|
100,451 |
|
Selling,
administrative and other expenses
|
|
|
3,076 |
|
|
|
4,575 |
|
|
|
9,968 |
|
|
|
16,974 |
|
Interest
expense
|
|
|
1,623 |
|
|
|
2,413 |
|
|
|
5,245 |
|
|
|
7,430 |
|
Financial
Services provision for credit and insurance losses
|
|
|
125 |
|
|
|
399 |
|
|
|
946 |
|
|
|
1,341 |
|
Total
costs and expenses
|
|
|
30,000 |
|
|
|
32,388 |
|
|
|
86,443 |
|
|
|
126,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive
interest income and other non-operating income/(expense), net (Note
9)
|
|
|
151 |
|
|
|
(244 |
) |
|
|
5,146 |
|
|
|
(344 |
) |
Financial
Services other income/(loss), net (Note 9)
|
|
|
131 |
|
|
|
300 |
|
|
|
431 |
|
|
|
935 |
|
Equity
in net income/(loss) of affiliated companies
|
|
|
41 |
|
|
|
13 |
|
|
|
(27 |
) |
|
|
119 |
|
Income/(Loss)
before income taxes
|
|
|
1,215 |
|
|
|
(573 |
) |
|
|
1,966 |
|
|
|
(9,346 |
) |
Provision
for/(Benefit from) income taxes
|
|
|
139 |
|
|
|
(463 |
) |
|
|
(40 |
) |
|
|
(811 |
) |
Income/(Loss)
from continuing operations
|
|
|
1,076 |
|
|
|
(110 |
) |
|
|
2,006 |
|
|
|
(8,535 |
) |
Income/(Loss)
from discontinued operations (Note 12)
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
|
|
9 |
|
Net
income/(loss)
|
|
|
1,076 |
|
|
|
(110 |
) |
|
|
2,011 |
|
|
|
(8,526 |
) |
Less:
Income/(Loss) attributable to noncontrolling interests
|
|
|
79 |
|
|
|
51 |
|
|
|
180 |
|
|
|
262 |
|
Net
income/(loss) attributable to Ford Motor Company
|
|
$ |
997 |
|
|
$ |
(161 |
) |
|
$ |
1,831 |
|
|
$ |
(8,788 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME/(LOSS) ATTRIBUTABLE TO FORD MOTOR COMPANY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
997 |
|
|
$ |
(161 |
) |
|
$ |
1,826 |
|
|
$ |
(8,797 |
) |
Income/(Loss)
from discontinued operations (Note 12)
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
|
|
9 |
|
Net
income/(loss)
|
|
$ |
997 |
|
|
$ |
(161 |
) |
|
$ |
1,831 |
|
|
$ |
(8,788 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMOUNTS
PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK
(Note 13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
income/(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
0.31 |
|
|
$ |
(0.07 |
) |
|
$ |
0.63 |
|
|
$ |
(3.94 |
) |
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net
income/(loss)
|
|
$ |
0.31 |
|
|
$ |
(0.07 |
) |
|
$ |
0.63 |
|
|
$ |
(3.94 |
) |
Diluted
income/(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
0.29 |
|
|
$ |
(0.07 |
) |
|
$ |
0.61 |
|
|
$ |
(3.94 |
) |
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net
income/(loss)
|
|
$ |
0.29 |
|
|
$ |
(0.07 |
) |
|
$ |
0.61 |
|
|
$ |
(3.94 |
) |
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 September 30, 2009 and
2008
(in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
AUTOMOTIVE
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ |
27,870 |
|
|
$ |
27,733 |
|
|
$ |
73,227 |
|
|
$ |
103,907 |
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
25,176 |
|
|
|
25,001 |
|
|
|
70,284 |
|
|
|
100,451 |
|
Selling,
administrative and other expenses
|
|
|
2,027 |
|
|
|
2,740 |
|
|
|
6,182 |
|
|
|
8,804 |
|
Total
costs and expenses
|
|
|
27,203 |
|
|
|
27,741 |
|
|
|
76,466 |
|
|
|
109,255 |
|
Operating
income/(loss)
|
|
|
667 |
|
|
|
(8 |
) |
|
|
(3,239 |
) |
|
|
(5,348 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
311 |
|
|
|
493 |
|
|
|
1,161 |
|
|
|
1,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income and other non-operating income/(expense), net (Note
9)
|
|
|
151 |
|
|
|
(244 |
) |
|
|
5,146 |
|
|
|
(344 |
) |
Equity
in net income/(loss) of affiliated companies
|
|
|
38 |
|
|
|
13 |
|
|
|
107 |
|
|
|
109 |
|
Income/(Loss)
before income taxes — Automotive
|
|
|
545 |
|
|
|
(732 |
) |
|
|
853 |
|
|
|
(7,149 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
SERVICES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
3,022 |
|
|
|
4,013 |
|
|
|
9,632 |
|
|
|
12,233 |
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
1,312 |
|
|
|
1,920 |
|
|
|
4,084 |
|
|
|
5,864 |
|
Depreciation
|
|
|
862 |
|
|
|
1,596 |
|
|
|
3,261 |
|
|
|
7,544 |
|
Operating
and other expenses
|
|
|
187 |
|
|
|
239 |
|
|
|
525 |
|
|
|
626 |
|
Provision
for credit and insurance losses
|
|
|
125 |
|
|
|
399 |
|
|
|
946 |
|
|
|
1,341 |
|
Total
costs and expenses
|
|
|
2,486 |
|
|
|
4,154 |
|
|
|
8,816 |
|
|
|
15,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income/(loss), net (Note 9)
|
|
|
131 |
|
|
|
300 |
|
|
|
431 |
|
|
|
935 |
|
Equity
in net income/(loss) of affiliated companies
|
|
|
3 |
|
|
|
— |
|
|
|
(134 |
) |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes — Financial Services
|
|
|
670 |
|
|
|
159 |
|
|
|
1,113 |
|
|
|
(2,197 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
COMPANY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
1,215 |
|
|
|
(573 |
) |
|
|
1,966 |
|
|
|
(9,346 |
) |
Provision
for/(Benefit from) income taxes
|
|
|
139 |
|
|
|
(463 |
) |
|
|
(40 |
) |
|
|
(811 |
) |
Income/(Loss)
from continuing operations
|
|
|
1,076 |
|
|
|
(110 |
) |
|
|
2,006 |
|
|
|
(8,535 |
) |
Income/(Loss)
from discontinued operations (Note 12)
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
|
|
9 |
|
Net
income/(loss)
|
|
|
1,076 |
|
|
|
(110 |
) |
|
|
2,011 |
|
|
|
(8,526 |
) |
Less:
Income/(Loss) attributable to noncontrolling interests
|
|
|
79 |
|
|
|
51 |
|
|
|
180 |
|
|
|
262 |
|
Net
income/(loss) attributable to Ford Motor Company
|
|
$ |
997 |
|
|
$ |
(161 |
) |
|
$ |
1,831 |
|
|
$ |
(8,788 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME/(LOSS) ATTRIBUTABLE TO FORD MOTOR COMPANY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
997 |
|
|
$ |
(161 |
) |
|
$ |
1,826 |
|
|
$ |
(8,797 |
) |
Income/(Loss)
from discontinued operations (Note 12)
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
|
|
9 |
|
Net
income/(loss)
|
|
$ |
997 |
|
|
$ |
(161 |
) |
|
$ |
1,831 |
|
|
$ |
(8,788 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMOUNTS
PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK
(Note 13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
income/(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
0.31 |
|
|
$ |
(0.07 |
) |
|
$ |
0.63 |
|
|
$ |
(3.94 |
) |
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net
income/(loss)
|
|
$ |
0.31 |
|
|
$ |
(0.07 |
) |
|
$ |
0.63 |
|
|
$ |
(3.94 |
) |
Diluted
income/(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
0.29 |
|
|
$ |
(0.07 |
) |
|
$ |
0.61 |
|
|
$ |
(3.94 |
) |
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net
income/(loss)
|
|
$ |
0.29 |
|
|
$ |
(0.07 |
) |
|
$ |
0.61 |
|
|
$ |
(3.94 |
) |
The
accompanying notes are part of the financial statements
Item
1. Financial Statements (Continued)
FORD
MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEET
(in
millions)
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
ASSETS
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
25,798 |
|
|
$ |
22,049 |
|
Marketable
securities
|
|
|
22,568 |
|
|
|
17,411 |
|
Finance
receivables, net (Note 2)
|
|
|
75,613 |
|
|
|
93,484 |
|
Other
receivables, net
|
|
|
7,296 |
|
|
|
5,674 |
|
Net
investment in operating leases
|
|
|
18,803 |
|
|
|
25,250 |
|
Inventories
(Note 3)
|
|
|
6,560 |
|
|
|
6,988 |
|
Equity
in net assets of affiliated companies
|
|
|
1,544 |
|
|
|
1,599 |
|
Net
property
|
|
|
24,812 |
|
|
|
24,143 |
|
Deferred
income taxes
|
|
|
3,664 |
|
|
|
3,108 |
|
Goodwill
and other net intangible assets (Note 5)
|
|
|
225 |
|
|
|
246 |
|
Assets
of held-for-sale operations (Note 12)
|
|
|
9,023 |
|
|
|
8,612 |
|
Other
assets
|
|
|
7,200 |
|
|
|
9,734 |
|
Total
assets
|
|
$ |
203,106 |
|
|
$ |
218,298 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Payables
|
|
$ |
15,209 |
|
|
$ |
13,145 |
|
Accrued
liabilities and deferred revenue
|
|
|
55,151 |
|
|
|
59,526 |
|
Debt
(Note 7)
|
|
|
132,017 |
|
|
|
152,577 |
|
Deferred
income taxes
|
|
|
2,644 |
|
|
|
2,035 |
|
Liabilities
of held-for-sale operations (Note 12)
|
|
|
5,355 |
|
|
|
5,542 |
|
Total
liabilities
|
|
|
210,376 |
|
|
|
232,825 |
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
Capital
stock
|
|
|
|
|
|
|
|
|
Common
Stock, par value $0.01 per share (3,244 million shares
issued)
|
|
|
32 |
|
|
|
23 |
|
Class
B Stock, par value $0.01 per share (71 million shares
issued)
|
|
|
1 |
|
|
|
1 |
|
Capital
in excess of par value of stock
|
|
|
14,698 |
|
|
|
10,875 |
|
Accumulated
other comprehensive income/(loss)
|
|
|
(8,704 |
) |
|
|
(10,085 |
) |
Treasury
stock
|
|
|
(178 |
) |
|
|
(181 |
) |
Retained
earnings/(Accumulated deficit)
|
|
|
(14,524 |
) |
|
|
(16,355 |
) |
Total
equity/(deficit) attributable to Ford Motor Company (Note
19)
|
|
|
(8,675 |
) |
|
|
(15,722 |
) |
Equity/(Deficit)
attributable to noncontrolling interests (Note 19)
|
|
|
1,405 |
|
|
|
1,195 |
|
Total
equity/(deficit) (Note 19)
|
|
|
(7,270 |
) |
|
|
(14,527 |
) |
Total
liabilities and equity
|
|
$ |
203,106 |
|
|
$ |
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)
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
ASSETS
|
|
|
|
|
|
|
Automotive
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
10,176 |
|
|
$ |
6,377 |
|
Marketable
securities
|
|
|
14,572 |
|
|
|
9,296 |
|
Total
cash and marketable securities
|
|
|
24,748 |
|
|
|
15,673 |
|
Receivables,
net
|
|
|
3,747 |
|
|
|
3,065 |
|
Inventories
(Note 3)
|
|
|
6,560 |
|
|
|
6,988 |
|
Deferred
income taxes
|
|
|
428 |
|
|
|
302 |
|
Other
current assets
|
|
|
2,796 |
|
|
|
3,450 |
|
Current
receivable from Financial Services
|
|
|
2,588 |
|
|
|
2,035 |
|
Total
current assets
|
|
|
40,867 |
|
|
|
31,513 |
|
Equity
in net assets of affiliated companies
|
|
|
1,412 |
|
|
|
1,076 |
|
Net
property
|
|
|
24,627 |
|
|
|
23,930 |
|
Deferred
income taxes
|
|
|
5,733 |
|
|
|
7,204 |
|
Goodwill
and other net intangible assets (Note 5)
|
|
|
216 |
|
|
|
237 |
|
Assets
of held-for-sale operations (Note 12)
|
|
|
8,112 |
|
|
|
8,414 |
|
Other
assets
|
|
|
1,544 |
|
|
|
1,441 |
|
Total
Automotive assets
|
|
|
82,511 |
|
|
|
73,815 |
|
Financial
Services
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
15,622 |
|
|
|
15,672 |
|
Marketable
securities
|
|
|
8,642 |
|
|
|
8,607 |
|
Finance
receivables, net (Note 2)
|
|
|
79,173 |
|
|
|
96,101 |
|
Net
investment in operating leases
|
|
|
16,819 |
|
|
|
23,120 |
|
Equity
in net assets of affiliated companies
|
|
|
132 |
|
|
|
523 |
|
Goodwill
and other net intangible assets (Note 5)
|
|
|
9 |
|
|
|
9 |
|
Assets
of held-for-sale operations (Note 12)
|
|
|
911 |
|
|
|
198 |
|
Other
assets
|
|
|
5,322 |
|
|
|
7,437 |
|
Total
Financial Services assets
|
|
|
126,630 |
|
|
|
151,667 |
|
Intersector
elimination
|
|
|
(3,245 |
) |
|
|
(2,535 |
) |
Total
assets
|
|
$ |
205,896 |
|
|
$ |
222,947 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Automotive
|
|
|
|
|
|
|
|
|
Trade
payables
|
|
$ |
11,622 |
|
|
$ |
9,193 |
|
Other
payables
|
|
|
2,367 |
|
|
|
1,982 |
|
Accrued
liabilities and deferred revenue
|
|
|
27,638 |
|
|
|
29,584 |
|
Deferred
income taxes
|
|
|
2,894 |
|
|
|
2,790 |
|
Debt
payable within one year (Note 7)
|
|
|
1,635 |
|
|
|
1,191 |
|
Total
current liabilities
|
|
|
46,156 |
|
|
|
44,740 |
|
Long-term
debt (Note 7)
|
|
|
25,254 |
|
|
|
23,036 |
|
Other
liabilities
|
|
|
22,030 |
|
|
|
23,766 |
|
Deferred
income taxes
|
|
|
495 |
|
|
|
614 |
|
Liabilities
of held-for-sale operations (Note 12)
|
|
|
5,355 |
|
|
|
5,487 |
|
Total
Automotive liabilities
|
|
|
99,290 |
|
|
|
97,643 |
|
Financial
Services
|
|
|
|
|
|
|
|
|
Payables
|
|
|
1,220 |
|
|
|
1,970 |
|
Debt
(Note 7)
|
|
|
105,774 |
|
|
|
128,842 |
|
Deferred
income taxes
|
|
|
2,045 |
|
|
|
3,280 |
|
Other
liabilities and deferred income
|
|
|
5,494 |
|
|
|
6,184 |
|
Liabilities
of held-for-sale operations (Note 12)
|
|
|
— |
|
|
|
55 |
|
Payable
to Automotive
|
|
|
2,588 |
|
|
|
2,035 |
|
Total
Financial Services liabilities
|
|
|
117,121 |
|
|
|
142,366 |
|
Intersector
elimination
|
|
|
(3,245 |
) |
|
|
(2,535 |
) |
Total
liabilities
|
|
|
213,166 |
|
|
|
237,474 |
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
Capital
stock
|
|
|
|
|
|
|
|
|
Common
Stock, par value $0.01 per share (3,244 million shares
issued)
|
|
|
32 |
|
|
|
23 |
|
Class
B Stock, par value $0.01 per share (71 million shares
issued)
|
|
|
1 |
|
|
|
1 |
|
Capital
in excess of par value of stock
|
|
|
14,698 |
|
|
|
10,875 |
|
Accumulated
other comprehensive income/(loss)
|
|
|
(8,704 |
) |
|
|
(10,085 |
) |
Treasury
stock
|
|
|
(178 |
) |
|
|
(181 |
) |
Retained
earnings/(Accumulated deficit)
|
|
|
(14,524 |
) |
|
|
(16,355 |
) |
Total
equity/(deficit) attributable to Ford Motor Company (Note
19)
|
|
|
(8,675 |
) |
|
|
(15,722 |
) |
Equity/(Deficit)
attributable to noncontrolling interests (Note 19)
|
|
|
1,405 |
|
|
|
1,195 |
|
Total
equity/(deficit) (Note 19)
|
|
|
(7,270 |
) |
|
|
(14,527 |
) |
Total
liabilities and equity
|
|
$ |
205,896 |
|
|
$ |
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 September 30, 2009 and
2008
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
Cash
flows from operating activities of continuing operations
|
|
|
|
|
|
|
Net
cash (used in)/provided by operating activities
|
|
$ |
15,630 |
|
|
$ |
3,269 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities of continuing operations
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(3,391 |
) |
|
|
(4,875 |
) |
Acquisitions
of retail and other finance receivables and operating
leases
|
|
|
(21,214 |
) |
|
|
(36,932 |
) |
Collections
of retail and other finance receivables and operating
leases
|
|
|
31,713 |
|
|
|
32,278 |
|
Purchases
of securities
|
|
|
(61,461 |
) |
|
|
(49,881 |
) |
Sales
and maturities of securities
|
|
|
56,927 |
|
|
|
47,852 |
|
Settlements
of derivatives
|
|
|
451 |
|
|
|
1,826 |
|
Proceeds
from sale of businesses
|
|
|
380 |
|
|
|
6,293 |
|
Cash
paid for acquisitions
|
|
|
— |
|
|
|
(13 |
) |
Transfer
of cash balances upon disposition of discontinued/held-for-sale
operations
|
|
|
— |
|
|
|
(925 |
) |
Other
|
|
|
(609 |
) |
|
|
348 |
|
Net
cash (used in)/provided by investing activities
|
|
|
2,796 |
|
|
|
(4,029 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities of continuing operations
|
|
|
|
|
|
|
|
|
Sales
of Common Stock
|
|
|
2,270 |
|
|
|
663 |
|
Changes
in short-term debt
|
|
|
(5,668 |
) |
|
|
(4,422 |
) |
Proceeds
from issuance of other debt
|
|
|
35,642 |
|
|
|
27,565 |
|
Principal
payments on other debt
|
|
|
(46,072 |
) |
|
|
(32,768 |
) |
Other
|
|
|
(743 |
) |
|
|
(531 |
) |
Net
cash (used in)/provided by financing activities
|
|
|
(14,571 |
) |
|
|
(9,493 |
) |
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
524 |
|
|
|
(136 |
) |
Cumulative
correction of Financial Services prior period error (Note
1)
|
|
|
(630 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents from continuing
operations
|
|
|
3,749 |
|
|
|
(10,389 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from discontinued operations
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities of discontinued operations
|
|
|
— |
|
|
|
— |
|
Cash
flows from investing activities of discontinued operations
|
|
|
— |
|
|
|
— |
|
Cash
flows from financing activities of discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents
|
|
$ |
3,749 |
|
|
$ |
(10,389 |
) |
|
|
|
|
|
|
|
|
|
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
|
|
|
3,749 |
|
|
|
(10,389 |
) |
Less:
cash and cash equivalents of discontinued/held-for-sale operations at
September 30
|
|
|
— |
|
|
|
— |
|
Cash
and cash equivalents at September 30
|
|
$ |
25,798 |
|
|
$ |
24,894 |
|
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 September 30, 2009 and
2008
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Cash
flows from operating activities of continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash (used in)/provided by operating activities
|
|
$ |
754 |
|
|
$ |
4,203 |
|
|
$ |
(7,242 |
) |
|
$ |
8,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities of continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(3,377 |
) |
|
|
(14 |
) |
|
|
(4,815 |
) |
|
|
(60 |
) |
Acquisitions
of retail and other finance receivables and operating
leases
|
|
|
— |
|
|
|
(21,214 |
) |
|
|
— |
|
|
|
(36,932 |
) |
Collections
of retail and other finance receivables and operating
leases
|
|
|
— |
|
|
|
31,824 |
|
|
|
— |
|
|
|
32,643 |
|
Net
(increase)/decrease of wholesale receivables
|
|
|
— |
|
|
|
9,435 |
|
|
|
— |
|
|
|
2,058 |
|
Purchases
of securities
|
|
|
(40,974 |
) |
|
|
(22,135 |
) |
|
|
(33,430 |
) |
|
|
(16,721 |
) |
Sales
and maturities of securities
|
|
|
36,201 |
|
|
|
21,128 |
|
|
|
33,676 |
|
|
|
14,176 |
|
Settlements
of derivatives
|
|
|
(52 |
) |
|
|
503 |
|
|
|
1,136 |
|
|
|
690 |
|
Proceeds
from sale of businesses
|
|
|
6 |
|
|
|
374 |
|
|
|
2,595 |
|
|
|
3,698 |
|
Cash
paid for acquisitions
|
|
|
— |
|
|
|
— |
|
|
|
(13 |
) |
|
|
— |
|
Transfer
of cash balances upon disposition of discontinued/held-for-sale
operations
|
|
|
— |
|
|
|
— |
|
|
|
(925 |
) |
|
|
— |
|
Investing
activity from Financial Services
|
|
|
15 |
|
|
|
— |
|
|
|
9 |
|
|
|
— |
|
Other
|
|
|
(735 |
) |
|
|
126 |
|
|
|
71 |
|
|
|
277 |
|
Net
cash (used in)/provided by investing activities
|
|
|
(8,916 |
) |
|
|
20,027 |
|
|
|
(1,696 |
) |
|
|
(171 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities of continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
of Common Stock
|
|
|
2,270 |
|
|
|
— |
|
|
|
663 |
|
|
|
— |
|
Changes
in short-term debt
|
|
|
242 |
|
|
|
(5,910 |
) |
|
|
56 |
|
|
|
(4,478 |
) |
Proceeds
from issuance of other debt
|
|
|
11,412 |
|
|
|
24,230 |
|
|
|
116 |
|
|
|
27,449 |
|
Principal
payments on other debt
|
|
|
(952 |
) |
|
|
(42,747 |
) |
|
|
(456 |
) |
|
|
(32,042 |
) |
Financing
activity to Automotive
|
|
|
— |
|
|
|
(15 |
) |
|
|
— |
|
|
|
(9 |
) |
Other
|
|
|
(193 |
) |
|
|
(550 |
) |
|
|
(206 |
) |
|
|
(325 |
) |
Net
cash (used in)/provided by financing activities
|
|
|
12,779 |
|
|
|
(24,992 |
) |
|
|
173 |
|
|
|
(9,405 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
246 |
|
|
|
278 |
|
|
|
(64 |
) |
|
|
(72 |
) |
Net
change in intersector receivables/payables and other
liabilities
|
|
|
(1,064 |
) |
|
|
1,064 |
|
|
|
(1,242 |
) |
|
|
1,242 |
|
Cumulative
correction of prior period error (Note 1)
|
|
|
— |
|
|
|
(630 |
) |
|
|
— |
|
|
|
— |
|
Net
increase/(decrease) in cash and cash equivalents from continuing
operations
|
|
|
3,799 |
|
|
|
(50 |
) |
|
|
(10,071 |
) |
|
|
(318 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities of discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Cash
flows from investing activities of discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Cash
flows from financing activities of discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents
|
|
$ |
3,799 |
|
|
$ |
(50 |
) |
|
$ |
(10,071 |
) |
|
$ |
(318 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
3,799 |
|
|
|
(50 |
) |
|
|
(10,071 |
) |
|
|
(318 |
) |
Less:
cash and cash equivalents of discontinued/held-for-sale operations at
September 30
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Cash
and cash equivalents at September 30
|
|
$ |
10,176 |
|
|
$ |
15,622 |
|
|
$ |
10,607 |
|
|
$ |
14,287 |
|
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 September 30, 2009 and
2008
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Net
income/(loss)
|
|
$ |
1,076 |
|
|
$ |
(110 |
) |
|
$ |
2,011 |
|
|
$ |
(8,526 |
) |
Other
comprehensive income/(loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
|
|
513 |
|
|
|
(2,061 |
) |
|
|
2,209 |
|
|
|
(2,615 |
) |
Net
gain/(loss) on derivative instruments
|
|
|
(68 |
) |
|
|
(109 |
) |
|
|
(191 |
) |
|
|
(136 |
) |
Employee
benefit-related
|
|
|
(131 |
) |
|
|
1,442 |
|
|
|
(587 |
) |
|
|
2,722 |
|
Net
holding gain/(loss)
|
|
|
2 |
|
|
|
(12 |
) |
|
|
(1 |
) |
|
|
(45 |
) |
Total
other comprehensive income/(loss), net of tax
|
|
|
316 |
|
|
|
(740 |
) |
|
|
1,430 |
|
|
|
(74 |
) |
Comprehensive
income/(loss)
|
|
|
1,392 |
|
|
|
(850 |
) |
|
|
3,441 |
|
|
|
(8,600 |
) |
Less:
Comprehensive income/(loss) attributable to noncontrolling interests (Note
19)
|
|
|
94 |
|
|
|
15 |
|
|
|
229 |
|
|
|
203 |
|
Comprehensive
income/(loss) attributable to Ford Motor Company
|
|
$ |
1,298 |
|
|
$ |
(865 |
) |
|
$ |
3,212 |
|
|
$ |
(8,803 |
) |
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
|
Finance
Receivables – Financial Services Sector
|
15
|
Note
3
|
Inventories
|
15
|
Note
4
|
Variable
Interest Entities
|
16
|
Note
5
|
Goodwill
and Other Net Intangible Assets
|
20
|
Note
6
|
Restricted
Cash
|
20
|
Note
7
|
Debt
and Commitments
|
21
|
Note
8
|
Impairments
|
29
|
Note
9
|
Other
Income/(Loss)
|
30
|
Note
10
|
Employee
Separation Actions and Exit and Disposal Activities
|
30
|
Note
11
|
Income
Taxes
|
31
|
Note
12
|
Discontinued
Operations, Held-For-Sale Operations, Other Dispositions, and
Acquisitions
|
32
|
Note
13
|
Amounts
Per Share Attributable to Ford Motor Company Common and Class B
Stock
|
35
|
Note
14
|
Derivative
Financial Instruments and Hedging Activities
|
35
|
Note
15
|
Retirement
Benefits
|
39
|
Note
16
|
Fair
Value Measurements
|
39
|
Note
17
|
Segment
Information
|
42
|
Note
18
|
Guarantees
|
44
|
Note
19
|
Equity/(Deficit)
Attributable to Ford Motor Company and Noncontrolling
Interests
|
45
|
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 differs 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 12 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.
Subsequent
Events. We evaluated the effects of all subsequent events from
the end of the third quarter through November 6, 2009, the date we filed our
financial statements with the U.S. Securities and Exchange Commission
("SEC").
Noncontrolling
Interests. We adopted the Financial Accounting Standards
Board's ("FASB") revised standard on accounting for noncontrolling interests on
its effective date, 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. The standard 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. Footnote disclosures for our interim financial periods
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 FASB's standard on accounting for
convertible debt instruments that may be settled in cash upon conversion
(including partial cash settlement), on its effective date, January 1,
2009. The standard specifies that issuers of convertible debt
securities that, upon conversion, may be settled in cash 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 standard applies to our 4.25% Senior Convertible Notes
due December 15, 2036 ("Convertible Notes") issued in December
2006. We have applied the standard retrospectively to all periods
presented.
Item
1. Financial Statements (Continued)
NOTE
1. PRINCIPLES OF PRESENTATION AND CONSOLIDATION (Continued)
The
following financial statement line items from our sector statement of operations
and sector balance sheet were affected by implementation of the change in
accounting for convertible debt instruments that, upon conversion, may be
settled in cash (in millions, except per share information):
|
|
Revised
Third Quarter |
|
|
As
Originally Reported Third Quarter |
|
|
Effect
of |
|
Statement
of Operations
|
|
2008
|
|
|
|
|
|
|
|
Automotive
interest expense
|
|
$ |
493 |
|
|
$ |
462 |
|
|
$ |
31 |
|
Income/(Loss)
from continuing operations attributable to Ford Motor
Company
|
|
|
(161 |
) |
|
|
(129 |
) |
|
|
(32 |
) |
Net
income/(loss) attributable to Ford Motor Company
|
|
|
(161 |
) |
|
|
(129 |
) |
|
|
(32 |
) |
Earnings
per share attributable to Ford Motor Company
|
|
|
(0.07 |
) |
|
|
(0.06 |
) |
|
|
(0.01 |
) |
|
|
Revised
First Nine Months |
|
|
As
Originally Reported First Nine Months |
|
|
Effect
of |
|
Statement
of Operations
|
|
2008
|
|
|
|
|
|
|
|
Automotive
interest expense
|
|
$ |
1,566 |
|
|
$ |
1,475 |
|
|
$ |
91 |
|
Income/(Loss)
from continuing operations attributable to Ford Motor
Company
|
|
|
(8,797 |
) |
|
|
(8,705 |
) |
|
|
(92 |
) |
Net
income/(loss) attributable to Ford Motor Company
|
|
|
(8,788 |
) |
|
|
(8,696 |
) |
|
|
(92 |
) |
Earnings
per share attributable to Ford Motor Company
|
|
|
(3.94 |
) |
|
|
(3.89 |
) |
|
|
(0.05 |
) |
|
|
Revised
December 31, |
|
|
As
Originally Reported December 31, |
|
|
Effect
of |
|
Balance
Sheet (a)
|
|
2008
|
|
|
|
|
|
|
|
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 the standard on accounting
for convertible debt instruments that, upon conversion, may be settled in
cash, the December 31, 2008 column on our consolidated and sector balance
sheets is "unaudited."
|
|
(b)
|
Effect
of Change related to the standard on accounting for convertible debt
instruments that, upon conversion, may be settled in cash includes
capitalized charges of $30 million; the remaining $41 million relates to
the assets of Volvo classified as held-for-sale operations (see Note 12
for discussion of Volvo).
|
|
(c)
|
Effect
of Change represents the equity component under the standard on accounting
for convertible debt instruments that, upon conversion, may be settled in
cash (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 before and after the adoption of the standard on accounting
for convertible debt instruments that, upon conversion, may be settled in
cash:
|
|
|
|
Basic
income/(loss)
|
|
|
|
|
After
Adoption
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
0.31 |
|
|
$ |
0.31 |
|
|
$ |
— |
|
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net
income/(loss)
|
|
$ |
0.31 |
|
|
$ |
0.31 |
|
|
$ |
— |
|
Diluted
income/(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
0.29 |
|
|
$ |
0.29 |
|
|
$ |
— |
|
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net
income/(loss)
|
|
$ |
0.29 |
|
|
$ |
0.29 |
|
|
$ |
— |
|
|
|
|
|
Basic
income/(loss)
|
|
|
|
|
After
Adoption
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
0.65 |
|
|
$ |
0.63 |
|
|
$ |
(0.02 |
) |
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net
income/(loss)
|
|
$ |
0.65 |
|
|
$ |
0.63 |
|
|
$ |
(0.02 |
) |
Diluted
income/(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
from continuing operations
|
|
$ |
0.61 |
|
|
$ |
0.61 |
|
|
$ |
— |
|
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net
income/(loss)
|
|
$ |
0.61 |
|
|
$ |
0.61 |
|
|
$ |
— |
|
Item
1. Financial Statements (Continued)
NOTE
1. PRINCIPLES OF PRESENTATION AND CONSOLIDATION (Continued)
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):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
Sector
balance sheet presentation of deferred income tax assets:
|
|
|
|
|
|
|
Automotive
sector current deferred income tax assets
|
|
$ |
428 |
|
|
$ |
302 |
|
Automotive
sector non-current deferred income tax assets
|
|
|
5,733 |
|
|
|
7,204 |
|
Financial
Services sector deferred income tax assets*
|
|
|
293 |
|
|
|
251 |
|
Total
|
|
|
6,454 |
|
|
|
7,757 |
|
Reclassification
for netting of deferred income taxes
|
|
|
(2,790 |
) |
|
|
(4,649 |
) |
Consolidated
balance sheet presentation of deferred income tax assets
|
|
$ |
3,664 |
|
|
$ |
3,108 |
|
|
|
|
|
|
|
|
|
|
Sector
balance sheet presentation of deferred income tax
liabilities:
|
|
|
|
|
|
|
|
|
Automotive
sector current deferred income tax liabilities
|
|
$ |
2,894 |
|
|
$ |
2,790 |
|
Automotive
sector non-current deferred income tax liabilities
|
|
|
495 |
|
|
|
614 |
|
Financial
Services sector deferred income tax liabilities
|
|
|
2,045 |
|
|
|
3,280 |
|
Total
|
|
|
5,434 |
|
|
|
6,684 |
|
Reclassification
for netting of deferred income taxes
|
|
|
(2,790 |
) |
|
|
(4,649 |
) |
Consolidated
balance sheet presentation of deferred income tax
liabilities
|
|
$ |
2,644 |
|
|
$ |
2,035 |
|
__________
* Financial
Services deferred income tax assets are included in Financial Services other
assets on our sector balance sheet.
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. These transactions are summarized as
follows:
|
·
|
In
the second half of 2008, we issued 88,325,372 shares of Ford Common Stock
resulting in proceeds of $434 million that we then used to purchase
debt of Ford Credit with a carrying value of $492 million and $10
million in related interest. We recognized a gain on
extinguishment of debt of $68 million on the transaction, recorded in
Automotive interest
income and other non-operating income/(expense),
net.
|
|
·
|
On
January 12, 2009, $135 million of these debt securities
matured.
|
|
·
|
During
August 2009, we issued 71,587,743 shares of Ford Common Stock, resulting
in proceeds of $565 million that we then used to purchase
debt of Ford Credit with a carrying value of $556 million and
$9 million in related interest. A de minimis loss on the
extinguishment of the debt was recorded in Automotive interest income and
other non-operating income/(expense),
net.
|
|
·
|
In
September 2009, Ford Credit bought back from us $267 million principal
amount of its debt securities and $8 million in interest for $276
million in cash. We recognized an Automotive sector gain of $1
million and Financial Services sector loss of $1 million on the
transaction, recorded in Automotive interest income and
other non-operating income/(expense), net and Financial Services other
income/(loss), net, respectively.
|
At
September 30, 2009 the remaining Ford Credit debt securities we purchased had a
carrying value of $646 million and an estimated fair value of $650
million.
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, $646 million and
$492 million of debt are reported as Financial Services debt at September 30, 2009
and December 31, 2008, respectively. Likewise,
included in Automotive
marketable securities
are $646 million and $492 million at September 30, 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 interest of $11 million and $8 million at September 30,
2009 and December 31, 2008, respectively, are included in the Intersector elimination lines
on the sector balance sheet.
Item
1. Financial Statements (Continued)
NOTE
1. PRINCIPLES OF PRESENTATION AND CONSOLIDATION (Continued)
Presentation
of Cash Flows
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
|
|
$ |
4,957 |
|
|
$ |
846 |
|
Reclassification
of wholesale receivable cash flows from investing to operating for
consolidated presentation (a)
|
|
|
9,435 |
|
|
|
2,058 |
|
Reclassification
of finance receivable cash flows from investing to operating for
consolidated presentation (b)
|
|
|
111 |
|
|
|
365 |
|
Reclassification
of Ford Credit's cash outflow related to the acquisition of Ford's public
unsecured debt securities from operating to financing for consolidated
presentation (c)
|
|
|
1,127 |
|
|
|
— |
|
Consolidated
cash flows from operating activities of continuing
operations
|
|
$ |
15,630 |
|
|
$ |
3,269 |
|
__________
(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.
|
(c)
|
See
discussion of "Ford Credit Acquisition of Ford Debt"
below.
|
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 loan 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 Principal payments on other
debt within Cash flows
from financing activities of continuing operations. On our
sector statement of cash flows, the cash outflow is presented as Purchases of securities by
our Financial Services sector within Cash flows from investing
activities of
continuing operations.
During
the second quarter of 2009, Ford Credit conducted a cash tender offer for Ford's
public unsecured debt securities. Pursuant to this offer, Ford Credit
purchased $3.4 billion principal amount of public unsecured debt securities for
an aggregate cost of $1.1 billion (including transaction costs and accrued and
unpaid interest payments for such tendered debt securities). 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. As a result, we recorded a gain on
extinguishment of debt in the amount of $2.2 billion, net of unamortized
discounts, premiums and fees, in Automotive interest income and other
non-operating income/(expense), net. Approximately $5.6
billion aggregate principal amount of our public unsecured debt securities
(including about $100 million of industrial revenue bonds) remains
outstanding.
On our
consolidated statement of cash flows, the $1.1 billion cash outflow related to
Ford Credit's purchase of our public unsecured debt securities 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 decrease in taxes payable by our
Financial Services sector within Cash flows from operating
activities of
continuing operations.
Ford Acquisition of Ford
Credit Debt. The cash
flows related to our acquisition of Ford Credit's debt securities discussed in
"Presentation of Balance Sheet" above are presented differently on our
consolidated and sector statements of cash flows.
Item
1. Financial Statements (Continued)
NOTE
1. PRINCIPLES OF PRESENTATION AND CONSOLIDATION (Continued)
As
discussed above in "Presentation of Balance Sheet," we purchased $424 million of
Ford Credit debt securities during the second half of 2008, $270 million of
which was purchased during the third quarter of 2008. The cash
outflow is reclassified from Automotive purchases of
securities within Cash
flows from investing activities of continuing operations on our sector
statement of cash flows to Principal payments on other debt
within Cash flows from
financing activities of continuing operations on our consolidated
statement of cash flows.
Also as
discussed above, the $135 million cash payment from Ford Credit to us related to
the maturity of Ford Credit's debt securities is not shown as a cash outflow on
our consolidated statement of cash flows, 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 other debt within Cash flows from financing activities
of continuing operations.
The cash
outflow of $556 million related to our acquisition of Ford Credit's debt
securities discussed above is reclassified from Automotive purchases of
securities within Cash
flows from investing activities of continuing operations on our sector
statement of cash flows to Principal payments on other
debt within Cash flows
from financing activities of continuing operations on our consolidated
statement of cash flows.
On our
consolidated statement of cash flows, the $267 million cash payment from Ford
Credit to us related to its repurchase of debt securities from us discussed
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 $267 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 other debt within Cash flows from financing activities
of continuing operations.
Ford Leasing Acquisition of Ford
Debt. In July 2009, Ford
Leasing, LLC ("Ford Leasing"), a wholly-owned subsidiary of Ford, purchased from
the lenders under our Credit Agreement $45 million principal amount of our
secured term loan thereunder for an aggregate cost of $37
million. Ford Holdings elected to receive the $37 million from Ford
Leasing as a dividend, whereupon the debt was immediately
forgiven. As a result of this transaction, we recorded a pre-tax gain
of $8 million in Automotive
interest income and other non-operating income/(expense), net in the
third quarter of 2009.
The cash
outflow of $37 million is presented differently on our consolidated and sector
statements of cash flows. The cash outflow is reclassified from Financial Services purchases of
securities within Cash
flows from investing activities of continuing operations on our sector
statement of cash flows to Principal payments on other
debt within Cash flows
from financing activities of continuing operations on our consolidated
statement of cash flows.
Liquidity
At
September 30, 2009, our Automotive sector had total cash, cash equivalents, and
marketable securities of $24.7 billion (including about $700 million of
Temporary Asset Account ("TAA") and other securities, and about $200 million of
marketable securities for which the cash settlement was not made by September
30, 2009 and for which there was a payable or receivable recorded on the balance
sheet).
We
experienced substantial negative cash flows during 2008, and had negative equity
of $7.3 billion at September 30, 2009. We continue to face many risks
and uncertainties related to the global economy, our industry in particular, and
the credit environment, which could materially impact our plan. Our
current planning assumptions forecast full-year 2009 U.S. industry sales volume
of about 10.6 million units, and industry sales volume of about 15.7 million
units for the 19 markets we track in Europe. We previously have
forecasted 2010 industry sales volume of about 12.5 million units in the United
States, and estimated a range of 13 to 14.5 million units for the 19 markets we
track in Europe; we will update our full-year 2010 planning assumptions when we
disclose full-year 2009 results. Our planning assumptions also
include Ford Credit's ability to obtain funding in sufficient amounts to support
the sale of Ford vehicles.
We
believe that all reasonably possible scenarios, including a decline in 2009 –
2010 industry sales volumes to levels below our planning assumptions, or
constraints on Ford Credit's ability to execute its funding plan in order to
support the sale of Ford products, would not exhaust our presently available
liquidity. 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.
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.
Item
1. Financial Statements (Continued)
NOTE
1. PRINCIPLES OF PRESENTATION AND CONSOLIDATION (Continued)
Fair
Value Measurements
In
determining fair value, we use various valuation techniques and prioritize the
use of observable inputs. We assess the inputs with which we measure
fair value using a three-tier hierarchy, based on the extent to which the inputs
used are observable in the market as follows:
|
·
|
Level
1 – inputs include quoted prices for identical instruments and are the
most observable.
|
|
·
|
Level
2 – inputs include quoted prices for similar assets and observable inputs
such as interest rates, currency exchange rates and yield
curves.
|
|
·
|
Level
3 – inputs are not observable in the market and include management’s
judgments about the assumptions market participants would use in pricing
the asset or liability.
|
See Note
16 for a discussion of fair value measurements.
NOTE
2. FINANCE RECEIVABLES – FINANCIAL SERVICES SECTOR
Net
finance receivables were as follows (in millions):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
Retail
(including direct financing leases)
|
|
$ |
60,269 |
|
|
$ |
67,316 |
|
Wholesale
|
|
|
18,489 |
|
|
|
27,483 |
|
Other
finance receivables
|
|
|
3,708 |
|
|
|
4,057 |
|
Total
finance receivables
|
|
|
82,466 |
|
|
|
98,856 |
|
Unearned
interest supplements
|
|
|
(1,830 |
) |
|
|
(1,343 |
) |
Allowance
for credit losses
|
|
|
(1,486 |
) |
|
|
(1,417 |
) |
Other
|
|
|
23 |
|
|
|
5 |
|
Net
finance receivables – sector balance
sheet
|
|
$ |
79,173 |
|
|
$ |
96,101 |
|
|
|
|
|
|
|
|
|
|
Net
finance receivables subject to fair value
|
|
$ |
74,022 |
|
|
$ |
91,584 |
|
Fair
value
|
|
$ |
74,669 |
|
|
$ |
84,615 |
|
|
|
|
|
|
|
|
|
|
Net
finance receivables – sector balance
sheet
|
|
$ |
79,173 |
|
|
$ |
96,101 |
|
Reclassification
of receivables purchased from Automotive sector and Other Financial
Services to Other
receivables, net
|
|
|
(3,560 |
) |
|
|
(2,617 |
) |
Net
finance receivables – consolidated balance sheet
|
|
$ |
75,613 |
|
|
$ |
93,484 |
|
The fair
value of finance receivables is generally calculated by discounting future cash
flows using an estimated discount rate that reflects the current credit,
interest rate, and prepayment risks associated with similar types of
instruments.
NOTE
3. INVENTORIES
Inventories
are summarized as follows (in millions):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
Raw
materials, work-in-process and supplies
|
|
$ |
3,057 |
|
|
$ |
2,747 |
|
Finished
products
|
|
|
4,336 |
|
|
|
5,091 |
|
Total
inventories under first-in, first-out method ("FIFO")
|
|
|
7,393 |
|
|
|
7,838 |
|
Less:
Last-in, first-out method ("LIFO") adjustment
|
|
|
(833 |
) |
|
|
(850 |
) |
Total
inventories
|
|
$ |
6,560 |
|
|
$ |
6,988 |
|
Inventories
are stated at lower of cost or market. About one-fourth of
inventories were determined under the LIFO method.
Item
1. Financial Statements (Continued)
NOTE
4. 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 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 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 entities described below include purchasing the majority, and in some
cases substantially all, of the entity's output under a cost-plus-margin
arrangement and/or volume-dependent pricing. These contractual
arrangements may require us to absorb entity losses when production volume
targets are not met and/or allow us to receive bonuses when production volume
targets are exceeded.
Effective
January 1, 2010, we will adopt FASB's new standard for determining VIE
consolidation. Issued in June 2009, FASB's new standard replaces the
quantitative-based risks and rewards calculation with an approach that is
primarily qualitative. The new standard requires ongoing reassessment
of the appropriateness of consolidation. The standard also requires
additional disclosure about involvement with VIEs. At this time, we
expect that adoption of this standard may result in the deconsolidation of
several of our joint ventures, including Ford Otosan (discussed below), which is
reported within our Ford Europe segment results. Although we continue
to examine the potential impact of this standard on our financial condition,
results of operations, and financial statement disclosures, we anticipate that
the adoption may negatively impact Income/(Loss) before income taxes
and in particular Ford Europe's pre-tax results. The standard
would have no effect on Net income/(loss) attributable to
Ford Motor Company.
Described
below are the significant VIEs that we consolidated as of September 30,
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.
First
Aquitaine Industries SAS ("First Aquitaine") operates a transmission plant in
Bordeaux, France which manufactures automatic transmissions for Ford Explorer,
Ranger, and Mustang vehicles. During the second quarter of 2009, we
transferred legal ownership of First Aquitaine to HZ Holding
France. We also entered into a volume-dependent pricing agreement
with the new owner to purchase all of the plant's output. As a
result, we now consider this entity to be a VIE of which we are the primary
beneficiary. See Note 8 for discussion of the impairment of our
investment in this plant.
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 a 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 12.
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 as held for sale during the first quarter of 2009
are shown in the table below and are included in the assets and liabilities of
Volvo classified as held-for-sale operations in Note 12.
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.
We also
hold interests in certain dealerships in North America. At September
30, 2009 there were approximately 28 dealerships consolidated as part of our
Dealer Development program. We supply and finance the majority of
vehicles and parts for these dealerships, and the operators have a contract to
buy our equity interest over a period of time. See Note 8 for
discussion of the impairment of our investment in these assets.
Item
1. Financial Statements (Continued)
NOTE
4. VARIABLE INTEREST ENTITIES (Continued)
The total
consolidated VIE assets and liabilities reflected on our balance sheet are as
follows (in millions):
Assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
654 |
|
|
$ |
665 |
|
Receivables
|
|
|
661 |
|
|
|
518 |
|
Inventories
|
|
|
711 |
|
|
|
1,117 |
|
Net
property
|
|
|
2,355 |
|
|
|
2,136 |
|
Assets
of held-for-sale operations
|
|
|
335 |
|
|
|
318 |
|
Other
assets
|
|
|
272 |
|
|
|
297 |
|
Total
assets
|
|
$ |
4,988 |
|
|
$ |
5,051 |
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Trade
payables
|
|
$ |
657 |
|
|
$ |
516 |
|
Accrued
liabilities
|
|
|
322 |
|
|
|
324 |
|
Debt
|
|
|
911 |
|
|
|
972 |
|
Liabilities
of held-for-sale operations
|
|
|
101 |
|
|
|
97 |
|
Other
liabilities
|
|
|
254 |
|
|
|
167 |
|
Total
liabilities
|
|
$ |
2,245 |
|
|
$ |
2,076 |
|
|
|
|
|
|
|
|
|
|
Equity
attributable to noncontrolling interests
|
|
$ |
1,365 |
|
|
$ |
1,168 |
|
The
financial performance of the consolidated VIEs reflected on our statement of
operations are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ |
1,526 |
|
|
$ |
1,889 |
|
|
$ |
3,590 |
|
|
$ |
5,690 |
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
1,220 |
|
|
|
1,662 |
|
|
|
2,892 |
|
|
|
4,671 |
|
Selling,
administrative and other expenses
|
|
|
141 |
|
|
|
179 |
|
|
|
365 |
|
|
|
557 |
|
Total
costs and expenses
|
|
|
1,361 |
|
|
|
1,841 |
|
|
|
3,257 |
|
|
|
5,228 |
|
Operating
income/(loss)
|
|
|
165 |
|
|
|
48 |
|
|
|
333 |
|
|
|
462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
10 |
|
|
|
18 |
|
|
|
32 |
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income and other non-operating income/(expense), net
|
|
|
5 |
|
|
|
9 |
|
|
|
28 |
|
|
|
38 |
|
Equity
in net income/(loss) of affiliated companies
|
|
|
1 |
|
|
|
— |
|
|
|
(1 |
) |
|
|
3 |
|
Income/(Loss)
before income taxes –
Automotive
|
|
|
161 |
|
|
|
39 |
|
|
|
328 |
|
|
|
452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for/(Benefit from) income taxes
|
|
|
41 |
|
|
|
(1 |
) |
|
|
105 |
|
|
|
119 |
|
Income/(Loss)
from continuing operations
|
|
|
120 |
|
|
|
40 |
|
|
|
223 |
|
|
|
333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net
income/(loss)
|
|
|
120 |
|
|
|
40 |
|
|
|
223 |
|
|
|
333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Income/(loss) attributable to noncontrolling interests
|
|
|
63 |
|
|
|
39 |
|
|
|
164 |
|
|
|
248 |
|
Net
income/(loss) attributable to Ford Motor Company
|
|
$ |
57 |
|
|
$ |
1 |
|
|
$ |
59 |
|
|
$ |
85 |
|
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
carrying value of our obligation related to these letters of credit, which will
expire no later than December 21, 2011, was approximately $10 million at
September 30, 2009. For additional discussion of these letters of
credit, see Note 18.
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.
Item
1. Financial Statements (Continued)
NOTE
4. VARIABLE INTEREST ENTITIES (Continued)
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.
Ford
Motor Company Capital Trust II ("Trust II") was formed in 2002. We
own 100% of Trust II's common stock which is equal to 5% of Trust II's total
equity.
Our
maximum exposure to VIEs of which we are not the primary beneficiary is as
follows (in millions):
|
|
|
|
|
|
|
|
Change
in Maximum Exposure
|
|
Investments
|
|
$ |
441 |
|
|
$ |
413 |
|
|
$ |
28 |
|
Liabilities
|
|
|
(32 |
) |
|
|
(38 |
) |
|
|
6 |
|
Guarantees
(off-balance sheet)
|
|
|
368 |
|
|
|
362 |
|
|
|
6 |
|
Total
maximum exposure
|
|
$ |
777 |
|
|
$ |
737 |
|
|
$ |
40 |
|
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-sponsored entities or others who obtain funding from government
programs. The asset-backed securities are backed by the expected cash
flows from finance receivables and Ford Credit's interest in net investments in
operating leases. These assets or interests in these assets have been
legally sold but continue to be recognized by Ford Credit. 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 such as cash reserves, 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 $26.3 billion and $18.2 billion at September 30, 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.
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 the investments. Ford Credit
does not guarantee any asset-backed securities and generally has no obligation
to provide liquidity or contribute cash or additional assets to the
VIEs.
In
certain instances in the first nine months of 2009, Ford Credit has elected to
provide additional enhancements or repurchase specific senior or subordinated
notes in order to address market conditions. From time to time, Ford
Credit renegotiates the terms of its commitments or reallocates the commitments
globally. In certain securitization transactions, Ford Credit has
dynamic enhancements through which Ford Credit is required to support the
performance of the securitization transactions by purchasing additional
subordinated notes or increasing cash reserves. 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 VIEs to Ford Credit.
VIEs that
are exposed to interest rate or currency risk have reduced their exposure by
entering into derivatives. In certain instances, Ford Credit has
entered into derivative transactions with a VIE to protect the VIE from these
risks that are not mitigated through derivative transactions between the VIE and
its counterparty.
Item
1. Financial Statements (Continued)
NOTE
4. VARIABLE INTEREST ENTITIES (Continued)
FCAR
Owner Trust ("FCAR") is a VIE that issues asset-backed commercial paper, and
Ford Credit may, on occasion, purchase 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 February 1, 2010. At
September 30, 2009 Ford Credit did not have any commercial paper issued to the
CPFF. At September 30, 2009, the finance receivables of FCAR
supported $6.7 billion of asset-backed commercial paper outstanding, of which
$98 million was held by Ford Credit.
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
September 30, 2009, the carrying values of the assets were $43.4 billion of
retail receivables, $13.5 billion of wholesale receivables, and $13.9 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 that support Ford Credit's
securitization transactions reflected on our balance sheet are as follows (in
millions):
|
|
|
|
|
|
|
|
|
Cash
& Cash Equivalents (a)
|
|
|
|
|
|
Cash
& Cash Equivalents (a)
|
|
|
|
|
VIEs
by asset class (c)
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$ |
3,342 |
|
|
$ |
32,079 |
|
|
$ |
2,673 |
|
|
$ |
34,507 |
|
Wholesale
(d)
|
|
|
1,007 |
|
|
|
7,987 |
|
|
|
1,029 |
|
|
|
15,537 |
|
Net
investment in operating leases
|
|
|
542 |
|
|
|
9,512 |
|
|
|
206 |
|
|
|
12,005 |
|
Total
|
|
$ |
4,891 |
|
|
$ |
49,578 |
|
|
$ |
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 $926 million and $949 million as of
September 30, 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") open market operations
program. This external funding of $2.1 billion and $308 million
at September 30, 2009 and December 31, 2008, respectively, was not
reflected as a liability of the VIEs, but was reflected in our
consolidated liabilities.
|
(c)
|
The
derivative assets of Ford Credit's consolidated VIEs were $58 million and
$46 million at September 30, 2009 and December 31, 2008, respectively, and
the derivative liabilities were $650 million and $808 million at September
30, 2009 and December 31, 2008,
respectively.
|
(d)
|
Cash
and cash equivalents includes cash contributions to excess funding
accounts of $68 million and $179 million at September 30, 2009 and
December 31, 2008, respectively, that were made by Ford Credit to the
VIEs. These cash enhancements ranged from zero to $1.4 billion
during the first nine months of
2009.
|
The
financial performance of the consolidated VIEs that support Ford Credit's
securitization transactions reflected in our statement of operations are as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
(Income)/Expense
|
|
|
|
|
|
Derivative
(Income)/Expense
|
|
|
|
|
VIEs
by asset class
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$ |
174 |
|
|
$ |
215 |
|
|
$ |
135 |
|
|
$ |
442 |
|
Wholesale
|
|
|
(1 |
) |
|
|
68 |
|
|
|
(10 |
) |
|
|
174 |
|
Net
investment in operating leases
|
|
|
99 |
|
|
|
125 |
|
|
|
11 |
|
|
|
135 |
|
Our
financial performance related to VIEs
|
|
$ |
272 |
|
|
$ |
408 |
|
|
$ |
136 |
|
|
$ |
751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
(Income)/Expense
|
|
|
|
|
|
Derivative
(Income)/Expense
|
|
|
|
|
VIEs
by asset class
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$ |
202 |
|
|
$ |
739 |
|
|
$ |
87 |
|
|
$ |
1,319 |
|
Wholesale
|
|
|
(3 |
) |
|
|
199 |
|
|
|
(26 |
) |
|
|
536 |
|
Net
investment in operating leases
|
|
|
82 |
|
|
|
368 |
|
|
|
76 |
|
|
|
476 |
|
Our
financial performance related to VIEs
|
|
$ |
281 |
|
|
$ |
1,306 |
|
|
$ |
137 |
|
|
$ |
2,331 |
|
Item
1. Financial Statements (Continued)
NOTE
4. VARIABLE INTEREST ENTITIES (Continued)
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 Equity in net
assets of affiliated companies. Ford Credit's maximum exposure
to any potential losses associated with these VIEs is limited to its equity
investments, which totaled $69 million and $109 million at September 30, 2009
and December 31, 2008, respectively.
NOTE
5. GOODWILL AND OTHER NET INTANGIBLE ASSETS
The
components of goodwill and other net intangible assets are as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Accumulated Amortization
|
|
|
|
|
|
|
|
|
Less:
Accumulated Amortization
|
|
|
|
|
Automotive
Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
Europe goodwill
|
|
$ |
34 |
|
|
$ |
— |
|
|
$ |
34 |
|
|
$ |
31 |
|
|
$ |
— |
|
|
$ |
31 |
|
Manufacturing
and production incentive rights
|
|
|
298 |
|
|
|
(204 |
) |
|
|
94 |
|
|
|
227 |
|
|
|
(113 |
) |
|
|
114 |
|
License
and advertising agreements
|
|
|
92 |
|
|
|
(30 |
) |
|
|
62 |
|
|
|
85 |
|
|
|
(23 |
) |
|
|
62 |
|
Other
intangible assets
|
|
|
74 |
|
|
|
(48 |
) |
|
|
26 |
|
|
|
71 |
|
|
|
(41 |
) |
|
|
30 |
|
Total
Automotive sector
|
|
|
498 |
|
|
|
(282 |
) |
|
|
216 |
|
|
|
414 |
|
|
|
(177 |
) |
|
|
237 |
|
Financial
Services Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
Credit goodwill
|
|
|
9 |
|
|
|
— |
|
|
|
9 |
|
|
|
9 |
|
|
|
— |
|
|
|
9 |
|
Other
intangible assets
|
|
|
4 |
|
|
|
(4 |
) |
|
|
— |
|
|
|
4 |
|
|
|
(4 |
) |
|
|
— |
|
Total
Financial Services sector
|
|
|
13 |
|
|
|
(4 |
) |
|
|
9 |
|
|
|
13 |
|
|
|
(4 |
) |
|
|
9 |
|
Total
Company
|
|
$ |
511 |
|
|
$ |
(286 |
) |
|
$ |
225 |
|
|
$ |
427 |
|
|
$ |
(181 |
) |
|
$ |
246 |
|
Changes
in the goodwill balances 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 September 30, 2009 and December 31,
2008.
Our
recognized 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
|
|
$ |
22 |
|
|
$ |
27 |
|
|
$ |
61 |
|
|
$ |
77 |
|
Intangible
asset amortization is forecasted to be approximately $70 million to $80 million
per year through 2010, and $10 million thereafter.
NOTE
6. RESTRICTED CASH
We
classify as restricted cash in Other assets on our
consolidated balance sheet any cash and cash equivalents to which we do not have
unilateral access as a result of legally-enforceable
agreements. Restricted cash does not include required minimum
balances, or cash securing debt raised through securitization transactions
("securitization cash"). See Note 7 for discussion of the minimum
balance requirement related to our Credit Agreement, and securitization
cash.
Restricted
cash reflected on our balance sheet is as follows (in millions):
|
|
|
|
|
|
|
Automotive
sector
|
|
$ |
803 |
|
|
$ |
363 |
|
Financial
Services sector
|
|
|
519 |
|
|
|
449 |
|
Total
Company
|
|
$ |
1,322 |
|
|
$ |
812 |
|
Item
1. Financial Statements (Continued)
NOTE
7. DEBT AND COMMITMENTS
Debt
outstanding is shown below (in millions).
|
|
|
|
|
|
|
|
|
|
|
Automotive
Sector
|
|
|
|
|
|
|
Debt
payable within one year
|
|
|
|
|
|
|
Short-term
|
|
$ |
810 |
|
|
$ |
543 |
|
Long-term
payable within one year
|
|
|
|
|
|
|
|
|
Public
unsecured debt securities
|
|
|
334 |
|
|
|
— |
|
Secured
term loan
|
|
|
70 |
|
|
|
70 |
|
Other
debt
|
|
|
421 |
|
|
|
578 |
|
Total
debt payable within one year
|
|
|
1,635 |
|
|
|
1,191 |
|
|
|
|
|
|
|
|
|
|
Long-term
debt payable after one year
|
|
|
|
|
|
|
|
|
Public
unsecured debt securities
|
|
|
5,260 |
|
|
|
9,148 |
|
Convertible
Notes
|
|
|
579 |
|
|
|
4,883 |
|
Subordinated
convertible debentures
|
|
|
3,077 |
|
|
|
3,027 |
|
Secured
term loan
|
|
|
4,486 |
|
|
|
6,790 |
|
Secured
revolving loan
|
|
|
10,166 |
|
|
|
— |
|
U.S.
Department of Energy loans
|
|
|
886 |
|
|
|
— |
|
Other
debt
|
|
|
1,065 |
|
|
|
951 |
|
Total
long-term debt payable after one year
|
|
|
25,519 |
|
|
|
24,799 |
|
|
|
|
|
|
|
|
|
|
Unamortized
discount (a)
|
|
|
(265 |
) |
|
|
(1,763 |
) |
|
|
|
|
|
|
|
|
|
Total
long-term debt payable after one year
|
|
|
25,254 |
|
|
|
23,036 |
|
|
|
|
|
|
|
|
|
|
Total
Automotive sector
|
|
$ |
26,889 |
|
|
$ |
24,227 |
|
|
|
|
|
|
|
|
|
|
Fair
value of debt
|
|
$ |
23,057 |
|
|
$ |
9,480 |
|
|
|
|
|
|
|
|
|
|
Financial
Services Sector
|
|
|
|
|
|
|
|
|
Short-term
debt
|
|
|
|
|
|
|
|
|
Asset-backed
commercial paper
|
|
$ |
6,571 |
|
|
$ |
11,503 |
|
Other
asset-backed short-term debt
|
|
|
5,198 |
|
|
|
5,569 |
|
Ford
Interest Advantage (b)
|
|
|
3,146 |
|
|
|
1,958 |
|
Other
short-term debt
|
|
|
983 |
|
|
|
1,538 |
|
Total
short-term debt
|
|
|
15,898 |
|
|
|
20,568 |
|
Long-term
debt
|
|
|
|
|
|
|
|
|
Unsecured
debt
|
|
|
|
|
|
|
|
|
Notes
payable within one year
|
|
|
11,608 |
|
|
|
15,712 |
|
Notes
payable after one year
|
|
|
33,636 |
|
|
|
37,249 |
|
Unamortized
discount
|
|
|
(558 |
) |
|
|
(256 |
) |
Fair
value adjustment (c)
|
|
|
290 |
|
|
|
334 |
|
Asset-backed
debt
|
|
|
|
|
|
|
|
|
Notes
payable within one year
|
|
|
21,503 |
|
|
|
26,501 |
|
Notes
payable after one year
|
|
|
23,397 |
|
|
|
28,734 |
|
Total
long-term debt
|
|
|
89,876 |
|
|
|
108,274 |
|
Total
Financial Services sector
|
|
$ |
105,774 |
|
|
$ |
128,842 |
|
|
|
|
|
|
|
|
|
|
Fair
value of debt
|
|
$ |
105,962 |
|
|
$ |
112,389 |
|
|
|
|
|
|
|
|
|
|
Total
Automotive and Financial Services sectors
|
|
$ |
132,663 |
|
|
$ |
153,069 |
|
Intersector
elimination (d)
|
|
|
(646 |
) |
|
|
(492 |
) |
Total
Company
|
|
$ |
132,017 |
|
|
$ |
152,577 |
|
_______
(a)
|
Includes
unamortized discount on convertible notes per the change in the accounting
standards for convertible debt instruments that, upon conversion, may be
settled in cash.
|
(b)
|
The
Ford Interest Advantage program consists of Ford Credit's floating rate
demand notes.
|
(c)
|
Adjustments
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.
|
Item
1. Financial Statements (Continued)
NOTE
7. DEBT AND COMMITMENTS (Continued)
The fair
value of debt is estimated based on quoted market prices, current market rates
for similar debt within approximately the same remaining maturities, or
discounted cash flow models utilizing current market rates. Fair
value of debt reflects interest accrued but not yet paid. Interest
accrued on Automotive sector debt is reported in Automotive accrued liabilities and
deferred revenue and was $339 million and $438 million at September 30,
2009 and December 31, 2008, respectively. Interest accrued on
Financial Services sector debt is reported in Financial Services other liabilities
and deferred income and was $1.1 billion and $1.3 billion at September
30, 2009 and December 31, 2008, respectively. The change in the fair
value of our debt in the first nine months of 2009 was primarily driven by
improvements in the credit markets generally, and an improved market view of
Ford specifically.
Debt
maturities at September 30, 2009 were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Debt Carrying Value
|
|
Automotive
Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public
unsecured debt securities
|
|
$ |
— |
|
|
$ |
334 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
5,260 |
|
|
$ |
5,594 |
|
|
$ |
— |
|
|
$ |
5,594 |
|
Convertible
Notes (a)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
579 |
|
|
|
579 |
|
|
|
(179 |
) |
|
|
400 |
|
Subordinated
convertible debentures
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,077 |
|
|
|
3,077 |
|
|
|
— |
|
|
|
3,077 |
|
Secured
term loan
|
|
|
18 |
|
|
|
70 |
|
|
|
70 |
|
|
|
70 |
|
|
|
4,328 |
|
|
|
— |
|
|
|
4,556 |
|
|
|
— |
|
|
|
4,556 |
|
Secured
revolving loan
|
|
|
— |
|
|
|
— |
|
|
|
10,166 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,166 |
|
|
|
— |
|
|
|
10,166 |
|
U.S.
Department of Energy loans
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
44 |
|
|
|
89 |
|
|
|
753 |
|
|
|
886 |
|
|
|
— |
|
|
|
886 |
|
Short
term and other debt (b)
|
|
|
332 |
|
|
|
1,015 |
|
|
|
292 |
|
|
|
198 |
|
|
|
141 |
|
|
|
318 |
|
|
|
2,296 |
|
|
|
— |
|
|
|
2,296 |
|
Unamortized
discount
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(86 |
) |
|
|
(86 |
) |
Total
Automotive debt
|
|
|
350 |
|
|
|
1,419 |
|
|
|
10,528 |
|
|
|
312 |
|
|
|
4,558 |
|
|
|
9,987 |
|
|
|
27,154 |
|
|
|
(265 |
) |
|
|
26,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Services Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured
debt
|
|
|
8,212 |
|
|
|
8,506 |
|
|
|
12,207 |
|
|
|
7,289 |
|
|
|
4,908 |
|
|
|
8,251 |
|
|
|
49,373 |
|
|
|
— |
|
|
|
49,373 |
|
Asset-backed
debt
|
|
|
15,985 |
|
|
|
21,108 |
|
|
|
14,760 |
|
|
|
3,659 |
|
|
|
953 |
|
|
|
204 |
|
|
|
56,669 |
|
|
|
— |
|
|
|
56,669 |
|
Unamortized
discount
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(558 |
) |
|
|
(558 |
) |
Fair
value adjustments (c)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
290 |
|
|
|
290 |
|
Total
Financial Services debt
|
|
|
24,197 |
|
|
|
29,614 |
|
|
|
26,967 |
|
|
|
10,948 |
|
|
|
5,861 |
|
|
|
8,455 |
|
|
|
106,042 |
|
|
|
(268 |
) |
|
|
105,774 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersector
elimination (d)
|
|
|
— |
|
|
|
(646 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(646 |
) |
|
|
— |
|
|
|
(646 |
) |
Total
Company
|
|
$ |
24,547 |
|
|
$ |
30,387 |
|
|
$ |
37,495 |
|
|
$ |
11,260 |
|
|
$ |
10,419 |
|
|
$ |
18,442 |
|
|
$ |
132,550 |
|
|
$ |
(533 |
) |
|
$ |
132,017 |
|
_______
(a)
|
Adjustment
reflects unamortized discount per the change in the accounting standards
for convertible debt instruments that, upon conversion, may be settled in
cash.
|
(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.
|
Item
1. Financial Statements (Continued)
NOTE
7. DEBT AND COMMITMENTS (Continued)
Automotive
Sector
Public
Unsecured Debt Securities
Our
public unsecured debt securities outstanding 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 |
|
|
|
184 |
|
6.55% Debentures due October
3, 2022 (a)
|
|
|
15 |
|
|
|
15 |
|
7
1/8% Debentures due November 15, 2025
|
|
|
209 |
|
|
|
297 |
|
7
1/2% Debentures due August 1, 2026
|
|
|
193 |
|
|
|
250 |
|
6
5/8% Debentures due February 15, 2028
|
|
|
104 |
|
|
|
127 |
|
6 5/8% Debentures due October
1, 2028 (b)
|
|
|
638 |
|
|
|
760 |
|
6 3/8% Debentures due February
1, 2029 (b)
|
|
|
260 |
|
|
|
458 |
|
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 |
|
|
|
397 |
|
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 |
|
|
|
152 |
|
7.40%
Debentures due November 1, 2046
|
|
|
398 |
|
|
|
469 |
|
9.980%
Debentures due February 15, 2047
|
|
|
181 |
|
|
|
232 |
|
7.70%
Debentures due May 15, 2097
|
|
|
142 |
|
|
|
377 |
|
Total
public unsecured debt securities (d)
|
|
$ |
5,594 |
|
|
$ |
9,148 |
|
_________
|
(a)
|
Unregistered
industrial revenue bonds.
|
|
(b)
|
Listed
on the Luxembourg Exchange and on the Singapore
Exchange.
|
|
(c)
|
Listed
on the New York Stock Exchange.
|
|
(d)
|
Total
excludes 9 1/2%
Debentures due September 15, 2011 and 9.215% Debentures due
September 15, 2021 with outstanding balances at September 30, 2009
of $167 million and $180 million, respectively. These securities are
on-lent to Ford Holdings to fund Financial Services activity and are
reported as Financial
Services debt.
|
Debt
Repurchases. In January 2009, we repurchased through a private
market transaction $165 million principal amount of our outstanding public
unsecured debt securities 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.
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 its tax liabilities to us. As a
result of the transaction, we recorded a pre-tax gain of $2.2 billion, net of
unamortized discounts, premiums and fees, in Automotive interest income and other
non-operating income/(expense), net in the second quarter of
2009.
Debt for Equity
Exchanges. During the first half of 2008, we issued an
aggregate of 46,437,906 shares of Ford Common Stock, par value $0.01 per share,
in exchange for $431 million principal amount of our outstanding public
unsecured debt securities. As a result of the exchange, we recorded a
pre-tax gain of $73 million, net of unamortized discounts, premiums and fees, in
Automotive interest income and
other non-operating income/(expense), net.
Item
1. Financial Statements (Continued)
NOTE
7. DEBT AND COMMITMENTS (Continued)
Convertible
Notes
Pursuant
to our December 2006 issuance, at September 30, 2009, we had outstanding $579
million of Convertible Notes. 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 20 trading days during any
consecutive 30 trading day period.
We
applied the guidance for accounting for convertible debt instruments that, upon
conversion, may be settled in cash retrospectively to all periods presented
following our adoption of this guidance on January 1, 2009 (see Note 1 for
additional detail).
The
following table summarizes the liability and equity components of our
Convertible Notes (in millions):
|
|
|
|
|
|
|
Liability
component
|
|
|
|
|
|
|
Principal
|
|
$ |
579 |
|
|
$ |
4,883 |
|
Unamortized
discount
|
|
|
(179 |
) |
|
|
(1,619 |
) |
Net
carrying amount
|
|
$ |
400 |
|
|
$ |
3,264 |
|
|
|
|
|
|
|
|
|
|
Equity
component (recorded in Capital in excess of par value
of stock)
|
|
$ |
(3,207 |
) |
|
$ |
(1,864 |
) |
We
recognized interest cost on our Convertible Notes as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual
interest coupon
|
|
$ |
6 |
|
|
$ |
53 |
|
|
$ |
68 |
|
|
$ |
158 |
|
Amortization
of discount
|
|
|
4 |
|
|
|
32 |
|
|
|
44 |
|
|
|
94 |
|
Total
interest cost on Convertible Notes
|
|
$ |
10 |
|
|
$ |
85 |
|
|
$ |
112 |
|
|
$ |
252 |
|
The
discount on the liability component will amortize through December 20,
2016. The total effective rate on the liability component was
10.5%.
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 467,909,227 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. As a result of the conversion, we recorded a
pre-tax gain of $1.2 billion to Automotive interest income and other
non-operating income/(expense), net in the second quarter of
2009.
Subsequent
Event. On November 3, 2009, we entered into an underwriting
agreement for the public issuance of $2.5 billion principal amount of 4.25%
Senior Convertible Notes due November 15, 2016. These notes are
convertible, under certain circumstances, into Ford Common Stock at a conversion
price of approximately $9.30 per share. Upon conversion, we will have
the right to deliver, in lieu of shares of Ford Common Stock, cash or a
combination of cash and Common Stock. The transaction is scheduled to
settle on November 9, 2009 and will result in net proceeds to us of about $2.44
billion. We have granted the underwriters an option to purchase an
additional $375 million in aggregate principal amount of these convertible
notes. The liability component will be recorded in Debt, and the equity
component will be recorded in Capital in excess of par value of
stock.
These
senior convertible notes will be issued pursuant to our existing effective shelf
registration statement filed with the SEC. Net proceeds to us from
the senior convertible notes offering are expected to be used for general
corporate purposes.
Item
1. Financial Statements (Continued)
NOTE
7. DEBT AND COMMITMENTS (Continued)
Subordinated
Convertible Debentures
At
September 30, 2009, we had outstanding $3 billion of 6.50% Junior Subordinated
Convertible Debentures due 2032 ("Subordinated Convertible Debentures") and $93
million of deferred interest, reported in Automotive long-term
debt. The $3 billion of Subordinated Debentures are due to
Trust II, a subsidiary trust, and are the sole assets of Trust II. As
of January 15, 2007, the Subordinated Convertible Debentures have become
redeemable at our option. As announced on March 27, 2009, we elected
to defer future interest payments related to the Trust Preferred Securities for
up to 5 years.
At
September 30, 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.
During
the first quarter of 2009, pursuant to a request for conversion, we issued an
aggregate of 2,437,562 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
Pursuant
to our December 2006 Credit Agreement, at September 30, 2009, we had outstanding
$4.6 billion of a secured term loan maturing on December 15, 2013 and $10.2
billion of revolving loans maturing on December 15, 2011. The term
loan principal amount amortizes at a rate of $70 million (1% of original loan)
per annum and bears interest at LIBOR plus a margin of 3.00%. The
revolving loan bears interest at LIBOR plus a margin of 2.25%.
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.
Item
1. Financial Statements (Continued)
NOTE
7. DEBT AND COMMITMENTS (Continued)
Secured Revolving Loan
Draw. Due to concerns about instability in the capital markets
and the uncertain state of the global economy, on February 3, 2009, we borrowed
$10.1 billion under the revolving credit facility of the Credit Agreement to
ensure access to these funds. As expected, the $890 million
commitment of Lehman Commercial Paper Inc. ("LCPI"), one of the lenders under
the facility, was not funded because LCPI filed for protection under Chapter 11
of the U.S. Bankruptcy Code on October 5, 2008. LCPI subsequently
assigned $110 million of its revolving commitment to other lenders, and $89
million of these assignee lenders' revolving commitments were funded in the
third quarter of 2009. On July 10, 2009, we terminated the remaining
LCPI commitment of $780 million.
We also
received an additional $10 million under the revolving credit facility in the
third quarter of 2009 for amounts previously committed but not yet
received.
Secured Term Loan
Repurchase. On March 27, 2009, Ford Credit purchased from the
lenders under the Credit Agreement $2.2 billion principal amount of our secured
term loan thereunder 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. 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.
In July
2009, Ford Leasing purchased from the lenders under the Credit Agreement $45
million principal amount of our secured term loan thereunder for an aggregate
cost of $37 million. Ford Holdings elected to receive the $37 million
from Ford Leasing as a dividend, whereupon the debt was immediately
forgiven. As a result of this transaction, we recorded a pre-tax gain
of $8 million in Automotive
interest income and other non-operating income/(expense), net in the
third quarter of 2009.
Subsequent Event. On November 2, 2009, we
proposed to the lenders under the Credit Agreement an amendment that would
reduce revolving lenders’ revolving commitments, extend the maturity of such
lenders’ revolving commitments until 2013 and modify certain covenants and other
provisions. Pursuant to the proposal, each revolving lender that
agrees to extend the maturity of its revolving commitments may reduce its
revolving commitment by up to 25 percent at its election and to the extent its
reduced revolving commitment exceeds certain specified levels, such excess would
be converted into a new term loan under the Credit Agreement maturing on
December 15, 2013. In exchange for a reduction in their revolving
commitments, as well as a 1 percentage point increase in interest rate margins,
an increase in fees, and payment of an upfront fee, the revolving lenders would
agree to extend the maturity of their revolving commitments and loans to
November 30, 2013 from December 15, 2011. The modified covenants
would expand existing limitations on debt prepayments and repurchases to allow
for further balance sheet improvements. We would repay revolving
loans to the extent necessary to effect the commitment reductions on December 3,
2009.
The
revolving lenders are required to submit their responses to our proposal by
November 18, 2009. As of the date of this Report, certain revolving
lenders have indicated that they intend to accept our proposal and extend about
$6 billion of revolving commitments and loans to November 30,
2013. The amendment and extension is subject to approval by lenders
holding a majority in principal amount of the loans and commitments outstanding
under the Credit Agreement.
Item
1. Financial Statements (Continued)
NOTE
7. DEBT AND COMMITMENTS (Continued)
U.S.
Department of Energy Loan
Pursuant
to the Loan Arrangement and Reimbursement Agreement (the "Arrangement
Agreement") with the U.S. Department of Energy ("DOE") entered into on September
16, 2009, we have outstanding $886 million in loans. The DOE agreed
to (i) arrange a 13-year multi-draw term loan facility (the "Facility") under
the Advanced Technology Vehicles Manufacturing ("ATVM") Program in the aggregate
principal amount of up to $5.9 billion, (ii) designate us as a borrower under
the ATVM Program and (iii) cause the Federal Financing Bank ("FFB") to enter
into the Note Purchase Agreement (the "Note Purchase Agreement") for the
purchase of notes to be issued by us evidencing such loans under the Arrangement
Agreement. Loans under the ATVM will be made by and through the
Federal Financing Bank, an instrumentality of the U.S. government that is under
the general supervision of the U.S. Secretary of the Treasury.
The
proceeds of advances under the Facility will be used to finance certain costs
eligible for financing under the ATVM Program ("Eligible Project Costs") that
are incurred through mid-2012 in the implementation of 13 advanced technology
vehicle programs approved by the DOE (each, a "Project"). The
Arrangement Agreement limits the amount of advances that may be used to fund
Eligible Project Costs for each Project, and our ability to finance Eligible
Project Costs with respect to a Project is conditioned on us meeting agreed
timing milestones and fuel economy targets for that Project.
Maturity, Interest Rate and
Amortization. Advances may be requested from September 16,
2009 through June 30, 2012, and the loans will mature on June 15, 2022 (the
"Maturity Date"). Each advance bears interest at a blended rate based
on the Treasury yield curve at the time such advance is
borrowed. Interest is payable quarterly in arrears. The
principal amount of the loans will be payable in equal quarterly installments
commencing on September 15, 2012 through the Maturity Date.
Collateral. The
$5.9 billion aggregate principal amount is comprised of two loans: a $1.5
billion note secured by a first priority lien on any assets purchased or
developed with the proceeds of the loans, and a $4.4 billion note secured by a
junior lien on all of the collateral pledged under our Credit Agreement
subordinated solely to (a) perfected security interests securing certain
indebtedness, as defined in the Arrangement Agreement, and letters of credit not
to exceed $19.1 billion and short-term cash management and hedging obligations
in an amount not to exceed $1.5 billion and (b) certain other permitted liens
described in the Arrangement Agreement.
Guarantees. Certain
of our subsidiaries that, together with us, hold a substantial portion of the
consolidated domestic automotive assets (excluding cash) and that guarantee the
Credit Agreement will guarantee our obligations under the Facility, and future
material domestic subsidiaries will become guarantors when formed or
acquired.
Affirmative
Covenants. The Arrangement Agreement contains affirmative
covenants substantially similar to those in the Credit Agreement (including
similar baskets and exceptions), as well as certain other affirmative covenants
required in connection with the ATVM Program, including compliance with ATVM
Program requirements, introduction of advanced technology vehicles to meet or
exceed projected overall annual fuel economy improvements and delivery of
progress reports and independent auditor reports with respect to the
Projects.
Item
1. Financial Statements (Continued)
NOTE
7. DEBT AND COMMITMENTS (Continued)
Negative
Covenants. The Arrangement Agreement contains negative
covenants substantially similar to those in the Credit Agreement. The
Arrangement Agreement also contains a negative covenant substantially similar to
the liquidity covenant in the Credit Agreement requiring that we not permit
Available Liquidity (as defined in the Arrangement Agreement) to be less than $4
billion.
Events of
Default. In addition to customary payment, representation,
bankruptcy and judgment defaults, the Arrangement Agreement contains
cross-payment and cross-acceleration defaults with respect to other debt for
borrowed money and a change in control default, as well as events of default
specific to the facility.
Financial
Services Sector
Unsecured
Debt
Debt
Repurchases. In the third quarter 2009, through private market
transactions, Ford Credit repurchased an aggregate of $1.5 billion principal
amount of its outstanding unsecured notes for $1.5 billion in
cash. As a result, Ford Credit recorded a pre-tax loss of $4 million,
net of unamortized discounts, premiums and fees, in Financial Services other
income/loss, net.
In the
first nine months of 2009, through private market transactions, our Financial
Services sector repurchased an aggregate of $2.6 billion principal amount of its
outstanding unsecured notes for $2.5 billion in cash. As a result,
our Financial Services sector recorded a pre-tax gain of $69 million, net of
unamortized discounts, premiums and fees, in Financial Services other
income/loss, net in the first nine months of 2009 ($51 million related to
Ford Holdings and $18 million related to Ford Credit).
Asset-Backed
Debt
The
following table shows the assets and the related liabilities related to Ford
Credit's secured debt arrangements that are included in our financial statements
(in billions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$ |
3.6 |
|
|
$ |
47.5 |
|
|
$ |
37.5 |
|
|
$ |
3.3 |
|
|
$ |
51.6 |
|
|
$ |
42.6 |
|
Wholesale
|
|
|
1.2 |
|
|
|
15.5 |
|
|
|
9.6 |
|
|
|
1.2 |
|
|
|
22.1 |
|
|
|
17.6 |
|
Net
investment in operating leases
|
|
|
1.3 |
|
|
|
13.9 |
|
|
|
9.5 |
|
|
|
1.0 |
|
|
|
15.6 |
|
|
|
12.0 |
|
Total
secured debt arrangements (a)(b)
|
|
$ |
6.1 |
|
|
$ |
76.9 |
|
|
$ |
56.6 |
|
|
$ |
5.5 |
|
|
$ |
89.3 |
|
|
$ |
72.2 |
|
_________
|
(a)
|
Includes
debt of $51.7 billion and $62.3 billion as of September 30, 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 $5.8 billion and $4.8
billion of cash and cash equivalents, $43.4 billion and $41.9 billion of
retail receivables, $13.5 billion and $19.6 billion of wholesale
receivables, and $13.9 billion and $15.6 billion of net investment in
operating leases as of September 30, 2009 and December 31, 2008,
respectively. Refer to Note 4 for further discussion regarding VIEs.
|
|
(b)
|
Includes
assets pledged as collateral of $3.6 billion and $1.4 billion and the
related secured debt arrangements of $2.4 billion and $1.1 billion as of
September 30, 2009 and December 31, 2008, respectively.
|
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, in
which it retains a significant interest, to bank conduits or sponsor
banks. The outstanding balance of the transferred pools of finance
receivables was $3.6 billion and $8.4 billion and the related secured debt was
$3 billion and $6.9 billion at September 30, 2009 and December 31, 2008,
respectively.
Financial
Services sector asset-backed debt also included $99 million and $105 million at
September 30, 2009 and December 31, 2008, respectively, that is secured by
property.
Item
1. Financial Statements (Continued)
NOTE
8. IMPAIRMENTS
Automotive
Sector
Held-for-Sale
Impairments
In the
first quarter of 2009 and the first quarter of 2008 we recorded held-for-sale
impairments of $650 million relating to Volvo and $421 million relating to
Jaguar Land Rover, respectively. See Note 12 for discussion of our
held-for-sale impairments.
Long-Lived
Asset Impairments
North America Long-Lived
Assets. In the second quarter of 2008, we recorded a pre-tax
impairment charge of $5.3 billion in Automotive cost of sales
related to the long-lived assets in our Ford North America
segment.
The table
below describes the significant components of the second quarter 2008 long-lived
asset impairment (in millions):
|
|
|
|
Land
|
|
$ |
— |
|
Buildings
and land improvements
|
|
|
698 |
|
Machinery,
equipment and other
|
|
|
2,833 |
|
Special
tools
|
|
|
1,769 |
|
Total
|
|
$ |
5,300 |
|
Other
Impairments
First
Aquitaine. During the second quarter of 2009, we recorded an
other-than-temporary impairment of our investment in the Bordeaux automatic
transmission plant of $79 million in Automotive cost of
sales. The fair value measurement of $241 million used to
determine the impairment was based on the cost approach and considered the
condition of the plant's fixed assets. The fair value of our
investment is classified in Level 3 of our fair-value hierarchy.
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 reflected anticipated proceeds
that are expected to be de
minimis. The fair value of our investment was classified in
Level 2 of our fair-value hierarchy. In the first quarter of 2008, we
recorded an other-than-temporary impairment of $88 million in Automotive cost of sales
related to our consolidated dealerships.
Financial
Services Sector
Long-Lived
Asset Impairments
Certain
Vehicle Line Operating Leases. In the second quarter of 2008,
we recorded a pre-tax impairment charge of $2.1 billion in Selling, administrative and other
expenses on our consolidated income statement and in Financial Services depreciation
on our sector income statement related to certain vehicle lines in Ford
Credit's North America operations operating lease portfolio.
Other
Impairments
DFO
Partnership. In March 2009, our Board approved a potential
sale of the Financial Service's investment in DFO Partnership. DFO
Partnership holds a portfolio of "non-core" diversified leveraged lease assets
(e.g., railcars, aircraft, and energy facilities). Information
obtained from bids was used to assist in determining a $200 million fair value
of the investment in DFO Partnership. As a result, during the first
quarter of 2009, an other-than-temporary impairment of the investment in DFO
Partnership of $141 million was recorded in Financial Services equity in net
income/(loss) of affiliated companies. The fair value of the
investment was classified in Level 2 of our fair-value hierarchy.
During
the third quarter of 2009, the Financial Services sector completed the sale of
its interest in DFO Partnership. As a result of the sale, a pre-tax
gain of $9 million (net of transaction costs) was recognized in Financial Services other
income/(loss), net.
Item
1. Financial Statements (Continued)
NOTE
9. OTHER INCOME/(LOSS)
Automotive
Sector. The following table summarizes the amounts included in
Automotive interest income and
other non-operating income/(expense), net (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$ |
47 |
|
|
$ |
203 |
|
|
$ |
160 |
|
|
$ |
809 |
|
Realized
and unrealized gains/(losses) on cash equivalents and marketable
securities
|
|
|
93 |
|
|
|
(430 |
) |
|
|
326 |
|
|
|
(812 |
) |
Gains/(Losses)
on the sale of held-for-sale operations, equity and cost investments, and
other dispositions
|
|
|
— |
|
|
|
(48 |
) |
|
|
(15 |
) |
|
|
(441 |
) |
Gains/(Losses)
on extinguishment of debt
|
|
|
8 |
|
|
|
34 |
|
|
|
4,666 |
|
|
|
107 |
|
Other*
|
|
|
3 |
|
|
|
(3 |
) |
|
|
9 |
|
|
|
(7 |
) |
Total
|
|
$ |
151 |
|
|
$ |
(244 |
) |
|
$ |
5,146 |
|
|
$ |
(344 |
) |
_________
* First
nine months of 2009 includes $4 million in other income associated with the
overall debt reduction actions discussed in Note 7.
Financial Services
Sector. The following table summarizes the amounts included in
Financial Services other
income/(loss), net (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income (non-financing related)
|
|
$ |
22 |
|
|
$ |
135 |
|
|
$ |
87 |
|
|
$ |
419 |
|
Realized
and unrealized gains/(losses) on cash equivalents and marketable
securities
|
|
|
31 |
|
|
|
34 |
|
|
|
43 |
|
|
|
(14 |
) |
Gains/(Losses)
on the sale of held-for-sale operations, equity and cost investments, and
other dispositions
|
|
|
12 |
|
|
|
(2 |
) |
|
|
15 |
|
|
|
33 |
|
Gains/(Losses)
on extinguishment of debt *
|
|
|
(4 |
) |
|
|
— |
|
|
|
73 |
|
|
|
— |
|
Investment
and other income related to sales of receivables
|
|
|
(49 |
) |
|
|
69 |
|
|
|
(30 |
) |
|
|
186 |
|
Insurance
premiums earned, net
|
|
|
20 |
|
|
|
28 |
|
|
|
76 |
|
|
|
110 |
|
Other
|
|
|
99 |
|
|
|
36 |
|
|
|
167 |
|
|
|
201 |
|
Total
|
|
$ |
131 |
|
|
$ |
300 |
|
|
$ |
431 |
|
|
$ |
935 |
|
_________
* Included
in the first nine months of 2009 is a gain of $4 million based on extinguishment
of debt from exercise of a contractually-permitted put option.
NOTE
10. 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.
Our
collective bargaining agreement with the National Automobile, Aerospace,
Transportation, and General Workers Union of Canada ("CAW") contains a provision
pursuant to which we are required to pay idled employees a portion of their
wages and certain benefits for a specified period of time based on the number of
credits an employee has received.
We
establish liabilities for employee benefits that we expect to provide under our
collective bargaining agreements. At September 30, 2009 and December
31, 2008, the related liabilities were $76 million and $411 million,
respectively. During the third quarter of 2009 and 2008, we recorded
in Automotive cost of
sales a reduction of expense of $22 million and $320 million,
respectively. In the first nine months of 2009 and 2008, we recorded
a reduction of expense of $336 million and $264 million,
respectively.
Item
1. Financial Statements (Continued)
NOTE
10. EMPLOYEE SEPARATION ACTIONS AND EXIT AND DISPOSAL ACTIVITIES (Continued)
Separation
Actions
The costs
of voluntary employee separation actions are recorded at the time of employees'
acceptances, unless the acceptances require explicit approval by the
Company. The costs of conditional voluntary separations are accrued
when all conditions are satisfied. Payments made to employees who
have separated and for which there are ongoing eligibility requirements are
accrued when the requirements 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. We have a separation
reserve established for voluntary employee separation actions recorded at the
time of employees' acceptances. At September 30, 2009 and December
31, 2008, this reserve was $58 million and $162 million,
respectively. The ending balance in the reserve primarily represents
the cost of separation packages for employees who accepted separation packages
but have not yet left the Company, as well as employees who accepted a
retirement package and ceased duties but remain on our employment rolls until
they reach retirement eligibility.
We
recorded pre-tax charges in Automotive cost of sales of
$15 million and $45 million for the third quarter of 2009 and 2008,
respectively, and $111 million and $236 million for the first nine months of
2009 and 2008, respectively. The charges result from acceptances of
voluntary employee separations actions in the periods and the ongoing costs
related to continued eligibility requirements that were met by employees who
were previously separated.
Other Employee Separation
Actions. The following table shows pre-tax charges for other
hourly and salaried employee separation actions for the third quarter and first
nine months of 2009 and 2008, respectively, which are recorded in Automotive cost of sales and
Selling, administrative and
other expenses (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
North America (U.S. salaried-related)
|
|
$ |
1 |
|
|
$ |
107 |
|
|
$ |
104 |
|
|
$ |
140 |
|
Ford
South America
|
|
|
6 |
|
|
|
— |
|
|
|
19 |
|
|
|
— |
|
Ford
Europe
|
|
|
7 |
|
|
|
7 |
|
|
|
79 |
|
|
|
17 |
|
Ford
Asia Pacific Africa
|
|
|
4 |
|
|
|
14 |
|
|
|
10 |
|
|
|
18 |
|
Volvo
|
|
|
1 |
|
|
|
7 |
|
|
|
5 |
|
|
|
8 |
|
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. In the third quarter and first nine months of
2009, Ford Credit recognized pre-tax charges of $14 million and $56 million,
respectively, in Selling,
administrative and other expenses for this and other employee separation
actions outside of the United States.
These
charges exclude pension costs.
NOTE
11. 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). We manage our operations by
multi-jurisdictional business units, however, and thus are unable to reasonably
compute one overall effective tax rate. Accordingly, our worldwide
tax provision is calculated pursuant to U.S. GAAP, 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 have reached agreement on our transfer pricing
methodologies. The agreement covers a number of years and has
resulted in a favorable impact to the income tax provision of $196 million
through the first nine months of 2009, primarily resulting from the refund of
prior Canadian tax payments.
Item
1. Financial Statements (Continued)
NOTE
11. INCOME TAXES (Continued)
On
September 11, 2009, our Board of Directors adopted a tax benefit preservation
plan (the "Plan") designed to preserve shareholder value and the value of
certain tax assets including net operating losses, capital losses and tax credit
carryforwards ("Tax Attributes"). At December 31, 2008, we had Tax
Attributes that would offset $19 billion of U.S. taxable income. Our
ability to use these Tax Attributes would be substantially limited if there were
an "ownership change" as defined under Section 382 of the Internal Revenue
Code. In general, an ownership change would occur if 5-percent
shareholders (as defined under U.S. federal income tax laws) collectively
increase their ownership in Ford by more than 50 percentage points over a
rolling three-year period.
In
connection with the Plan, our Board of Directors declared a dividend of one
preferred share purchase right for each share of Ford Common and Class B Stock
as of the close of business on September 25, 2009. In accordance with
the Plan, shares held by any person who acquires, without the approval of our
Board of Directors, beneficial ownership of 4.99% or more of outstanding Ford
Common Stock (including any ownership interest held by that person's affiliates
and associates as defined under the Plan) could be subject to significant
dilution.
NOTE
12. DISCONTINUED OPERATIONS, HELD-FOR-SALE OPERATIONS, OTHER
DISPOSITIONS, AND ACQUISITIONS
Automotive
Sector
Discontinued
Operations
Automotive Protection Corporation
("APCO"). In 2007, we completed the sale of APCO and realized
a pre-tax gain of $51 million (net of transaction costs and working capital
adjustments), reported in Income/(Loss) from discontinued
operations. In the second quarter of 2009, Ford received
additional proceeds related to the settlement of a state and local tax matter
that was unresolved at the time of sale and recognized after-tax gain of $3
million in Income/(Loss) from
discontinued operations.
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%. 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 ceased 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.
Item
1. Financial Statements (Continued)
NOTE
12. DISCONTINUED OPERATIONS, HELD-FOR-SALE OPERATIONS, OTHER
DISPOSITIONS, AND ACQUISITIONS
(Continued)
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.
The
assets and liabilities of Volvo classified as held for sale are as
follows:
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Receivables
|
|
$ |
387 |
|
|
$ |
399 |
|
Inventories
|
|
|
1,399 |
|
|
|
1,630 |
|
Net
property
|
|
|
4,958 |
|
|
|
4,422 |
|
Goodwill
|
|
|
1,264 |
|
|
|
1,150 |
|
Other
intangibles
|
|
|
210 |
|
|
|
198 |
|
Other
assets
|
|
|
544 |
|
|
|
615 |
|
Impairment
of carrying value
|
|
|
(650 |
) |
|
|
— |
|
Total
assets of the held-for-sale operations
|
|
$ |
8,112 |
|
|
$ |
8,414 |
|
Liabilities
|
|
|
|
|
|
|
|
|
Payables
|
|
$ |
1,953 |
|
|
$ |
1,626 |
|
Pension
liabilities
|
|
|
443 |
|
|
|
560 |
|
Warranty
liabilities
|
|
|
388 |
|
|
|
494 |
|
Other
liabilities
|
|
|
2,571 |
|
|
|
2,807 |
|
Total
liabilities of the held-for-sale operations
|
|
$ |
5,355 |
|
|
$ |
5,487 |
|
Jaguar Land
Rover. On June 2, 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. In the second quarter of 2008, we recognized a pre-tax
loss of $106 million, reported in Automotive interest income and other
non-operating income/(expense), net.
During
the third quarter of 2008, we settled final purchase price adjustments and
recognized an additional pre-tax loss of $30 million reported in Automotive interest income and other
non-operating income/(expense), net. With this, our pre-tax
loss is $136 million. There are no assets or liabilities on our balance sheet
related to Jaguar Land Rover operations.
As part
of the transaction, we continue to supply Jaguar Land Rover with powertrains,
stampings, and other vehicle components. We also provide transitional
support, including engineering, information technology, accounting and other
services. Ford Credit provided financing for Jaguar Land Rover
dealers and customers during a transition period, which varied by market, for up
to 12 months. Due to the cash flows related to these ongoing
activities, Jaguar Land Rover does not qualify as a discontinued
operation.
Other
Dispositions
Progress Ford Sales Limited
("PFS"). In the second quarter of 2009, PFS was substantially
liquidated. As a result, we recognized in Automotive cost of sales a
$281 million foreign exchange translation loss previously deferred in Accumulated other comprehensive
income/(loss).
NuCellSys Holding GmbH
("NuCellSys"). In the second quarter of 2009, we reached an
agreement with Daimler AG ("Daimler") to sell our entire ownership interest in
NuCellSys to Daimler. NuCellSys was a joint venture created by Ford
and Daimler in 2005 for research into and development and manufacture of fuel
cell systems. As a result of the sale, we recognized a loss of $29
million in Automotive interest
income and other non-operating income/(expense), net.
Automotive Components Holdings, LLC
("ACH"). During the second quarter of 2008, we completed the
sale of the ACH glass business to Zeledyne, LLC ("Zeledyne"). As a
result of this transaction, we recognized a pre-tax loss of $285 million
reported in Automotive
interest income and other non-operating income/(expense),
net.
During
the third quarter of 2008, the sale agreement between Ford and Zeledyne was
amended resulting in an additional $19 million pre-tax loss reported in Automotive interest income and other
non-operating income/(expense), net. With this, our pre-tax
loss was $304 million.
Item
1. Financial Statements (Continued)
NOTE
12. DISCONTINUED OPERATIONS, HELD-FOR-SALE OPERATIONS, OTHER
DISPOSITIONS, AND ACQUISITIONS
(Continued)
Ballard Power Systems, Inc.
("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 (50.1%) and Ballard (19.9%) that
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
Triad Financial Corporation
("Triad"). In 2005, Ford Credit completed the sale of
Triad. Ford Credit received additional proceeds pursuant to a
contractual agreement entered into at the closing of the sale, causing Ford
Credit to recognize an after-tax gain of $2 million and $9 million in the first
nine months of 2009 and 2008, respectively, in Income/(Loss) from discontinued
operations.
Held-for-Sale
Operations
Held-for-Sale Finance
Receivables. During the third quarter of 2009, Ford Credit
reclassified to Assets of
discontinued/held-for-sale operations $911 million of Ford Credit
Australia held-for-investment finance receivables that it no longer had the
intent to hold for the foreseeable future or until maturity or
payoff. Information from an independent bid for these assets was used
to determine the fair value of the $911 million that is classified in Level 2 of
our fair value hierarchy. A valuation allowance of $52 million was
recorded in Financial Services
other income/(loss), net related to these assets.
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
December 31, 2008 are summarized as follows (in millions):
|
|
|
|
Assets
|
|
|
|
Finance
receivables, net
|
|
$ |
194 |
|
Other
assets
|
|
|
4 |
|
Total
assets of the held-for-sale operations
|
|
$ |
198 |
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Accounts
payable
|
|
$ |
13 |
|
Debt
|
|
|
41 |
|
Other
liabilities
|
|
|
1 |
|
Total
liabilities of the held-for-sale operations
|
|
$ |
55 |
|
Other
Dispositions
Nordic
Operations. During the second quarter of 2008, Ford Credit
completed the creation of a joint venture finance company and transferred the
majority of its business and assets from Denmark, Finland, Norway, and Sweden
into the joint venture. The joint venture will support the sale of
Ford vehicles in these markets. As a result of the sale, Ford Credit
reduced Finance receivables,
net by $1.7 billion, and recognized a pre-tax gain of $85 million (net of
transaction costs and including $35 million of foreign currency translation
adjustments) in Financial
Services revenues. Ford Credit reports its ownership interest
in the joint venture as an equity method investment.
PRIMUS Financial Services Inc.
("PRIMUS Japan"). During the second quarter of 2008, Ford
Credit completed the sale of 96% of its ownership interest in PRIMUS Japan, its
operation in Japan that offered automotive retail and wholesale financing of
Ford and Mazda vehicles. As a result of the sale, Ford Credit reduced
Finance receivables, net
by $1.8 billion, reduced Debt by $252 million, and
recognized a pre-tax gain of $22 million (net of transaction costs and including
$28 million of foreign currency translation adjustments) in Financial Services
revenues. Ford Credit reports its remaining ownership interest
as a cost method investment.
Item
1. Financial Statements (Continued)
NOTE
12. DISCONTINUED OPERATIONS, HELD-FOR-SALE OPERATIONS, OTHER
DISPOSITIONS, AND ACQUISITIONS
(Continued)
Primus Finance and Leasing, Inc.
("Primus Philippines"). During the second quarter of 2008,
Ford Credit completed the sale of its 60% ownership interest in Primus
Philippines, its operation in the Philippines that offered automotive retail and
wholesale financing of Ford and Mazda vehicles. Ford Credit also
completed the sale of its 40% ownership interest in PFL Holdings, Inc., a
holding company in the Philippines that owned the remaining 40% ownership
interest in Primus Philippines. As a result of the sale, Ford Credit
recognized a pre-tax gain of $5 million (net of transaction costs and including
$1 million of foreign currency translation adjustments) in Financial Services
revenues.
NOTE
13. 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 restricted stock
unit 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
|
|
$ |
997 |
|
|
$ |
(161 |
) |
|
$ |
1,826 |
|
|
$ |
(8,797 |
) |
Effect
of dilutive Convertible Notes (a)(b)
|
|
|
10 |
|
|
|
— |
|
|
|
110 |
|
|
|
— |
|
Effect
of dilutive Trust Preferred Securities (a)(c)
|
|
|
46 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Diluted
income/(loss) from continuing operations
|
|
$ |
1,053 |
|
|
$ |
(161 |
) |
|
$ |
1,936 |
|
|
$ |
(8,797 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
shares outstanding
|
|
|
3,260 |
|
|
|
2,280 |
|
|
|
2,887 |
|
|
|
2,236 |
|
Restricted
and uncommitted-ESOP shares
|
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
Basic
shares
|
|
|
3,259 |
|
|
|
2,279 |
|
|
|
2,886 |
|
|
|
2,235 |
|
Net
dilutive options and restricted and uncommitted-ESOP shares
(d)
|
|
|
102 |
|
|
|
— |
|
|
|
75 |
|
|
|
— |
|
Dilutive
Convertible Notes (b)
|
|
|
63 |
|
|
|
— |
|
|
|
231 |
|
|
|
— |
|
Dilutive
convertible Trust Preferred Securities (c)
|
|
|
160 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Diluted
shares
|
|
|
3,584 |
|
|
|
2,279 |
|
|
|
3,192 |
|
|
|
2,235 |
|
_________
|
(a)
|
As
applicable, includes interest expense, amortization of discount,
amortization of fees, and other changes in income or loss that would
result from the assumed conversion.
|
Not
included in calculation of diluted earnings per share due to their antidilutive
effect:
|
(b)
|
538
million shares for the third quarter of 2008 and the first nine months of
2008, and the related income effect for Convertible
Notes.
|
|
(c)
|
162
million shares for the third quarter of 2008, and 160 million shares and
162 million shares for the first nine months of 2009 and 2008,
respectively, and the related income effect for Trust Preferred
Securities.
|
|
(d)
|
28
million contingently-issuable shares for third quarter of 2008 and 26
million contingently-issuable shares for first nine months of
2008.
|
NOTE
14. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING
ACTIVITIES
Derivative
Financial Instruments and Hedge Accounting
We
adopted FASB newly-issued standard for derivative instruments and hedging
activities on its effective date, January 1, 2009. The standard
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.
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 does generate 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 September 30, 2009 was approximately $2 billion, representing the
maximum loss that we would recognize 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,
the actual loss we would recognize if all counterparties failed to perform as
contracted would be significantly lower.
Item
1. Financial Statements (Continued)
NOTE
14. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
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. In the third quarter of 2009, we began posting cash
collateral with certain counterparties based on our net position with regard to
foreign currency and commodity derivative contracts. As of September
30, 2009, we posted $19 million in cash collateral related to derivative
instruments, which is included in restricted cash and reported in Other assets on our
consolidated balance sheet.
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 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 also is 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 also is 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
14. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
Income
Effect of Derivative Instruments
The
following table summarizes by hedge designation 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 (in millions):
|
|
|
|
|
|
|
|
|
Gain/(Loss)
Recognized in OCI
|
|
|
Gain/(Loss)
Reclassified from AOCI to Income
|
|
|
Gain/(Loss)
Recognized in Income
|
|
|
Gain/(Loss)
Recognized in OCI
|
|
|
Gain/(Loss)
Reclassified from AOCI to Income
|
|
|
Gain/(Loss)
Recognized in Income
|
|
Automotive
Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
exchange contracts
|
|
$ |
(14 |
) |
|
$ |
(13 |
) |
|
$ |
— |
|
|
$ |
(83 |
) |
|
$ |
38 |
(a) |
|
$ |
(1 |
) |
Commodity
contracts
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
Total
|
|
$ |
(14 |
) |
|
$ |
(12 |
) |
|
$ |
— |
|
|
$ |
(83 |
) |
|
$ |
42 |
|
|
$ |
(1 |
) |
Derivatives
not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
exchange contracts – operating exposures (b)
|
|
|
|
|
|
|
|
|
|
$ |
(87 |
) |
|
|
|
|
|
|
|
|
|
$ |
(88 |
) |
Foreign
exchange contracts – investment portfolios
|
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
(12 |
) |
Commodity
contracts
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
(37 |
) |
Other
– interest rate contracts and warrants
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
(6 |
) |
Total
|
|
|
|
|
|
|
|
|
|
$ |
(83 |
) |
|
|
|
|
|
|
|
|
|
$ |
(143 |
) |
Financial
Services Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest settlements and accruals excluded from the assessment of hedge
effectiveness
|
|
|
|
|
|
|
|
|
|
$ |
50 |
|
|
|
|
|
|
|
|
|
|
$ |
107 |
|
Ineffectiveness
(c)
|
|
|
|
|
|
|
|
|
|
|
(18 |
) |
|
|
|
|
|
|
|
|
|
|
(14 |
) |
Total
|
|
|
|
|
|
|
|
|
|
$ |
32 |
|
|
|
|
|
|
|
|
|
|
$ |
93 |
|
Derivatives
not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate contracts
|
|
|
|
|
|
|
|
|
|
$ |
34 |
|
|
|
|
|
|
|
|
|
|
$ |
(50 |
) |
Foreign
exchange contracts (b)
|
|
|
|
|
|
|
|
|
|
|
(114 |
) |
|
|
|
|
|
|
|
|
|
|
(226 |
) |
Cross
currency interest rate swap contracts (b)
|
|
|
|
|
|
|
|
|
|
|
(54 |
) |
|
|
|
|
|
|
|
|
|
|
60 |
|
Other
– warrants
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
— |
|
Total
|
|
|
|
|
|
|
|
|
|
$ |
(133 |
) |
|
|
|
|
|
|
|
|
|
$ |
(216 |
) |
_________
|
(a)
|
Includes
a $4 million gain reclassified from AOCI to income in the first quarter of
2009 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
included in assessment of hedge effectiveness on the derivative (a $46
million gain and a $1 million loss in the third quarter and first nine
months of 2009, respectively) and on the hedged item (a $64 million loss
and a $13 million loss in the third quarter and first nine months of 2009,
respectively).
|
The
notional amounts of the derivative financial instruments do not necessarily
represent amounts exchanged by the parties and, therefore, are not a direct
measure of our exposure to the financial risks described above. The
amounts exchanged are calculated by reference to the notional amounts and by
other terms of the derivatives, such as interest rates, foreign currency
exchange rates or commodity volumes and prices.
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.
Item
1. Financial Statements (Continued)
NOTE
14. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
We expect
to reclassify existing net losses of $3 million from Accumulated other comprehensive
income/(loss) to Automotive cost of sales
during the next twelve months as the underlying exposures are
realized.
Balance
Sheet Effect of Derivative Instruments
The
following table summarizes the estimated fair value of our derivative financial
instruments at September 30, 2009 (in millions unless otherwise
noted):
|
|
|
|
|
|
|
|
Fair
Value of Liabilities
|
|
Automotive
Sector
|
|
|
|
|
|
|
|
|
|
Cash
flow hedges:
|
|
|
|
|
|
|
|
|
|
Foreign
exchange contracts
|
|
$ |
0.2 |
|
|
$ |
3 |
|
|
$ |
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
exchange contracts – operating exposures
|
|
|
5.3 |
|
|
|
101 |
|
|
|
81 |
|
Foreign
exchange contracts – investment exposures
|
|
|
0.2 |
|
|
|
1 |
|
|
|
1 |
|
Commodity
contracts
|
|
|
1.3 |
|
|
|
11 |
|
|
|
98 |
|
Other
– interest rate contracts and warrants
|
|
|
0.2 |
|
|
|
2 |
|
|
|
17 |
|
Total
derivatives not designated as hedging instruments
|
|
|
7.0 |
|
|
|
115 |
|
|
|
197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Automotive sector derivative instruments
|
|
$ |
7.2 |
|
|
$ |
118 |
|
|
$ |
202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Services Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate contracts
|
|
$ |
6.8 |
|
|
$ |
465 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate contracts
|
|
|
85.8 |
|
|
|
1,629 |
|
|
|
1,150 |
|
Foreign
exchange contracts
|
|
|
5.2 |
|
|
|
26 |
|
|
|
44 |
|
Cross
currency interest rate swap contracts
|
|
|
3.4 |
|
|
|
220 |
|
|
|
267 |
|
Total
derivatives not designated as hedging instruments
|
|
|
94.4 |
|
|
|
1,875 |
|
|
|
1,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Financial Services sector derivative instruments
|
|
$ |
101.2 |
|
|
$ |
2,340 |
|
|
$ |
1,461 |
|
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.
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 September 30, 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 $1 million and $14 million for Automotive
and Financial Services sectors, respectively, and reduced derivative liabilities
by $3 million and $27 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 16 for additional information on fair value
measurements of derivative instruments.
Item
1. Financial Statements (Continued)
NOTE
15. RETIREMENT BENEFITS
Pension
and OPEB expense is summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
$ |
85 |
|
|
$ |
94 |
|
|
$ |
76 |
|
|
$ |
91 |
|
|
$ |
102 |
|
|
$ |
80 |
|
Interest
cost
|
|
|
674 |
|
|
|
672 |
|
|
|
326 |
|
|
|
357 |
|
|
|
225 |
|
|
|
356 |
|
Expected
return on assets
|
|
|
(822 |
) |
|
|
(865 |
) |
|
|
(342 |
) |
|
|
(382 |
) |
|
|
(32 |
) |
|
|
(64 |
) |
Amortization
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior
service costs/(credits)
|
|
|
94 |
|
|
|
93 |
|
|
|
22 |
|
|
|
24 |
|
|
|
(228 |
) |
|
|
(232 |
) |
(Gains)/Losses
and Other
|
|
|
4 |
|
|
|
5 |
|
|
|
51 |
|
|
|
56 |
|
|
|
21 |
|
|
|
60 |
|
Separation
programs
|
|
|
— |
|
|
|
43 |
|
|
|
11 |
|
|
|
24 |
|
|
|
— |
|
|
|
1 |
|
(Gain)/Loss
from curtailment
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(2,603 |
) |
Net
expense/(income)
|
|
$ |
35 |
|
|
$ |
42 |
|
|
$ |
144 |
|
|
$ |
170 |
|
|
$ |
87 |
|
|
$ |
(2,402 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
$ |
257 |
|
|
$ |
283 |
|
|
$ |
215 |
|
|
$ |
327 |
|
|
$ |
306 |
|
|
$ |
236 |
|
Interest
cost
|
|
|
2,023 |
|
|
|
2,016 |
|
|
|
923 |
|
|
|
1,218 |
|
|
|
673 |
|
|
|
1,217 |
|
Expected
return on assets
|
|
|
(2,466 |
) |
|
|
(2,597 |
) |
|
|
(963 |
) |
|
|
(1,374 |
) |
|
|
(98 |
) |
|
|
(223 |
) |
Amortization
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior
service costs/(credits)
|
|
|
281 |
|
|
|
281 |
|
|
|
62 |
|
|
|
78 |
|
|
|
(682 |
) |
|
|
(670 |
) |
(Gains)/Losses
and Other
|
|
|
12 |
|
|
|
13 |
|
|
|
128 |
|
|
|
164 |
|
|
|
62 |
|
|
|
237 |
|
Separation
programs
|
|
|
7 |
|
|
|
248 |
|
|
|
122 |
|
|
|
66 |
|
|
|
2 |
|
|
|
12 |
|
(Gain)/Loss
from curtailment
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4 |
) |
|
|
(2,714 |
) |
Net
expense/(income)
|
|
$ |
114 |
|
|
$ |
244 |
|
|
$ |
487 |
|
|
$ |
479 |
|
|
$ |
259 |
|
|
$ |
(1,905 |
) |
_________
* 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 nine months of 2009, we contributed $1.1 billion 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 $300 million in 2009, for a total of $1.4 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.
NOTE
16. FAIR VALUE MEASUREMENTS
Cash Equivalents – Financial
Instruments. Cash and all highly liquid investments with a
maturity of 90 days or less at date of purchase are classified as Cash and cash
equivalents. We measure financial instruments classified as
cash equivalents at fair value. We use quoted prices where available
to determine fair value for U.S. Treasury securities, and industry-standard
valuation models using market-based inputs when quoted prices are unavailable,
such as for government agency securities and corporate obligations.
Marketable
Securities. Investments including U.S. government and non-U.S.
government securities, corporate obligations and equities, and asset-backed
securities with a maturity date greater than 90 days at the date of purchase are
classified as marketable securities. Where available, including for
U.S. Treasury securities and corporate equities, we use quoted market prices to
measure fair value. If quoted market prices are not available, such
as for government agency securities, asset-backed securities, and corporate
obligations, matrix pricing models for similar assets are used.
Retained Interest in Securitized
Assets. Ford Credit estimates the fair value of retained
interests using internal valuation models, market inputs, and its own
assumptions in estimating cash flows from the sales of retail
receivables.
Derivative financial
instruments. Detail on valuation methodologies used to measure
fair value of derivative instruments may be found in Note 14.
The fair
value of debt and loan receivables are presented together with the related
carrying value in Notes 2 and 7, respectively. These Notes also
include a description of valuation methodologies.
Item
1. Financial Statements (Continued)
NOTE
16. FAIR VALUE MEASUREMENTS (Continued)
The
following table summarizes the fair value at September 30, 2009 of those
financial instruments that are measured at fair value on a recurring basis (in
millions):
|
|
Items
Measured at Fair Value on a Recurring Basis
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at September 30,
2009
|
|
Automotive
Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
equivalents – financial instruments (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
government
|
|
$ |
152 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
152 |
|
Government-sponsored
enterprises
|
|
|
— |
|
|
|
779 |
|
|
|
— |
|
|
|
779 |
|
Government
– non U.S.
|
|
|
— |
|
|
|
140 |
|
|
|
— |
|
|
|
140 |
|
Corporate
debt
|
|
|
— |
|
|
|
1,897 |
|
|
|
— |
|
|
|
1,897 |
|
Total
cash equivalents – financial instruments
|
|
|
152 |
|
|
|
2,816 |
|
|
|
— |
|
|
|
2,968 |
|
Marketable
securities (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
government
|
|
|
8,667 |
|
|
|
— |
|
|
|
— |
|
|
|
8,667 |
|
Government-sponsored
enterprises
|
|
|
— |
|
|
|
2,421 |
|
|
|
2 |
|
|
|
2,423 |
|
Corporate
debt
|
|
|
— |
|
|
|
519 |
|
|
|
9 |
|
|
|
528 |
|
Mortgage-backed
and other asset-backed
|
|
|
— |
|
|
|
362 |
|
|
|
31 |
|
|
|
393 |
|
Equity
|
|
|
895 |
|
|
|
1 |
|
|
|
— |
|
|
|
896 |
|
Government
– non U.S.
|
|
|
— |
|
|
|
405 |
|
|
|
2 |
|
|
|
407 |
|
Other
liquid investments (c)
|
|
|
— |
|
|
|
611 |
|
|
|
— |
|
|
|
611 |
|
Total
marketable securities
|
|
|
9,562 |
|
|
|
4,319 |
|
|
|
44 |
|
|
|
13,925 |
|
Derivative
financial instruments
|
|
|
— |
|
|
|
112 |
|
|
|
6 |
|
|
|
118 |
|
Total
assets at fair value
|
|
$ |
9,714 |
|
|
$ |
7,247 |
|
|
$ |
50 |
|
|
$ |
17,011 |
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
financial instruments
|
|
$ |
— |
|
|
$ |
202 |
|
|
$ |
— |
|
|
$ |
202 |
|
Total
liabilities at fair value
|
|
$ |
— |
|
|
$ |
202 |
|
|
$ |
— |
|
|
$ |
202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Services Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
equivalents – financial instruments (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
government
|
|
$ |
400 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
400 |
|
Government-sponsored
enterprises
|
|
|
— |
|
|
|
4,500 |
|
|
|
— |
|
|
|
4,500 |
|
Government
– non U.S.
|
|
|
— |
|
|
|
751 |
|
|
|
— |
|
|
|
751 |
|
Total
cash equivalents – financial instruments
|
|
|
400 |
|
|
|
5,251 |
|
|
|
— |
|
|
|
5,651 |
|
Marketable
securities (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
government
|
|
|
6,549 |
|
|
|
— |
|
|
|
— |
|
|
|
6,549 |
|
Government-sponsored
enterprises
|
|
|
— |
|
|
|
1,453 |
|
|
|
— |
|
|
|
1,453 |
|
Corporate
debt
|
|
|
— |
|
|
|
170 |
|
|
|
3 |
|
|
|
173 |
|
Mortgage-backed
and other asset-backed
|
|
|
— |
|
|
|
249 |
|
|
|
— |
|
|
|
249 |
|
Equity
|
|
|
20 |
|
|
|
— |
|
|
|
— |
|
|
|
20 |
|
Government
– non U.S.
|
|
|
— |
|
|
|
24 |
|
|
|
— |
|
|
|
24 |
|
Other
liquid investments (c)
|
|
|
— |
|
|
|
174 |
|
|
|
— |
|
|
|
174 |
|
Total
marketable securities
|
|
|
6,569 |
|
|
|
2,070 |
|
|
|
3 |
|
|
|
8,642 |
|
Derivative
financial instruments
|
|
|
— |
|
|
|
1,775 |
|
|
|
565 |
|
|
|
2,340 |
|
Retained
interest in securitized assets
|
|
|
— |
|
|
|
— |
|
|
|
33 |
|
|
|
33 |
|
Total
assets at fair value
|
|
$ |
6,969 |
|
|
$ |
9,096 |
|
|
$ |
601 |
|
|
$ |
16,666 |
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
financial instruments
|
|
$ |
— |
|
|
$ |
740 |
|
|
$ |
721 |
|
|
$ |
1,461 |
|
Total
liabilities at fair value
|
|
$ |
— |
|
|
$ |
740 |
|
|
$ |
721 |
|
|
$ |
1,461 |
|
_________
|
(a)
|
Cash equivalents –
financial instruments in this table excludes time deposits,
certificates of deposit, money market accounts, and other cash equivalents
reported at par value totaling $4.2 billion and $7 billion as of September
30, 2009 for Automotive and Financial Services sectors, respectively,
which approximates fair value.
|
|
(b)
|
Marketable
securities excludes an investment in Ford Credit debt securities held by
the Automotive sector with a carrying value of $646 million and an
estimated fair value of $650 million as of September 30, 2009; see Note 1
for additional detail.
|
|
(c)
|
Other
liquid investments include certificates of deposit and time deposits with
a maturity of more than 90 days at date of
purchase.
|
Item
1. Financial Statements (Continued)
NOTE
16. FAIR VALUE MEASUREMENTS (Continued)
The
following table summarizes the changes for the period ended September 30, 2009
in Level 3 financial instruments measured at fair value on a recurring basis (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 September 30, 2009
|
|
|
Change
In Unrealized Gains/ (Losses) on Instruments Still Held
(b)
|
|
Automotive
Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable
securities (c)
|
|
$ |
150 |
|
|
$ |
(21 |
) |
|
$ |
(53 |
) |
|
$ |
(32 |
) |
|
$ |
44 |
|
|
$ |
(3 |
) |
Derivative
financial instruments, net (d)
|
|
|
(32 |
) |
|
|
(8 |
) |
|
|
46 |
|
|
|
— |
|
|
|
6 |
|
|
|
2 |
|
Total
Level 3 fair value
|
|
$ |
118 |
|
|
$ |
(29 |
) |
|
$ |
(7 |
) |
|
$ |
(32 |
) |
|
$ |
50 |
|
|
$ |
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Services Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable
securities (e)
|
|
$ |
5 |
|
|
$ |
(2 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3 |
|
|
$ |
(2 |
) |
Derivative
financial instruments, net (f)
|
|
|
(74 |
) |
|
|
(50 |
) |
|
|
(32 |
) |
|
|
— |
|
|
|
(156 |
) |
|
|
(99 |
) |
Retained
interest in securitized assets (g)
|
|
|
92 |
|
|
|
9 |
|
|
|
(68 |
) |
|
|
— |
|
|
|
33 |
|
|
|
(1 |
) |
Total
Level 3 fair value
|
|
$ |
23 |
|
|
$ |
(43 |
) |
|
$ |
(100 |
) |
|
$ |
— |
|
|
$ |
(120 |
) |
|
$ |
(102 |
) |
_________
|
(a)
|
Includes
option premiums (paid)/received on options traded during the quarter.
|
|
(b)
|
For
those assets and liabilities still held at September 30, 2009.
|
|
(c)
|
Realized/unrealized
gains/(losses) on Level 3 Automotive sector marketable securities for the
period presented are recorded in Automotive interest
income and other
non-operating income/(expenses), net (zero for the third quarter of
2009, and a $1 million loss for the first nine months of 2009), and Accumulated other
comprehensive income/(loss) reflecting foreign currency translation
(zero for the third quarter of 2009, and a $20 million loss for the first
nine months of 2009).
|
|
(d)
|
Reflects
fair value of derivative assets, net of
liabilities. Realized/unrealized gains/(losses) on Level 3
Automotive sector derivative financial instruments for the period
presented are recorded to Automotive cost of sales
(a $2 million loss for the third quarter of 2009, and a $10 million
loss for first nine months of 2009), and Automotive interest income and
other non-operating income/(expense), net (a $1 million gain for
the third quarter of 2009, and a $2 million gain for the first nine months
of 2009).
|
|
(e)
|
Realized/unrealized
gains/(losses) on Level 3 Financial Services sector marketable securities
for the period presented are recorded to Financial Services other
income/(loss), net (zero for the third quarter of 2009, and a $2
million loss for the first nine months of
2009).
|
|
(f)
|
Reflects
fair value of derivative assets, net of
liabilities. Realized/unrealized gains/(losses) on Level 3
Financial Services sector derivative financial instruments for the period
presented are recorded to Financial Services other
income/(loss), net (an $80 million loss for the third quarter of
2009, and a $52 million loss for the first nine months of 2009), and Accumulated other
comprehensive income/(loss) reflecting foreign currency translation
(a $19 million loss for the third quarter of 2009, and a $2 million gain
for the first nine months of 2009).
|
|
(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 (zero for the third quarter of 2009, and a $10
million gain for the first nine months of 2009) and Accumulated other
comprehensive income/(loss) (a $1 million gain for the third
quarter of 2009, and a $1 million loss for the first nine months of
2009).
|
Item
1. Financial Statements (Continued)
NOTE
17. SEGMENT INFORMATION
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRD
QUARTER 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales/Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
customer
|
|
$ |
13,718 |
|
|
$ |
2,089 |
|
|
$ |
7,584 |
|
|
$ |
1,484 |
|
|
$ |
2,995 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
27,870 |
|
Intersegment
|
|
|
65 |
|
|
|
— |
|
|
|
168 |
|
|
|
— |
|
|
|
8 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
241 |
|
Income/(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
223 |
|
|
|
241 |
|
|
|
177 |
|
|
|
21 |
|
|
|
25 |
|
|
|
— |
|
|
|
— |
|
|
|
(142 |
) |
|
|
545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRD
QUARTER 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales/Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
customer
|
|
$ |
10,748 |
|
|
$ |
2,712 |
|
|
$ |
9,660 |
|
|
$ |
1,697 |
|
|
$ |
2,916 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
27,733 |
|
Intersegment
|
|
|
172 |
|
|
|
— |
|
|
|
174 |
|
|
|
— |
|
|
|
18 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
364 |
|
Income/(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
(36 |
) |
|
|
480 |
|
|
|
29 |
|
|
|
(24 |
) |
|
|
(484 |
) |
|
|
(1 |
) |
|
|
(37 |
) |
|
|
(659 |
) |
|
|
(732 |
) |
|
|
Financial
Services Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRD
QUARTER 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales/Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
customer
|
|
$ |
2,937 |
|
|
$ |
85 |
|
|
$ |
— |
|
|
$ |
3,022 |
|
|
$ |
— |
|
|
$ |
30,892 |
|
Intersegment
|
|
|
104 |
|
|
|
4 |
|
|
|
— |
|
|
|
108 |
|
|
|
(349 |
) |
|
|
— |
|
Income/(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
677 |
|
|
|
(7 |
) |
|
|
— |
|
|
|
670 |
|
|
|
— |
|
|
|
1,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRD
QUARTER 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales/Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
customer
|
|
$ |
3,939 |
|
|
$ |
74 |
|
|
$ |
— |
|
|
$ |
4,013 |
|
|
$ |
— |
|
|
$ |
31,746 |
|
Intersegment
|
|
|
171 |
|
|
|
2 |
|
|
|
— |
|
|
|
173 |
|
|
|
(537 |
) |
|
|
— |
|
Income/(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
161 |
|
|
|
(2 |
) |
|
|
— |
|
|
|
159 |
|
|
|
— |
|
|
|
(573 |
) |
_________
* Includes
intersector transactions occurring in the ordinary course of
business.
Item
1. Financial Statements (Continued)
NOTE
17. SEGMENT INFORMATION (Continued)
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST
NINE MONTHS 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales/Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
customer
|
|
$ |
34,705 |
|
|
$ |
5,333 |
|
|
$ |
20,811 |
|
|
$ |
3,855 |
|
|
$ |
8,523 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
73,227 |
|
Intersegment
|
|
|
262 |
|
|
|
— |
|
|
|
539 |
|
|
|
— |
|
|
|
35 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
836 |
|
Income/(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
(1,600 |
) |
|
|
377 |
|
|
|
(479 |
) |
|
|
(108 |
) |
|
|
(994 |
) |
|
|
— |
|
|
|
3 |
|
|
|
3,654 |
|
|
|
853 |
|
Total
assets at September 30 (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST
NINE MONTHS 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales/Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
customer
|
|
$ |
42,077 |
|
|
$ |
6,900 |
|
|
$ |
31,374 |
|
|
$ |
5,143 |
|
|
$ |
11,439 |
|
|
$ |
— |
|
|
$ |
6,974 |
|
|
$ |
— |
|
|
$ |
103,907 |
|
Intersegment
|
|
|
461 |
|
|
|
— |
|
|
|
663 |
|
|
|
— |
|
|
|
75 |
|
|
|
— |
|
|
|
63 |
|
|
|
— |
|
|
|
1,262 |
|
Income/(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
(7,634 |
) |
|
|
1,125 |
|
|
|
1,336 |
|
|
|
15 |
|
|
|
(787 |
) |
|
|
(63 |
) |
|
|
38 |
|
|
|
(1,179 |
) |
|
|
(7,149 |
) |
Total
assets at September 30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94,617 |
|
|
|
Financial
Services Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST
NINE MONTHS 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales/Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
customer
|
|
$ |
9,400 |
|
|
$ |
232 |
|
|
$ |
— |
|
|
$ |
9,632 |
|
|
$ |
— |
|
|
$ |
82,859 |
|
Intersegment
|
|
|
302 |
|
|
|
11 |
|
|
|
— |
|
|
|
313 |
|
|
|
(1,149 |
) |
|
|
— |
|
Income/(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
1,287 |
|
|
|
(174 |
) |
|
|
— |
|
|
|
1,113 |
|
|
|
— |
|
|
|
1,966 |
|
Total
assets at September 30 (a)
|
|
|
124,792 |
|
|
|
10,513 |
|
|
|
(8,675 |
) |
|
|
126,630 |
|
|
|
(3,245 |
) |
|
|
205,896 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRST
NINE MONTHS 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales/Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
customer
|
|
$ |
12,032 |
|
|
$ |
201 |
|
|
$ |
— |
|
|
$ |
12,233 |
|
|
$ |
— |
|
|
$ |
116,140 |
|
Intersegment
|
|
|
597 |
|
|
|
8 |
|
|
|
— |
|
|
|
605 |
|
|
|
(1,867 |
) |
|
|
— |
|
Income/(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
(2,187 |
) |
|
|
(10 |
) |
|
|
— |
|
|
|
(2,197 |
) |
|
|
— |
|
|
|
(9,346 |
) |
Total
assets at September 30
|
|
|
155,305 |
|
|
|
10,237 |
|
|
|
(9,632 |
) |
|
|
155,910 |
|
|
|
(4,009 |
) |
|
|
246,518 |
|
_________
(a)
|
As
reported on our sector balance
sheet.
|
(b)
|
Includes
intersector transactions occurring in the ordinary course of
business.
|
Item
1. Financial Statements (Continued)
NOTE
18. GUARANTEES
At
September 30, 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 including suppliers 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 $256
million and $206 million at September 30, 2009 and December 31, 2008,
respectively. The carrying value of our recorded liabilities related
to guarantees was $72 million and $24 million at September 30, 2009 and December
31, 2008, respectively. Our assessment of performance risk under
these guarantees is reviewed regularly, and have resulted in no changes to our
initial valuation.
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 Financing 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
September 30, 2009 and December 31, 2008, the deferred gain related to the
letters of credit was $10 million and $14 million, respectively. We
believe future performance under these letters of credit is remote.
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. At June 1, 2009,
the indemnifications provided to the buyer of Jaguar Land Rover which were
subject to an aggregate limit of $805 million expired; however, outstanding
claims relating to these indemnifications, as well as indemnifications relating
to certain warranties described in the preceding sentence
continue. We believe that the probability of payment under these
claims and indemnifications 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 third 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, and most
elements are reviewed and adjusted quarterly. 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
|
|
|
(1,895 |
) |
|
|
(2,140 |
) |
Changes
in accrual related to warranties issued during the period
|
|
|
1,073 |
|
|
|
1,575 |
|
Changes
in accrual related to pre-existing warranties
|
|
|
644 |
|
|
|
13 |
|
Foreign
currency translation and other
|
|
|
117 |
|
|
|
(77 |
) |
Ending
balance
|
|
$ |
3,285 |
|
|
$ |
3,580 |
|
Item
1. Financial Statements (Continued)
NOTE
19. EQUITY/(DEFICIT) ATTRIBUTABLE TO FORD MOTOR COMPANY AND
NONCONTROLLING INTERESTS
We
adopted the revised standard on accounting for noncontrolling interests on
January 1, 2009, pursuant to which noncontrolling interests are considered a
component of equity. The standard also 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 (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, January 1
|
|
$ |
(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 of stock for debt conversion, employee benefit
plans, and other
|
|
|
110 |
|
|
|
— |
|
|
|
110 |
|
|
|
154 |
|
|
|
— |
|
|
|
154 |
|
Adoption
of the fair value option for financial assets and financial
liabilities
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance, March 31
|
|
$ |
(17,577 |
) |
|
$ |
1,100 |
|
|
$ |
(16,477 |
) |
|
$ |
8,816 |
|
|
$ |
1,466 |
|
|
$ |
10,282 |
|
Total
comprehensive income/(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income/(loss)
|
|
|
2,261 |
|
|
|
90 |
|
|
|
2,351 |
|
|
|
(8,697 |
) |
|
|
89 |
|
|
|
(8,608 |
) |
Other
comprehensive income/(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
|
|
2,107 |
|
|
|
104 |
|
|
|
2,211 |
|
|
|
(1,452 |
) |
|
|
27 |
|
|
|
(1,425 |
) |
Net
gain/(loss) on derivative instruments
|
|
|
(36 |
) |
|
|
— |
|
|
|
(36 |
) |
|
|
(252 |
) |
|
|
— |
|
|
|
(252 |
) |
Employee
benefit-related
|
|
|
(450 |
) |
|
|
(1 |
) |
|
|
(451 |
) |
|
|
1,184 |
|
|
|
— |
|
|
|
1,184 |
|
Net
holding gain/(loss)
|
|
|
(2 |
) |
|
|
— |
|
|
|
(2 |
) |
|
|
(6 |
) |
|
|
— |
|
|
|
(6 |
) |
Total
other comprehensive income/(loss)
|
|
|
1,619 |
|
|
|
103 |
|
|
|
1,722 |
|
|
|
(526 |
) |
|
|
27 |
|
|
|
(499 |
) |
Total
comprehensive income/(loss)
|
|
|
3,880 |
|
|
|
193 |
|
|
|
4,073 |
|
|
|
(9,223 |
) |
|
|
116 |
|
|
|
(9,107 |
) |
Other
changes in equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
in excess of par value of stock for equity issuance, debt conversion,
employee benefit plans, and other
|
|
|
2,944 |
|
|
|
— |
|
|
|
2,944 |
|
|
|
398 |
|
|
|
— |
|
|
|
398 |
|
Dividends
|
|
|
— |
|
|
|
(3 |
) |
|
|
(3 |
) |
|
|
— |
|
|
|
(128 |
) |
|
|
(128 |
) |
Increase
in noncontrolling interest related to newly consolidated
VIEs
|
|
|
— |
|
|
|
40 |
|
|
|
40 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other
|
|
|
10 |
|
|
|
(5 |
) |
|
|
5 |
|
|
|
2 |
|
|
|
5 |
|
|
|
7 |
|
Ending
balance, June 30
|
|
$ |
(10,743 |
) |
|
$ |
1,325 |
|
|
$ |
(9,418 |
) |
|
$ |
(7 |
) |
|
$ |
1,459 |
|
|
$ |
1,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance, June 30
|
|
$ |
(10,743 |
) |
|
$ |
1,325 |
|
|
$ |
(9,418 |
) |
|
$ |
(7 |
) |
|
$ |
1,459 |
|
|
$ |
1,452 |
|
Total
comprehensive income/(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income/(loss)
|
|
|
997 |
|
|
|
79 |
|
|
|
1,076 |
|
|
|
(161 |
) |
|
|
51 |
|
|
|
(110 |
) |
Other
comprehensive income/(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
|
|
498 |
|
|
|
15 |
|
|
|
513 |
|
|
|
(2,025 |
) |
|
|
(36 |
) |
|
|
(2,061 |
) |
Net
gain/(loss) on derivative instruments
|
|
|
(68 |
) |
|
|
— |
|
|
|
(68 |
) |
|
|
(109 |
) |
|
|
— |
|
|
|
(109 |
) |
Employee
benefit-related
|
|
|
(131 |
) |
|
|
— |
|
|
|
(131 |
) |
|
|
1,442 |
|
|
|
— |
|
|
|
1,442 |
|
Net
holding gain/(loss)
|
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
|
|
(12 |
) |
|
|
— |
|
|
|
(12 |
) |
Total
other comprehensive income/(loss)
|
|
|
301 |
|
|
|
15 |
|
|
|
316 |
|
|
|
(704 |
) |
|
|
(36 |
) |
|
|
(740 |
) |
Total
comprehensive income/(loss)
|
|
|
1,298 |
|
|
|
94 |
|
|
|
1,392 |
|
|
|
(865 |
) |
|
|
15 |
|
|
|
(850 |
) |
Other
changes in equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
in excess of par value of stock for equity issuance, debt conversion,
employee benefit plans, and other
|
|
|
769 |
|
|
|
— |
|
|
|
769 |
|
|
|
525 |
|
|
|
— |
|
|
|
525 |
|
Dividends
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
Increase
in noncontrolling interest related to newly consolidated
VIEs
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other
|
|
|
1 |
|
|
|
(14 |
) |
|
|
(13 |
) |
|
|
1 |
|
|
|
(15 |
) |
|
|
(14 |
) |
Ending
balance, September 30
|
|
$ |
(8,675 |
) |
|
$ |
1,405 |
|
|
$ |
(7,270 |
) |
|
$ |
(346 |
) |
|
$ |
1,458 |
|
|
$ |
1,112 |
|
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 September 30, 2009, and the related consolidated
statements of operations and comprehensive income for the three-month and
nine-month periods ended September 30, 2009 and 2008 and the condensed
consolidated statement of cash flows for the nine-month periods ended September
30, 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
stockholders' equity, and of cash flows 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 the Financial Accounting
Standards Board's ("FASB") revised standard on accounting for noncontrolling
interests and the FASB's standard on 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 12, 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
November
6, 2009
ITEM
2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
THIRD
QUARTER RESULTS OF OPERATIONS
Our
worldwide net income attributable to Ford Motor Company was $997 million or
$0.29 per
share of Common and Class B Stock in the third quarter of 2009, an improvement
of $1.2 billion from a net loss attributable to Ford Motor Company of $161
million or $0.07 per share of Common and Class B Stock in the third quarter of
2008.
Results
by sector are shown below (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
|
|
|
|
|
|
|
Automotive
sector
|
|
$ |
545 |
|
|
$ |
(732 |
) |
|
$ |
1,277 |
|
Financial
Services sector
|
|
|
670 |
|
|
|
159 |
|
|
|
511 |
|
Total
Company
|
|
|
1,215 |
|
|
|
(573 |
) |
|
|
1,788 |
|
Provision
for/(Benefit from) income taxes
|
|
|
139 |
|
|
|
(463 |
) |
|
|
602 |
|
Income/(Loss)
from continuing operations
|
|
|
1,076 |
|
|
|
(110 |
) |
|
|
1,186 |
|
Income/(Loss)
from discontinued operations
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net
income/(loss)
|
|
|
1,076 |
|
|
|
(110 |
) |
|
|
1,186 |
|
Less:
Income/(Loss) attributable to noncontrolling interests (b)
|
|
|
79 |
|
|
|
51 |
|
|
|
28 |
|
Net income/(loss) attributable
to Ford Motor Company (c)
|
|
$ |
997 |
|
|
$ |
(161 |
) |
|
$ |
1,158 |
|
__________
|
(a)
|
Adjusted
for the effect of the change in the accounting standards for convertible
debt instruments that, upon conversion, may be settled in cash; 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 standard on accounting for noncontrolling interests,
which was effective January 1, 2009. Primarily related to Ford
Europe's consolidated 41% owned affiliate, Ford Otosan. The
pre-tax results for Ford Otosan were $89 million and $106 million in the
third quarter of 2009 and 2008, respectively.
|
|
(c)
|
Formerly
labeled "Net income/(loss)," reflects new presentation under the standard
on accounting for noncontrolling interests, effective January 1, 2009.
|
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 special items in each category by segment or business
unit (in millions):
|
|
Third Quarter
– Income/(Loss)
|
|
Personnel and Dealer-Related
Items:
|
|
|
|
|
|
|
Automotive
Sector
|
|
|
|
|
|
|
Ford
North America
|
|
|
|
|
|
|
Retiree
health care and related charges
|
|
$ |
(120 |
) |
|
$ |
2,569 |
|
Personnel-reduction
actions/Other
|
|
|
(23 |
) |
|
|
(197 |
) |
U.S.
dealer actions
|
|
|
(13 |
) |
|
|
(38 |
) |
Job
Security Benefits
|
|
|
22 |
|
|
|
320 |
|
Total
Ford North America
|
|
|
(134 |
) |
|
|
2,654 |
|
Ford
South America
|
|
|
|
|
|
|
|
|
Personnel-reduction
actions
|
|
|
(6 |
) |
|
|
— |
|
Ford
Europe
|
|
|
|
|
|
|
|
|
Personnel-reduction
actions/Other
|
|
|
(16 |
) |
|
|
(40 |
) |
Ford
Asia Pacific Africa
|
|
|
|
|
|
|
|
|
Personnel-reduction
actions
|
|
|
(6 |
) |
|
|
(28 |
) |
Volvo
|
|
|
|
|
|
|
|
|
Personnel-reduction
actions
|
|
|
(3 |
) |
|
|
(15 |
) |
U.S.
dealer actions
|
|
|
— |
|
|
|
(11 |
) |
Total
Volvo
|
|
|
(3 |
) |
|
|
(26 |
) |
Other
Automotive
|
|
|
|
|
|
|
|
|
Returns
on assets held in the TAA
|
|
|
93 |
|
|
|
(250 |
) |
Total
Personnel and Dealer-Related Items - Automotive sector
|
|
|
(72 |
) |
|
|
2,310 |
|
Other Items:
|
|
|
|
|
|
|
|
|
Automotive
Sector
|
|
|
|
|
|
|
|
|
Ford
North America
|
|
|
|
|
|
|
|
|
Accelerated
depreciation related to AAI acquisition of leased facility
|
|
|
— |
|
|
|
(82 |
) |
Gain/(Loss)
on sale of ACH plants
|
|
|
— |
|
|
|
(19 |
) |
Total
Ford North America
|
|
|
— |
|
|
|
(101 |
) |
Volvo
|
|
|
|
|
|
|
|
|
Held-for-sale
cessation of depreciation and related charges
|
|
|
163 |
|
|
|
— |
|
Other
Automotive
|
|
|
|
|
|
|
|
|
Gain
on debt securities exchanged for equity
|
|
|
— |
|
|
|
35 |
|
Net
gains on debt reduction actions
|
|
|
8 |
|
|
|
— |
|
Total
Other Automotive
|
|
|
8 |
|
|
|
35 |
|
Jaguar
Land Rover
|
|
|
|
|
|
|
|
|
Sale-related/Other
|
|
|
— |
|
|
|
(37 |
) |
Total
Other Items – Automotive sector
|
|
|
171 |
|
|
|
(103 |
) |
Financial
Services Sector
|
|
|
|
|
|
|
|
|
DFO
Partnership – gain on sale
|
|
|
9 |
|
|
|
— |
|
Total
|
|
$ |
108 |
|
|
$ |
2,207 |
|
Included
in Provision for/(Benefit
from) income taxes are tax benefits of $16 million and $641 million for
the third quarter of 2009 and 2008, respectively, that we consider to be special
items. For 2008, this amount primarily consists of the tax effects of
the pre-tax special items listed above, and a $630 million benefit reflecting
the change in our deferred tax asset valuation allowance allocated to Income/(Loss) from continuing
operations after taking into consideration income from Accumulated other comprehensive
income/(loss) when determining whether sufficient future taxable income
exists to realize deferred tax assets.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Discussion
of Automotive and Financial Services sector results of operations below is on a
pre-tax basis. Discussion of overall Automotive cost changes,
including structural cost changes (e.g., manufacturing and engineering,
pension/OPEB, overhead, etc.), is at constant exchange and excludes special
items and discontinued operations. In addition, costs that vary
directly with production volume, such as material, freight, and warranty costs,
are measured at constant volume and mix.
AUTOMOTIVE
SECTOR
Results
of Operations
Details
by segment or business unit of Income/(Loss) before income taxes
are shown below for the third quarter of 2009 and 2008 (in millions),
with Mazda and Jaguar Land Rover separated out from "ongoing"
subtotals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
North America *
|
|
$ |
223 |
|
|
$ |
(36 |
) |
|
$ |
259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
South America
|
|
|
241 |
|
|
|
480 |
|
|
|
(239 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
Europe
|
|
|
177 |
|
|
|
29 |
|
|
|
148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
Asia Pacific Africa
|
|
|
21 |
|
|
|
(24 |
) |
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volvo
|
|
|
25 |
|
|
|
(484 |
) |
|
|
509 |
|
Total
ongoing Automotive operations
|
|
|
687 |
|
|
|
(35 |
) |
|
|
722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Automotive
|
|
|
(142 |
) |
|
|
(659 |
) |
|
|
517 |
|
Total
ongoing Automotive
|
|
|
545 |
|
|
|
(694 |
) |
|
|
1,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mazda
|
|
|
— |
|
|
|
(1 |
) |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jaguar
Land Rover
|
|
|
— |
|
|
|
(37 |
) |
|
|
37 |
|
Total
Automotive sector
|
|
$ |
545 |
|
|
$ |
(732 |
) |
|
$ |
1,277 |
|
__________
* Includes
the sales of Mazda6 by our consolidated subsidiary, AAI.
Details
by segment of Automotive revenues ("sales") and wholesale unit volumes for the
third quarter of 2009 and 2008 are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
North America (c)
|
|
$ |
13.7 |
|
|
$ |
10.8 |
|
|
$ |
2.9 |
|
|
|
28 |
% |
|
|
516 |
|
|
|
462 |
|
|
|
54 |
|
|
|
12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
South America
|
|
|
2.1 |
|
|
|
2.7 |
|
|
|
(0.6 |
) |
|
|
(23 |
) |
|
|
108 |
|
|
|
126 |
|
|
|
(18 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
Europe
|
|
|
7.6 |
|
|
|
9.7 |
|
|
|
(2.1 |
) |
|
|
(21 |
) |
|
|
393 |
|
|
|
410 |
|
|
|
(17 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
Asia Pacific Africa (d)
|
|
|
1.5 |
|
|
|
1.7 |
|
|
|
(0.2 |
) |
|
|
(13 |
) |
|
|
139 |
|
|
|
111 |
|
|
|
28 |
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volvo
|
|
|
3.0 |
|
|
|
2.9 |
|
|
|
0.1 |
|
|
|
3 |
|
|
|
76 |
|
|
|
66 |
|
|
|
10 |
|
|
|
15 |
|
Total
Automotive sector
|
|
$ |
27.9 |
|
|
$ |
27.8 |
|
|
$ |
0.1 |
|
|
|
— |
|
|
|
1,232 |
|
|
|
1,175 |
|
|
|
57 |
|
|
|
5 |
|
______
(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 by unconsolidated affiliates totaling about 73,000
and 41,000 units in the third 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 third quarter of
2009 and 2008, along with the level of dealer stocks as of September 30, 2009
and 2008, are shown below:
|
|
|
|
Dealer-Owned
Stocks (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
Over/(Under) 2008
|
|
United
States (b)
|
|
|
14.6 |
% |
|
|
12.4 |
% |
|
|
2.2 |
|
pts.
|
|
|
313 |
|
|
|
478 |
|
|
|
(165 |
) |
South
America (b) (c)
|
|
|
9.9 |
|
|
|
9.6 |
|
|
|
0.3 |
|
|
|
|
27 |
|
|
|
43 |
|
|
|
(16 |
) |
Europe
(b) (d)
|
|
|
9.2 |
|
|
|
8.6 |
|
|
|
0.6 |
|
|
|
|
190 |
|
|
|
272 |
|
|
|
(82 |
) |
Asia
Pacific Africa (b) (e) (f)
|
|
|
2.0 |
|
|
|
2.0 |
|
|
|
— |
|
|
|
|
43 |
|
|
|
56 |
|
|
|
(13 |
) |
Volvo
– United States/Europe (d)
|
|
|
0.6/1.2 |
|
|
|
0.4/1.2 |
|
|
|
0.2/— |
|
|
|
|
10/28 |
|
|
|
16/36 |
|
|
|
(6)/(8) |
|
_________
|
(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.
|
|
(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
improvement in results is more than explained by favorable net pricing ($1.9
billion), favorable cost changes ($1.7 billion), and returns on assets held in
the TAA (about $400 million), offset partially by the non-recurrence of a
retiree health care curtailment gain and higher retiree health care and related
charges ($2.7 billion). The favorable cost changes are more than
explained by lower structural costs and lower net product costs.
The
increase in revenues is more than explained by favorable net pricing and
favorable volume, offset partially by unfavorable changes in currency
exchange.
The table
below details our Automotive sector third quarter 2009 structural cost changes
at constant 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
|
|
$ |
0.5 |
|
Advertising
& sales promotions
|
Reduced
costs
|
|
|
0.2 |
|
Pension
and OPEB
|
Primarily
the effect of the UAW Retiree Health Care Settlement
Agreement
|
|
|
0.2 |
|
Overhead
|
Primarily
salaried personnel reductions
|
|
|
0.1 |
|
|
Total
|
|
$ |
1.0 |
|
Ford North America
Segment. The improvement in results primarily reflects
favorable net pricing, favorable cost changes, and favorable volume and mix,
offset partially by the non-recurrence of a retiree health care curtailment gain
and higher retiree health care and related charges, and unfavorable changes in
currency exchange. The favorable cost changes are more than explained
by lower net product costs and lower structural costs (including lower
manufacturing and engineering, pension and OPEB, and overhead
costs).
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, unfavorable volume and mix, 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 increase in earnings primarily reflects favorable
cost changes and favorable net pricing, offset partially by unfavorable volume
and mix and unfavorable changes in currency exchange rates. The
favorable cost changes are more than explained by lower structural costs
(including lower manufacturing and engineering and advertising and sales
promotions costs) and lower net product costs.
Ford Asia Pacific Africa
Segment. The improvement in results primarily reflects
favorable net pricing, favorable China joint venture profits, lower costs
associated with personnel-reduction actions, and favorable cost changes, offset
partially by unfavorable changes in currency exchange. The favorable
cost changes are more than explained by lower structural costs (including lower
advertising and sales promotions and manufacturing and engineering costs) and
lower freight costs, offset partially by higher net product costs.
Volvo Segment. The
improvement in results primarily reflects favorable cost changes, held-for-sale
cessation of depreciation, favorable changes in currency exchange rates, and
favorable volume and mix. The favorable cost changes primarily
reflect lower structural costs (including lower manufacturing and engineering,
advertising and sales promotions, and overhead costs) and lower net product
costs.
Other
Automotive. The improvement in earnings is more than explained
by higher returns on the assets held in the TAA, higher returns on our cash
portfolio, and lower interest expense, offset partially by lower interest income
and unfavorable fair market value adjustments on our investment in
Mazda.
FINANCIAL
SERVICES SECTOR
Results
of Operations
Details
by segment or business unit of Revenues and Income/(Loss) before income taxes
for the third quarter of 2009 and 2008 are shown below:
|
|
|
|
|
|
Revenues
|
|
|
Income/(Loss)
Before Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
Credit
|
|
$ |
2.9 |
|
|
$ |
3.9 |
|
|
$ |
(1.0 |
) |
|
$ |
677 |
|
|
$ |
161 |
|
|
$ |
516 |
|
Other
Financial Services
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
— |
|
|
|
(7 |
) |
|
|
(2 |
) |
|
|
(5 |
) |
Total
|
|
$ |
3.0 |
|
|
$ |
4.0 |
|
|
$ |
(1.0 |
) |
|
$ |
670 |
|
|
$ |
159 |
|
|
$ |
511 |
|
Ford
Credit
The
increase in pre-tax earnings primarily reflects lower depreciation expense for
leased vehicles consistent with lower residual losses on returned vehicles due
to higher auction values (about $400 million); a lower provision for credit
losses,
primarily related to lower severity offset partially by higher repossessions
(about $250 million); lower operating costs (about $100 million); and net gains
related to unhedged currency exposure, primarily from
cross-border intercompany lending (about $60 million). These factors
were offset partially by lower volume, primarily
reflecting lower industry volumes, lower dealer stocks, the impact of
divestitures and alternative business arrangements, and changes in currency
exchange rates (about $300 million).
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 third
quarter of 2009 and 2008 are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
|
|
|
|
|
|
|
North
America operations
|
|
$ |
650 |
|
|
$ |
114 |
|
|
$ |
536 |
|
International
operations
|
|
|
(7 |
) |
|
|
71 |
|
|
|
(78 |
) |
Unallocated
risk management*
|
|
|
34 |
|
|
|
(24 |
) |
|
|
58 |
|
Income/(Loss)
before income taxes
|
|
|
677 |
|
|
|
161 |
|
|
|
516 |
|
Provision
for/(Benefit from) income taxes and Gain on disposal of discontinued
operations
|
|
|
250 |
|
|
|
66 |
|
|
|
184 |
|
Net
income/(loss)
|
|
$ |
427 |
|
|
$ |
95 |
|
|
$ |
332 |
|
________
* Consists
of gains and losses related to market valuation adjustments to derivatives
primarily related to movements in interest rates.
The
increase in pre-tax earnings for Ford Credit's North America operations
primarily reflects lower depreciation expense for leased vehicles, a lower
provision for credit losses, net gains related to unhedged currency exposure
from cross-border intercompany lending, and lower operating
costs. These factors were offset partially by lower
volume. The decline in pre-tax results for Ford Credit's
International operations primarily reflects lower volume, a valuation allowance
for finance receivables classified as held-for-sale at September 30, 2009
(related to the sale of Ford Credit's Australia retail portfolio on October 1,
2009), and a higher provision for credit losses. These factors were
offset partially by lower operating costs and lower residual
losses. The change in unallocated risk management reflects the
non-recurrence of 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):
|
|
|
|
|
|
|
|
|
|
Receivables
– On-Balance Sheet
|
|
|
|
|
|
|
|
|
|
Finance
receivables
|
|
|
|
|
|
|
|
|
|
Retail
installment
|
|
$ |
58.4 |
|
|
$ |
65.5 |
|
|
$ |
(7.1 |
) |
Wholesale
|
|
|
18.6 |
|
|
|
27.7 |
|
|
|
(9.1 |
) |
Other
|
|
|
2.5 |
|
|
|
2.8 |
|
|
|
(0.3 |
) |
Unearned
interest supplements
|
|
|
(1.8 |
) |
|
|
(1.3 |
) |
|
|
(0.5 |
) |
Allowance
for credit losses
|
|
|
(1.5 |
) |
|
|
(1.4 |
) |
|
|
(0.1 |
) |
Finance
receivables, net
|
|
|
76.2 |
|
|
|
93.3 |
|
|
|
(17.1 |
) |
Net
investment in operating leases
|
|
|
16.3 |
|
|
|
22.5 |
|
|
|
(6.2 |
) |
Total
receivables – on-balance sheet (a)(b)
|
|
$ |
92.5 |
|
|
$ |
115.8 |
|
|
$ |
(23.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Memo:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
receivables – managed
(c)
|
|
$ |
94.4 |
|
|
$ |
117.7 |
|
|
$ |
(23.3 |
) |
Total
receivables – serviced
(d)
|
|
|
94.5 |
|
|
|
118.0 |
|
|
|
(23.5 |
) |
__________
(a)
|
At
September 30, 2009 and December 31, 2008, includes finance receivables of
$63 billion and $73.7 billion, respectively, that have been sold for legal
purposes in securitization transactions that do not satisfy the
requirements for accounting sale treatment. In addition, at
September 30, 2009 and December 31, 2008, includes net investment in
operating leases of $13.9 billion and $15.6 billion, respectively, that
have been included in securitization transactions that do not satisfy the
requirements for accounting sale treatment. These underlying
securitized assets are available only for payment of the debt and other
obligations issued or arising in the securitization transactions; they are
not available to pay Ford Credit's other obligations or the claims of its
other creditors. Ford Credit holds the right to the excess cash
flows not needed to pay the debt and other obligations issued or arising
in each of these securitization transactions.
|
(b)
|
Includes
allowance for credit losses of $1.7 billion at September 30, 2009 and
December 31, 2008.
|
(c)
|
Includes
on-balance sheet receivables, excluding unearned interest supplements
related to finance receivables of $1.8 billion and $1.3 billion at
September 30, 2009 and December 31, 2008, respectively; and includes
off-balance sheet retail receivables of about $100 million and about $600
million at September 30, 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 September 30, 2009 and
December 31, 2008, respectively.
|
The
decrease in receivables from year-end 2008 primarily reflects 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 the various categories of financing 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.
|
|
|
|
|
|
|
|
|
|
|
|
On-Balance
Sheet
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
(in millions)
|
|
$ |
240 |
|
|
$ |
296 |
|
|
$ |
(56 |
) |
|
Loss-to-receivables
ratio
|
|
|
0.97 |
% |
|
|
0.89 |
% |
|
|
0.08 |
|
pts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Memo:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
– managed (in millions)
|
|
$ |
241 |
|
|
$ |
303 |
|
|
$ |
(62 |
) |
|
Loss-to-receivables
– managed
|
|
|
0.97 |
% |
|
|
0.89 |
% |
|
|
0.08 |
|
pts.
|
The
decrease in charge-offs from a year ago primarily reflects lower losses in the
United States, offset partially by higher losses in Europe. The
decrease in the United States reflects lower severity and lower other
charge-offs, offset partially by higher repossessions and higher wholesale and
dealer loan charge-offs. The increase in Europe primarily reflects
higher wholesale charge-offs and non-recurrence of recoveries in
Germany.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for credit losses (in millions)
|
|
$ |
1,715 |
|
|
$ |
1,668 |
|
|
$ |
47 |
|
|
Allowance
as a percentage of end-of-period receivables
|
|
|
1.79 |
% |
|
|
1.40 |
% |
|
|
0.39 |
|
pts.
|
The
allowance for credit losses is primarily a function of portfolio quality,
historical loss performance, and receivable levels. While the credit
quality of Ford Credit's retail and lease originations remains high, its
allowance for credit losses has increased from 2008. This increase in
allowance for credit losses is consistent with the increase in charge-offs, and includes
about $260 million primarily reflecting higher retail installment and lease
repossession assumptions and higher wholesale and dealer loan default
assumptions compared to historical trends used in Ford Credit's models.
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 September 30, 2009, about 5% of
the outstanding U.S. retail finance and lease contracts in Ford Credit's
serviced portfolio were classified as high risk at contract inception, slightly
higher than year-end 2008 of about 4%. This increase primarily
reflects a lower percentage of lease contracts in Ford Credit's retail
installment and lease portfolio. Lease contracts generally include
shorter average terms and higher average FICO scores compared with retail
finance contracts.
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Continued)
FIRST
NINE MONTHS RESULTS OF OPERATIONS
Our
worldwide net income attributable to Ford Motor Company was $1.8 billion or
$0.61 per share of Common and Class B Stock in the first nine months of 2009, an
improvement of $10.6 billion from a net loss attributable to Ford Motor Company
of $8.8 billion or $3.94 per share of Common and Class B Stock in the first nine
months of 2008.
Results
by sector for the first nine months of 2009 and 2008 are shown below (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
|
|
|
|
|
|
|
Automotive
sector
|
|
$ |
853 |
|
|
$ |
(7,149 |
) |
|
$ |
8,002 |
|
Financial
Services sector
|
|
|
1,113 |
|
|
|
(2,197 |
) |
|
|
3,310 |
|
Total
Company
|
|
|
1,966 |
|
|
|
(9,346 |
) |
|
|
11,312 |
|
Provision
for/(Benefit from) income taxes
|
|
|
(40 |
) |
|
|
(811 |
) |
|
|
771 |
|
Income/(Loss)
from continuing operations
|
|
|
2,006 |
|
|
|
(8,535 |
) |
|
|
10,541 |
|
Income/(Loss)
from discontinued operations
|
|
|
5 |
|
|
|
9 |
|
|
|
(4 |
) |
Net
income/(loss)
|
|
|
2,011 |
|
|
|
(8,526 |
) |
|
|
10,537 |
|
Less:
Income/(Loss) attributable to noncontrolling interests (b)
|
|
|
180 |
|
|
|
262 |
|
|
|
(82 |
) |
Net income/(loss) attributable
to Ford Motor Company (c)
|
|
$ |
1,831 |
|
|
$ |
(8,788 |
) |
|
$ |
10,619 |
|
__________
|
(a)
|
Adjusted
for the effect of the change in the accounting standards for convertible
debt instruments that, upon conversion, may be settled in cash; 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 standard on accounting for noncontrolling interests,
which was effective January 1, 2009. Primarily related to Ford
Europe's consolidated 41% owned affiliate, Ford Otosan. The
pre-tax results for Ford Otosan were $203 million and $476 million in the
first nine months of 2009 and 2008,
respectively.
|
|
(c)
|
Formerly
labeled "Net income/(loss)," reflects new presentation under the standard
on accounting for noncontrolling interests effective January 1,
2009.
|
Year to
date, the benefit from income taxes includes the favorable impact of
approximately $273 million in refunds of prior-period tax and related interest
and $196 million for the Canadian transfer pricing agreement, including the
effects of interest.
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Continued)
The
following table details special items in each category by segment or business
unit (in millions):
|
|
First
Nine Months –
Income/(Loss)
|
|
Personnel and Dealer-Related
Items:
|
|
|
|
|
|
|
Automotive
Sector
|
|
|
|
|
|
|
Ford
North America
|
|
|
|
|
|
|
Retiree
health care and related charges
|
|
$ |
(408 |
) |
|
$ |
2,680 |
|
Personnel-reduction
actions/Other
|
|
|
(292 |
) |
|
|
(644 |
) |
U.S.
dealer actions (primarily dealership impairments)
|
|
|
(105 |
) |
|
|
(185 |
) |
Job
Security Benefits
|
|
|
336 |
|
|
|
262 |
|
Total
Ford North America
|
|
|
(469 |
) |
|
|
2,113 |
|
Ford
South America
|
|
|
|
|
|
|
|
|
Personnel-reduction
actions
|
|
|
(19 |
) |
|
|
— |
|
Ford
Europe
|
|
|
|
|
|
|
|
|
Personnel-reduction
actions/Other
|
|
|
(160 |
) |
|
|
(54 |
) |
Ford
Asia Pacific Africa
|
|
|
|
|
|
|
|
|
Personnel-reduction
actions
|
|
|
(14 |
) |
|
|
(40 |
) |
Volvo
|
|
|
|
|
|
|
|
|
Personnel-reduction
actions
|
|
|
(12 |
) |
|
|
(38 |
) |
U.S.
dealer actions
|
|
|
(1 |
) |
|
|
(20 |
) |
Total
Volvo
|
|
|
(13 |
) |
|
|
(58 |
) |
Other
Automotive
|
|
|
|
|
|
|
|
|
Returns
on assets held in TAA
|
|
|
96 |
|
|
|
(250 |
) |
Mazda
|
|
|
|
|
|
|
|
|
Impairment
of dealer network goodwill
|
|
|
— |
|
|
|
(214 |
) |
Total
Personnel and Dealer-Related Items - Automotive sector
|
|
|
(579 |
) |
|
|
1,497 |
|
Other Items:
|
|
|
|
|
|
|
|
|
Automotive
Sector
|
|
|
|
|
|
|
|
|
Ford
North America
|
|
|
|
|
|
|
|
|
Fixed
asset impairment charges
|
|
|
— |
|
|
|
(5,300 |
) |
Gain/(Loss)
on sale of ACH plants
|
|
|
— |
|
|
|
(324 |
) |
Accelerated
depreciation related to AAI acquisition of leased facility
|
|
|
— |
|
|
|
(82 |
) |
Ballard
restructuring/Other
|
|
|
— |
|
|
|
(70 |
) |
Total
Ford North America
|
|
|
— |
|
|
|
(5,776 |
) |
Ford
Europe
|
|
|
|
|
|
|
|
|
Investment
impairment and related charges
|
|
|
(100 |
) |
|
|
— |
|
Volvo
|
|
|
|
|
|
|
|
|
Held-for-sale
impairment
|
|
|
(650 |
) |
|
|
— |
|
Held-for-sale
cessation of depreciation and related charges
|
|
|
290 |
|
|
|
— |
|
Total
Volvo
|
|
|
(360 |
) |
|
|
— |
|
Other
Automotive
|
|
|
|
|
|
|
|
|
Liquidation
of foreign subsidiary – foreign currency translation
impact
|
|
|
(281 |
) |
|
|
— |
|
Gain
on debt securities exchanged for equity
|
|
|
— |
|
|
|
108 |
|
Net
gains on debt reduction actions
|
|
|
4,663 |
|
|
|
— |
|
Total
Other Automotive
|
|
|
4,382 |
|
|
|
108 |
|
Jaguar
Land Rover
|
|
|
|
|
|
|
|
|
Sale-related/Other
|
|
|
3 |
|
|
|
38 |
|
Total
Other Items – Automotive sector
|
|
|
3,925 |
|
|
|
(5,630 |
) |
Financial
Services Sector
|
|
|
|
|
|
|
|
|
DFO
Partnership impairment
|
|
|
(141 |
) |
|
|
— |
|
Ford
Credit net operating lease impairment charge
|
|
|
— |
|
|
|
(2,086 |
) |
DFO
Partnership – gain on
sale
|
|
|
9 |
|
|
|
— |
|
Gain
on purchase of Ford Holdings debt securities
|
|
|
51 |
|
|
|
— |
|
Total
Other Items – Financial Services sector
|
|
|
(81 |
) |
|
|
(2,086 |
) |
Total
|
|
$ |
3,265 |
|
|
$ |
(6,219 |
) |
Included
in Provision for/(Benefit
from) income taxes are tax benefits of $118 million and $1.4 billion for
the first nine months of 2009 and 2008, respectively, that we consider to be
special items. For 2008, this amount primarily consists of the tax
effects of the pre-tax special items listed above, and a $1.3 billion benefit
reflecting the change in our deferred tax asset valuation allowance allocated to
Income/(Loss) from continuing
operations after taking into consideration income from Accumulated other comprehensive
income/(loss) when determining whether sufficient future taxable income
exists to realize deferred tax assets.
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Continued)
Discussion
of Automotive and Financial Services sector results of operations below is on a
pre-tax basis. Discussion of overall Automotive cost changes,
including structural cost changes (e.g., manufacturing and engineering,
pension/OPEB, overhead, etc.), is at constant exchange and excludes special
items and discontinued operations. In addition, costs that vary
directly with production volume, such as material, freight, and warranty costs,
are measured at constant volume and mix.
AUTOMOTIVE
SECTOR
Results
of Operations
Details
by segment or business unit of Income/(Loss) before income taxes
are shown below for the first nine months of 2009 and 2008 (in millions),
with Mazda and Jaguar Land Rover separated out from "ongoing"
subtotals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
North America *
|
|
$ |
(1,600 |
) |
|
$ |
(7,634 |
) |
|
$ |
6,034 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
South America
|
|
|
377 |
|
|
|
1,125 |
|
|
|
(748 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
Europe
|
|
|
(479 |
) |
|
|
1,336 |
|
|
|
(1,815 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
Asia Pacific Africa
|
|
|
(108 |
) |
|
|
15 |
|
|
|
(123 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Volvo
|
|
|
(994 |
) |
|
|
(787 |
) |
|
|
(207 |
) |
Total
ongoing Automotive operations
|
|
|
(2,804 |
) |
|
|
(5,945 |
) |
|
|
3,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Automotive
|
|
|
3,654 |
|
|
|
(1,179 |
) |
|
|
4,833 |
|
Total
ongoing Automotive
|
|
|
850 |
|
|
|
(7,124 |
) |
|
|
7,974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mazda
|
|
|
— |
|
|
|
(63 |
) |
|
|
63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jaguar
Land Rover
|
|
|
3 |
|
|
|
38 |
|
|
|
(35 |
) |
Total
Automotive sector
|
|
$ |
853 |
|
|
$ |
(7,149 |
) |
|
$ |
8,002 |
|
__________
* Includes
the sales of Mazda6 by our consolidated subsidiary, AAI.
Details
by segment of Automotive revenues ("sales") and wholesale unit volumes for the
first nine months of 2009 and 2008 are shown below:
|
|
|
|
|
|
Sales
(a)
|
|
|
Wholesales
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
North America (c)
|
|
$ |
34.7 |
|
|
$ |
42.1 |
|
|
$ |
(7.4 |
) |
|
|
(18 |
)% |
|
|
1,328 |
|
|
|
1,845 |
|
|
|
(517 |
) |
|
|
(28 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
South America
|
|
|
5.4 |
|
|
|
6.9 |
|
|
|
(1.5 |
) |
|
|
(23 |
) |
|
|
312 |
|
|
|
337 |
|
|
|
(25 |
) |
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
Europe
|
|
|
20.8 |
|
|
|
31.4 |
|
|
|
(10.6 |
) |
|
|
(34 |
) |
|
|
1,136 |
|
|
|
1,442 |
|
|
|
(306 |
) |
|
|
(21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
Asia Pacific Africa (d)
|
|
|
3.9 |
|
|
|
5.1 |
|
|
|
(1.2 |
) |
|
|
(25 |
) |
|
|
377 |
|
|
|
365 |
|
|
|
12 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volvo
|
|
|
8.5 |
|
|
|
11.4 |
|
|
|
(2.9 |
) |
|
|
(25 |
) |
|
|
224 |
|
|
|
279 |
|
|
|
(55 |
) |
|
|
(20 |
) |
Total
ongoing Automotive
|
|
|
73.3 |
|
|
|
96.9 |
|
|
|
(23.6 |
) |
|
|
(24 |
) |
|
|
3,377 |
|
|
|
4,268 |
|
|
|
(891 |
) |
|
|
(21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jaguar
Land Rover
|
|
|
— |
|
|
|
7.0 |
|
|
|
(7.0 |
) |
|
|
(100 |
) |
|
|
— |
|
|
|
125 |
|
|
|
(125 |
) |
|
|
(100 |
) |
Total
Automotive sector
|
|
$ |
73.3 |
|
|
$ |
103.9 |
|
|
$ |
(30.6 |
) |
|
|
(30 |
) |
|
|
3,377 |
|
|
|
4,393 |
|
|
|
(1,016 |
) |
|
|
(23 |
) |
______
(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 for first quarter 2008, Malaysia by
unconsolidated affiliates totaling about 191,000 and 145,000 units in the
first nine months 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 nine months
of 2009 and 2008, along with the level of dealer stocks as of September 30, 2009
and 2008, are shown below:
|
|
|
|
Dealer-Owned
Stocks (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States (b)
|
|
|
15.0 |
% |
|
|
14.0 |
% |
|
|
1.0 |
|
pts.
|
|
|
313 |
|
|
|
478 |
|
|
|
(165 |
) |
South
America (b) (c)
|
|
|
10.4 |
|
|
|
9.5 |
|
|
|
0.9 |
|
|
|
|
27 |
|
|
|
43 |
|
|
|
(16 |
) |
Europe
(b) (d)
|
|
|
9.2 |
|
|
|
8.7 |
|
|
|
0.5 |
|
|
|
|
190 |
|
|
|
272 |
|
|
|
(82 |
) |
Asia
Pacific Africa (b) (e) (f)
|
|
|
2.0 |
|
|
|
2.0 |
|
|
|
— |
|
|
|
|
43 |
|
|
|
56 |
|
|
|
(13 |
) |
Volvo –
United States/Europe (d)
|
|
|
0.6/1.2 |
|
|
|
0.5/1.3 |
|
|
|
0.1/ |
(0.1) |
|
|
|
10/28 |
|
|
|
16/36 |
|
|
|
(6)/(8) |
|
_________
(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.
|
(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
improvement in results is more than explained by the non-recurrence of fixed
asset impairment charges in Ford North America ($5.3 billion), net
gains on debt reduction actions ($4.7 billion),
favorable cost changes ($4.2 billion), and
favorable net pricing ($3.8 billion), offset
partially by unfavorable volume and mix ($5.4 billion), the
non-recurrence of a retiree health care curtailment gain and higher retiree
health care and related charges ($3.1 billion), and unfavorable changes in
currency exchange ($1.3 billion). The favorable cost changes
primarily reflect lower structural costs, offset partially by higher net product
costs.
The
decrease in revenues is explained by unfavorable volume, unfavorable currency
exchange, and
the non-recurrence of Jaguar Land Rover revenues, offset partially by favorable
net pricing.
The table
below details our Automotive sector first nine months 2009 structural cost
changes at constant 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
|
|
$ |
2.4 |
|
Pension
and OPEB
|
Primarily
the effect of the UAW Retiree Health Care Settlement
Agreement
|
|
|
0.8 |
|
Advertising
& sales promotions
|
Reduced
costs
|
|
|
0.6 |
|
Spending-related
|
Primarily
lower depreciation and amortization related to the North America asset
impairment at the end of second quarter 2008
|
|
|
0.4 |
|
Overhead
|
Primarily
salaried personnel reductions
|
|
|
0.4 |
|
|
Total
|
|
$ |
4.6 |
|
Ford North America
Segment. The improvement in earnings primarily reflects the
non-recurrence of fixed asset impairment charges, favorable net pricing, and favorable
cost changes, offset partially by the non-recurrence of a retiree health care
curtailment gain and higher retiree health care and related charges, and
unfavorable volume and mix. The favorable cost changes primarily
reflect lower structural costs (including lower manufacturing and engineering,
pension and OPEB, spending-related, and overhead costs).
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Continued)
Ford South America
Segment. The decrease in earnings primarily reflects
unfavorable changes in currency exchange rates, unfavorable cost changes, and
unfavorable volume and mix, 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 reflects unfavorable volume
and mix, lower earnings due to lower volumes at our consolidated joint ventures,
unfavorable changes in currency exchange rates, higher costs associated with
personnel-reduction actions, and an investment impairment, offset partially by
favorable cost changes and favorable net pricing. The favorable cost
changes are more than explained by lower structural costs (including lower
manufacturing and engineering, advertising and sales promotions, and
spending-related costs),
offset partially by higher net product costs.
Ford Asia Pacific Africa
Segment. The decline in results primarily reflects unfavorable
volume and mix and unfavorable changes in currency exchange rates, offset
partially by favorable cost changes and favorable net pricing. The
favorable cost changes are more than explained by lower structural costs
(including lower manufacturing and engineering, advertising and
sales promotions, pension, and overhead costs), offset partially by higher net
product costs.
Volvo Segment. The
decline in earnings is more than explained by unfavorable volume and mix and a
held-for-sale impairment, offset partially by favorable cost changes and
favorable changes in currency exchange rates. The favorable cost
changes primarily reflect lower structural costs (including lower advertising
and sales promotions, manufacturing and engineering, and overhead costs) and
lower net product costs.
Other
Automotive. The improvement in results primarily reflects net
gains on debt reduction actions (discussed in more detail in "Liquidity and
Capital Resources" and Note 7 of the Notes to the Financial
Statements).
FINANCIAL
SERVICES SECTOR
Results
of Operations
Details
by segment or business unit of Revenues and Income/(Loss) before income taxes
for the first nine months of 2009 and 2008 are shown below:
|
|
|
|
|
|
|
|
|
Income/(Loss)
Before Income Taxes (in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ford
Credit
|
|
$ |
9.4 |
|
|
$ |
12.0 |
|
|
$ |
(2.6) |
|
$ |
1,287 |
|
|
$ |
(2,187 |
) |
|
$ |
3,474 |
|
Other
Financial Services
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
— |
|
|
|
(174 |
) |
|
|
(10 |
) |
|
|
(164 |
) |
Total
|
|
$ |
9.6 |
|
|
$ |
12.2 |
|
|
$ |
(2.6 |
) |
|
$ |
1,113 |
|
|
$ |
(2,197 |
) |
|
$ |
3,310 |
|
Ford
Credit
The
improvement in pre-tax results primarily reflects the non-recurrence of the 2008
impairment charge to Ford Credit's North America operations operating lease
portfolio for contracts terminating beginning third quarter of 2008 (about $2.1
billion); lower depreciation expense for leased vehicles and lower residual
losses on returned vehicles due to higher auction values (about $1.4 billion);
and a lower provision for credit losses, primarily related to non-recurrence of
higher severity offset partially by higher repossessions (about $350
million). The increase in results also reflects net gains related to
unhedged currency exposure, primarily from cross-border intercompany lending
(about $300 million); the non-recurrence of net losses related to market
valuation adjustments to derivatives, shown as unallocated risk management in
the following table ($217 million); and lower operating costs, offset partially
by other expenses including restructuring costs (about $200
million). These favorable factors were offset partially by lower
volume primarily reflecting lower industry volumes, lower dealer stocks, the
impact of divestitures and alternative business arrangements, and changes in
currency exchange rates (about $900 million); and the non-recurrence of the gain
related to the sale of approximately half of Ford Credit's ownership interest in
its Nordic operations (about $100 million).
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 nine
months of 2009 and 2008 are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss)
before income taxes
|
|
|
|
|
|
|
|
|
|
North
America operations
|
|
$ |
1,245 |
|
|
$ |
(2,454 |
) |
|
$ |
3,699 |
|
International
operations
|
|
|
(1 |
) |
|
|
441 |
|
|
|
(442 |
) |
Unallocated
risk management*
|
|
|
43 |
|
|
|
(174 |
) |
|
|
217 |
|
Income/(Loss)
before income taxes
|
|
|
1,287 |
|
|
|
(2,187 |
) |
|
|
3,474 |
|
Provision
for/(Benefit from) income taxes and Gain on disposal of discontinued
operations
|
|
|
460 |
|
|
|
(879 |
) |
|
|
1,339 |
|
Net
income/(loss)
|
|
$ |
827 |
|
|
$ |
(1,308 |
) |
|
$ |
2,135 |
|
________
*
Consists of gains and losses related to market valuation adjustments to
derivatives primarily related to movements in interest rates.
The
improvement in pre-tax results for Ford Credit's North America operations
primarily reflects non-recurrence of the impairment charge for operating leases,
lower depreciation expense for leased vehicles, a lower provision for credit
losses, net gains related to unhedged currency exposure from cross-border
intercompany lending, and lower operating costs. These factors were
offset partially by lower volume. The
decline in pre-tax results for Ford Credit's International operations primarily
reflects lower volume, a higher provision for credit losses primarily reflecting
losses in Spain and Germany, non-recurrence of a gain related to the sale of
approximately half of Ford Credit's ownership interest in its Nordic operations,
lower financing margin primarily in Mexico, and a valuation allowance for
finance receivables classified as held-for-sale at September 30, 2009 (related
to the sale of Ford Credit's Australia retail portfolio on October 1,
2009). These factors were offset partially by lower operating costs
and lower residual losses. The
change in unallocated risk management reflects the non-recurrence of net losses
related to market valuation adjustments to derivatives primarily related to
movements in interest rates.
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.
|
|
|
|
|
|
|
|
|
|
|
|
On-Balance
Sheet
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
(in millions)
|
|
$ |
857 |
|
|
$ |
771 |
|
|
$ |
86 |
|
|
Loss-to-receivables
ratio
|
|
|
1.10 |
% |
|
|
0.74 |
% |
|
|
0.36 |
|
pts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Memo:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
– managed (in millions)
|
|
$ |
862 |
|
|
$ |
800 |
|
|
$ |
62 |
|
|
Loss-to-receivables
– managed
|
|
|
1.10 |
% |
|
|
0.75 |
% |
|
|
0.35 |
|
pts.
|
The
increase in charge-offs from a year ago reflects higher losses in Europe, offset
partially by lower losses in the United States. The increase in
Europe reflects higher losses in Spain and Germany. The decrease in
the United States reflects lower severity and lower other charge-offs, offset
partially by higher repossessions, higher wholesale and dealer loan charge-offs,
and lower recoveries.
Other
Financial Services
The
decline in earnings 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 its 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 97% of
Ford Credit's total investment in operating leases at September 30, 2009 (in
thousands, except for percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Placements
|
|
|
11 |
|
|
|
68 |
|
|
|
46 |
|
|
|
287 |
|
Terminations
|
|
|
95 |
|
|
|
97 |
|
|
|
297 |
|
|
|
301 |
|
Returns
|
|
|
73 |
|
|
|
84 |
|
|
|
249 |
|
|
|
257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Memo:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
rates
|
|
|
77 |
% |
|
|
86 |
% |
|
|
84 |
% |
|
|
85 |
% |
The
decrease in placement volumes during the third quarter of 2009 primarily
reflects 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.
The
decrease in termination volumes during the third quarter of 2009 compared with
the same period a year ago reflects lower volumes for Jaguar, Land Rover, and
Volvo brand vehicles, while the decrease in return volumes reflects lower
overall return rates consistent with improved auction values relative to Ford
Credit's expectations of lease-end values 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 third quarter 2009 vehicle mix for lease terms comprising about 61% of
Ford Credit's active Ford, Lincoln, and Mercury brand U.S. operating lease
portfolio (in thousands, except for percentages):
|
|
|
|
|
|
|
Returns
|
|
|
|
|
|
|
|
|
|
|
|
|
24-Month
term
|
|
|
12 |
|
|
|
18 |
|
|
|
43 |
|
|
|
71 |
|
36-Month
term
|
|
|
11 |
|
|
|
15 |
|
|
|
53 |
|
|
|
43 |
|
39-Month
term/Other term
|
|
|
10 |
|
|
|
6 |
|
|
|
27 |
|
|
|
16 |
|
Total
returns
|
|
|
33 |
|
|
|
39 |
|
|
|
123 |
|
|
|
130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Memo:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
rates
|
|
|
70 |
% |
|
|
88 |
% |
|
|
81 |
% |
|
|
87 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction
Values at Constant Third Quarter 2009 Vehicle Mix
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24-Month
term
|
|
$ |
19,730 |
|
|
$ |
16,920 |
|
|
$ |
18,330 |
|
|
$ |
17,205 |
|
36-Month
term
|
|
|
14,825 |
|
|
|
12,880 |
|
|
|
13,450 |
|
|
|
13,010 |
|
The
decline in U.S. return volumes in the third quarter of 2009 compared with the
same period a year ago primarily reflects the lower return rate shown in the
table consistent with improved auction values relative to Ford Credit's
expectations of lease-end values at the time of contract
purchase. The increase in auction values at constant third quarter
2009 mix primarily reflects the overall auction value improvement in the used
vehicle market. Auction values, at constant third quarter 2009 mix,
improved by about $1,200 per unit compared with the second quarter of 2009 for
vehicles under 24-month and 36-month leases.
In the
first nine months of 2009, trends and causal factors compared with the same
period a year ago were consistent with those described above. While
vehicle auction values were up significantly from 2008 levels, Ford Credit
expects them to remain volatile.
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 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,
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 TAA securities. Gross cash is detailed below as of the
dates shown (in billions):
|
|
September 30,
|
|
|
June 30,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
10.1 |
|
|
$ |
11.9 |
|
|
$ |
6.4 |
|
|
$ |
10.6 |
|
|
$ |
16.9 |
|
|
$ |
20.7 |
|
Marketable
securities (a)
|
|
|
14.6 |
|
|
|
9.7 |
|
|
|
9.3 |
|
|
|
11.5 |
|
|
|
5.1 |
|
|
|
2.0 |
|
Loaned
securities
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7.4 |
|
|
|
10.3 |
|
Total
cash, marketable securities, and loaned securities
|
|
|
24.7 |
|
|
|
21.6 |
|
|
|
15.7 |
|
|
|
22.1 |
|
|
|
29.4 |
|
|
|
33.0 |
|
Securities-in-transit
(b)
|
|
|
(0.2 |
) |
|
|
(0.2 |
) |
|
|
— |
|
|
|
(0.7 |
) |
|
|
(0.1 |
) |
|
|
(0.3 |
) |
UAW-Ford
TAA/Other
|
|
|
(0.7 |
) |
|
|
(0.4 |
) |
|
|
(2.3 |
) |
|
|
(2.5 |
) |
|
|
(2.7 |
) |
|
|
— |
|
Short-term
VEBA assets
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.9 |
|
Gross
cash
|
|
$ |
23.8 |
|
|
$ |
21.0 |
|
|
$ |
13.4 |
|
|
$ |
18.9 |
|
|
$ |
26.6 |
|
|
$ |
34.6 |
|
________
|
(a)
|
Included
at September 30, 2009, June 30, 2009, and December 31, 2008 are Ford
Credit debt securities that we purchased, which are reflected in the table
at a carrying value of $646 million, $357 million, and $492 million,
respectively; the estimated fair value is $650 million, $348 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, certain 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. This differs from a cash flow statement presented
in accordance with U.S. GAAP and differs from
Cash flows from operating
activities of continuing operations, the most directly comparable U.S.
GAAP financial measure.
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Continued)
Changes
in Automotive gross cash are summarized below (in billions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
cash at end of period
|
|
$ |
23.8 |
|
|
$ |
18.9 |
|
|
$ |
23.8 |
|
|
$ |
18.9 |
|
Gross
cash at beginning of period (b)
|
|
|
21.0 |
|
|
|
26.6 |
|
|
|
13.4 |
|
|
|
34.6 |
|
Total
change in gross cash
|
|
$ |
2.8 |
|
|
$ |
(7.7 |
) |
|
$ |
10.4 |
|
|
$ |
(15.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating-related
cash flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive
income/(loss) before income taxes (excluding special
items)
|
|
$ |
0.4 |
|
|
$ |
(2.9 |
) |
|
$ |
(2.5 |
) |
|
$ |
(3.0 |
) |
Capital
expenditures
|
|
|
(1.0 |
) |
|
|
(1.8 |
) |
|
|
(3.4 |
) |
|
|
(4.7 |
) |
Depreciation
and special tools amortization
|
|
|
1.2 |
|
|
|
1.3 |
|
|
|
3.4 |
|
|
|
4.3 |
|
Changes
in receivables, inventories and trade payables
|
|
|
1.3 |
|
|
|
(1.4 |
) |
|
|
3.6 |
|
|
|
(2.9 |
) |
Other
(c)
|
|
|
(0.1 |
) |
|
|
(2.2 |
) |
|
|
(2.9 |
) |
|
|
(3.7 |
) |
Subtotal
|
|
|
1.8 |
|
|
|
(7.0 |
) |
|
|
(1.8 |
) |
|
|
(10.0 |
) |
Up-front
subvention payments to Ford Credit (b)
|
|
|
(0.5 |
) |
|
|
(0.7 |
) |
|
|
(1.6 |
) |
|
|
(2.3 |
) |
Total
operating-related cash flows
|
|
|
1.3 |
|
|
|
(7.7 |
) |
|
|
(3.4 |
) |
|
|
(12.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
changes in gross cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
impact of personnel-reduction programs and Job Security Benefits
accrual
|
|
|
(0.2 |
) |
|
|
(0.2 |
) |
|
|
(0.7 |
) |
|
|
(0.5 |
) |
Contributions
to funded pension plans
|
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
(0.8 |
) |
|
|
(0.9 |
) |
Net
effect of TAA/VEBA on gross cash (d)
|
|
|
(0.2 |
) |
|
|
(0.1 |
) |
|
|
1.7 |
|
|
|
(4.6 |
) |
Net
receipts from Financial Services sector
|
|
|
0.6 |
|
|
|
— |
|
|
|
0.9 |
|
|
|
0.9 |
|
Acquisitions
and divestitures
|
|
|
— |
|
|
|
0.2 |
|
|
|
(0.1 |
) |
|
|
2.0 |
|
Net
proceeds from/(payments on) Automotive sector debt (e)
|
|
|
0.8 |
|
|
|
(0.1 |
) |
|
|
10.5 |
|
|
|
(0.5 |
) |
Equity
issuances, net
|
|
|
0.6 |
|
|
|
0.6 |
|
|
|
2.2 |
|
|
|
0.8 |
|
Other
|
|
|
— |
|
|
|
(0.3 |
) |
|
|
0.1 |
|
|
|
(0.6 |
) |
Total
change in gross cash
|
|
$ |
2.8 |
|
|
$ |
(7.7 |
) |
|
$ |
10.4 |
|
|
$ |
(15.7 |
) |
__________
|
(a)
|
Except
as noted (see note (b) below), 2008 data exclude Jaguar Land
Rover.
|
|
(b)
|
2008
data include Jaguar Land Rover.
|
|
(c)
|
Third
quarter 2009 Other Operating-related cash flows were primarily driven by
timing differences between the expensing of retiree health care payments
and the payment of those expenses, partially offset by the receipt of $400
million of Canadian government tax
refund.
|
|
(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)
|
Third
quarter 2009 primarily reflects $900 million receipt of U.S. Department of
Energy loans for the development of more fuel-efficient vehicles and $100
million draw on our revolving line of credit, partially offset by net debt
repayments.
|
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 third quarter and first nine months of 2009
and 2008 (in billions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities of continuing operations
(b)
|
|
$ |
3.0 |
|
|
$ |
(5.6 |
) |
|
$ |
0.8 |
|
|
$ |
(7.2 |
) |
Items
included in operating-related cash flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(1.0 |
) |
|
|
(1.8 |
) |
|
|
(3.4 |
) |
|
|
(4.7 |
) |
Net
transactions between Automotive and Financial Services sectors
(c)
|
|
|
(0.4 |
) |
|
|
(0.1 |
) |
|
|
(1.3 |
) |
|
|
(1.4 |
) |
Net
cash flows from non-designated derivatives
|
|
|
(0.1 |
) |
|
|
0.3 |
|
|
|
(0.1 |
) |
|
|
1.1 |
|
Items
not included in operating-related cash flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
impact of personnel-reduction programs and Job Security Benefits
accrual
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
0.7 |
|
|
|
0.5 |
|
Contributions
to funded pension plans
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.8 |
|
|
|
0.9 |
|
Tax
refunds, tax payments, and tax receipts from affiliates
|
|
|
(0.2 |
) |
|
|
— |
|
|
|
(0.5 |
) |
|
|
(0.9 |
) |
Other
(b)
|
|
|
(0.3 |
) |
|
|
(0.8 |
) |
|
|
(0.4 |
) |
|
|
(0.6 |
) |
Operating-related
cash flows
|
|
$ |
1.3 |
|
|
$ |
(7.7 |
) |
|
$ |
(3.4 |
) |
|
$ |
(12.3 |
) |
__________
|
(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.
|
Equity
Issuances. On May 18, 2009, we issued 345 million shares of
Ford Common Stock pursuant to a public offering at a price of $4.75 per share,
resulting in total gross proceeds of about $1.6 billion.
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Continued)
To
enhance Automotive liquidity, in August 2009, we issued in market transactions
71.6 million shares of Ford Common Stock for an aggregate price of $565 million,
and used the proceeds to purchase $556 million principal amount of outstanding
Ford Credit debt securities maturing prior to 2011, and $9 million in related
interest. Pending their maturity, the Ford Credit debt securities are
reflected in Automotive gross cash and, when the debt securities mature, their
par value will be paid in cash by Ford Credit.
On
November 2, 2009, we announced our intention to enter into an equity
distribution agreement with certain broker/dealers pursuant to which we may
offer and sell shares of Ford Common Stock from time to time for an aggregate
offering price of up to $1 billion. Any sales of Ford Common Stock
under the equity distribution agreement are not expected to commence until
December 2009, and are expected to be made over a several-month period by means
of ordinary brokers’ transactions on the New York Stock Exchange at market
prices or as otherwise agreed.
On
November 3, 2009, we entered into an underwriting agreement for the public
issuance of $2.5 billion principal amount of 4.25% Senior Convertible Notes due
November 15, 2016. These notes are convertible, under certain
circumstances, into Ford Common Stock at a conversion price of approximately
$9.30 per share. Upon conversion, we will have the right to deliver,
in lieu of shares of Ford Common Stock, cash or a combination of cash and Common
Stock. The transaction is scheduled to settle on November 9, 2009 and
will result in net proceeds to us of about $2.44 billion. We have
granted the underwriters an option to purchase an additional $375 million in
aggregate principal amount of these senior convertible notes, which as of
the filing of this Report has not been exercised.
The
shares of Ford Common Stock and senior convertible notes will be issued pursuant
to our existing effective shelf registration statement filed with the
SEC. Net proceeds to us from sales under the equity distribution
agreement, if any, and from the senior convertible notes offering are expected
to be used for general corporate purposes.
Secured Credit
Agreement. Due to concerns about instability in the capital
markets and the uncertain state of the global economy, on February 3, 2009, we
borrowed $10.1 billion under the revolving credit facility of the Credit
Agreement to ensure access to these funds. As expected, the $890
million commitment of Lehman Commercial Paper Inc. ("LCPI"), one of the lenders
under the facility, was not funded because LCPI filed for protection under
Chapter 11 of the U.S. Bankruptcy Code on October 5, 2008. LCPI
subsequently assigned $110 million of its revolving commitment to other lenders,
and $89 million of these assignee lenders' revolving commitments were funded in
the third quarter of 2009. On July 10, 2009, we terminated the
remaining LCPI commitment of $780 million. We also received an
additional $10 million under the revolving credit facility in the third quarter
of 2009 for amounts previously committed but not yet received.
Consequently,
the total committed capacity of the revolving credit facility under the Credit
Agreement is $10.7 billion, which matures on December 15, 2011. Of
this amount, $10.2 billion has been borrowed and about $500 million is being
utilized for letters of credit. Based on current planning assumptions
for the period 2009 – 2011, we do not anticipate using these funds for
operational requirements. At September 30, 2009, we also had
outstanding $4.6 billion of secured term loans under the Credit Agreement, which
mature on December 15, 2013.
On
November 2, 2009, we proposed to the lenders under the Credit Agreement an
amendment that would reduce revolving lenders’ revolving commitments, extend the
maturity of such lenders’ revolving commitments until 2013 and modify certain
covenants and other provisions. Pursuant to the proposal, each
revolving lender that agrees to extend the maturity of its revolving commitments
may reduce its revolving commitment by up to 25 percent at its election and to
the extent its reduced revolving commitment exceeds certain specified levels,
such excess would be converted into a new term loan under the Credit Agreement
maturing on December 15, 2013. In exchange for a reduction in their
revolving commitments, as well as a 1 percentage point increase in interest rate
margins, an increase in fees, and payment of an upfront fee, the revolving
lenders would agree to extend the maturity of their revolving commitments and
loans to November 30, 2013 from December 15, 2011. The modified
covenants would expand existing limitations on debt prepayments and repurchases
to allow for further balance sheet improvements. We would repay
revolving loans to the extent necessary to effect the commitment reductions on
December 3, 2009.
The
revolving lenders are required to submit their responses to our proposal by
November 18, 2009. As of the date of this Report, certain revolving
lenders have indicated that they intend to accept our proposal and extend about
$6 billion of revolving commitments and loans to November 30,
2013. The amendment and extension is subject to approval by lenders
holding a majority in principal amount of the loans and commitments outstanding
under the Credit Agreement.
U.S. Department of Energy Advanced
Technology Vehicles Manufacturing Incentive Program. As
disclosed in our Current Report on Form 8-K dated September 16, 2009 (the
"September 2009 Form 8-K Report"), we entered into a Loan Arrangement and
Reimbursement Agreement ("Arrangement Agreement") with the U.S. Department of
Energy ("DOE"), pursuant to which the DOE agreed to (i) arrange a 13-year
multi-draw term loan facility (the "Facility") under the ATVM Program in the
aggregate principal amount of up to $5.937 billion, (ii) designate us as a
borrower under the ATVM Program and (iii) cause Federal Financing Bank to enter
into a Note Purchase Agreement (the "Note Purchase Agreement") for the purchase
of notes to be issued by us evidencing such loans. The proceeds of
advances under the Facility will be used to finance certain costs eligible for
financing under the ATVM Program that are incurred through
mid-2012. Advances under the Facility may be requested through June
30, 2012. Each advance under the Facility will bear interest at a
blended rate based on the Treasury yield curve at the time such advance is
borrowed, based on the principal amortization schedule for that advance, with
interest payable quarterly in arrears. The principal amount of the
loans under the Facility are payable in equal quarterly installments commencing
on September 15, 2012 through June 15, 2022. Through September 30,
2009 we have received $886 million in loans under the Facility. For
additional details regarding the Arrangement Agreement and the Note Purchase
Agreement, refer to Exhibits 10.1 and 10.2 filed with the September 2009 Form
8-K Report.
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Continued)
Other Credit
Facilities.* Excluding the Credit Agreement, at September 30,
2009 we had $620 million of other contractually-committed Automotive credit
facilities with financial institutions, including $25 million of worldwide
unsecured credit facilities and $595 million of local credit facilities to
foreign affiliates. Of the $620 million of contractually-committed
credit facilities, $136 million has been utilized. Of the $484
million available for use, $53 million will expire in 2010, $366 million will
expire in 2012, and $65 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). Our Automotive sector net debt calculation is
detailed below (in billions):
|
|
|
|
|
|
|
Gross
cash
|
|
$ |
23.8 |
|
|
$ |
13.4 |
|
Less:
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
25.3 |
|
|
|
23.0 |
|
Debt
payable within one year
|
|
|
1.6 |
|
|
|
1.2 |
|
Total
debt
|
|
|
26.9 |
|
|
|
24.2 |
|
Net
cash/(debt)
|
|
$ |
(3.1 |
) |
|
$ |
(10.8 |
) |
The
change in total debt primarily is explained by the $10.2 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
half of 2009.
Debt Reduction
Actions. We undertook the following transactions during the
first half of 2009, which reduced our Automotive debt by a total of $10.1
billion principal amount (with a carrying value of $8.5 billion):
|
·
|
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.
|
|
·
|
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, 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.
|
See Note
7 of the Notes to the Financial Statements for our debt maturity table as of
September 30, 2009 and additional debt disclosures.
__________
* 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)
Amendment to UAW Retiree Health Care
Settlement Agreement. As disclosed in our Current Report on
Form 8-K dated July 22, 2009 ("July 2009 Form 8-K Report"), we entered into an
amendment to 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
VEBA trust (the "New VEBA") that on December 31, 2009 would assume the
obligation to provide retiree health care benefits to eligible active and
retired UAW Ford hourly employees and their eligible spouses, surviving spouses
and dependents. The amendment to the Settlement Agreement ("Amended
Settlement Agreement") was filed as Exhibit 10.2 to the July 2009 Form 8-K
Report.
The
Amended Settlement Agreement provides for smoothing of payment obligations and
provides us the option to use Ford Common Stock to satisfy up to approximately
50% of our future payment obligations to the New VEBA. The Amended
Settlement Agreement is subject to final court approval and other
conditions.
In the
event that the Amended Settlement Agreement is approved by the court and the
other conditions to its implementation are met, we will issue to the New VEBA
two notes, Note A and Note B, which will have covenants and events of default
that mirror those contained in the Credit Agreement. These notes will
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 $6,705.47 million, will
require us to make cash payments to the New VEBA 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 will require us to make payments to the New VEBA
beginning 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,
subject to certain conditions, of making each payment in cash, Ford Common
Stock, or a combination of cash and Ford Common Stock with any Ford Common Stock
to be delivered in satisfaction of such payment obligation being valued based on
the volume-weighted average price per share for the 30 trading-day period ending
on the second business day prior to the relevant payment date. The
aggregate principal amount of Note A and Note B (i.e., $13.2 billion), and the
amortization thereof, represent approximately 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 2009 through 2018, which is
intended to cover transaction costs the New VEBA may incur 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.
Under the
Amended Settlement Agreement, we also will issue to the New VEBA a warrant
entitling it to purchase approximately 362 million shares of Ford Common Stock
at an exercise price of $9.20 per share, which is intended to mirror the
economic value of the conversion option in the convertible note provided for in
the Settlement Agreement. Upon
exercise of the warrant, the warrant holder has the option to elect to have us
settle on a net share basis (delivering to the holder shares of our Common Stock
having a value equal to the “in-the-money” amount of the warrant).
In addition, an amended securityholder and registration rights agreement
provides for certain hedging restrictions, certain sales restrictions relating
to Note A and Note B as well as the warrant and shares of Ford Common Stock, and
customary registration rights relating to the sale of shares of Ford Common
Stock received by the New VEBA pursuant to our stock payment option in respect
of Note B, as well as the warrant and shares of Ford Common Stock issued upon
the exercise thereof.
For
additional detail, see the Amended Settlement Agreement filed as Exhibit 10.2 to
the July 2009 Form 8-K Report.
Notwithstanding
our option to pay a portion of 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 planning assumptions, we believe that 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 $10.2 billion revolving loan maturing on December 15,
2011), and provide a cushion against the uncertain global economic
environment. We will continue to pursue actions to improve our
balance sheet, including as discussed above the proposal to reduce and extend
our revolving loan, the equity distribution agreement, and the senior
convertible notes offering.
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Continued)
Financial
Services Sector
Ford
Credit
Debt. At September
30, 2009, Ford Credit's debt was $103.4 billion compared with $126.5 billion at
year-end 2008. At September 30, 2009, unsecured long-term debt
(including notes payable within one year) was down about $8 billion from
year-end 2008, primarily reflecting about $12 billion of debt maturities and
repurchases, offset partially by about $4 billion of new unsecured long-term
debt issuance. Unsecured long-term debt maturities were as
follows: 2009 — $4 billion; 2010 — $8 billion; 2011 — $12 billion;
and the remainder thereafter. At September 30, 2009, asset-backed
long-term debt (including notes payable within one year) was down about $10
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
sufficient 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, unsecured funding costs have increased over time. While Ford
Credit has accessed the unsecured debt market when available, Ford Credit has
increased its use of securitization funding as this 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 securitization transactions, a significant portion of which will consist
of eligible issuances pursuant to government-sponsored securitization funding
programs. In addition, Ford Credit has various alternative business
arrangements for select products and markets that reduce Ford Credit's funding
requirements while allowing Ford Credit to support us (e.g., Ford Credit's
partnering in Brazil for retail financing and partnering by FCE Bank plc ("FCE")
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.
Consistent
with the overall market, Ford Credit has been impacted by volatility and
disruptions in the asset-backed securities markets since August
2007. The global credit crisis has presented many challenges,
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 Ford Credit's
committed liquidity programs, higher enhancements resulting in reduced net
proceeds from securitization transactions, 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.
While
challenges remain, Ford Credit continued to see improvement in the capital
markets for the second consecutive quarter evidenced by improvement in market
access and credit spreads, including: three unsecured debt issuances
for about $4 billion with significantly improved credit spreads from the first
to the most recent; increasingly tighter spreads on the top-rated tranches of
Ford Credit's U.S. retail securitization transactions; Ford Credit's first
public wholesale securitization transaction since 2006; and the sale of over
$150 million of subordinated notes from Ford Credit's September 2009 public
retail securitization transaction.
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;
|
|
·
|
Continued
disruption in the capital markets beyond the conclusion of the
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 Securitization
Funding Programs. Although Ford Credit will continue to
utilize government-sponsored securitization funding programs in the near term,
it expects to rely less on these funding sources in the future and to derive
more funding from public and private securitization and unsecured
markets.
The U.S.
Federal Reserve’s Term Asset-Backed Securities Loan Facility ("TALF") became
effective in March 2009. Much of Ford Credit's public securitization
issuance in the United States during 2009 has been and will be eligible for
TALF. Through October 31, 2009, Ford Credit completed six
TALF-eligible securitization transactions totaling $10.3 billion, including
about $8 billion of retail loan securitization transactions, $1.5 billion in
October 2009 for a wholesale securitization transaction, and about $800 million
for a lease securitization transaction.
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Continued)
At
September 30, 2009, FCE had $2.2 billion of outstanding short-term funding under
the European Central Bank’s ("ECB") open market operations program backed by
retained rated securitization notes of $2.1 billion and wholesale receivables of
about $100 million.
In
September 2009, Ford Credit Australia received access to the Australian
government-sponsored "OzCar" program. The AU$550 million program
provides asset-backed wholesale funding, subject to wholesale asset
levels. This program is available until June 30, 2010.
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. Given Ford Credit's
present ability to access the Canadian public and private securitization
markets, it does not plan to participate in this program.
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 as announced by the Federal Reserve in June 2009 sales can
be now be made through February 1, 2010. At September 30, 2009, Ford
Credit does not have any FCAR asset-backed commercial paper issued to the
CPFF.
Term Funding
Plan. The following table shows Ford Credit's public and
private term funding issuances in 2008 and through October 31, 2009, and its
planned issuances for full-year 2009 (in billions):
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public
Term Funding
|
|
|
|
|
|
|
|
|
|
Unsecured
|
|
$ |
4
–
5 |
|
|
$ |
4 |
|
|
$ |
2 |
|
Securitization
Transactions (a)
|
|
|
14 – 16 |
|
|
|
13 |
|
|
|
11 |
|
Total
public term funding
|
|
$ |
18 – 21 |
|
|
$ |
17 |
|
|
$ |
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Term Funding
(b)
|
|
$ |
9–10 |
|
|
$ |
9 |
|
|
$ |
29 |
|
__________
(a)
|
Reflects
new issuance; excludes other structured
financings.
|
(b)
|
Includes
private term debt, securitization transactions, other structured
financings, and other term funding; excludes sales to Ford Credit's
on-balance sheet asset-backed commercial paper
programs.
|
Through
October 31, 2009, Ford Credit completed about $17 billion of public term funding
transactions, including about $10 billion of retail asset-backed securitization
transactions in the United States, Canada, and Europe, about $2 billion of
wholesale asset-backed securitization transactions in the United States, about
$1 billion of lease asset-backed securitization transactions in the United
States and Germany, and about $4 billion of unsecured issuances.
Through
October 31, 2009, Ford Credit completed about $9 billion of private term funding
transactions (excluding its on-balance sheet asset-backed commercial paper
program) in several markets, including about $4 billion in
Canada. These private transactions included retail, lease, and
wholesale asset-backed securitization transactions.
Liquidity. The
following table illustrates the various sources of Ford Credit's liquidity as of
the dates shown (in billions):
|
|
September 30, |
|
|
December 31,
|
|
|
|
|
|
|
|
|
Cash,
cash equivalents, and
marketable securities*
|
|
$ |
23.4 |
|
|
$ |
23.6 |
|
|
|
|
|
|
|
|
|
|
Committed
liquidity programs
|
|
|
23.3 |
|
|
|
28.0 |
|
Asset-backed
commercial paper (FCAR)
|
|
|
10.4 |
|
|
|
15.7 |
|
Credit
facilities
|
|
|
1.3 |
|
|
|
2.0 |
|
Committed
capacity
|
|
|
35.0 |
|
|
|
45.7 |
|
Committed
capacity and cash
|
|
|
58.4 |
|
|
|
69.3 |
|
Less:
Capacity in excess of eligible receivables
|
|
|
(7.7 |
) |
|
|
(4.8 |
) |
Less:
Cash and cash equivalents to support on-balance sheet securitization
transactions
|
|
|
(6.1 |
) |
|
|
(5.5 |
) |
Liquidity
|
|
|
44.6 |
|
|
|
59.0 |
|
Less:
Utilization
|
|
|
(20.7 |
) |
|
|
(37.6 |
) |
Liquidity
available for use
|
|
$ |
23.9 |
|
|
$ |
21.4 |
|
__________
|
*
|
Excludes
marketable securities related to insurance
activities.
|
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Continued)
At
September 30, 2009, committed capacity and cash shown above totaled $58.4
billion, of which $44.6 billion could be utilized (after adjusting for capacity
in excess of eligible receivables of $7.7 billion and cash required to support
on-balance sheet securitization transactions of $6.1 billion). At
September 30, 2009, $20.7 billion was utilized, leaving $23.9 billion available
for use (including $17.3 billion of cash, cash equivalents and marketable
securities, but excluding marketable securities related to insurance activities
and cash and cash equivalents to support on-balance sheet securitization
transactions).
At
September 30, 2009, Ford Credit's liquidity available for use was greater than
year-end 2008 by $2.5 billion, as debt maturities and cash payments were lower
than the impact of lower receivables and new debt issuances. The
increase in liquidity available for use from year-end 2008 also included a $630
million cumulative adjustment, reflected in the first quarter of 2009, to
correct for the overstatement of cash and cash equivalents and certain accounts
payable that originated in prior periods. Liquidity available for use
was about 25% of managed receivables, compared with 18% at year-end
2008. In addition to the $23.9 billion of liquidity available for
use, the $7.7 billion of capacity in excess of eligible receivables provides
Ford Credit with an alternative for funding future purchases or originations and
gives Ford Credit flexibility to shift capacity to alternate markets and
asset-classes.
Cash, Cash Equivalents, and Marketable
Securities. At September 30, 2009, Ford Credit's cash, cash
equivalents, and marketable securities (excluding marketable securities related
to insurance activities) totaled $23.4 billion, compared with $23.6 billion at
year-end 2008. In the normal course of Ford Credit's 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 $19.3 billion at September 30, 2009 ($10.7 billion retail and
$8.6 billion wholesale) of which $7.9 billion are commitments to
FCE. These committed liquidity programs have varying maturity dates,
with $14.8 billion having maturities within the next twelve months (of which
$4.9 billion relates to FCE commitments), and the balance having maturities
between November 2010 and October 2011. While 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
capacity in excess of eligible receivables would enable it to absorb some
reductions. 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 securitization transactions. At September 30, 2009,
$11.3 billion of these commitments were in use. These programs
generally 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. 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 September 30, 2009,
Ford Credit had $2.1 billion of outstanding funding in this
program.
Asset-Backed Commercial
Paper. At September 30, 2009, Ford Credit had $10.4 billion of
contractually-committed liquidity facilities provided by banks to support Ford
Credit's FCAR program. This includes $114 million provided by Lehman
Brothers Bank, FSB ("Lehman Brothers Bank"), which is guaranteed by Lehman
Brothers Holdings Inc. ("Lehman"). On September 15, 2008, Lehman
filed for protection under Chapter 11 of the U.S. Bankruptcy Code.
Of the
$10.4 billion of contractually-committed liquidity facilities, $4.4 billion are
committed through June 28, 2010, $174 million are committed through June 30,
2011, and $5.8 billion are committed through June 29,
2012. Utilization of these facilities is subject to conditions
specific to the FCAR program and Ford Credit's 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 September 30, 2009, $10 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 September 30, 2009, the outstanding commercial paper
balance for the FCAR program was $6.7 billion, of which $98 million was held by
Ford Credit.
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Continued)
Credit
Facilities. At September 30, 2009, Ford Credit and its
subsidiaries, including FCE, had $1.3 billion of contractually-committed
unsecured credit facilities with financial institutions, of which $671 million
were available for use. Of the lines available for use, $273 million
expire in 2010, $338 million expire in 2011, and $60 million expire in
2012. Of the $1.3 billion of contractually-committed credit
facilities, almost all are FCE worldwide credit facilities. The FCE
worldwide credit facilities may be used, at FCE's option, by any of FCE's direct
or indirect majority owned subsidiaries. FCE will guarantee any such
borrowings. All of the FCE worldwide credit facilities are free of
material adverse change clauses, restrictive financial covenants, and credit
rating triggers that could limit FCE's ability to obtain funding.
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):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
debt
|
|
$ |
103.4 |
|
|
$ |
126.5 |
|
Equity
|
|
|
10.5 |
|
|
|
10.6 |
|
Financial
statement leverage (to 1)
|
|
|
9.9 |
|
|
|
12.0 |
|
The
following table illustrates the calculation of Ford Credit's managed leverage
(in billions, except for ratios):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
debt
|
|
$ |
103.4 |
|
|
$ |
126.5 |
|
Securitized
off-balance sheet receivables outstanding
|
|
|
0.1 |
|
|
|
0.6 |
|
Retained
interest in securitized off-balance sheet receivables
|
|
|
— |
|
|
|
(0.1 |
) |
Adjustments
for cash, cash equivalents, and marketable securities (a)
|
|
|
(23.4 |
) |
|
|
(23.6 |
) |
Adjustments
for derivative accounting (b)
|
|
|
(0.4 |
) |
|
|
(0.4 |
) |
Total
adjusted debt
|
|
$ |
79.7 |
|
|
$ |
103.0 |
|
|
|
|
|
|
|
|
|
|
Equity
|
|
$ |
10.5 |
|
|
$ |
10.6 |
|
Adjustments
for derivative accounting (b)
|
|
|
(0.1 |
) |
|
|
(0.2 |
) |
Total
adjusted equity
|
|
$ |
10.4 |
|
|
$ |
10.4 |
|
|
|
|
|
|
|
|
|
|
Managed
leverage (to 1)
|
|
|
7.7 |
|
|
|
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 September 30, 2009,
Ford Credit's managed leverage was 7.7 to 1, compared with 9.9 to 1 at December
31, 2008. Ford Credit's managed leverage is significantly below the
threshold of 11.5 to 1 set forth in the Amended and Restated Support Agreement
with us. In the third quarter of 2009, Ford Credit paid a cash
distribution of $400 million and a non-cash distribution of $31 million for its
ownership interest in AB Volvofinans to its parent. For additional
information on Ford Credit's planned 2009 – 2010 distributions, see the
"Outlook" section.
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Continued)
On-Balance
Sheet Securitization Transactions
Most of
Ford Credit's securitization transactions do not satisfy the requirements for
accounting sale treatment and, therefore, the securitized assets and related
debt are included in its financial statements. Securitized assets are
only available to repay the related asset-backed debt and to pay other
securitization investors and other participants. These underlying
securitized assets are available only for payment of the debt and 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. Ford Credit holds the right to the excess cash flows
not needed to pay the debt and other obligations issued or arising in each of
these securitization transactions. For wholesale securitization
transactions, the amount of Ford Credit's participation interest fluctuates
based on the outstanding receivable and debt levels of the respective
trusts. Assets and associated liabilities related to Ford Credit's
on-balance sheet securitizations are as follows (in billions):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
Total
outstanding principal amount of finance receivables and net investment in
operating leases included in on-balance sheet securitization
transactions*
|
|
$ |
76.9 |
|
|
$ |
89.3 |
|
Cash
and cash equivalents balances to be used only to support the on-balance
sheet securitization transactions
|
|
|
6.1 |
|
|
|
5.5 |
|
Debt
payable only out of collections on the underlying securitized assets and
related enhancements*
|
|
|
56.6 |
|
|
|
72.2 |
|
________
*
|
Includes
assets pledged as collateral of $3.6 billion and $1.4 billion and the
related secured debt arrangements of $2.4 billion and $1.1 billion as of
September 30, 2009 and December 31, 2008,
respectively.
|
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, excluding
sales of businesses and liquidating portfolios) since January 2007, which is
consistent with Ford Credit's plan to execute on-balance sheet securitization
transactions.
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Continued)
Total
Company
Equity/(Deficit). At
September 30, 2009, Total
equity/(deficit) attributable to Ford Motor Company was negative $7.3
billion, an improvement of $7.3 billion compared with December 31,
2008. The improvement primarily reflects favorable changes in Capital in excess of par value of
stock, primarily the Common Stock issuances and the Convertible Notes
conversion; favorable changes in Accumulated other comprehensive
income/(loss) (see Note 19 of the Notes to the Financial Statements for
details of Other comprehensive income/(loss) attributable to Ford; and favorable
changes in Retained
earnings, which primarily relate to the first nine months net income
attributable to Ford.
Credit
Ratings. Our short-term and long-term debt is rated by four
credit rating agencies designated as nationally recognized statistical rating
organizations ("NRSROs") by the SEC:
|
·
|
Moody’s
Investors Service, Inc. ("Moody's");
and
|
|
·
|
Standard
& Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. ("S&P").
|
The
following rating actions have been taken by these NRSROs since July 1,
2009:
Ford
|
In
July 2009, S&P changed the ratings outlook for Ford to developing from
negative. In August 2009, Fitch revised its outlook for Ford to
stable from negative, and, DBRS changed its trend for Ford to stable from
negative. In September 2009, Moody's upgraded Ford's corporate
rating to Caa1 from Caa3, upgraded Ford's senior unsecured debt to Caa2
from Ca, and upgraded Ford's senior secured debt to B1 from
Caa1. Moody's also changed the ratings outlook to stable from
negative.
On
November 2, 2009, DBRS placed Ford's long-term credit ratings under review
with positive implications; Fitch revised Ford's outlook to positive from
stable; and Moody's raised Ford's corporate rating to B3 from Caa1, its
senior unsecured rating to Caa1 from Caa2, and its senior secured rating
to Ba3 from B1. Moody's outlook for Ford remains
stable. On November 3, 2009, S&P upgraded Ford's corporate
rating to B- from CCC+, its senior secured rating to B- from CCC+, and its
senior unsecured rating to CCC from CCC-. S&P's ratings
outlook for Ford remains stable.
|
|
|
|
|
Ford Credit
|
In
July 2009, S&P changed the outlook assigned to Ford Credit to
developing from negative. In August 2009, Fitch changed the
outlook assigned to Ford Credit to stable from negative and revised the
senior unsecured debt rating assigned to Ford Credit to B from
B-. Also in August 2009, DBRS changed the trend assigned to
Ford Credit to stable from negative. In September 2009, Moody’s
placed Ford Credit under review for a possible upgrade.
On
November 2, 2009, DBRS placed Ford Credit's ratings under review with
positive implications; Fitch revised Ford Credit's outlook to positive
from stable; and Moody's upgraded Ford Credit's senior unsecured rating to
B3 from Caa1 while keeping its credit ratings under review for a possible
upgrade. On November 3, 2009, S&P upgraded Ford Credit's
senior unsecured rating to B- from CCC+ with a stable
outlook.
|
The
following chart summarizes certain of the credit ratings and the outlook
presently assigned to Ford and Ford Credit by these four NRSROs:
|
|
NRSRO
RATINGS |
|
|
|
Ford |
|
Ford
Credit |
|
|
|
Issuer
Default/ Corporate/ Issuer Rating |
|
Long-Term
Senior Unsecured |
|
Senior Secured |
|
|
|
Long-Term
Senior Unsecured |
|
Short-Term
Unsecured |
|
|
|
DBRS
|
|
|
CCC
(high)
|
|
|
CCC
|
|
|
B
(low)
|
|
Positive
|
|
|
B
(low)
|
|
|
R-5
|
|
Pos/Stable
|
|
Fitch
|
|
|
CCC
|
|
|
CC
|
|
|
B
|
|
Positive
|
|
|
B
|
|
|
C
|
|
Positive
|
|
Moody's
|
|
|
B3
|
|
|
Caa1
|
|
|
Ba3
|
|
Stable
|
|
|
B3
|
|
|
NP
|
|
Review
|
|
S&P
|
|
|
B-
|
|
|
CCC
|
|
|
B-
|
|
Stable
|
|
|
B-
*
|
|
|
NR
|
|
Stable
|
|
__________
*
|
S&P
assigns FCE a long-term senior unsecured rating of 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 strategy to achieve our
objectives. For additional discussion of the economic environment and
discussion and assessment of the risks and opportunities to our planning
assumptions, see "Item 1A. Risk Factors," "Overview," "Outlook," and "Critical
Accounting Estimates" in our Form 2008 10-K Report and subsequent Form 10-Q
Reports, including updates thereto in this Report.
Our
projection of upcoming vehicle production is as follows (in
thousands):
|
|
|
Vehicle
Unit
|
|
Over/(Under)
|
|
|
|
|
Ford
North America
|
570
|
|
141
|
Ford
Europe
|
456
|
|
91
|
Volvo
|
95
|
|
27
|
We expect
weak industry sales volume across most markets this year. Our current
expectation is that global industry sales volume will decline by about 7% for
full-year 2009 compared with 2008. The increase in fourth quarter
2009 production compared with a year ago is to return to planned dealer stock
levels and match production with market demand for our products. We
expect gradual improvement in industry sales volumes during 2010, despite
expected substantial payback in Europe from the very effective 2009 scrappage
programs, particularly in Germany.
Our
planning assumptions for 2009 include the following:
Industry Volume (a)
|
Full-Year Plan
|
Full-Year Outlook
|
Memo:
First Nine Months
|
(million
units)
|
|
|
|
–United
States
|
10.5
– 12.5
|
About
10.6
|
10.5
|
–Europe
(b)
|
12.5
– 13.5
|
About
15.7
|
15.7
|
|
|
|
|
Operational Metrics
|
|
|
|
Compared
with 2008:
|
|
|
|
–Quality
– United States
|
Improve
|
On
Track
|
Improved
|
–Quality
– International
|
Improve
|
Mixed
|
Mixed
|
–Automotive
Structural Costs (c)
|
Improve
by About $4 Billion
|
Improve
by About $5 Billion
|
Improved
by $4.6 Billion
|
–U.S.
Market Share (Ford Lincoln Mercury)
|
Stabilize
|
Improve
|
15.0%
|
–U.S.
Share of Retail Market (d)
|
Stabilize
|
Improve
|
12.9%
|
–Europe
Market Share (b)
|
Equal
/ Improve
|
Improve
|
9.2%
|
–Automotive
Operating-Related Cash Flow (e)
|
Negative
but Significant Improvement
|
On
Track
|
$(3.4)
Billion
|
Absolute
Amount:
|
|
|
|
–Capital
Spending
|
$5 Billion –
$5.5
Billion
|
About
$5 Billion
|
$3.4
Billion
|
__________
(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)
|
Structural
cost changes are measured at constant exchange, and exclude special items
and discontinued operations.
|
(d)
|
Compared
with full-year 2008 share of retail market of 12.1%; first nine months
2009 results are a preliminary
estimate.
|
(e)
|
See
"Liquidity and Capital Resources" discussion above for reconciliation to
U.S. GAAP.
|
Although
we see improvement in leading economic indicators in our major markets and
financial markets have continued to normalize with ongoing policy support,
consumer confidence and labor market weakness present a challenge to near-term
economic outlook (particularly in the United States and United
Kingdom). In addition, our suppliers and dealers have been weakened
by the global economic downturn.
Commodity
prices have begun to increase with the emergence of initial signs of economic
recovery, and we anticipate this trend will continue into 2010. Our
business also will continue to be affected by currency
volatility.
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Continued)
We are on
track to exceed our goal of reducing Automotive structural costs by about $4
billion during 2009. As indicated, we currently expect full-year 2009
Automotive structural cost reductions to be about $5 billion. Going
forward, we expect structural costs to be relatively stable, as we largely have
completed the significant restructuring actions in our manufacturing facilities
and personnel-reduction actions. These cost-reduction actions, along
with our UAW Retiree Health Care Settlement Agreement (discussed in "Liquidity
and Capital Resources" above) having become effective in the third quarter of
2008, lowered our overall cost structure.
Based on
our planning assumptions, we expect positive Automotive operating-related cash
flow in the fourth quarter of 2009.
As
previously disclosed, our debt balances will increase upon implementation of the
Retiree Health Care Settlement Agreement. Assuming court and other
approvals, on December 31, 2009 we will make scheduled payments under Note A and
Note B totaling about $2 billion (of which up to about $610 million may be
settled in Ford Common Stock at our option). Subject to final fair
market valuation of and the calculation of the imputed interest related to Note
A and Note B, we presently estimate that, following satisfaction of the year-end
payment obligations, recognition of these debt obligations will increase our
debt by about $7 billion to $8 billion, and increase reported 2010 interest
expense by about $700 million.
Also as
previously announced, as part of our ongoing discussions regarding the possible
sale of Volvo, we have identified a consortium led by Zhejiang Geely Group
Holding Co. Ltd. as the preferred bidder. We will be engaging in more
detailed and focused negotiations, but no final decisions have been made to
date.
Ford
Credit expects to be profitable in the fourth quarter of 2009. Ford
Credit anticipates managed receivables at year-end 2009 to be in the range of
$90 billion to $95 billion, consistent with managed receivables of $94 billion
at September 30, 2009.
Ford
Credit now expects to pay total distributions of about $3 billion in 2009 –
2010, including the first quarter 2009 non-cash distribution of about $1.1
billion, and, during the third quarter of 2009, the cash distribution of $400
million and non-cash distribution of $31 million (related to Ford Credit's
ownership interest in AB Volvofinans). This increase in planned
distributions from the $2 billion reported in the "Outlook" section of our most
recent Form 10-Q Report primarily reflects the improved funding environment and
Ford Credit's lower managed leverage. Ford Credit will continue to
balance future distributions with the successful execution of its funding
plan.
We
anticipate that Ford Credit will be profitable in 2010, but at a reduced level
compared with 2009, reflecting lower average receivables and the non-recurrence
of certain favorable factors experienced during 2009.
Based on
our recent performance and our planning assumptions, we now expect full-year
2011 total Company and Ford North America pre-tax results to be solidly
profitable, excluding special items, and full-year 2011 Automotive
operating-related cash flow to be positive.
While we
believe that the global economy will be improving by 2011, the near-term outlook
remains uncertain as we monitor the pace of economic recovery. There
is a high likelihood, for example, that in 2010 the European markets we track
will experience a substantial decrease in industry sales volume as scrappage
programs expire, which could more than offset the potential increase in U.S.
industry sales volume. We will provide our 2010 planning assumptions
when we release our full-year 2009 results.
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:
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Continued
or worsening financial crisis;
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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;
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Decline
in market share;
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Continued
or increased price competition resulting from industry overcapacity,
currency fluctuations, or other
factors;
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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;
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A
return to elevated gasoline prices, as well as the potential for volatile
prices or reduced availability;
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Lower-than-anticipated
market acceptance of new or existing
products;
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Fluctuations
in foreign currency exchange rates, commodity prices, and interest
rates;
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Adverse
effects from the bankruptcy of, government-funded restructuring of, change
in ownership or control of, or alliances entered into by a major
competitor;
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Restriction
on use of tax attributes from tax law "ownership
change";
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Economic
distress of suppliers that may require us to provide financial support or
take other measures to ensure supplies of components or materials, which
could increase our costs, affect our liquidity, or cause production
disruptions;
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Single-source
supply of components or materials;
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Labor
or other constraints on our ability to restructure our
business;
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Work
stoppages at Ford or supplier facilities or other interruptions of
supplies;
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Pension
and postretirement health care and life insurance liabilities impairing
our liquidity or financial
condition;
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Inability
to implement the amended Retiree Health Care Settlement Agreement
regarding UAW hourly retiree health
care;
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Worse-than-assumed
economic and demographic experience for our postretirement benefit plans
(e.g., discount rates or investment
returns);
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Discovery
of defects in vehicles resulting in delays in new model launches, recall
campaigns or increased warranty
costs;
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Increased
safety, emissions, fuel economy, or other regulation resulting in higher
costs, cash expenditures, or sales
restrictions;
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Unusual
or significant litigation or governmental investigations arising out of
alleged defects in our products or
otherwise;
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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);
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Adverse
effects on our results from a decrease in or cessation of government
incentives;
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Adverse
effects on our operations resulting from certain geo-political or other
events;
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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;
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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);
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Failure
of financial institutions to fulfill commitments under committed credit
facilities;
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Ford
Credit's need for substantial liquidity to finance its
business;
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Inability
of Ford Credit to obtain competitive
funding;
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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;
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A
prolonged disruption of the debt and securitization
markets;
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Higher-than-expected
credit losses;
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Increased
competition from banks or other financial institutions seeking to increase
their share of financing Ford
vehicles;
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Collection
and servicing problems related to finance receivables and net investment
in operating leases;
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Lower-than-anticipated
residual values or higher-than-expected return volumes for leased
vehicles;
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New
or increased credit, consumer, data protection, or other regulation
resulting in greater costs or financing restrictions;
and
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Inability
to implement our plans to further reduce structural costs and increase
liquidity.
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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 subsequent Form 10-Q Reports.
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%. 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)
U.S. GAAP
standards of accounting for income taxes require 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 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. U.S. GAAP
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:
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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;
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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 U.S. GAAP;
and
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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.
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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, 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
the revised standard on accounting for defined benefit pension and other
postretirement benefit plans). During 2007, we recorded an additional
valuation allowance of $1.4 billion (including about $700 million resulting from
adopting the accounting for uncertainty in income taxes
standard). 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 the standard for convertible
debt instruments that, upon conversion, may be settled in cash, the December 31,
2008 valuation allowance was reduced by about $600 million to $17.2
billion. Income in the first nine months of 2009, primarily in the
United States, decreased the valuation allowance by about $300 million to a
balance of $16.9 billion at September 30, 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 results in a reversal of a
portion of the valuation allowance relating to realized deferred tax assets, but
does 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 September 30,
2009 that it is more likely than not such deferred tax assets will not be
realized (in whole or in part), and accordingly we continue to record a full
valuation allowance against the net deferred tax assets.
At
September 30, 2009 and December 31, 2008 our net deferred tax assets, net of the
valuation allowances of $16.9 billion and $17.2 billion, respectively, were $1
billion and $1.1 billion, respectively. 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 September 30, 2009 and December 31, 2008, we recognized a net
deferred tax asset of $1.6 billion and $1.4 billion, respectively, 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. Even with lower volumes and higher credit losses in the
recent past as discussed in "Results of Operations" above, FCE operations remain
profitable in the first nine months of 2009. If in the future FCE
profits in the United Kingdom decline, additional valuation allowances may be
required. We will continue to assess the need for a valuation
allowance in the future.
ACCOUNTING
STANDARDS CODIFICATION
In June
2009, the Financial Accounting Standards Board ("FASB") issued SFAS No. 168,
The FASB Accounting Standards
CodificationTM and the Hierarchy of Generally
Accepted Accounting Principles - a replacement of FASB Statement No.
162. This standard establishes the FASB Accounting Standards
Codification ("Codification") as the single source of authoritative U.S. GAAP,
superseding all previously issued authoritative guidance. All
references to pre-Codification GAAP in our financial statements are replaced
with descriptive titles.
ACCOUNTING
STANDARDS ISSUED BUT NOT YET ADOPTED
Accounting for Transfers of
Financial Assets – an amendment of the FASB Statement No.
140. Issued in June 2009, this standard provides greater
transparency about transfers of financial assets and a company’s continuing
involvement in transferred financial assets. The standard also
removes the concept of a qualifying special-purpose entity from U.S. GAAP,
changes the requirements for derecognizing financial assets, and requires
additional disclosures about a transferor’s continuing involvement with the
transferred financial assets and the related risks retained. This
standard applies to transfers occurring on or after January 1, 2010, and early
adoption is prohibited.
Amendments to FASB
Interpretation No. 46(R), Consolidation of Variable Interest
Entities. Issued in June 2009, this
standard for VIE consolidation replaces the quantitative-based risks and rewards
calculation with an approach that is primarily qualitative. The new
standard also requires ongoing reassessments of the appropriateness of
consolidation, and additional disclosures about involvement with
VIEs. The standard is effective for us as of January 1, 2010, and
early adoption is prohibited. At this time, we expect that adoption
of this standard may result in the deconsolidation of several of our joint
ventures, including Ford Otosan reported within our Ford Europe segment
results. Although we continue to examine the potential impact of this
standard on our financial condition, results of operations, and financial
statement disclosures, we anticipate that its adoption may negatively impact
Income/(Loss)
before income taxes and in
particular Ford Europe's pre-tax results (see Note 4 of the Notes to the
Financial Statements for additional information regarding the financial results
of our consolidated VIEs). The standard will have no effect
on Net income/(loss)
attributable to Ford Motor Company.
We have
not yet adopted the guidance on 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 September 30, 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 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 (including adjustments for credit risk) at September 30, 2009
was an asset of approximately $2 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 (excluding adjustments
for credit risk), assuming a 10% adverse change in the underlying foreign
currency exchange rates, would be approximately $974 million at September 30,
2009 and was $600 million at December 31, 2008. If adjustments for
credit risk were to be included, the decrease would be smaller.
At
September 30, 2009, intercompany loans were fully hedged, compared to
unhedged loans of $1.7 billion at the end of the second quarter of
2009.
Commodity Price
Risk. The net fair value of commodity forward and option
contracts (including adjustments for credit risk) at September 30, 2009 was a
liability of $88 million, compared to a liability of $212 million at December
31, 2008. The potential decrease in fair value of commodity forward
and option contracts (excluding adjustments for credit risk), assuming a 10%
decrease in the underlying commodity prices, would be approximately $22 million
at September 30, 2009, compared with a decrease of $26 million at December 31,
2008. If adjustments for credit risk were to be included, the
decrease would be smaller.
Financial
Services Sector
Foreign Currency
Risk. At September 30, 2009, Ford Credit’s intercompany
loans were fully hedged, compared to unhedged loans of $3.8 billion at the end
of the second quarter of 2009. Ford Credit achieved this result via
implementation of alternate hedging structures, and continued reduction in
intercompany loans resulting from local funding actions. As a result,
Ford Credit believes its market risk exposure relating to changes in currency
exchange rates is insignificant. Ford Credit’s overall currency
exposure, and therefore Ford Credit’s hedging requirements, will reduce as Ford
Credit continues to work on funding its operations locally and explores
alternative business arrangements 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 September 30, 2009, all else constant, such an
increase in interest rates would reduce pre-tax cash flow by $8 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 September 30, 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 no material changes in business processes or
practices during the quarter that resulted in or likely would result in
significant changes in our internal control over financial
reporting.
PART
II. OTHER INFORMATION
ITEM
1. Legal
Proceedings.
Class
Action Matters
Canadian Export Antitrust Class
Actions (previously reported on page 34 of our 2008 Form 10-K Report, page 64 of
our Quarterly Report on Form 10-Q Report for the period ended March 31, 2009,
and page 77 of our Quarterly Report on Form 10-Q for the period ended June 30,
2009). 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. The
federal court actions were consolidated for coordinated pretrial proceedings in
the U.S. District Court for the District of Maine; as reported in our most
recent Form 10-Q Report, the District Court granted our motion for summary
judgment. Plaintiffs did not appeal. State court actions
remain pending in six states, with a statewide class having been certified in
California and our petition for an immediate appeal of that certification order
having been denied. Proceedings in the other five states were stayed
pending final resolution of the consolidated federal court actions which now
have been dismissed.
Environmental
Matters
Dearborn Research and Engineering
Center. In August 2009, our Dearborn Research and Engineering
Center ("R&E Center") received a notice of violation from the Michigan
Department of Environmental Quality ("MDEQ"). The notice alleges that
the R&E Center exceeded fuel usage limitations at its engine test facility,
and did not properly certify compliance with its air permit. MDEQ has
commenced an administrative enforcement proceeding. We are working
with MDEQ to resolve this matter, and will take remedial actions to address any
violations.
ITEM
2. Unregistered
Sales of Equity Securities and Use of Proceeds.
During
the third quarter of 2009, we purchased shares of Ford Common Stock as
follows:
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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
|
|
July
1, 2009 through July 31, 2009
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
|
** |
|
Aug.
1, 2009 through Aug. 31, 2009
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
** |
|
Sept.
1, 2009 through Sept. 30,
2009
|
|
|
9,808 |
|
|
|
7.21 |
|
|
|
— |
|
|
|
** |
|
Total/Average
|
|
|
9,808 |
|
|
|
7.21 |
|
|
|
— |
|
|
|
** |
|
_________
*
|
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: (i) income tax related
to the lapse of restrictions on restricted stock or the issuance of
unrestricted stock; and (ii)
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
Stationary Source
Emissions. The U.S. Environmental Protection Agency ("EPA" or
"U.S. EPA") issued a final rule on September 22, 2009 establishing a national
greenhouse gas ("GHG") reporting system. Facilities with production
processes that fall into certain industrial source categories, or that contain
boilers and process heaters and emit 25,000 or more metric tons per year of
GHGs, will be required to submit annual GHG emission reports to
EPA. Facilities subject to the rule must begin collecting data on
January 1, 2010, and submit an annual report for calendar year 2010 by March 31,
2011. Many of our facilities in the United States will be required to
submit reports. Under the rule, we also will be required to report
emissions of certain greenhouse gases from heavy-duty engines and vehicles;
these requirements phase in beginning with the 2011 model year.
On
September 30, 2009, EPA issued a proposed rule (the "PSD Tailoring Rule") that
would define the circumstances under which certain GHGs would be regulated under
the Clean Air Act's New Source Review - Prevention of Significant Deterioration
("PSD") rules and Title V operating permits program. The PSD
Tailoring Rule was issued due to concerns that, once EPA regulates GHGs from
motor vehicles, GHGs will become regulated air pollutants under PSD and Title V,
triggering permit requirements for many small sources not currently regulated
under those programs. The PSD Tailoring Rule proposes to address this
by setting a 25,000 ton per year GHG emission level as the threshold for
inclusion in the PSD and Title V permit programs. The proposal does
not specify what best-available control technology would be for controlling GHG
emissions, but indicates that the agency would evaluate this and other
applicability issues during the first five years after issuance of the final
rule. After this five-year period, EPA would consider lowering the
applicability threshold.
Depending
upon the scope of the final rule, a large percentage of our facilities could be
required to obtain PSD and Title V permits for GHG emissions. These
requirements could lead to the installation of additional pollution control
equipment, potential delay in the issuance of permits due to changes at a
facility, and increased operating costs.
In July
2009, EPA proposed a new National Ambient Air Quality Standard ("NAAQS") for
oxides of nitrogen, as measured by nitrogen dioxide ("NO2"). EPA
proposes to set a new one-hour standard for NO2 of between 80-100 parts per
billion. The proposal also includes a plan to establish a roadside
monitoring network primarily intended to measure NO2 concentrations near major
roads in urban areas. The Alliance of Automobile Manufacturers, of
which we are a member along with other major manufacturers, submitted comments
on both the level of the standards and the roadside monitoring
plan. The new NAAQS for nitrogen oxides could lead to requirements
for additional emission controls from both stationary and mobile
sources.
Motor Vehicle Fuel Economy.
Various steps have been taken toward the implementation of the May 2009
agreement in principle between the federal government, the state of California,
and the auto industry with respect to motor vehicle GHG and fuel economy
standards. The auto industry has sought to stay federal court
litigation in California, Vermont, and Rhode Island challenging those states'
rights to issue motor vehicle GHG standards; stays have been granted by each of
the courts. EPA has issued a revised decision granting a Clean Air
Act waiver for California's GHG regulations, and the automotive industry has
refrained from challenging that decision, although the waiver decision has been
challenged by the National Automobile Dealers Association and the U.S. Chamber
of Commerce. The California Air Resources Board adopted some of the
modifications to its regulations that will be required to implement the
agreement in principle, with additional modifications expected later this
year. EPA and the National Highway Traffic Safety Administration
promulgated a joint Notice of Proposed Rulemaking setting forth their proposal
for harmonizing GHG and fuel economy standards for the 2012-2016 model
years. Their proposal is currently under review, with public comments
due by November 27, 2009; we anticipate that both Ford and the Alliance of
Automobile Manufacturers will file comments. The rules are expected
to be finalized by April 2010.
The
Canadian federal government has announced that new vehicle GHG emissions will be
regulated via the carbon dioxide provisions of the Canadian Environmental
Protection Act. Regulation will begin with 2011 model-year vehicles
and, starting with 2012 model-year vehicles, will be aligned with the GHG
standards issued by the U.S. EPA. Several provinces, including
British Columbia, Quebec, Manitoba, and Nova Scotia, have announced their
intention to impose California-style GHG standards at the provincial level,
although it is likely that the latest developments in the United States and the
declared Canadian federal regulatory path may dissuade these provinces from
taking unilateral action.
Union
Negotiations
On
November 1, 2009, the CAW announced that a majority of its members employed by
Ford Canada had voted to ratify modifications to the terms of the existing
collective bargaining agreement between Ford Canada and the CAW. The
modifications are patterned off of the modifications agreed to by the CAW for
its agreements with the Canadian operations of General Motors Company and
Chrysler LLC and are expected to result in annual cost savings. The
agreement also confirms the end of production at the St. Thomas Assembly Plant
in 2011.
On
November 2, 2009, the UAW announced that a majority of its members employed by
Ford had voted against ratification of a tentative agreement that would have
modified the terms of the existing collective bargaining agreement between Ford
and the UAW. In March 2009, the Ford-UAW membership ratified
modifications to the existing collective bargaining agreement that went most of
the way to bringing us to competitive parity with the U.S. operations of
foreign-owned automakers. The latest modifications were designed to
closely match the modified collective bargaining agreements between the UAW and
our domestic competitors, General Motors Company and Chrysler
LLC. Among the proposed modifications was a provision that would have
precluded any strike action relating to improvements in wages and benefits
during the negotiation of a new collective bargaining agreement upon expiration
of the current agreement in September 2011, and would have subjected disputes
regarding improvements in wages and benefits to binding arbitration, to
determine competitiveness based on wages and benefits paid by other automotive
manufacturers operating in the United States.
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.
|
|
FORD
MOTOR COMPANY
|
|
|
|
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
November 6, 2009
|
By:
|
/s/
Bob Shanks
|
|
|
|
|
Bob
Shanks
|
|
|
|
|
Vice
President and Controller
|
|
EXHIBIT
INDEX
|
|
|
|
|
Exhibit
10.1
|
|
Loan
Arrangement and Reimbursement Agreement between Ford Motor Company and the
U.S. Department of Energy dated as of September 16, 2009
|
|
Filed
as Exhibit 10.1 to our Current Report on Form 8-K filed September 22,
2009.*
|
|
|
|
|
|
Exhibit
10.2
|
|
Note
Purchase Agreement dated as of September 16, 2009 among the Federal
Financing Bank, Ford Motor Company, and the U.S. Secretary of
Energy
|
|
Filed
as Exhibit 10.2 to our Current Report on Form 8-K filed September 22,
2009.*
|
|
|
|
|
|
Exhibit
10.3
|
|
Tax
Benefit Preservation Plan dated September 11, 2009 between Ford Motor
Company and Computershare Trust Company, N.A.
|
|
Filed
as Exhibit 4.1 to our Current Report on Form 8-K filed September 11,
2009.*
|
|
|
|
|
|
Exhibit
10.4
|
|
Certificate
of Designation of Series A Junior Participating Preferred Stock filed on
September 11, 2009
|
|
Filed
as Exhibit 3.1 to our Current Report on Form 8-K filed September 11,
2009.*
|
|
|
|
|
|
Exhibit
10.5
|
|
Third
Amendment to the Credit Agreement dated as of December 15,
2006
|
|
Filed
as Exhibit 10.1 to our Current Report on Form 8-K filed July 28,
2009.*
|
|
|
|
|
|
Exhibit
10.6
|
|
Amendment
dated July 23, 2009 to Ford Motor Company's UAW Retiree Health Care
Settlement Agreement
|
|
Filed
as Exhibit 10.2 to our Current Report on Form 8-K filed July 28,
2009.*
|
|
|
|
|
|
Exhibit
10.7
|
|
Amendment
dated July 22, 2009 to the Note Purchase Agreement dated April 7, 2008
between Ford Motor Company and its wholly-owned subsidiary Ford-UAW
Holdings LLC
|
|
Filed
as Exhibit 10.3 to our Current Report on Form 8-K filed July 28,
2009.*
|
|
|
|
|
|
|
|
Ford
Motor Company and Subsidiaries Calculation of Ratio of Earnings to
Combined Fixed Charges
|
|
Filed
with this Report.
|
|
|
|
|
|
|
|
Letter
of PricewaterhouseCoopers LLP dated November 6, 2009 relating to financial
information
|
|
Filed
with this Report.
|
|
|
|
|
|
|
|
Rule
15d-14(a) Certification of CEO
|
|
Filed
with this Report.
|
|
|
|
|
|
|
|
Rule
15d-14(a) Certification of CFO
|
|
Filed
with this Report.
|
|
|
|
|
|
|
|
Section
1350 Certification of CEO
|
|
Furnished
with this Report.
|
|
|
|
|
|
|
|
Section
1350 Certification of CFO
|
|
Furnished
with this Report.
|
|
|
|
|
|
Exhibit
101.INS
|
|
XBRL
Instance Document
|
|
Furnished
with this Report.**
|
|
|
|
|
|
Exhibit
101.SCH
|
|
XBRL
Taxonomy Extension Schema Document
|
|
Furnished
with this Report.**
|
|
|
|
|
|
Exhibit
101.CAL
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
Furnished
with this Report.**
|
|
|
|
|
|
Exhibit
101.LAB
|
|
XBRL
Taxonomy Extension Label Linkbase Document
|
|
Furnished
with this Report.**
|
|
|
|
|
|
Exhibit
101.PRE
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
|
Furnished
with this Report.**
|
|
|
|
|
|
Exhibit
101.DEF
|
|
XBRL
Taxonomy Extension Definition Linkbase Document
|
|
Furnished
with this Report.**
|
________
|
*
|
Incorporated
by reference herein.
|
|
**
|
Submitted
electronically with this Report.
|
83