UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the Securities
---- Exchange Act of 1934 (No Fee Required)
For the fiscal year ended December 31, 1998
or
Transition report pursuant to Section 13 or 15(d) of the Securities
---- Exchange Act of 1934 (No Fee Required)
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Delaware 38-0549190
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(State of incorporation) (I.R.S. employer identification no.)
The American Road, Dearborn, Michigan 48121
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(Address of principal executive offices) (Zip code)
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered (a)
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Common Stock, par value $1.00 per share New York Stock Exchange
Pacific Coast Stock Exchange
Depositary Shares, each representing New York Stock Exchange
1/2,000 of a share of Series B Cumulative
Preferred Stock, as described below
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(a) In addition, shares of Common Stock of Ford are listed on certain stock exchanges in the United Kingdom and Continental Europe.
[Cover page 1 of 2 pages]
Securities registered pursuant to Section 12(g) of the Act:
Series B Cumulative Preferred Stock, par value $1.00 per share, with an annual dividend rate of $4,125 per share and a liquidation preference of $50,000 per share.
As of February 26, 1999, Ford had outstanding 1,140,797,769 shares of Common Stock and 70,852,076 shares of Class B Stock. Based on the New York Stock Exchange Composite Transaction closing price of the Common Stock on that date ($59 5/16 a share), the aggregate market value of such Common Stock was $67,663,567,674. Although there is no quoted market for our Class B Stock, shares of Class B Stock may be converted at any time into an equal number of shares of Common Stock for the purpose of effecting the sale or other disposition of such shares of Common Stock. The shares of Common Stock and Class B Stock outstanding at February 26, 1999 included shares owned by persons who may be deemed to be "affiliates" of Ford. We do not believe, however, that any such person should be considered to be an affiliate. For information concerning ownership of outstanding Common Stock and Class B Stock, see the Proxy Statement for Ford's Annual Meeting of Stockholders to be held on May 13, 1999 (our "Proxy Statement"), which is incorporated by reference under various Items of this Report.
Document Where Incorporated
-------- ------------------
Proxy Statement Part III (Items 10,
11, 12 and 13)
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* As stated under various Items of this Report, only certain specified portions of such document are incorporated by reference in this Report.
[Cover page 2 of 2 pages]
PART I
Ford Motor Company was incorporated in Delaware in 1919. We acquired the business of a Michigan company, also known as Ford Motor Company, incorporated in 1903 to produce and sell automobiles designed and engineered by Henry Ford. We are the world's largest producer of trucks and the second- largest producer of cars and trucks combined. We and our subsidiaries also engage in other businesses, such as manufacturing automotive components and systems and financing and renting vehicles and equipment.
Overview
Ford's business is divided into two business sectors, and we manage these
sectors as four primary operating segments. These business sectors and operating
segments are described below.
Business Sectors Operating Segments Description
---------------- ------------------ -----------
Automotive:
Automotive design, manufacture, sale and service
of cars and trucks
Visteon Automotive Systems design, manufacture, sale and service of
automotive components and systems
Financial Services:
Ford Motor Credit Company vehicle-related financing, leasing and insurance
The Hertz Corporation rental of cars, trucks and industrial and
construction equipment, and other
activities
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We provide financial information (such as, revenues, income and assets) for
each of these business sectors and operating segments in three areas of this
Report: (1) Item 6. "Selected Financial Data" on pages 32 through 34; (2) Item
7. "Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 35 through 48; and (3) Note 17 of our Notes to Financial
Statements located at the end of this Report (pages FS-31 and FS-32). Financial
information relating to certain geographic areas is also included in the
above-mentioned areas of this Report
Item 1. Business (Continued)
Automotive Sector
Ford sells cars and trucks and automotive components and systems throughout the world. In 1998 we sold globally 6.8 million vehicles. Our automotive vehicle brands include Ford, Mercury, Lincoln, Jaguar and Aston Martin. In addition, we own 33.4% of Mazda Motor Corporation. Also, on March 1, 1999, we entered into a definitive agreement with AB Volvo to buy Volvo's worldwide passenger car business. The transaction will close following receipt of regulatory approvals.
The worldwide automotive industry, Ford included, is affected significantly by a number of factors over which we have little control, including general economic conditions. In the United States, the automotive industry is a highly-competitive, cyclical business that has a wide variety of product offerings. Most of the cars and trucks sold in the United States are produced by us or by two other manufacturers. The number of cars and trucks sold to retail buyers (commonly referred to as "industry demand") can vary substantially from year to year. In any year, industry demand depends largely on general economic conditions, the cost of purchasing and operating cars and trucks and the availability and cost of credit and fuel. Industry demand also reflects the fact that cars and trucks are durable items that people can wait to replace.
The automotive industry outside of the United States consists of many producers, with no single dominant producer. Certain manufacturers, however, account for the major percentage of total sales within particular countries, especially their countries of origin. Most of the factors that affect the U.S. automotive industry and its sales volumes and profitability are equally relevant outside the United States.
The worldwide automotive industry also is affected significantly by a substantial amount of costly government regulation. In the United States and Europe, for example, government regulation has arisen primarily out of concern for the environment, for greater vehicle safety and for improved fuel economy. Many governments also regulate local content and/or impose import requirements as a means of creating jobs, protecting domestic producers or influencing their balance of payments.
Ford's unit sales vary with the level of total industry demand and our share of that industry demand. Our share is influenced by how our products compare with those offered by other manufacturers based on many factors, including design, driveability, price, quality, reliability, safety and utility. Our share is also affected by our timing of new model introductions and manufacturing capacity limitations. Our ability to satisfy changing consumer preferences with respect to type or size of vehicle and its design and performance characteristics can impact our sales and earnings significantly.
Item 1. Business (Continued)
The profitability of vehicle sales is affected by many factors, including the following:
- unit sales volume
- the mix of vehicles and options sold
- the margin of profit on each vehicle sold
- the level of "incentives" (price discounts) and other
marketing costs
- the costs for customer warranty claims and other customer
satisfaction actions
- the costs for government-mandated safety, emission and
fuel economy technology and equipment
- the ability to manage costs
- the ability to recover cost increases through higher prices
Further, because the automotive industry is capital intensive, it operates with a relatively high percentage of fixed costs, which can result in large changes in earnings from relatively small changes in unit volume.
Following is a discussion of the automotive industry in the principal markets where we compete, as well as a discussion of our Visteon operating segment:
Sales Data. The following table shows U.S. industry retail deliveries of cars and trucks for the years indicated:
U. S. Industry Retail Deliveries
(millions of units)
Years Ended December 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- ---------- --------- ----------
Cars........................................ 8.2 8.3 8.6 8.6 9.0
Trucks...................................... 7.8 7.2 6.9 6.5 6.4
---- ---- --- ---- ----
Total....................................... 16.0 15.5 15.5 15.1 15.4
==== ==== ==== ==== ====
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Item 1. Business (Continued)
Ford classifies cars by small, middle, large and luxury segments and trucks by compact pickup, compact bus/van/utility, full-size pickup, full-size bus/van/utility and medium/heavy segments. The large and luxury car segments and the compact bus/van/utility, full-size pickup and full-size bus/van/utility truck segments include the industry's most profitable vehicle lines. The term "bus" as used in this discussion refers to vans designed to carry passengers. The following tables show the proportion of U.S. retail car and truck unit sales by segment for the industry (including Japanese and other foreign-based manufacturers) and Ford for the years indicated:
U. S. Industry Vehicle Sales by Segment
------------------------------------------------------------------
Years Ended December 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- ---------- --------- ----------
CARS
Small....................................... 16.9% 18.1% 19.1% 19.6% 20.1%
Middle...................................... 23.6 24.7 25.6 26.4 26.8
Large....................................... 3.4 3.9 3.9 4.3 4.8
Luxury...................................... 7.1 6.7 6.7 6.8 6.6
----- ----- ----- ----- -----
Total U.S. Industry Car Sales............... 51.0 53.4 55.3 57.1 58.3
----- ----- ----- ----- -----
TRUCKS
Compact Pickup.............................. 6.7 6.4 6.2 6.8 7.7
Compact Bus/Van/Utility..................... 21.1 20.0 19.0 18.0 16.9
Full-Size Pickup............................ 12.4 12.0 12.6 11.5 11.0
Full-Size Bus/Van/Utility................... 6.5 6.1 5.0 4.4 4.1
Medium/Heavy................................ 2.3 2.1 1.9 2.2 2.0
----- ----- ----- ----- -----
Total U.S. Industry Truck Sales............. 49.0 46.6 44.7 42.9 41.7
----- ----- ----- ----- -----
Total U.S. Industry Vehicle Sales........... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
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Ford Vehicle Sales by Segment in U.S.
------------------------------------------------------------------
Years Ended December 31,
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1998 1997 1996 1995 1994
--------- --------- ---------- --------- ----------
CARS
Small....................................... 13.1% 12.7% 13.4% 15.1% 17.5%
Middle...................................... 16.7 19.6 22.1 22.3 22.7
Large....................................... 5.7 5.6 5.3 4.9 5.2
Luxury...................................... 4.2 4.1 4.1 4.4 4.7
----- ----- ----- ----- -----
Total Ford U.S. Car Sales................... 39.7 42.0 44.9 46.7 50.1
----- ----- ----- ----- -----
TRUCKS
Compact Pickup.............................. 8.4 7.7 7.4 8.0 8.9
Compact Bus/Van/Utility..................... 18.1 18.9 20.0 20.1 16.7
Full-Size Pickup............................ 21.3 19.3 20.0 17.9 16.7
Full-Size Bus/Van/Utility................... 12.1 11.0 6.6 5.9 6.2
Medium/Heavy*............................... 0.4 1.1 1.1 1.4 1.4
----- ----- ----- ----- -----
Total Ford U.S. Truck Sales................. 60.3 58.0 55.1 53.3 49.9
----- ----- ----- ----- -----
Total Ford U.S. Vehicle Sales............... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
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As shown in the tables above, since 1994 there has been a steady shift from cars to trucks for both industry sales and Ford sales.
Market Share Data. The following tables show changes in car and truck market shares of U.S. and foreign-based manufacturers for the years indicated:
U.S. Car Market Shares*
------------------------------------------------------------------
Years Ended December 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- ---------- --------- ----------
U.S. Manufacturers (Including Imports)
Ford..................................... 19.2% 19.7% 20.6% 20.9% 21.8%
General Motors........................... 29.8 32.2 32.3 33.9 34.0
Chrysler**............................... 9.1 8.9 9.8 9.1 9.0
----- ----- ----- ----- -----
Total U.S. Manufacturers.............. 58.1 60.8 62.7 63.9 64.8
Foreign-Based Manufacturers***
Japanese................................. 31.8 30.9 30.0 29.7 29.6
All Other................................ 10.1 8.3 7.3 6.4 5.6
----- ----- ----- ----- -----
Total Foreign-Based Manufacturers..... 41.9 39.2 37.3 36.1 35.2
----- ----- ----- ------ -----
Total U.S. Car Retail Deliveries...... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
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U.S. Truck Market Shares*
------------------------------------------------------------------
Years Ended December 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- ---------- --------- ----------
U.S. Manufacturers (Including Imports)
Ford..................................... 30.2% 31.1% 31.1% 31.9% 30.1%
General Motors........................... 27.5 28.8 29.0 29.9 30.9
Chrysler**............................... 22.6 21.7 23.4 21.3 21.7
Navistar International................... 1.3 1.3 1.3 1.4 1.3
All Other................................ 2.3 1.9 1.8 2.0 1.8
----- ----- ----- ----- -----
Total U.S. Manufacturers.............. 83.9 84.8 86.6 86.5 85.8
Foreign-Based Manufacturers***
Japanese................................. 14.5 14.1 12.7 12.7 13.5
All Other................................ 1.6 1.1 0.7 0.8 0.7
----- ----- ----- ----- -----
Total Foreign-Based Manufacturers..... 16.1 15.2 13.4 13.5 14.2
----- ------ ----- ----- -----
Total U.S. Truck Retail Deliveries.... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
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U.S. Combined Car and Truck Market Shares*
------------------------------------------------------------------
Years Ended December 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- ---------- --------- ----------
U.S. Manufacturers (Including Imports)
Ford..................................... 24.6% 25.0% 25.2% 25.6% 25.2%
General Motors........................... 28.7 30.6 30.8 32.2 32.7
Chrysler**............................... 15.7 14.8 15.9 14.3 14.3
Navistar International................... 0.7 0.6 0.6 0.6 0.5
All Other................................ 1.1 0.9 0.7 0.9 0.8
----- ----- ----- ----- -----
Total U.S. Manufacturers.............. 70.8 71.9 73.2 73.6 73.5
Foreign-Based Manufacturers***
Japanese................................. 23.3 23.2 22.4 22.6 22.9
All Other................................ 5.9 4.9 4.4 3.8 3.6
----- ----- ----- ----- -----
Total Foreign-Based Manufacturers..... 29.2 28.1 26.8 26.4 26.5
----- ----- ----- ----- -----
Total U.S. Car and Truck Retail Deliveries 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
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Item1. Business (Continued)
Marketing Incentives and Fleet Sales. Automotive manufacturers that sell vehicles in the United States frequently give purchasers price discounts or other marketing incentives. These incentives are the result of intense competition from new product offerings by both domestic and foreign manufacturers and the desire to maintain economic production levels and market shares. Manufacturers provide these incentives to both retail and fleet customers (fleet customers include daily rental companies, commercial fleet customers, leasing companies and governments). Marketing incentives generally are higher during periods of economic downturns, when excess capacity in the industry tends to increase.
Ford's marketing costs in the United States as a percentage of gross sales revenue were as follows for the following three years: 10.4% (1998), 8.7% (1997) and 8.0% (1996). These "marketing costs" include primarily (i) marketing incentives on vehicles, such as, retail rebates and costs for special financing and lease programs, (ii) reserves for costs and/or losses associated with our required repurchase of certain vehicles sold to daily rental companies and (iii) costs for advertising and sales promotions for vehicles.
Fleet sales generally are less profitable than retail sales, and sales to daily rental companies generally are less profitable than sales to other fleet purchasers. The mix between sales to daily rental companies and other fleet customers has been about evenly split in recent years. The table below shows our fleet sales in the United States, and the amount of those sales as a percentage of our total U.S. car and truck sales, for the last five years.
Ford Fleet Sales
------------------------------------------------------------------
Years Ended December 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- ---------- --------- ----------
Units sold.................................. 878,000 923,000 936,000 971,000 924,000
Percent of Ford's total U.S. car and truck sales 22% 24% 24% 25% 24%
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Warranty Coverage. Ford presently provides warranty coverage for defects in factory-supplied materials and workmanship on all vehicles (other than medium trucks) sold by it in the United States. This warranty coverage extends for at least 36 months or 36,000 miles (whichever occurs first) and covers all components of the vehicle, other than tires which are warranted by the tire manufacturers. In general, different warranty coverage is provided on medium/heavy trucks and on vehicles sold outside the United States. In addition, as discussed below under "Governmental Standards - Mobile Source Emissions Control", the Federal Clean Air Act requires a useful life of 10 years or 100,000 miles (whichever occurs first) for emissions equipment on most light duty vehicles sold in the United States. As a result of the coverage of these warranties and the increased concern for customer satisfaction, costs for warranty repairs, emissions equipment repairs and customer satisfaction actions ("warranty costs") can be substantial. Estimated warranty costs for each vehicle sold by us are accrued at the time of sale. Such accruals, however, are subject to adjustment from time to time depending on actual experience.
Outside of the United States, Europe is our largest market for the sale of cars and trucks. The automotive industry in Europe is intensely competitive. Over the past year, nine new or freshened vehicles were introduced in the European market by various manufacturers. For the past 12 years, the top six manufacturers have each achieved a car market share in about the 10% to 17% range. (Manufacturers' shares, however, vary considerably by country.) This competitive environment is expected to intensify further as Japanese manufacturers, which together had a European car market share of 11.5% for 1998, increase their production capacity in Europe and import restrictions on Japanese built-up vehicles are removed in total by December 31, 1999. We estimate that in 1998 the European automotive industry had excess capacity of approximately 6.2 million units (based on a comparison of European domestic demand and capacity).
Item 1. Business (Continued)
In 1998, vehicle manufacturers sold 16.1 million cars and trucks in Europe, up 7% from 1997 levels. Ford's combined car and truck market share in Europe in 1998 was 10.3%, down 1.1 percentage points from 1997.
For Ford, Great Britain and Germany are the most important markets within Europe, although the Southern European countries are becoming increasingly significant. Any adverse change in the British or German market has a significant effect on our total automotive profits. For 1998 compared with 1997, total industry sales were up 4% in Great Britain and up 7% in Germany.
Mexico and Canada. Mexico and Canada also are important markets for us. In 1998, industry sales of new cars and trucks in Mexico were 665,000 units, up 34% from 1997 levels. In Canada, industry volume in 1998 was 1.4 million units, equal to 1997 levels. Ford's combined car and truck market shares in these markets in 1998 was 16.6% (Mexico) and 19% (Canada).
South America. Brazil and Argentina are our principal markets in South America. The economic environment in those countries has been volatile in recent years, leading to large variations in profitability. Results also have been influenced by government actions to reduce inflation and public deficits, and improve the balance of payments. Industry sales in 1998 were 1.6 million units in Brazil, down 19% from 1997, and 455,000 units in Argentina, up 7% from 1997. Brazilian government austerity measures in 1998 adversely impacted industry vehicle sales in that country and are expected to continue to adversely affect industry sales in 1999. Ford's combined car and truck market shares in these markets in 1998 was 13.1% (Brazil) and 16.4% (Argentina).
Asia Pacific. In the Asia Pacific region, Australia, Taiwan and Japan are
our principal markets. Industry volumes in 1998 in this region were as follows:
808,000 units in Australia (up 12% from 1997), 474,000 units in Taiwan (down 2%
from 1997) and 5.9 million units in Japan (down 13% from 1997). In 1998, Ford's
combined car and truck market share in Australia was 15.9%. In Taiwan (where
sales of built-up vehicles manufactured in Japan are prohibited), we had a
combined car and truck market share in 1998 of 15.4%. Our combined car and truck
market share in Japan has never exceeded 1%. Our principal competition in the
Asia Pacific region has been the Japanese manufacturers. We anticipate that the
continuing relaxation of import restrictions (including duty reductions) in
Australia and Taiwan will intensify competition in those markets.
The financial crisis that began in Thailand in mid-year 1997, and spread to the neighboring Southeast Asian nations, particularly Indonesia, has resulted in a significant reduction of vehicle sales for the region. These markets had been expanding, but economic growth is now expected to remain subdued during a period of restructuring. Taiwan and South Africa have also been affected by the crisis. Ford is positioning itself to participate actively in these markets in recognition of their long-term growth opportunities.
Africa. We operate in the South African market through South African Motor Corporation (Pty.) Limited ("SAMCOR") in which we have a 45% equity interest. SAMCOR is an assembler and distributor of Ford, Mazda and Mitsubishi vehicles in South Africa. In 1998, industry volume in South Africa was 314,000 units, down 17% from 1997 levels. SAMCOR's combined car and truck market share in 1998 was 15.9% (Ford's share was 7.4%).
Item 1. Business (Continued)
The worldwide automotive industry is trending toward further consolidation, such as the recent DaimlerChrysler merger. Such consolidation could be good for the industry to the extent it reduces excess capacity. Consolidation could also result in there being fewer but stronger competitors in the industry. We believe that Ford is well-positioned and does not need to participate in the consolidation trend to compete globally. However, as with our pending transaction with Volvo, we consider opportunities with other manufacturers when we believe it would be beneficial to our business. Presently, our major competitors on a global basis are DaimlerChrysler, General Motors, Honda, Toyota and Volkswagen.
Visteon is an enterprise of Ford and consists of certain subsidiaries and divisions of Ford. Visteon is a global provider of integrated systems and components to automotive manufacturers and other automotive suppliers. Visteon ranks as the second-largest automotive supplier in the world. Its seven divisions are:
- Chassis Systems
- Climate Control Systems
- Electronic Systems
- Exterior Systems
- Glass Systems
- Interior Systems
- Powertrain Control Systems
Currently, most of Visteon's business is with Ford. In 1998 Visteon's mix of business was 92% Ford and 8% non-Ford (including sales by unconsolidated joint ventures, the figures are 91% Ford and 9% non-Ford). In addition, in 1998 most of Visteon's business was in North America (81%) as compared with outside North America (19%). Visteon's goal, however, is to continue to obtain new business from companies other than Ford and to further expand its business beyond North America. In 1998, 46% of Visteon's new business was from non-Ford customers and 33% was from outside North America.
Below are some financial highlights for Visteon (in millions):
Years Ended December 31,
-------------------------------------
1998 1997
---------------- ----------------
Revenue $17,762 $17,220
Pre-Tax Income 1,129 825
Net Income 712 518
After-Tax Return on Sales 4.0% 3.0%
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Item 1. Business (Continued)
Financial Services Sector
Ford Credit is an indirect wholly owned subsidiary of Ford. Ford Credit and its subsidiaries provide wholesale financing and capital loans to Ford retail dealerships and associated non-Ford dealerships throughout the world. Most of these dealerships are privately owned. Ford Credit also purchases from these dealerships retail installment sale contracts and retail leases. In addition, it makes loans to vehicle leasing companies, the majority of which are affiliated with such dealerships. Subsidiaries of Ford Credit provide these financing services in the United States, Europe, Canada, Australia, Indonesia and India to non-Ford dealerships. A substantial majority of all new vehicles financed by Ford Credit and its subsidiaries are manufactured by Ford and our affiliates. Ford Credit also provides retail financing for used vehicles built by Ford and other manufacturers. In addition to vehicle financing, Ford Credit makes loans to affiliates of Ford and finances certain receivables of Ford and our subsidiaries.
Outside the United States, FCE Bank plc is Ford Credit's largest operation. FCE Bank's primary business is to support the sale of Ford vehicles in Europe through the Ford dealer network. It provides a variety of retail, leasing and wholesale finance plans in most countries in which it operates.
Ford Credit also conducts insurance operations through The American Road Insurance Company and its subsidiaries in the United States and Canada. American Road's business primarily consists of: extended service plan contracts for new and used vehicles manufactured by affiliated and nonaffiliated companies, primarily originating from Ford dealers; physical damage insurance covering vehicles and equipment financed at wholesale by Ford Credit; and the reinsurance of credit life and credit disability insurance for retail purchasers of vehicles and equipment.
Ford Credit financed the following percentages of new Ford cars and trucks sold or leased at retail and sold at wholesale in the United States and Europe during the last three years:
Years Ended December 31,
----------------------------------------------------
1998 1997 1996
--------------- --------------- -------------
United States
-------------
Retail*............................ 42.3% 37.5% 37.6%
Wholesale.......................... 82.5 79.8 79.5
Europe
------
Retail*............................ 32.5 29.1 29.3
Wholesale.......................... 95.4 95.0 90.8
-------------------
* As a percentage of total sales and leases of Ford vehicles, including
cash sales.
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Item 1. Business (Continued)
Ford Credit's net finance receivables and net investment in operating leases were as follows at the dates indicated (in millions):
December 31,
-------------------------------------
1998 1997
---------------- ----------------
Net finance receivables
Retail $67,733 $55,601
Wholesale 22,650 21,605
Other 6,839 5,276
------- -------
Total finance receivables, net of unearned income 97,222 82,482
Less: allowance for credit losses (1,280) (1,170)
------- -------
Net finance receivables $95,942 $81,312
======= =======
Net investment in operating leases
Vehicles, at cost $42,663 $41,926
Lease origination costs 63 65
Less: Accumulated depreciation (7,891) (6,943)
Allowance for credit losses (268) (302)
------- -------
Net investment in operating leases $34,567 $34,746
======= =======
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Ford Credit's total receivable balances related to accounts past due 60 days or more were as follows at the dates indicated (in millions):
December 31,
-------------------------------------
1998 1997
--------------- --------------
Retail $473 $497
Wholesale 73 35
Other 32 59
---- ----
Total $578 $591
==== ====
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The following table sets forth information concerning Ford Credit's credit loss experience with respect to the various categories and geographic regions of financing during the years indicated (in millions):
Years Ended or at December 31,
------------------------------------------------
1998 1997 1996
------------- ------------- -------------
Net credit losses/(recoveries)
Retail* $1,031 $1,004 $ 804
Wholesale 9 (1) 19
Other (1) 4 7
------ ------ -------
Total $1,039 $1,007 $ 830
====== ====== =======
United States $ 916 $ 900 $ 707
Europe 57 67 95
Other international 66 40 28
------ ------ -------
Total $1,039 $1,007 $ 830
====== ====== =======
Net losses as a percentage of average net receivables**
Retail 1.10% 1.17% 1.03%
Total finance receivables 0.86 0.89 0.78
Provision for credit losses $1,180 $1,338 $ 993
Allowance for credit losses 1,548 1,471 1,218
Allowance for credit losses
as a percentage of net receivables** 1.19% 1.27% 1.09%
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Item 1. Business (Continued)
Shown below is an analysis of Ford Credit's allowance for credit losses
related to finance receivables and operating leases for the years indicated (in
millions):
1998 1997 1996
------------- ------------- -------------
Balance, beginning of year $1,471 $1,218 $1,055
Additions 1,180 1,338 993
Deductions
Losses 1,243 1,239 1,021
Recoveries (203) (232) (191)
------ ------ ------
Net losses 1,040 1,007 830
Other changes, principally
amounts relating to finance
receivables and operating
leases sold 63 78 -
------ ------ ------
Net deductions 1,103 1,085 830
------ ------ ------
Balance, end of year $1,548 $1,471 $1,218
====== ====== ======
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Ford Credit and FCE Bank rely heavily on their ability to raise substantial amounts of funds. These funds are obtained primarily by the sale of commercial paper, the issuance of term debt and, in the case of FCE Bank, certificates of deposit. Funds also are provided by retained earnings and sales of receivables. The level of funds can be affected by certain transactions with Ford, such as capital contributions and dividend payments, interest supplements and other support from Ford for vehicles financed and leased by Ford Credit or FCE Bank under Ford-sponsored special financing or leasing programs. Funds also can be affected by the timing of payments for the financing of dealers' wholesale inventories and for income taxes.
The ability of Ford Credit and FCE Bank to obtain funds is affected by their credit ratings and the nature and availability of support facilities, such as revolving credit agreements and receivables sales facilities. Ford Credit and FCE Bank's credit ratings are closely related to the financial condition of and the outlook for Ford. The long-term senior debt of each of Ford, Ford Credit and FCE Bank is rated "A1" (by Moody's Investors Service) and "A" (by Standard & Poor's Ratings Group). The commercial paper of each of Ford Credit and FCE Bank is rated "Prime-1" (by Moody's) and "A-1" (by S&P).
Under a profit maintenance agreement with Ford Credit, Ford has agreed to make payments to maintain Ford Credit's earnings at certain levels. In addition, under a support agreement with FCE Bank, Ford has agreed to retain a certain direct or indirect ownership interest in FCE Bank and to make (or cause Ford Credit to make) payments to maintain FCE Bank's net worth at certain levels. No payments were required under either of these agreements during the period 1988 through 1998.
Item 1. Business (Continued)
Hertz and its affiliates and independent licensees operate what Hertz believes is the largest car rental business in the world based upon revenues and volume of rental transactions. They also operate what they believe to be one of the largest industrial and construction equipment rental business in the United States based upon revenues. Hertz and its affiliates, associates and independent licensees, do the following:
- rent and lease cars and trucks
- rent industrial and construction equipment
- sell their used cars and equipment
- provide third-party claim management services
- provide telecommunications services
These businesses are operated from over 5,000 locations throughout the United States and in approximately 140 foreign countries and jurisdictions. In April 1997, Hertz completed an initial public offering of common stock representing a 19.1% economic interest in Hertz.
Below are some financial highlights for Hertz (in millions):
Years Ended December 31,
-------------------------------------
1998 1997
---------------- ----------------
Revenue $4,250 $3,905
Pre-Tax Income 465 343
Net Income 277 202
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Item 1. Business (Continued)
Governmental Standards
A number of governmental standards and regulations relating to safety, corporate average fuel economy ("CAFE"), emissions control, noise control, damageability and theft prevention are applicable to new motor vehicles, engines, and equipment manufactured for sale in the United States, Europe and elsewhere. In addition, manufacturing and assembly facilities in the United States, Europe and elsewhere are subject to stringent standards regulating air emissions, water discharges and the handling and disposal of hazardous substances. Such facilities in the United States also are subject to a comprehensive federal-state permit program relating to air emissions.
Mobile Source Emissions Control -- U.S. Requirements. The Federal Clean Air Act imposes stringent limits on the amount of regulated pollutants that lawfully may be emitted by new motor vehicles and engines produced for sale in the United States. Concurrently, most light duty vehicles sold in the United States must comply with these standards for 10 years or 100,000 miles, whichever first occurs. The EPA has filed a report with Congress indicating that more stringent emissions standards will be required for the 2004 model year and beyond. It is anticipated that the EPA will begin the rulemaking process in 1999 to propose post-2004 model year standards that are more stringent than the default standards contained in the Clean Air Act. The EPA is expected to propose regulations which would require most light duty trucks to meet the same emissions standards as passenger cars. The proposed standards are likely to limit severely the use of diesel technology. If the standards are too stringent, it will impact our ability to produce and offer a broad range of products with the characteristics and functionality that customers demand.
Pursuant to the Clean Air Act, California has received a waiver from the EPA to establish its own unique emissions control standards. New vehicles and engines sold in California must be certified by the California Air Resources Board ("CARB"). CARB's emissions requirements (the "California program") for model years 1994 through 2003 require manufacturers to meet a non-methane organic gasses fleet average requirement that are significantly more stringent than those prescribed by the Clean Air Act for the corresponding periods of time. The California program initially required that a specified percentage of each manufacturer's vehicles produced for sale in California, beginning at 2% in 1998 and increasing to 10% in 2003, must be zero-emission vehicles ("ZEVs"), which produce no emissions of regulated pollutants. In 1996, however, CARB eliminated the ZEV mandate until the 2003 model year. Around the same time, vehicle manufacturers voluntarily entered into an agreement with CARB to provide air quality benefits for California equivalent to a 49 state program (i.e., equivalent to providing vehicles certified to the California low emission vehicle standard nationwide beginning with the 2001 model year), to continue research and development of ZEV technology and to provide specific numbers of advanced technology battery vehicles through demonstration programs in California.
Electric vehicles are the only presently known type of zero-emission vehicles. However, despite intensive research activities, technologies have not been identified that would allow manufacturers to produce an electric vehicle that either meets most customers' expectations or is commercially viable. Compliance with the ZEV mandate may require manufacturers to curtail the sale of non-electric vehicles or to offer substantial discounts on electric vehicles, selling them well below cost, while increasing the price on non-electric vehicles. The California program and ZEV mandates present significant technological challenges to manufacturers and compliance may require costly actions that would have a substantial adverse effect on Ford's sales volume and profits.
At a November 1998 hearing, CARB adopted stringent new vehicle emissions standards that must be phased in beginning in the 2004 model year. These new standards treat most light duty trucks the same as passenger cars and require both types of vehicles to meet new stringent emissions requirements. It is also expected that these new standards will essentially eliminate the use of
Item 1. Business (Continued)
diesel technology. CARB's new standards present a difficult engineering and technological challenge, and may impact our ability to produce and offer a broad range of products with the characteristics and functionality that customers demand.
The Clean Air Act also permits other states which do not meet national ambient air quality standards to adopt the California program no later than two years before the affected model year. Under the Act, twelve northeastern states and the District of Columbia formed a group known as the Ozone Transport Commission (the "OTC"). Based on an OTC recommendation, the EPA required each OTC jurisdiction to adopt the California program. The OTC jurisdictions also may adopt California's ZEV mandates, if any, but the EPA does not require them to do so. In March 1997, the Circuit Court of Appeals for the District of Columbia vacated the EPA's rule requiring the OTC jurisdictions to adopt the California program; however, that decision did not affect California programs, including ZEV mandates, already adopted by individual states. There are major problems with transferring California standards to the Northeast -- many dealers sell vehicles in neighboring states and the driving range of present ZEVs is greatly diminished (by more than 50 percent) in cold weather. Also, the Northeast states have refused to adopt the California reformulated gasoline requirement, which makes the task of meeting standards even more difficult.
The California program was adopted in New York and Massachusetts and is currently in effect for model years 1996 and beyond. In addition, these two states adopted ZEV mandates beginning with model year 1998. In August 1998, as a result of a legal challenge from the automotive industry, New York's pre-2003 model year ZEV requirements were declared invalid by the U.S. Court of Appeals for the Second Circuit. Massachusetts has attempted to adopt as a standard ZEV obligations mirroring a voluntary agreement in California between auto manufacturers and CARB. A federal district court invalidated these regulations, but Massachusetts has appealed the decision to the U.S. Court of Appeals for the First Circuit. Connecticut adopted the California program beginning with model year 1998. Rhode Island and Vermont adopted the California program beginning with model year 1999 (with a ZEV mandate to be required in Vermont after certain determinations with respect to the advancement of ZEV technology have been made). Maine has adopted the California program beginning with the 2001 model year. Maryland and New Jersey have laws requiring adoption of the California program and ZEV mandates after certain conditions, relating to actions which may be taken by other OTC jurisdictions, have been met.
In response to OTC actions, the automotive industry proposed a National Low Emissions Vehicle (NLEV) program, which the EPA promulgated as a rule and which has been agreed to by all manufacturers and all OTC jurisdictions except Maine, Massachusetts, New York and Vermont. This NLEV program requires manufacturers to sell low emission vehicles in the participating OTC jurisdictions beginning with the 1999 model year, and throughout the remainder of the country beginning with the 2001 model year. The OTC jurisdictions which have agreed to the NLEV program will for its duration substitute the NLEV program for any of their other emissions programs for passenger cars and light duty gasoline trucks. California and the non-participating OTC jurisdictions will retain their California-based programs. A petition seeking judicial review of the EPA's rule establishing NLEV has been filed by a coalition of environmental groups. The petition alleges that the rule violates the Clean Air Act.
Under the Clean Air Act, the EPA and CARB can require manufacturers to recall and repair non-conforming vehicles. The EPA, through its testing of production vehicles, can also halt the shipment of non-conforming vehicles. Ford may be required to recall, or may voluntarily recall, vehicles for such purposes in the future. The costs of related repairs or inspections associated with such recalls can be substantial.
The Clean Air Act generally prohibits the introduction of new fuel additives unless a waiver is granted by the EPA. In 1995, the EPA was ordered by a federal court to grant such a waiver to Ethyl Corporation for the additive MMT. Ford and other manufacturers believe that the use of MMT will impair the performance of current emissions systems and onboard diagnostics systems. Widespread use of MMT could increase Ford's future warranty costs and necessitate changes in our warranties for emission control devices.
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European Requirements. European Union ("EU") directives and related legislation limit the amount of regulated pollutants that may be emitted by new motor vehicles and engines sold in the EU. In 1998, the EU adopted a new directive on emissions from passenger cars and light commercial trucks. More stringent emissions standards will apply to new car certifications beginning January 1, 2000 and to new car registrations beginning January 1, 2001 ("Stage III Standards"). A second level of even more stringent emission standards will apply to new car certifications beginning January 1, 2005 and to new car registrations beginning January 1, 2006 ("Stage lV Standards"). The comparable light commercial truck Stage III Standards and Stage IV Standards would come into effect one year later than the passenger car requirements. The directive includes a framework that permits EU member states to introduce fiscal incentives to promote early compliance with the Stage III and Stage IV Standards. The directive also introduces on-board diagnostic requirements, more stringent evaporative emission requirements, and in-service compliance testing and recall provisions for emissions-related defects that occur in the first five years or 80,000 kilometers of vehicle life (extended to 100,000 kilometers in 2005). The Stage IV Standards for diesel engines are not yet technically feasible and may impact our ability to produce and offer a broad range of products with the characteristics and functionality that customers want. A related EU directive was adopted at the same time which establishes standards for cleaner fuels beginning in 2000 and even cleaner fuels in 2005. The EU is setting up a program to assess the need for further changes to vehicle emission and fuel standards after 2005.
Certain European countries are conducting in-use emissions testing to ascertain compliance of motor vehicles with applicable emissions standards. These actions could lead to recalls of vehicles; the future costs of related inspection or repairs could be substantial.
Motor Vehicle Safety -- The National Traffic and Motor Vehicle Safety Act of 1966 (the "Safety Act") regulates motor vehicles and motor vehicle equipment in two primary ways. First, the Safety Act prohibits the sale in the United States of any new vehicle or equipment that does not conform to applicable motor vehicle safety standards established by the National Highway Traffic Safety Administration (the "Safety Administration"). Meeting or exceeding many safety standards is costly because the standards tend to conflict with the need to reduce vehicle weight in order to meet emissions and fuel economy standards. Second, the Safety Act requires that defects related to motor vehicle safety be remedied through safety recall campaigns. There currently are pending before the Safety Administration a number of investigations relating to alleged safety defects in Ford vehicles. A manufacturer is also obligated to recall vehicles if it determines they do not comply with a safety standard. Should Ford or the Safety Administration determine that either a safety defect or a noncompliance exists with respect to certain of Ford's vehicles, the costs of such recall campaigns could be substantial.
In September 1998, the Safety Administration published a proposed advanced air bag rule that would significantly affect the design and testing of new vehicles. While Ford supports efforts to further improve air bag systems, and is aggressively working with suppliers to quickly introduce new designs, we have many concerns about the proposed rule. These concerns include a dramatic increase in the number of required tests, complex and vague requirements, the need to incorporate new and unproven technology, and a potential increase in safety risks. We are moving aggressively to install even more advanced air bag restraint systems in our vehicles, but the proposed rule could substantially interfere with these plans. If such a rule were to become effective, it could significantly increase our costs, especially if it requires us to change our present advanced air bag design programs. We outlined our concerns in a December 1998 response to the Safety Administration's proposal. The Safety Administration is expected to publish a supplemental notice which likely will propose additional changes to the rule. Ford and other vehicle manufacturers will have another chance to respond to the new proposal before a final rule is published.
The Safety Administration has published a rule requiring a revised standardized label that automakers must display prominently to warn drivers of sport utility vehicles about rollover risks. The label must be affixed to the sun visor or the driver side window of all such vehicles beginning with the model year 2000. The Safety Administration is also investigating the feasibility
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of a test to measure the propensity of a vehicle to roll over. It is unlikely that an objective meaningful stability test can be developed. Nonetheless, the Safety Administration has announced its intention to issue a final rule to require manufacturers to label vehicles based on their performance on the yet-to-be-determined stability test. Such a label could impact customer satisfaction and the sales of Ford products.
The subject of truck-to-car compatibility in relation to collisions continues to receive significant media attention and the government is studying this issue. While we and our suppliers are continuing to work on this complex issue, government regulation to address vehicle compatibility also is possible.
Final regulations implementing the Fastener Quality Act of 1990 are applicable to certain fasteners (i.e., nuts, bolts, washers and screws) manufactured after July 26, 1998. The regulations impose burdensome and costly testing, certification and record keeping requirements which are not compatible with quality assurance systems currently used in the automotive industry. Congress delayed the implementation of the Act pending a Department of Commerce report. The report, issued in February 1999, addressed automotive industry concerns by suggesting a narrowing of covered fasteners and an exemption for fasteners manufactured to industry standards. Congress is considering amendments to the Act. If amendments are adopted consistent with the principles outlined in the Commerce Department report, it would significantly lessen the burden of the legislation.
Canada, the European Union, individual member countries within the EU and other countries in Europe, South America and the Asia Pacific markets also have safety standards applicable to motor vehicles and are likely to adopt additional or more stringent standards in the future.
Motor Vehicle Fuel Economy -- U.S. Requirements. Under the Motor Vehicle Information and Cost Savings Act vehicles must meet minimum CAFE standards set by the Safety Administration. A manufacturer is subject to potentially substantial civil penalties if it fails to meet the CAFE standard in any model year, after taking into account all available credits for the preceding three model years and expected credits for the three succeeding model years.
The Cost Savings Act established a passenger car CAFE standard of 27.5 mpg for the 1985 and later model years, which the Safety Administration believes it has the authority to amend to a level it determines to be the maximum feasible level. The Safety Administration has established a 20.7 mpg CAFE standard applicable to light trucks.
Ford expects to be able to comply with the foregoing CAFE standards, in some cases using credits from prior or succeeding years. In November 1998, we filed a plan to meet the 1998 light truck standards using credits to be generated in future years, and this plan has been approved by the Safety Administration. In general, a continued increase in demand for larger vehicles, coupled with a decline in demand for small and middle-size vehicles could jeopardize our long-term ability to maintain compliance with CAFE standards.
It is anticipated that efforts may be made to raise the CAFE standard because of concerns for carbon dioxide ("CO2") emissions, energy security or other reasons. President Clinton's Climate Change Action Plan ("CCAP") sets a goal to improve new vehicle fuel efficiency in an amount equivalent to at least 2% per year over a 10 to 15 year period. In addition, international concerns over global warming due to the emission of "greenhouse gasses" have given rise to strong pressures to increase fuel economy. During the December 1997 meeting of the parties to the United Nations Climate Change Convention in Kyoto, Japan, the United States agreed to reduce greenhouse gas emissions by 7% below their 1990 levels during the 2008-2012 period (the "Kyoto Protocol"). The Kyoto Protocol is not yet binding on the United States, pending signature by the President and ratification by the Senate. If the CCAP or Kyoto Protocol goals are partially or fully implemented through increases in the CAFE standard, or if significant increases in car or light truck CAFE standards for subsequent model years otherwise are imposed, Ford would find it necessary to take various costly actions that would have substantial adverse effects on its sales volume and profits. For example, Ford might have to curtail or eliminate production of larger family-size and luxury cars and full-size light trucks, restrict
Item 1. Business (Continued)
offerings of engines and popular options, and continue or increase market support programs for its most fuel-efficient cars and light trucks.
Foreign Requirements. The EU is also a party to the Kyoto Protocol and has agreed to reduce greenhouse gas emissions by 8% below their 1990 levels during the 2008-2012 period. In December 1997, the European Council of Environment Ministers (the "Environment Council") reaffirmed its goal to reduce average CO2 emissions from new cars to 120 grams per kilometer by 2010 (at the latest) and invited European motor vehicle manufacturers to negotiate further with the European Commission on a satisfactory voluntary environmental agreement to help achieve this goal. In October 1998, the EU agreed to support an environmental agreement with the European Automotive Manufacturers Association (of which Ford is a member) on CO2 emission reductions from new passenger cars (the "Agreement"). The Agreement establishes an emission target of 140 grams of CO2 per kilometer for the average of new cars sold in the EU by the Association's members in 2008. In addition, the Agreement provides that certain Association members (including Ford) will introduce models emitting no more than 120 grams of CO2 per kilometer in 2000, and establishes an estimated target range of 165-170 grams of CO2 per kilometer for the average of new cars sold in 2003. Also in 2003, the Association will review the potential for additional CO2 reductions, with a view to moving further toward the EU's objective of 120 grams of CO2 per kilometer by 2012. The Agreement assumes (among other things) that no negative measures will be implemented against diesel-fueled cars and the full availability of improved fuels with low sulfur content in 2005. Average CO2 emissions of 140 grams per kilometer for new passenger cars corresponds to a 25% reduction in average CO2 emissions compared to 1995.
The Environment Council requested the European Commission to review in 2003 the EU's progress toward reaching the 120 gram target by 2010, and to implement annual monitoring of the average CO2 emissions from new passenger cars and progress toward achievement of the objectives for 2000 and 2003.
In February 1999, the European Commission published an amended proposal for a new EU directive on the availability of consumer information about the fuel economy and CO2 emissions of new passenger cars. Although the proposal includes certain minimum EU requirements on the information to be made available, individual Member States would be able to set national requirements for (i) labels to be displayed on passenger cars at their point of sale, (ii) guides listing all passenger cars available for sale in the EU to be available in booklet and electronic form, and (iii) posters to be displayed in dealerships ranking the fuel economy, CO2 emissions, and estimated fuel costs of passenger cars available for sale there.
In 1995, members of the German Automobile Manufacturers Association (including Ford Werke AG) made a voluntary pledge to reduce by 2005 the average fuel consumption of new cars sold in Germany by 25% from 1990 levels, to review before the year 2000 the need for and feasibility of further reductions in average fuel consumption, to make regular reports on fuel consumption, and to increase industry research and development efforts toward this end.
Other European countries are considering other initiatives for reducing CO2 emissions from motor vehicles. Taken together such proposals could have substantial adverse effects on our sales volumes and profits in Europe.
Japan has adopted automobile fuel consumption goals that manufacturers must attempt to achieve by the 2000 model year. The consumption levels apply only to gasoline-powered vehicles, vary by vehicle weight, and range from 5.8 km/I to 19.2 km/l.
U.S. Stationary Source Air Pollution Control -- The Clean Air Act limits various emissions into the atmosphere from stationary sources as well as mobile sources, and allows states to adopt even more stringent standards. The Act imposes comprehensive permit requirements for manufacturing facilities in
Item 1. Business (Continued)
addition to those required by various states. Regulations continue to be promulgated under the Act, and the costs to comply with the Act could be substantial. In addition, the enormous complexity and time-consuming nature of the comprehensive permit program provided for by the Act may reduce operational flexibility and may interfere with future competitive upgrading of Ford's U.S. production facilities.
U.S. Water Pollution Control -- Pursuant to the Federal Water Pollution Control Act (the "Clean Water Act"), Ford is required to obtain permits for its manufacturing facilities that regulate the facilities' discharge of wastewater into public waters and municipal sewerage systems. The EPA also requires management standards and, in some cases, permits for the discharge of storm water. The standards under the Clean Water Act are established by the EPA and by the state where a facility is located. Many states have requirements that go beyond those established under the Clean Water Act.
The EPA also adopted regulations, pursuant to the Great Lakes Critical Programs Act of 1990, that require more restrictive standards for discharges into waters that impact the Great Lakes. These regulations may require the addition of costly control equipment.
U.S. Hazardous Substance and Waste Control -- Pursuant to the Federal Resource Conservation and Recovery Act, the EPA has issued regulations establishing certain procedures and standards for persons who generate, transport, treat, store, or dispose of hazardous wastes and requiring corrective action for prior releases. States may adopt even more extensive requirements. The Federal Comprehensive Environmental Response, Compensation, and Liability Act requires notification regarding certain releases into the environment, and creates potential liability for remediation costs and for damage to natural resources at sites where our waste was taken for treatment or disposal. A number of states have enacted separate laws of this type. In addition, under the Federal Toxic Substances Control Act ("TSCA"), the EPA evaluates environmental and health effects of existing chemicals and new substances. Pursuant to TSCA, the EPA regulates the use of polychlorinated biphenyls in transformers, capacitors and other equipment that may be located at our U.S. facilities.
European Stationary Source Environmental Control -- The European Union and individual member countries impose requirements on waste and hazardous wastes, incineration, packaging, landfill, soil pollution, integrated pollution control, air emissions standards, import/export and use of dangerous substances, air and water quality standards, noise, environmental management systems, energy efficiency, emissions reporting, and planning and permitting. Additional or more stringent requirements (including tax measures and civil liability schemes for cleaning polluted sites) are likely to be adopted in the future. The cost of complying with these standards could be substantial.
The European Commission has published a draft proposal to introduce an obligation for motor vehicle manufacturers to take back end-of-life vehicles on a cost-free basis beginning in 2003, to impose requirements on the proportion of the vehicle that may be disposed of in landfills and the proportion that must be reused or recycled beginning in 2005, and to ban the use of certain substances in vehicles beginning in 2003. Such proposals could, if adopted, impose a substantial cost on manufacturers. The German Automobile Association (including Ford Werke AG) and the German Automobile Importers Association made a voluntary pledge to establish a nationwide infrastructure network to take back passenger cars that are at least 12 years old (and meet certain other requirements) on a cost-free basis to their owners.
Pollution Control Costs -- During the period 1999 through 2003, we expect to spend approximately $468 million on our North American and European facilities to comply with air and water pollution and hazardous waste control standards which now are in effect or are scheduled to come into effect. Of this total, we estimate spending approximately $90 million in 1999 and $92 million in 2000.
Worldwide Regulatory Compatibility -- Our efforts to develop new markets and increase imports are impeded by incompatible automotive safety,
Item 1. Business (Continued)
environmental and other product regulatory standards. At present, differing standards either restrict the vehicles we can export to serve new markets or increase the cost and complexity to do so.
Employment Data
The average number of people we employed by geographic area was as
follows for the years indicated:
1998 1997
--------------- ---------------
United States 173,899 189,787
Europe 105,351 104,014
Other 65,925 70,091
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Total 345,175 363,892
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In 1998, the average number of people we employed decreased 5.1 percent reflecting our divestiture of The Associates, offset partially by increased employment at Hertz. The above figures for 1997 include 21,161 employees at The Associates. Most of our employees work in our Automotive and Visteon operations.
For further information regarding employment statistics of Ford, see Item
6. "Selected Financial Data" later in this Report. For information concerning
employee retirement benefits, see Note 8 of our Notes to Financial Statements at
the end of this Report.
Substantially all of the hourly employees in our Automotive and Visteon operations in the United States are represented by unions and covered by collective bargaining agreements. Approximately 99% of these unionized hourly employees in our Automotive segment (as well as many of those in our Visteon segment) are represented by the United Automobile Workers (the "UAW"). Approximately 3% of our salaried employees are represented by unions. Most hourly employees and many non-management salaried employees of our subsidiaries outside the United States also are represented by unions. Collective bargaining agreements between Ford and the UAW and between Ford of Canada and the Canadian Automobile Workers were entered into in 1996 and are scheduled to expire in September 1999. We do not know whether we will be able to reach new agreements with these unions without a work stoppage occurring. If there is a work stoppage, Ford's profits could be substantially adversely affected.
In recent years we have not had significant work stoppages at our facilities, but they have occurred in some of our suppliers' facilities. Any protracted work stoppages in the future, whether in our facilities or those of certain suppliers, could substantially adversely affect our results of operations.
Item 1. Business (Continued)
Research and Development
We conduct research and development primarily to improve the performance (including fuel efficiency), safety and customer satisfaction of our products, and to develop new products. We also have staffs of scientists who engage in basic research. We maintain extensive engineering, research and design facilities for these purposes, including large centers in Dearborn, Michigan; Dunton, England; and Merkenich, Germany. Most of our research and development relates to our Automotive and Visteon operating segments.
During the last three years we took charges to our consolidated income for
research and development we sponsored in the following amounts: $6.3 billion
(1998), $6.3 billion (1997) and $6.8 billion (1996). Any customer-sponsored
research and development activities that we conduct are not material.
We own substantially all of our U.S. manufacturing and assembly facilities. These facilities are situated in various sections of the country and include assembly plants, engine plants, casting plants, metal stamping plants, components plants, transmission and axle plants and glass plants. We also own a majority of our distribution centers, warehouses and sales offices, with the remainder being leased.
In addition, we maintain and operate manufacturing plants, assembly facilities, parts distribution centers and engineering centers outside the United States. We own substantially all of these facilities.
Below is more information on the separate number of facilities operated by our Automotive and Visteon segments:
- Automotive: Approximately 150 plants; 540 distribution, engineering and research and development centers and warehouses; and 314 owned dealerships.
- Visteon: Approximately 60 plants and 37 sales, engineering and technical centers.
The furniture, equipment and other physical property owned by our Financial Services operations are not material in relation to their total assets.
Various legal actions, governmental investigations and proceedings and claims are pending or may be instituted or asserted in the future against us and our subsidiaries, including those arising out of the following: alleged defects in our products; governmental regulations covering safety, emissions and fuel economy; financial services; employment-related matters; dealer, supplier and other contractual relationships; intellectual property rights; product warranties; and environmental matters. Some of the pending legal actions are, or purport to be, class actions. Some of the foregoing matters involve or may involve compensatory, punitive or antitrust or other multiplied damage claims in very large amounts, or demands for recall campaigns, environmental remediation programs, sanctions or other relief which, if granted, would require very large expenditures. See Item 1, "Business--Governmental Standards". Included among the foregoing matters are the following:
Occupant Restraint Systems. Ford is a defendant in various actions for damages arising out of automobile accidents where the plaintiffs claim that their injuries resulted from (or were aggravated by) alleged defects in the occupant restraint systems in vehicle lines of various model years. For those cases in which damages have been specified, the damages specified by the plaintiffs, including both actual and punitive damages, aggregated approximately $1 billion at December 31, 1998.
Bronco II. Ford is a defendant in various personal injury lawsuits involving the alleged propensity of Bronco II utility vehicles to roll over. For those cases in which damages have been specified, the damages specified by the plaintiffs, including both actual and punitive damages, aggregated approximately $1.8 billion at December 31, 1998.
In most of the actions described in the two paragraphs above, no dollar amount of damages is specified or the specific amount we refer to is only the jurisdictional minimum. It has been our experience that in cases that allege a specific amount of damages in excess of the jurisdictional minimum, such amounts, on average, bear little relation to the actual amounts of damages paid by Ford in resolving such cases. The damages we pay generally are, on average, substantially less than the amounts originally claimed. In addition to the pending actions, accidents have occurred and claims have arisen which also may result in lawsuits in which the plaintiffs may allege similar defects.
Asbestos. We are a defendant in various actions for injuries claimed to have resulted from alleged contact with certain Ford parts and other products containing asbestos. The plaintiffs in these actions seek damages, including both actual and punitive damages, of approximately $2.1 billion at December 31, 1998. (In some of these actions, the plaintiffs have not specified a dollar amount of damages or the specific amount referred to is only the jurisdictional minimum.) As distinguished from most lawsuits against us, in most of these asbestos-related cases, we are but one of many defendants, and many of our co-defendants have substantial resources.
General. We have received notices from government environmental enforcement agencies concerning four matters which potentially involve monetary sanctions exceeding $100,000. The agencies believe that Ford facilities may have violated regulations relating to certain emissions from facility operations.
Item 3. Legal Proceedings (Continued)
We have received notices under various federal and state environmental laws that we (along with others) may be a potentially responsible party for the costs associated with remediating numerous hazardous substance storage, recycling or disposal sites in many states and, in some instances, for natural resource damages. We also may have been a generator of hazardous substances at a number of other sites. The amount of any such costs or damages for which we may be held responsible could be substantial. The contingent losses that we expect to incur in connection with many of these sites have been accrued and those losses are reflected in our financial statements in accordance with generally accepted accounting principles. However, for many sites, the remediation costs and other damages for which we ultimately may be responsible are not reasonably estimable because of uncertainties with respect to factors such as our connection to the site or to materials there, the involvement of other potentially responsible parties, the application of laws and other standards or regulations, site conditions, and the nature and scope of investigations, studies and remediation to be undertaken (including the technologies to be required and the extent, duration and success of remediation). As a result, we are unable to determine or reasonably estimate the amount of costs or other damages for which we are potentially responsible in connection with these sites, although that total could be substantial.
CCA Lawsuit. The Corporation for Clean Air, Inc., a California non-profit group ("CCA"), filed a lawsuit in California against Ford and numerous other engine and vehicle manufacturers and owners of vehicle fleets, under California's Safe Drinking Water and Toxic Enforcement Act ("Proposition 65"). Under Proposition 65 any business that knowingly and intentionally exposes any person to certain carcinogens and reproductive toxins must provide that person with an advance clear and reasonable warning, unless the business can prove that the exposures are insignificant. CCA's complaint alleges that manufacturers and fleet owners of diesel powered vehicles are exposing California's citizens to diesel exhaust in violation of Proposition 65. Maximum penalties under Proposition 65 are $2,500 per vehicle per day of violation. In September 1998, the California Superior Court dismissed the lawsuit, finding that CCA failed to provide admissible evidence sufficient to maintain a case under Proposition 65 and that vehicle manufacturers are not responsible for providing warnings of exposures for vehicles that are not under their control. CCA has filed notice of its intent to appeal the court's decision.
Ford has been named a defendant in various class action lawsuits. Class action lawsuits can involve very large groups of plaintiffs, such as statewide or nationwide classes, if plaintiffs persuade the court to grant class certification. We believe we have valid defenses in each of these cases; however, if plaintiffs were to prevail in any of these lawsuits, we could be required to pay substantial damages.
Paint. There are four purported class actions pending against Ford alleging defects in the paint processes used on more than six million vehicles we manufactured in model years 1984 through 1993. One case (Landry) is nationwide in scope and is pending in the U.S. District Court for the Eastern District of Louisiana. In August 1998, the Landry court denied the plaintiffs' motion for class certification. In February 1999, the Court of Appeals denied plaintiffs' request to permit them to appeal the class cerrtification decision prior to trial. In another case (Sheldon), a Texas state court certified two subclasses of Texas residents for trial. The Texas Court of Appeals affirmed the class certification order and approved a bifurcated trial process that would require class members to prove causation and damages in separate trials following a classwide trial on the existence of a defect and Ford's knowledge of the defect. We appealed the class certification to the Texas Supreme Court and oral argument was heard in February 1999. We are awaiting a ruling. The third case, Nienhuis, was filed in Illinois state court in May 1998. It raises the same allegations as Landry and Sheldon with respect to a larger group of vehicles, and alleges a nationwide class or, alternatively, a class of Illinois residents. We removed the action to federal court and, in June 1998, the case was conditionally transferred to the Louisiana federal court where Landry is pending. The case was later remanded to state court, and our appeal of the remand order is pending. The fourth case, Clayman, was filed in Pennsylvania state court and asserts, on behalf of Pennsylvania residents, claims similar to those raised in Nienhuis. We removed Clayman to federal court and sought to have it consolidated with Landry
Item 3. Legal Proceedings (Continued)
in the U.S. District Court for the Eastern District of Louisiana. It too was remanded to state court. In each pending lawsuit, the plaintiffs seek unspecified compensatory damages, as well as punitive damages, attorneys' fees and costs.
Ignition Switch. In 1996, we were served with fourteen purported class action lawsuits alleging that certain 1983 to 1993 model year vehicles were equipped with defective ignition switches that could cause an electrical short circuit, resulting in smoke and fire damage. Most of the suits were brought on behalf of plaintiffs who have not experienced a problem, but who claim that their vehicles have diminished value because of the allegedly defective switches. Some of the lawsuits were purportedly brought on behalf of plaintiffs who claim to have suffered fire or smoke damage to their vehicles. Plaintiffs seek unspecified compensatory damages, punitive damages, attorneys' fees and costs, as well as injunctive relief requiring, among other things, that Ford replace the allegedly defective ignition switch in all affected vehicles. All fourteen lawsuits were consolidated for pretrial proceedings in federal court in New Jersey. In August 1997, the court denied plaintiffs' motion for class certification. In September 1997, the court dismissed all of the claims brought by the non-incident class members except the implied warranty claims brought under Louisiana law and the breach of contract claims. In May 1998, plaintiffs in the "incident" (smoke and fire damage) cases filed an amended complaint which attempts to consolidate all such claims in a single action. The complaint proposes alternative classes and several subclasses. The plaintiffs have indicated that the proposed classes and subclasses may be amended following further discovery. In August 1998, the court reaffirmed its denial of class certification and ruled on plaintiffs' motion to remand the actions, remanding one of the fourteen consolidated actions to Alabama state court and retaining jurisdiction over the others. In October 1998, plaintiffs in the non-incident cases filed a motion to amend an earlier court ruling that dismissed with prejudice the claims under the federal Magnuson-Moss Warranty Act and requested leave to file an amended complaint restating these and other claims. The court denied the motion as to two of the plaintiffs but allowed the third plaintiff to amend the complaint to pursue breach of express warranty claims and claims for injunctive relief and/or restitution under the California Business and Professions Act.
In a related matter, State Farm Mutual Automobile Insurance Company filed a lawsuit in federal court in California in January 1998 against Ford and United Technologies Automotive, Inc. State Farm seeks damages for insurance claims it paid to cover vehicle damage caused by allegedly defective ignition switches, the deductible amounts paid by its insureds, other compensatory damages, disgorgement of profits and attorney's fees and costs. We have moved to dismiss State Farm's claims and obtained a transfer of the action to the New Jersey federal court where the ignition switch class actions are pending. State Farm opposed the transfer. Also, a private insurer, the California State Automobile Association Inter-insurance Bureau has filed a separate action against us seeking to recover amounts it paid for 15 vehicle fire claims allegedly caused by defective ignition switches. The Bureau's lawsuit has also been transferred to the New Jersey federal court for consolidated pre-trial proceedings with the other ignition switch-related lawsuits. We have moved to dismiss the Bureau's complaint.
TFI Module. Six purported class actions are pending in state courts on behalf of owners and lessees of 1983 through 1995 model year Ford vehicles containing a distributor-mounted thick film ignition (TFI) module. The plaintiffs allege that distributor-mounted TFI modules are defective because they have a high propensity to fail due to exposure to engine heat, causing the engine to stumble, stall, or not start. The plaintiffs in these cases seek pre- and post-judgment interest, attorneys' fees, disgorgement of profits, compensatory damages, punitive damages, notice to the public, and the recall and retrofit of all vehicles with the allegedly defective TFI modules. The cases are pending in Alabama, California, Illinois, Maryland, Tennessee and Washington. The Alabama and Tennessee cases were conditionally certified as nationwide class actions (excluding California). The cases in Illinois, Maryland and Washington purport to be regional class actions, and the California case is statewide in scope. The California case is the "lead" case and proceedings in the other cases are stayed. The court has certified a class of California residents who currently own or lease the subject vehicles and residents who purchased such vehicles when they were new. The court also certified a sub-class of consumers pursuing Consumer Legal Remedies Act claims, bringing the total class to approximately 3.2 million members. In the unlikely event that plaintiffs
Item 3. Legal Proceedings (Continued)
recovered fully on all of their claimed damages, the total award in the California action would exceed $4 billion. Trial in the California case is scheduled for April 5, 1999. The trial court recently denied Ford's motions to decertify the class and for summary judgment. We are seeking leave to appeal some of those rulings. If leave to appeal is denied, we will have the right to appeal after trial if necessary.
Air Bag. One purported class action lawsuit is pending in Alabama state court alleging that air bags are defective because they can cause injury, particularly to children and small adults. Plaintiffs allege that their vehicles are unsuitable for transporting children and small adults and, therefore, are not worth the purchase price they paid. They seek compensatory damages, including the alleged diminution in value of their vehicles. The Alabama action appears to be nationwide in scope and purports to represent owners of 1993 through 1996 (and some 1997) model year cars and light trucks with passenger air bags. The plaintiffs named as defendants Ford, General Motors Corporation, Chrysler Corporation, and an Alabama automobile dealership. The trial court denied defendants' motion for change of venue, and the Alabama Supreme Court declined to hear an appeal on that issue. We have asked the court to reconsider that decision. Our motion to dismiss this action is pending.
Ford/Citibank Visa. Following the June 1997 announcement of the termination of the Ford/Citibank credit card rebate program, five purported nationwide class actions and one purported statewide class action were filed against Ford; Citibank is also a defendant in some of these actions. The actions allege damages in an amount up to $3,500 for each cardholder who obtained a Ford/Citibank credit card in reliance on the rebate program and who is precluded from accumulating discounts toward the purchase or lease of new Ford vehicles after December 1997 as a result of the termination of the rebate program. Plaintiffs contend that defendants deceptively breached their contract by unilaterally terminating the program, that defendants have been unjustly enriched as a result of the interest charges and fees collected from cardholders, and further, that defendants conspired to deprive plaintiffs of the benefits of their credit card agreement. Plaintiffs seek compensatory damages, or alternatively, reinstatement of the rebate program, and punitive damages, costs, expenses and attorneys' fees. The five purported nationwide class actions were filed in state courts in Alabama, Illinois, New York, Oregon and Washington, and the purported statewide class action was filed in a California state court. The Alabama court has conditionally certified a class consisting of Alabama residents. Ford removed all of the cases to federal court, which consolidated and transferred the cases to federal court in Washington for pretrial proceedings. In September 1998, Ford and Citibank jointly filed a motion to dismiss the consolidated lawsuit pending before the court in Washington. The motion to dismiss was denied in November 1998 and the parties are currently pursuing pretrial discovery. The plaintiffs in the Oregon and Alabama cases have moved to remand their cases to state court.
Flat Glass. Ford is a defendant in 14 purported class actions brought on behalf of purchasers of flat glass alleging that we and other manufacturers fixed prices and allocated markets in violation of federal and state antitrust laws. Twelve of the class actions are nationwide in scope and pending in federal court and the other two class actions are statewide in scope and are pending in state courts. The other defendants include Pilkington, Libbey-Owens Ford, AFG Industries, PPG Industries, Asahi Glass, and Guardian Industries. Nineteen similar purported class actions are pending in various courts in which Ford is not currently named as a defendant. A total of 28 federal cases have been consolidated in a federal court in Pennsylvania for pretrial proceedings. The parties are currently engaged in discovery related to class certification. In the actions involving Ford, the plaintiffs seek economic and treble damages.
Lease Residual. In January 1998 in connection with a case pending in Illinois state court, Ford and Ford Credit were served with a summons and intervention counterclaim complaint relating to Ford Credit's leasing practices (Higginbotham v. Ford Credit). The counterclaim plaintiff, Carla Higginbotham, is a member of a class that has been conditionally certified for settlement purposes in Shore v. Ford Credit. In the Shore case, Ford Credit commenced an action for deficiency against Virginia Shore, a Ford Credit lessee. Shore counterclaimed for purported violations of the Truth-in-Leasing Act (alleging that certain lease charges were excessive) and the Truth-in-Lending Act (alleging that the lease lacked clarity). Shore purported to represent a class of all similarly situated lessees. Ford was not a party to the Shore case.
Item 3. Legal Proceedings (Continued)
Higginbotham objected to the proposed settlement of the Shore case, intervened as a named defendant, filed separate counterclaims against Ford Credit, and joined Ford as an additional counterclaim defendant. Higginbotham asserts claims against Ford Credit for violations of the Consumer Leasing Act, declaratory judgment concerning the enforceability of early termination provisions in Ford Credit's leases, and fraud. She also asserts a claim against Ford Credit and Ford for conspiracy to violate the Truth-in-Lending Act. The Higginbotham counterclaims allege that Ford Credit inflates the residual values of its leased vehicles, which results in lower monthly lease payments but higher termination fees for lessees who exercise their right of early termination. Higginbotham claims that the early termination fees were not adequately disclosed on the lease form and that the fees are excessive and illegal because of the allegedly inflated residual values. She also alleges that Ford dictated the residual values to Ford Credit and thereby participated in an unlawful conspiracy. This case was stayed pending the approval/rejection of the settlement in Shore. In November 1998, the court issued a ruling that rejected the proposed settlement in Shore. Consequently, the Higginbotham case is proceeding and Ford Credit is in the process of responding to discovery requests. Ford intends to remove the case to federal court and move to dismiss the counterclaims.
Lease Agreement Disclosure. Twenty purported class action lawsuits have been filed in various courts against Ford Credit and, in all but three cases, Primus Automotive Financial Services, Inc., a subsidiary of Ford Credit. The lawsuits, each of which purports to be brought on behalf of a statewide class, allege that Ford Credit and Primus leasing contracts improperly failed to disclose acquisition and administrative fees that are included in the amount of a customer's monthly lease payment. Plaintiffs seek compensatory damages in the amount of all such undisclosed fees, an injunction prohibiting the companies from continuing the practice of not disclosing such fees, attorneys' fees, interest, costs and in some cases, punitive damages. We are seeking dismissal of all the lawsuits. A Georgia federal court and Alabama, Arkansas, Iowa, Minnesota, Missouri and Wisconsin state courts have recently dismissed seven of the lawsuits, finding that itemization of monthly lease charges is not required under federal or state law.
Lifetime Service Guarantee. In June 1998, a purported class action lawsuit was filed against Ford in California state court challenging the legality of our termination of the Lifetime Service Guarantee program as of January 1, 1992. Plaintiff alleges that the program, which ran from 1983 until the program's termination date, constituted a product warranty that could not be terminated. Plaintiff alleges claims for violation of the federal Magnuson-Moss Warranty Act, breach of contract, negligent misrepresentation, violation of the California Song-Beverly Consumer Warranty Act, violation of the California Consumer Legal Remedies Act ("CLRA"), violations of the California Unfair Competition Law ("UCL") and declaratory relief. The Magnuson-Moss and declaratory relief claims are alleged on behalf of a purported nationwide class. The breach of contract, negligent misrepresentation, and Song-Beverly claims are alleged on behalf of a purported subclass of California residents. The CLRA and UCL claims are alleged on behalf of "the general public" ostensibly under "private attorney general" provisions in those statutes. Plaintiff claims compensatory, exemplary, and punitive damages, attorneys' fees, civil penalties, disgorgement, and interest in unspecified amounts, as well as an injunction compelling Ford to reinstate the Lifetime Service Guarantee program. We have removed the case to federal court in California. The parties are currently engaged in pretrial discovery.
Patents. A number of claims have been made or may be asserted in the future against Ford alleging infringement of patents held by others. We believe that we have valid defenses with respect to the claims that have been asserted. If some of these claims should lead to litigation, however, and if the claimant were to prevail, we could be required to pay substantial damages.
OFCCP Proceeding. In April 1997, the Department of Labor issued an administrative enforcement proceeding challenging our compliance with obligations imposed by Executive Order 11246, which prohibits employment
Item 3. Legal Proceedings (Continued)
discrimination and requires affirmative action by government contractors and subcontractors. The Office of Federal Contract Compliance Programs ("OFCCP") claims that our Kentucky Truck Plant used a hiring process in 1993 for entry-level hourly laborer positions that discriminated against female applicants. OFCCP seeks an order awarding back pay to the "affected class of women," a job offer to each of these persons, and retroactive seniority for each person. Ford and the OFCCP have completed a partial consent decree that resolves the disputes relating to our cooperation in various OFCCP investigations concerning hourly hiring practices at Ford facilities. Trial before an administrative law judge on the OFCCP proceeding relating to our Kentucky Truck Plant is set for August 16, 1999.
FTC Investigation. The Federal Trade Commission and the Department of Justice are continuing their investigation, commenced in 1995, of the retail vehicle financing credit practices of Ford Credit for compliance with the Equal Credit Opportunity Act and Regulation B.
Red Carpet Lease Terminations. We have been advised that a consortium of 37 states is investigating certain Ford Credit Red Carpet Lease ("RCL") practices and that the Florida Attorney General's Office is leading the investigation. The investigation focuses on whether Ford Credit RCL customers who want to terminate leases early and purchase the leased vehicle have been misled by the alleged improper failure to itemize (i) the cost of terminating the lease and (ii) the vehicle purchase price. We believe that Ford Credit's business practices are fair under applicable law, and we are attempting to negotiate a resolution of the matter.
Not required.
Our executive officers and their positions and ages at March 15, 1999 are
shown in the table below:
Present Position
Name Position Held Since Age
---- -------- ---------- ---
Jacques A. Nasser* President and January 1999 51
Chief Executive Officer
(also a Director)
W. Wayne Booker Vice Chairman November 1996 64
Peter J. Pestillo Vice Chairman and January 1999 60
Chief of Staff
John M. Devine Executive Vice President and November 1996 54
Chief Financial Officer
Carlos E. Mazzorin Group Vice President-- January 1998 57
Purchasing and
Ford of Mexico
James J. Padilla Group Vice President-- January 1999 52
Manufacturing
Richard Parry-Jones Group Vice President-- January 1998 47
Product Development
and Quality
Robert L. Rewey Group Vice President-- December 1993 60
Marketing, Sales and Service
Henry D. G. Wallace Group Vice President-- January 1999 53
Asia Pacific Operations
and Associations
Gurminder S. Bedi Vice President-- January 1998 51
Truck Vehicle Center
William W. Boddie Vice President-- January 1998 53
Small and Medium Car
Vehicle Center
Mei Wei Cheng Vice President-- January 1999 49
(President, Ford
Motor (China) Ltd.)
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Present Position
Name Position Held Since Age
---- -------- ---------- ---
William J. Cosgrove Vice President--Business January 1999 53
and Product Strategy
James D. Donaldson Vice President January 1998 56
(President, Ford of
Europe Incorporated)
Wayne S. Doran Vice President November 1997 64
(Chairman, Ford Motor Land
Development Corporation)
Louise K. Goeser Vice President--Quality March 1999 45
Ronald E. Goldsberry Vice President--Global January 1999 56
Service Business Strategy
Elliott S. Hall Vice President-- July 1998 60
Dealer Development
Mark W. Hutchins Vice President July 1999 53
(President, Lincoln and Mercury)
I. Martin Inglis Vice President January 1999 48
(President, Ford South
American Operations)
Michael D. Jordan Vice President--Ford January 1999 52
Customer Service Division
Kenneth K. Kohrs Vice President March 1999 60
Vaughn A. Koshkarian Vice President--Public Affairs January 1999 58
Robert O. Kramer Vice President January 1999 60
Roman J. Krygier Vice President-- January 1999 56
Powertrain Operations
Malcolm S. Macdonald Vice President and January 1998 58
Treasurer
J.C. Mays Vice President--Design October 1997 44
James E. Miller Vice President January 1998 52
Craig H. Muhlhauser Vice President January 1999 50
(President, Visteon
Automotive Systems)
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Present Position
Name Position Held Since Age
---- -------- ---------- ---
Janet G. Mullins Vice President-- January 1998 49
Washington Affairs
David L. Murphy Vice President-- January 1999 53
Human Resources
James G. O'Connor Vice President June 1998 56
(President, Ford Division)
Helen O. Petrauskas Vice President--Environmental March 1983 54
and Safety Engineering
William F. Powers Vice President--Research February 1996 58
Neil W. Ressler Vice President and January 1999 59
Chief Technical Officer
Research and Vehicle Technology
John M. Rintamaki Vice President--General Counsel January 1999 57
and Secretary
Ross H. Roberts Vice President June 1998 61
(President, Ford Investment
Enterprises Corporation)
Dennis E. Ross Vice President and January 1998 48
Chief Tax Officer
Shamel T. Rushwin Vice President - Advanced March 1999 51
Manufacturing Engineering
Nicholas V. Scheele Vice President February 1999 55
William A. Swift Vice President and Controller January 1999 55
Chris P. Theodore Vice President - Large Luxury March 1999 48
Vehicle Center
David W. Thursfield Vice President-- January 1998 53
Vehicle Operations
Robert J. Womac Vice President (Executive November 1996 55
Vice President, Operations,
Visteon Automotive Systems)
|
Present Position
Name Position Held Since Age
---- -------- ---------- ---
Martin B. Zimmerman Vice President-- January 1999 52
Governmental Affairs
Rolf Zimmermann Vice President December 1998 52
(Chairman, Ford Werke AG)
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Some of the officers listed above also are members of one or more additional committees of Ford that are not committees of the Board of Directors.
All of the above officers, except those noted below, have been employed by Ford or its subsidiaries in one or more capacities during the past five years. Described below are the positions (other than those with Ford or its subsidiaries) held by those officers who have not been with Ford or its subsidiaries for five years:
- Mr. Cheng most recently was President and Regional Executive of GE Appliances Ltd. in Hong Kong. Prior to that he was President of General Electric China, and prior to that, President of AT&T China Inc.
- Ms. Goeser served at Whirlpool Corporation as General Manager, Refrigeration Product Team, Whirlpool North American Appliance Group, and before that, as Vice President, Corporate Quality.
- Mr. Mays was Vice President of Design Development at SHR Perceptual Management in Scottsdale, Arizona. Prior to that he was design director responsible for worldwide design strategy, development and execution for Audi AG.
- Mr. Muhlhauser was an officer of United Technologies Corporation and held the positions of Senior Vice President, Sales and Service-Americas, and Senior Vice President, Worldwide Aftermarket - Pratt & Whitney.
- Mr. Ross was a partner in the New York law firm of Davis, Polk & Wardwell.
- Mr. Rushwin most recently was Vice President-International Manufacturing and Minivan Assembly Operations at DaimlerChrysler AG. His prior positions at Daimler-Chrysler AG were: General Manager-Minivan Platform Assembly and Plant Manger-Belvidere Assembly Plant.
- Mr. Theodore most recently was Senior Vice President-Platform Engineering
at DaimlerChrysler AG. His prior positions at DaimlerChrysler AG were:
Vice President-Platform Engineering, General Manager-Small Car Platform
Engineering and General Manager-Minivan Platform Engineering.
Under Ford's By-Laws the executive officers are elected by the Board of Directors at the Annual Meeting of the Board of Directors held for this purpose. Each officer is elected to hold office until his or her successor is chosen or as otherwise provided in the By-Laws.
PART II
Our Common Stock is listed on the New York and Pacific Coast Stock Exchanges in the United States and on certain stock exchanges in Belgium, France, Germany, Switzerland and the United Kingdom.
The table below shows the high and low sales prices for our Common Stock and the dividends we paid per share of Common and Class B Stock for each quarterly period in 1998 and 1997.
1998 1997
--------------------------------------- ----------------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
-------- ------- ------- ------- ------- ------- ------- -------
Common Stock price per share*
High $43-5/8 $59-1/8 $61-7/16 $59-7/8 $23-1/4 $26-15/64 $30-5/8 $33-3/8
Low 28-5/16 41-11/64 40-5/8 38-13/16 20-27/64 19-59/64 25-23/64 27-9/16
Dividends per share of
Common and Class B Stock $0.42 $0.42 $0.42 $0.46 $0.385 $0.42 $0.42 $0.42
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As of February 26, 1999, stockholders of record of Ford included 223,695 holders of Common Stock and 104 holders of Class B Stock.
During 1998 we sold 1,116,209 shares of our Common Stock in private transactions that were not registered with the Securities and Exchange Commission. These transactions were exempt from registration requirements because they were private placements under Section 4(2) of the Securities Act of 1933, as amended. These shares were sold to owners of automotive dealership businesses in exchange for those businesses. The consideration we received for the shares was equal to the market value of the shares at the time of the transactions.
The following tables set forth selected financial data and other data concerning Ford for each of the last eleven years (dollar amounts in millions except per share amounts):
SUMMARY OF OPERATIONS 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Automotive Sector
Sales $119,083 $122,935 $118,023 $110,496 $107,137 $91,568 $84,407 $72,051 $81,844 $82,879 $82,193
Operating income/(loss) 6,685 6,946 2,516 3,281 5,826 1,432 (1,775) (3,769) 316 4,252 6,612
Income/(loss) before income
taxes and cumulative effects
of changes in accounting
principles 6,958 7,082 2,571 3,166 5,997 1,291 (1,952) (4,052) 275 5,156 7,312
Income/(loss) before cumulative
effects of changes in
accounting principles a/, c/ 4,752 4,714 1,655 2,056 3,913 1,008 (1,534) (3,186) 99 3,175 4,609
-------- -------- -------- -------- -------- ------- ------- ------- ------- ------- -------
Net income/(loss) 4,752 4,714 1,655 2,056 3,913 1,008 (8,628) (3,186) 99 3,175 4,609
-------- -------- -------- -------- -------- ------- ------- ------- ------- ------- -------
Financial Services Sector
Revenues $ 25,333 $ 30,692 $ 28,968 $ 26,641 $ 21,302 $16,953 $15,725 $16,235 $15,806 $13,267 $10,253
Income before income taxes and
cumulative effects of changes
in accounting principles 18,438 3,857 4,222 3,539 2,792 2,712 1,825 1,465 1,220 874 1,031
Income before cumulative
effects of changes in
accounting principles b/,
d/, e/ 17,319 2,206 2,791 2,083 1,395 1,521 1,032 928 761 660 691
-------- -------- -------- -------- -------- ------- ------- ------- ------- ------- -------
Net income 17,319 2,206 2,791 2,083 1,395 1,521 1,243 928 761 660 691
-------- -------- -------- -------- -------- ------- ------- ------- ------- ------- -------
Total Company
Income/(loss) before income
taxes and cumulative effects
of changes in accounting
principles $ 25,396 $ 10,939 $ 6,793 $ 6,705 $ 8,789 $ 4,003 $ (127) $(2,587) $ 1,495 $ 6,030 $ 8,343
Provision/(credit) for income
taxes 3,176 3,741 2,166 2,379 3,329 1,350 295 (395) 530 2,113 2,999
Minority interests in net
income of subsidiaries 149 278 181 187 152 124 80 66 105 82 44
-------- -------- -------- -------- -------- ------- ------ ------- ------- ------- -------
Income/(loss) before
cumulative effects of
changes in accounting
principles a/, b/, c/, d/, e/ 22,071 6,920 4,446 4,139 5,308 2,529 (502) (2,258) 860 3,835 5,300
Cumulative effects of changes
in accounting principles - - - - - - (6,883) - - - -
-------- -------- -------- -------- -------- ------- ------- ------- ------- ------- -------
Net income/(loss) $ 22,071 $ 6,920 $ 4,446 $ 4,139 $ 5,308 $ 2,529 $(7,385) $(2,258) $ 860 $ 3,835 $ 5,300
======== ======== ======== ======== ======== ======= ======= ======= ======= ======= =======
Total Company Data Per Share
of Common and Class B
Stock f/
Income/(loss) before cumulative
effects of changes in
accounting principles 18.17 $ 5.75 $ 3.73 $ 3.58 $ 4.97 $ 2.27 $ (0.73) $ (2.40) $ 0.93 $ 4.11 $ 5.48
Income/(loss)
Basic 18.17 5.75 3.73 3.58 4.97 2.27 (7.81) (2.40) 0.93 4.11 5.48
Diluted 17.76 5.62 3.64 3.33 4.44 2.10 (7.81) 2.40) 0.92 4.06 5.40
Cash dividends 1.72 1.645 1.47 1.23 0.91 0.80 0.80 0.98 1.50 1.50 1.15
Common stock price range (NYSE)
High 61-7/16 33-3/8 24-47/64 21-53/64 23-1/4 21-61/64 16-15/64 12-17/32 16-5/16 18-51/64 18-17/64
Low 28-5/16 19-59/64 18-3/32 16-7/16 17-11/64 14-9/32 9-7/32 7-49/64 8-19/64 13-47/64 12-41/64
Average number of shares of
Common and Class B Stock
outstanding (in millions) 1,211 1,195 1,179 1,071 1,010 986 972 952 926 934 968
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SUMMARY OF OPERATIONS 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
(continued) ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total Company Balance
Sheet Data at Year-End
Assets
Automotive Sector $ 88,744 $ 85,079 $ 79,658 $ 72,772 $ 68,639 $ 61,737 $ 57,170 $ 52,397 $ 50,824 $ 45,819 $ 43,128
Financial Services
Sector 148,801 194,018 183,209 170,511 150,983 137,201 123,375 122,032 122,839 115,074 100,239
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total assets $237,545 $279,097 $262,867 $243,283 $219,622 $198,938 $180,545 $174,429 $173,663 $160,893 $143,367
Long-term debt
Automotive Sector $ 8,713 $ 7,047 $ 6,495 $ 5,475 $ 7,103 $ 7,084 $ 7,068 $ 6,539 $ 4,553 $ 1,137 $ 1,336
Financial Services
Sector 55,468 73,198 70,641 68,259 58,104 47,900 42,369 43,680 40,779 37,784 30,777
Stockholders' equity g/ 23,409 30,734 26,762 24,547 21,659 15,574 14,753 22,690 23,238 22,728 21,529
Total Company Facility
and Tooling Data
Capital expenditures for
facilities (excluding
special tools) $ 5,109 $ 5,695 $ 5,362 $ 5,455 $ 5,236 $ 4,339 $ 3,613 $ 3,611 $ 4,702 $ 4,412 $ 3,148
Depreciation 11,393 10,404 9,519 8,954 7,207 5,456 4,658 3,956 3,185 2,720 2,458
Expenditures for special
tools 3,508 3,022 3,289 3,542 3,310 2,475 2,177 2,236 2,556 2,354 1,634
Amortization of special
tools 2,936 3,179 3,272 2,765 2,129 2,012 2,097 1,822 1,695 1,509 1,335
Total Company Employee
Data - Worldwide
Payroll $ 16,848 $ 17,187 $ 17,616 $ 16,567 $ 15,853 $ 13,750 $ 13,754 $ 12,850 $ 14,014 $ 13,327 $ 13,010
Total labor costs 25,731 25,546 25,689 23,758 22,985 20,065 19,850 17,998 18,962 18,152 18,108
Average number of employees 345,175 363,892 371,702 346,989 337,728 321,925 325,333 331,977 369,547 366,641 358,939
Total Company Employee
Data - U.S. Operations
Payroll $ 10,639 $ 10,840 $ 10,961 $ 10,488 $ 10,381 $ 8,889 $ 8,019 $ 7,393 $ 8,313 $ 8,654 $ 8,477
Average number of employees 173,899 189,787 189,718 186,387 180,861 166,995 158,501 156,203 180,228 188,402 185,651
Average hourly labor
costs h/
Earnings $ 24.30 $ 22.97 $ 22.30 $ 21.79 $ 21.81 $ 20.94 $ 19.92 $ 19.10 $ 18.44 $ 17.77 $ 17.39
Benefits 21.42 20.60 19.47 18.66 19.13 18.12 19.24 17.97 14.12 13.21 13.07
-------- -------- -------- ------- -------- -------- -------- -------- -------- -------- --------
Total hourly labor
costs $ 45.72 $ 43.45 $ 41.77 $ 40.45 $ 40.94 $ 39.06 $ 39.16 $ 37.07 $ 32.56 $ 30.98 $ 30.46
======== ======== ======== ======== ======== ======== ======== ======== ======== ======== ========
- - - - -
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g/ The cumulative effects of changes in accounting principles reduced equity
by $6,883 million in 1992.
h/ Per hour worked (in dollars). Excludes data for subsidiary companies.
SUMMARY OF VEHICLE UNIT SALES i/
(in thousands) 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
North America
United States
Cars 1,563 1,614 1,656 1,767 2,036 1,925 1,820 1,588 1,870 2,201 2,364
Trucks 2,425 2,402 2,241 2,226 2,182 1,859 1,510 1,253 1,416 1,517 1,537
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total United States 3,988 4,016 3,897 3,993 4,218 3,784 3,330 2,841 3,286 3,718 3,901
Canada 279 319 258 254 281 256 237 259 257 326 349
Mexico 103 97 67 32 92 91 126 112 89 87 63
----- ----- ----- ------ ----- ----- ----- ----- ----- ----- -----
Total North America 4,370 4,432 4,222 4,279 4,591 4,131 3,693 3,212 3,632 4,131 4,313
Europe
Britain 498 466 516 496 520 464 420 471 607 739 753
Germany 444 460 436 409 386 340 407 501 361 326 332
Italy 205 248 180 193 179 172 266 301 219 153 98
France 155 153 194 165 180 150 194 190 185 192 168
Spain 171 155 155 160 163 117 165 128 155 173 158
Other countries 377 318 339 286 281 250 270 296 289 296 290
----- ----- ----- ------ ----- ----- ----- ----- ----- ----- -----
Total Europe 1,850 1,800 1,820 1,709 1,709 1,493 1,722 1,887 1,816 1,879 1,799
Other international
Brazil 178 214 190 201 164 151 117 137 137 157 154
Australia 133 132 138 139 125 120 105 104 134 154 132
Argentina 97 147 64 48 54 49 49 26 18 25 30
Taiwan 77 79 86 106 97 122 119 107 115 115 88
Japan 25 40 52 57 50 53 64 83 99 82 60
Other countries 93 103 81 67 63 65 71 67 72 65 86
---- ----- ----- --- --- --- --- --- --- ---- ---
Total other
international 603 715 611 618 553 560 525 524 575 598 550
Total worldwide cars and
trucks 6,823 6,947 6,653 6,606 6,853 6,184 5,940 5,623 6,023 6,608 6,662
Total worldwide tractors j/ - - - - - - - 13 66 72 77
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total worldwide vehicle
unit sales 6,823 6,947 6,653 6,606 6,853 6,184 5,940 5,636 6,089 6,680 6,739
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
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OVERVIEW
Our worldwide net income was $22,071 million in 1998, or $17.76 per diluted share of Common and Class B Stock. This compares with the $6,920 million, or $5.62 per diluted share, we earned in 1997. Our 1998 net income includes earnings of $177 million from The Associates through March 12, 1998 and a one-time, non-cash gain of $15,955 million that resulted from our spin-off of The Associates. Excluding these amounts related to The Associates, our net income would have been $5,939 million, or $4.72 per diluted share of Common and Class B Stock, compared with 1997 net income (excluding The Associates earnings) of $6,088 million, or $4.94 per diluted share.
Our 1998 net income also includes the following other one-time charges totaling $631 million, which we incurred in the fourth quarter:
- $472 million for employee early retirement and separation programs,
- $86 million for writing off our net exposure in Kia Motors Company, and
- $73 million relating to the transfer of our Batavia, Ohio transmission
plant to a new joint venture company formed by us and ZF
Friedrichshafen AG to manufacture continuously variable transmissions.
In addition, our earnings per share in 1998 were reduced by $0.07 for the premium paid to repurchase our Series B preferred stock. For more details regarding one-time charges see Note 15 (pages FS-28 and FS-29) of our Notes to Financial Statements.
Our worldwide revenues were $144.4 billion in 1998, down $9.2 billion from 1997. We sold 6,823,000 cars and trucks in 1998, down 124,000 units from 1997. Our stockholders' equity was $23.4 billion at December 31, 1998, down $7.3 billion compared with December 31, 1997. This reduction primarily was a result of The Associates spin-off.
FOURTH QUARTER 1998 RESULTS OF OPERATIONS
In the fourth quarter of 1998, we earned $1,043 million, or $0.84 per diluted share of Common and Class B Stock, compared with $1,796 million, or $1.45 per diluted share, in the fourth quarter of 1997. The one-time charges discussed above and the absence of earnings from The Associates in the fourth quarter of 1998 more than account for the earnings decline. Excluding one-time charges, our fourth quarter 1998 earnings would have been $1,674 million, or $1.35 per diluted share, compared with earnings (excluding The Associates) of $1,572 million, or $1.27 per diluted share, in 1997.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Details of our Automotive sector earnings for the fourth quarter of 1998
and 1997 are shown below (in millions):
Fourth Quarter
Net Income/(Loss)
---------------------------------------
1998
O/(U)
1998 1997 1997
---------- ----------- -----------
North American Automotive $1,047 $1,353 $ (306)
Automotive Outside North America
- Europe (74) 158 (232)
- South America (151) (71) (80)
- Rest of World (2) (99) 97
------ ------ -------
Total Automotive Outside
North America (227) (12) (215)
------ ------ ------
Total Automotive Sector $ 820 $1,341 $ (521)
====== ====== ======
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The decline in our fourth quarter 1998 Automotive sector earnings in North America is more than explained by one-time charges of $363 million. Without the one-time charges, our results in North America would have improved over our fourth quarter 1997 earnings by $57 million, reflecting primarily higher sales volume, offset partially by higher marketing costs.
The decline in our fourth quarter Automotive sector earnings in Europe reflects one-time charges of $137 million, lower volume and costs associated with the Focus car line launch, offset partially by cost reductions. The earnings decline in South America was caused by one-time charges and the deteriorating economy in Brazil.
Details of our Financial Services sector earnings for the fourth quarter of 1998 and 1997 are shown below (in millions):
Fourth Quarter
Net Income/(Loss)
-------------------------------------
1998
O/(U)
1998 1997 1997
---------- ----------- ---------
Ford Credit $234 $218 $ 16
Hertz 48 35 13
Minority Interests, Eliminations,
and Other (excluding
The Associates) (59) (22) (37)
---- ---- -----
Financial Services (excluding
The Associates) 223 231 (8)
The Associates - 278 (278)
The Associates Minority Interest - (54) 54
---- ---- -----
Total Financial Services
Sector $223 $455 $(232)
==== ==== =====
Memo: Ford's share of earnings in
The Associates $ - $224 $(224)
Hertz 39 28 11
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Our Financial Services sector had lower fourth quarter 1998 earnings primarily because, unlike in the fourth quarter of 1997, they did not include earnings from The Associates.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FULL-YEAR 1998 RESULTS OF OPERATIONS
Details of our full-year Automotive sector earnings for 1998, 1997 and 1996
are shown below (in millions):
Full-Year
Net Income/(Loss)
-------------------------------------
1998 1997 1996
---------- ---------- ---------
North American Automotive $4,612 $4,434 $2,255
Automotive Outside North America
- Europe 193 273 (291)
- South America (226) 40 (642)
- Rest of World 173 (33) 333
------ ------ ------
Total Automotive Outside
North America 140 280 (600)
------ ------ ------
Total Automotive Sector $4,752 $4,714 $1,655
====== ====== ======
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Details of our full-year Financial Services sector earnings for 1998, 1997 and 1996 are shown below (in millions):
Full-Year
Net Income/(Loss)
-------------------------------------
1998 1997 1996
---------- ----------- ---------
Ford Credit $ 1,084 $1,031 $1,441
Hertz 277 202 159
USL Capital - - 191
One-Time Actions
- Gain on Sale of Common Stock
of The Associates and Hertz - 269 650
- Sale of USL Capital Assets - - 95
- Budget Rent a Car Write-down - - (233)
Minority Interests, Eliminations,
and Other (174) (128) (257)
------- ----- ------
Financial Services (excluding
The Associates) 1,187 1,374 2,046
The Associates 220* 1,032 857
The Associates Minority Interest (43) (200) (112)
Gain on the Spin-off of
The Associates 15,955 - -
------- ----- ------
Total Financial Services Sector $17,319 $2,206 $2,791
======= ====== ======
Memo: Ford's share of earnings in
----------------------------------
The Associates $ 177* $ 832 $ 745
Hertz 224 168 159
- - - - -
*Through March 12, 1998
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
1998 COMPARED WITH 1997
Worldwide earnings for our Automotive sector were $4,752 million in 1998 on sales of $119.1 billion, compared with $4,714 million in 1997 on sales of $122.9 billion. Excluding one-time charges, our Automotive sector earnings were $5,377 million in 1998 compared with $4,883 million in 1997. The 1997 one-time charge was for restructuring actions in the second quarter. The increase in operating earnings reflects primarily continued cost reductions and improved vehicle mix, offset partially by lower volume and higher marketing costs. Adjusted for constant volume and mix, our total costs in the Automotive sector declined $2.2 billion compared with 1997.
Our Automotive sector earnings in North America were $4,612 million in 1998 on sales of $87 billion, compared with $4,434 million in 1997 on sales of $89 billion. Excluding one-time charges, earnings were $4,975 million, up $416 million compared with a year ago. The increase reflects primarily continued cost reductions and improved vehicle mix, offset partially by lower volumes and higher marketing costs. The after-tax return on sales for our North American Automotive sector was 5.3% in 1998. Excluding one-time charges, after-tax return on sales was 5.8%, up 6/10 of a percentage point from 1997.
In 1998, 16 million new cars and trucks were sold in the United States, up from 15.5 million units in 1997. Our share of those unit sales was 24.6% in 1998, down 4/10 of a percentage point, more than explained by the discontinuation of low margin vehicle lines.
Our Automotive sector earnings in Europe were $193 million in 1998, $80 million worse than a year ago. The deterioration reflected higher restructuring costs, lower export sales and costs associated with the Focus car line launch, offset partially by cost reductions.
In 1998, 16.1 million new cars and trucks were sold in Europe, up from 15 million units in 1997. Our share of those unit sales was 10.3% in 1998, down 1.1 percentage points from a year ago. In the fourth quarter of 1998, our market share in Europe was 9.4%, down 1.7 percentage points. Our market share declined because of intense competitive conditions in Europe and limited availability of our new Focus car line during its launch.
Our Automotive sector in South America lost $226 million in 1998, compared with a profit of $40 million in 1997. The decline was the result of lower volume and revenue resulting from weak economic conditions and charges we incurred for employee reductions, offset partially by lower costs. We reduced production in Brazil and Argentina in the fourth quarter because of anticipated weaker demand in those markets in 1999.
In 1998, 1.6 million new cars and trucks were sold in Brazil, compared with 1.9 million in 1997. Our share of those unit sales was 13.1% in 1998, down 1.2 percentage points from a year ago. In the fourth quarter of 1998, our market share in Brazil declined to 11.8%, down 5 percentage points. These declines in market share reflect new product entries from other manufacturers and an increasingly competitive market.
Our Visteon operations, included in our Automotive sector, earned $712 million on revenues of $17,762 million in 1998, compared with $518 million on revenues of $17,220 million in 1997. This earnings improvement reflects primarily cost reductions and increased revenue. Visteon's after-tax return on sales in 1998 was 4.0%, up one percentage point compared with the prior year.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Earnings of our Financial Services sector consist primarily of two segments, Ford Credit and Hertz. In 1998 we spun-off The Associates to our shareholders, resulting in a $15,955 million gain to Ford. For details of the spin-off see Note 15 (page FS-29) of our Notes to Financial Statements.
Ford Credit's consolidated net income in 1998 was $1,084 million, up $53 million or 5% from 1997. Compared with 1997, the increase in full-year earnings primarily reflects improved credit loss performance, higher gains on receivable sales, lower effective tax rates and higher financing volumes, offset partially by lower net financing margins and higher operating costs. Lower financing margins reflect higher depreciation expense for leased vehicles as a result of lower-than-anticipated residual values.
Earnings at Hertz in 1998 were $277 million (of which $224 million was Ford's share). In 1997, Hertz had earnings of $202 million (of which $168 million was Ford's share). The increase in earnings reflects primarily higher revenues and improved profit margins in worldwide car rental operations.
We set and communicated the financial targets listed below for 1998. Our results against these targets also are listed below.
Full-Year 1998 Target 1998 Result
----------------------------- ----------------------------
Automotive Sector
-----------------
- North America 5% return on sales 5.3% return on sales
- Europe Profitable $193 million profit
- South America Breakeven $226 million loss
- Total Costs Down $1 billion from 1997 down $2.2 billion
(at constant volume and mix)
- Capital Spending Lower than 1997 $29 million lower
- Visteon $1.5 billion in new business $2.3 billion in new business
Improve return on sales 1 percentage point improvement
Financial Services Sector
-------------------------
- Ford Credit Grow earnings 10%+ Up 5%
- Hertz Record earnings Record
(Up $75 million from 1997)
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The Automotive sector in South America did not meet its target to break even as the result of lower volume and revenue resulting from weak economic conditions and charges we incurred for employee reductions. Ford Credit's shortfall to achieve the target to grow earnings by 10% reflected primarily the impact of lower-than-anticipated residual values.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
1997 COMPARED WITH 1996
Our Automotive sector earnings in North America were a record $4,434 million in 1997, up $2,179 million from 1996. The increase reflected higher margins from ongoing cost, quality, and vehicle mix improvements. Adjusted for constant volume and mix, total Automotive costs declined $3 billion in 1997. The after-tax return on sales was 5.1% in 1997, up 2.3 percentage points from 1996.
The U.S. economy continued on a path of strong growth, low unemployment, and moderate inflation in 1997. In 1997, 15.5 million new cars and trucks were sold, about the same level as 1996. Ford's share of those unit sales was 25%, down 2/10 of a percentage point from 1996.
Our Automotive sector operations in Europe returned to profitability in 1997 with earnings of $273 million, compared with a loss of $291 million in 1996. The improvement reflected primarily lower operating costs (at constant volume and mix), offset partially by lower volume.
In 1997, 15 million new cars and trucks were sold, compared with 14.3 million units in 1996. Ford's share was 11.4%, down 4/10 of a percentage point from 1996.
Our Automotive sector operations in South America were profitable, earning $40 million in 1997, compared with a loss of $642 million in 1996. Higher earnings reflected primarily improved volume and mix, and lower material costs (at constant volume and mix). In 1997, 1.9 million new cars and trucks were sold in Brazil (the largest market in South America). Ford's share of those unit sales was 14.3% in 1997, up 4.3 percentage points from 1996.
Earnings for the Financial Services sector in 1997 were down $585 million, compared with 1996. Excluding the one-time actions in 1997 and 1996 shown previously, results from operations in 1997 were down $342 million from 1996.
Lower earnings at Ford Credit in 1997, compared with 1996, resulted primarily from lower net financing margins, higher credit losses and loss reserve requirements, and a higher effective tax rate; improved operating costs and higher financing volumes were a partial offset. Net financing margins decreased from 1996, reflecting higher depreciation costs on leased vehicles (as a result of lower-than-anticipated residuals). Credit losses as a percent of average net finance receivables (including net investment in operating leases) were 0.89% in 1997, compared with 0.78% in 1996, reflecting higher losses per repossession.
Record earnings at The Associates reflected primarily higher levels of earning assets and improved net interest margins, offset partially by higher credit losses. Credit losses as a percent of average net finance receivables were 2.40% in 1997, compared with 2.03% in 1996.
Record earnings at Hertz reflected continued strong performance in the U.S. car rental market both in terms of increased transaction volume and more favorable pricing.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, our Automotive sector had $23.8 billion of cash and marketable securities, up $3.0 billion from December 31, 1997. This increase occurred even though we paid a total of $2.1 billion in regular cash dividends on our Common Stock, Class B Stock and Preferred Stock during 1998, and paid a special cash dividend of $3.2 billion related to The Associates spin-off.
In 1998, we spent $8.1 billion for capital goods, such as machinery, equipment, tooling and facilities, used in our Automotive sector. This is down $29 million from 1997. Capital expenditures were 6.8% of sales in 1998, up 2/10 of a percentage point from a year ago.
At December 31, 1998, our Automotive sector had total debt of $9.8 billion. This amount was 30% of our total capitalization (that is, the sum of our stockholders' equity and Automotive debt) at the end of 1998, compared with 21% of total capitalization at year-end 1997.
The Associates spin-off primarily explains the declines discussed below.
At December 31, 1998, our Financial Services sector had cash and marketable securities totaling $2.1 billion, down $1.7 billion from December 31, 1997.
Net receivables and lease investments were $132.6 billion at December 31, 1998, down $43 million from December 31, 1997.
Total debt was $122.3 billion at December 31, 1998, down $37.8 billion from December 31, 1997.
Outstanding commercial paper at December 31, 1998 totaled $46.2 billion at Ford Credit, and $2.3 billion at Hertz, with an average remaining maturity of 30 days and 52 days, respectively.
For a discussion of the credit and other financial support facilities for our Automotive and Financial Services sectors at December 31, 1998, see Note 9 (pages FS-22 and FS-23) of our Notes to Financial Statements.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
YEAR 2000 DATE CONVERSION
An issue affecting Ford and others is the inability of many computer systems and applications to process the year 2000 and beyond ("Y2K"). To address this problem, in 1996, we initiated a global Y2K program to manage Ford's overall Y2K compliance effort. As part of this program, we established a global Central Program Office to coordinate our Y2K compliance efforts. We also have established a Y2K Steering Committee comprised of senior executives to address compliance issues. Ford's Y2K program has been certified by the Information Technology Association of America as meeting its Y2K best practices standards.
We achieved all compliance objectives that we set for ourselves for 1998, including interim 1998 objectives. We expect to complete most of the remaining remediation efforts by the end of June 1999, with the rest completed in the third quarter of 1999. We have identified the following ten distinct areas for Ford's Y2K compliance efforts:
Business Computer Systems: These include computer systems and applications relating to operations such as financial reporting, human resources, manufacturing, marketing and sales (including vehicle ordering), product engineering and design, purchasing, and treasury. In 1997 we implemented a compliance plan focused on critical systems. By year-end 1998, all critical systems had been repaired, tested, independently verified and implemented into a production environment. In addition, we initiated an enterprise test plan for all key business processes in November 1998. As of February 28, 1999, 86% of all business computer systems were Y2K compliant.
Plant Floor Equipment: We have implemented a process to assess equipment and machinery in our 180 manufacturing and assembly plants and parts warehouse facilities. We have implemented strategies to repair, replace, or develop contingency plans for all non-compliant hardware and software. As of February 28, 1999, 92% of our plant floor systems were Y2K compliant, and 85% of those systems that are critical were Y2K compliant.
Suppliers: Ford has deployed, in conjunction with an industry trade association (the Automotive Industry Action Group), a process to pursue a common Y2K compliance approach with the automotive supply industry in North America. Similar actions are underway in Europe and the rest of the world. Y2K awareness and educational sessions have been made available to first, second, and third tier suppliers. Ford does business with approximately 5,000 vehicle production and critical non-production suppliers. We have asked each of these suppliers to respond to a Y2K compliance questionnaire, and a majority of them have done so. Based on these responses, the criticality of the product or service being supplied and other factors, during 1999 we will selectively audit Y2K compliance of our suppliers.
Vehicle Components: Although testing continues, we have determined that the Y2K problem does not affect the onboard computer systems in our vehicles. The functionality of these systems is based generally on engine cycles or the time elapsed since the vehicle was started, not any particular date. We have surveyed suppliers of microprocessors and embedded system assemblies, and no problems have been identified to date. Recent internal global surveys to all Ford employees have substantiated these findings.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Affiliates: Ford Credit, Hertz, and our other consolidated subsidiaries, as well as our non-consolidated joint ventures, have developed plans to address Y2K compliance similar to those of Ford. We have contacted and are monitoring over 200 affiliates to ensure plans are in place to achieve timely Y2K compliance.
Product Development Test Equipment: This includes equipment and systems for testing vehicle emissions, safety and performance. We are working with suppliers to replace our non-compliant systems with common global test systems where needed. As of February 28, 1999, 45% of our product development test systems were Y2K compliant, and 63% of those systems that are critical were Y2K compliant.
End-User Computing: Desktop computers are used throughout Ford. Our plans to make these computers Y2K compliant include the replacement or repair of all non-compliant computers and related software, distribution of an assessment tool for end-user developed applications and the training of over 700 end-user program coordinators worldwide. As of February 28, 1999, 57% of critical end-user programs were Y2K compliant.
Technical Infrastructure: We established a dedicated testing facility to repair and test our critical systems infrastructures, such as wide area networks, local area networks, electronic data centers, and e-mail systems. As of February 28, 1999, 75% of our hardware, software and global communications network were Y2K compliant.
Dealers: We are handling the compliance of all Ford-developed dealer systems, such as vehicle and parts ordering systems. Dealer compliance efforts with respect to other systems are being monitored by us through various dealer service providers.
Physical Properties and Infrastructures: We have assessed the impact of Y2K on all building systems globally in two phases. Phase I included energy management, fire, and security systems in our production facilities. We are correcting problems where required. Phase II of the program has expanded to include leased office facilities. These facilities have minimal Y2K issues. As of February 28, 1999, 82% of our plant, engineering support and owned office building systems were Y2K compliant. We are also confirming the Y2K preparedness of our energy and other utility suppliers.
On the next page is a timetable showing Ford's internal target dates for compliance and the status of compliance (at February 28, 1999) for each of the areas mentioned above. We established these target dates before December 31, 1999 to allow sufficient time to perform enterprise-wide testing and further validation of our Y2K compliance.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Year 2000 Program Timing
Status as of February 28, 1999
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Business Computer Systems ---Plan: 100% compliant by 6/99----------------
Status: 86%(a)
Plant Floor Equipment ---Plan: 100% compliant by 6/99-----------
Status: 92%(b)
Production and
Critical Non-Production Suppliers ---Plan: 100% ready (c) by 6/99------------
Status: 88%
Vehicle Components ---Plan: 100% compliant by 6/99----------------
Status: 100%
Affiliates ---Plan: 100% ready (c) by 6/99-----------
Status: 88%
PD Test Equipment ---Plan: 100% compliant by 6/99-------
Status: 45%(d)
Critical End-User Computing ---Plan: 100% compliant by 6/99----------------
Status: 57%
Technical Infrastructure ---Plan: 100% compliant by 6/99------------------
Status: 75%
Dealers ---Plan: 100% ready (c) by 9/99----------------
Status: 78%
Physical Properties and
Infrastructure ---Plan: 100% compliant by 6/99----------
Status: 82%
-----------------
(a) 100% of critical business computer systems were compliant at year-end 1998.
(b) 85% of critical plant floor equipment was compliant at February 28, 1999.
(c) "Ready" means having a comprehensive Y2K program in place and a plan that
will achieve compliance before January 1, 2000.
(d) 63% of critical PD test equipment was compliant at February 28, 1999.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
We estimate that we will spend about $375 million for our Y2K compliance efforts. We will incur this amount over about a three-year period that commenced mid-1997 and will end mid-2000. Y2K compliance costs incurred through December 31, 1998 were about $155 million. Our annual Y2K costs relating to information technology have represented and are expected through year-end 2000 to represent about 10% of our total annual information technology budget.
The most reasonably likely worst case scenario for Ford with respect to the Y2K problem is the failure of a supplier, including an energy supplier, to be Y2K compliant such that its supply of needed products or services to a Ford or supplier manufacturing facility is interrupted temporarily. This could result in Ford not being able to produce one or more vehicle lines for a period of time, which in turn could result in lost sales and profits. We are monitoring the preparedness of utility suppliers to ensure plans are in place for uninterrupted service.
We have established a Y2K business resumption planning committee to evaluate business disruption scenarios, coordinate the establishment of Y2K contingency plans, and identify and implement preemptive strategies. The committee will develop detailed contingency plans for critical business processes by the end of March 1999 and will validate those plans by the end of June 1999.
EURO CONVERSION
A single currency called the euro was introduced in Europe on January 1, 1999. Eleven of the fifteen member countries of the European Union adopted the euro as their common legal currency as of that date. Fixed conversion rates between these participating countries' existing currencies (the "legacy currencies") and the euro were established as of that date. The legacy currencies will remain legal tender as denominations of the euro until at least January 1, 2002 (but not later than July 1, 2002). During this transition period, parties may settle transactions using either the euro or a participating country's legacy currency.
The increased price transparency resulting from the use of a single currency in the eleven participating countries may affect the ability of Ford and other companies to price their products differently in the various European markets. A possible result of this is price harmonization at lower average prices for products sold in some markets. Nevertheless, differences in national value added tax regimes, national vehicle registration taxes, customer preferences for equipment and options, sizes and types of vehicles and engines, and trade-in values may reduce the potential for price harmonization.
Introduction of the euro may reduce the amount of Ford's exposure to changes in foreign exchange rates, due to the netting effect of having assets and liabilities denominated in a single currency as opposed to the various legacy currencies. As a result, our foreign exchange hedging costs could be reduced. Conversely, because there will be less diversity in our exposure to foreign currencies, movements in the euro's value in U.S. dollars could have a more pronounced effect, whether positive or negative, on us.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
We have budgeted up to $50 million (including contingencies) for the period from 1997 through 2003 to cover the worldwide costs of preparing for and making operational changes to accommodate introduction of the euro. Certain of our business functions have introduced euro-capability as of January 1, 1999, including, for example, systems for making and receiving certain payments, pricing and invoicing. Other business functions will be converted for the euro by the end of the transition period (December 31, 2001), but may be converted earlier where operationally efficient or cost-effective, or to meet customer needs.
DISSOLUTION OF AUTOEUROPA JOINT VENTURE
Effective January 1, 1999, our joint venture with Volkswagen AG in Portugal (AutoEuropa) was dissolved. This action will improve our first quarter 1999 after-tax results by approximately $165 million. Prior to the dissolution, we held a 50% interest in AutoEuropa and accounted for it on an equity basis.
VOLVO
On March 1, 1999, we entered into a definitive agreement with AB Volvo for the purchase of Volvo's worldwide passenger car business for a price of $6.45 billion. On March 8, 1999, AB Volvo's shareholders approved the transaction. The transaction will close following receipt of regulatory approvals.
ROUGE COMPLEX
On February 1, 1999, an explosion occurred at the powerhouse of the Rouge Complex in Dearborn, Michigan, completely halting production at the powerhouse. Thirty-one people were injured or died as a result of this accident. The powerhouse supplied energy and steam to the entire Rouge Complex. We own part of the powerhouse and have manufacturing plants and an assembly plant located within the Complex. Those plants supply products to various Ford manufacturing and assembly plants worldwide. Through alternative sources of power we have resumed normal production at all of our manufacturing and assembly plants in the Rouge Complex. A significant supplier of steel to us also is located in the Rouge Complex. We do not know when that supplier will be able to fully resume its production. In the interim, we have implemented contingency plans for temporary alternative sources of steel. We have insurance, including business interruption coverage, which should limit the financial impact from the accident.
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related Information," was issued by the Financial Accounting Standards Board in June 1997. We adopted SFAS 131 effective with the 1998 financial statements.
Statement of Financial Accounting Standards No. 132 ("SFAS 132"), "Employers' Disclosures about Pensions and Other Postretirement Benefits," was issued by the Financial Accounting Standards Board in February 1998. We adopted SFAS 132 effective with the 1998 financial statements.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," was issued by the American Institute of Certified Public Accountants in March 1998. This SOP provides guidance on accounting for the costs of computer software developed or obtained for internal use, and requires capitalization of certain internal-use computer software costs. We will adopt this SOP for costs incurred beginning January 1, 1999. Adoption of this standard is expected to improve full-year 1999 after-tax results by an estimated $220 million.
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," was issued by the Financial Accounting Standards Board in June 1998. This Statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires recognition of all derivatives as either assets or liabilities on the balance sheet and measurement of those instruments at fair value. If certain conditions are met, a derivative may be designated specifically as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment referred to as a fair value hedge, (b) a hedge of the exposure to variability in cash flows of a forecasted transaction (a cash flow hedge), or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a forecasted transaction. We anticipate having each of these types of hedges, and we will comply with the requirements of SFAS 133 when we adopt it. We expect to adopt SFAS 133 beginning January 1, 2000. We have not yet determined the effect of adopting SFAS 133.
OUTLOOK
Our outlook for car and truck industry sales in 1999 in our major markets is as follows:
United States - between 15.5 to 16 million units, compared with
the 16 million units sold in 1998
Europe - lower than the 16.1 million units sold in 1998
Brazil - substantially lower than the 1.6 million units
sold in 1998
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Ford's management has set and communicated certain financial targets for
1999. While we hope to achieve these goals, they should not be interpreted as
projections, expectations or forecasts of 1999 results. The financial targets
for 1999 are as follows:
Automotive Sector Full-Year 1999 Target ----------------- -------------------------------------------------------------- - North America After-tax return on sales greater than 5% - Europe Grow earnings - South America Improve operating results* - Total Costs Down $1 billion from 1998 (at constant volume and mix) - Capital Spending $8.5 billion (includes capitalized software) - Visteon Grow earnings; obtain $2 billion of new business Financial Services Sector ------------------------- - Ford Credit Grow earnings by 10% - Hertz Record earnings (eighth consecutive year of increased earnings) Total Company ------------- - Total shareholder returns Top quartile of the S&P 500 over time |
RISK FACTORS
Statements included in this Report may constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation: greater price competition in the U.S. and Europe resulting from currency fluctuations or industry overcapacity; a significant decline in U.S. or European industry sales resulting from slowing economic growth; currency fluctuations; further economic difficulties in South America, including those resulting from Brazilian government austerity programs; a market shift from truck sales in the U.S.; lower-than-anticipated residual values for leased vehicles; problems relating to the Y2K issue; increased safety or emissions regulation resulting in higher costs and/or sales restrictions; work stoppages at key Ford or supplier facilities; and the discovery of defects in vehicles resulting in recall campaigns, increased warranty costs or litigation.
Ford is exposed to a variety of market risks, including the effects of changes in foreign currency exchange rates, interest rates and commodity prices.
- Our Automotive sector frequently has expenditures denominated in foreign currencies, including the following: purchases and sales of finished vehicles and production parts; debt and other payables; subsidiary dividends; and investments in subsidiaries. These expenditures create exposures to changes in exchange rates.
- We also are exposed to changes in prices of commodities used in our Automotive sector.
- To ensure funding over business and economic cycles and to minimize overall borrowing costs, our Financial Services sector issues debt and other payables with various maturity and interest rate structures. The maturity and interest rate structures frequently differ from the invested assets. Exposures to fluctuations in interest rates are created by the difference in maturities of liabilities versus the maturities of assets.
We monitor and manage these financial exposures as an integral part of our overall risk management program, which recognizes the unpredictability of financial markets and seeks to reduce the potentially adverse effect on our results. The effect of changes in exchange rates, interest rates and commodity prices on our earnings generally has been small relative to other factors that also affect earnings, such as unit sales and operating margins. For more information on these financial exposures, see Note 1 (pages FS-9 and FS-10) and Note 14 (pages FS-26 and FS-27) of our Notes to Financial Statements.
Our interest rate risk and foreign currency exchange rate risk are quantified below. Our risks related to commodity derivative positions are not material.
Interest Rate Risk -- We use interest rate swaps (including those with a currency swap component) primarily at Ford Credit to mitigate the effects of interest rate fluctuations on earnings by changing the characteristics of debt to match the characteristics of assets. All interest rate swap agreements are designated to hedge either a specific debt issue or pool of debt. We use a model to assess the sensitivity of our earnings to changes in market interest rates. The model recalculates earnings by adjusting rates associated with variable rate instruments on the repricing date and by adjusting rates on fixed rate instruments scheduled to mature in the subsequent twelve months, effective on their scheduled maturity date. Interest income and interest expense are then recalculated based on the revised rates. Assuming an instantaneous increase or decrease of one percentage point in interest rates applied to all financial instruments and leased assets, our after-tax earnings would change by $23 million over a 12-month period.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk (Continued)
Foreign Currency Risk - We use derivative financial instruments to hedge assets, liabilities and firm commitments denominated in foreign currencies. We use a value-at-risk (VAR) analysis to evaluate our exposure to changes in foreign currency exchange rates. The primary assumptions used in the VAR analysis are as follows:
- A historical time series analysis (variance/covariance) is used to calculate changes in the value of currency derivative instruments (forwards and options) and all significant underlying exposures. The VAR includes an 18-month exposure horizon and a one-month holding period.
- The VAR analysis calculates the potential risk, within a 99% confidence level, on firm commitment exposures (cash flows), including the effects of foreign currency derivatives. (Translation exposures are not included in the VAR analysis). The model generally assumes currency prices are normally distributed and draws volatility data from the currency markets.
- Estimates of correlations of market factors primarily are drawn from the JP Morgan RiskMetricsTM datasets.
Based on our overall currency exposure (including derivative positions) during 1998, the risk during 1998 to our pre-tax cash flow from currency movements was on average less than $300 million, with a high of $350 million and a low of $200 million. At December 31, 1998, currency movements are projected to affect our pre-tax cash flow over the next 18 months by less than $325 million, within a 99% confidence level. Compared with our projection at December 31, 1997, the 1998 VAR amount is approximately $75 million higher, primarily because of increased currency exchange rate volatility and increased exposure.
Our Financial Statements, the accompanying Notes and the Report of Independent Accountants that are filed as part of this Report are listed under Item 14. "Exhibits, Financial Statement Schedules, and Reports on Form 8-K" and are set forth on pages FS-1 through FS-33 immediately following the signature pages of this Report.
Selected quarterly financial data for us and our consolidated subsidiaries for 1998 and 1997 is in Note 18 of our Notes to Financial Statements.
Not required.
PART III
The information required by Item 10 regarding our directors is incorporated by reference from the information under the captions "Election of Directors" and "Management Stock Ownership" in our Proxy Statement. The information required by Item 10 regarding our executive officers appears as Item 4A under Part I of this Report.
The information required by Item 11 is incorporated by reference from the information under the following captions in our Proxy Statement: "Compensation of Directors", "Compensation and Option Committee Report on Executive Compensation", "Compensation of Executive Officers", "Stock Options", "Performance Stock Rights and Restricted Stock Units", "Stock Performance Graphs" and "Retirement Plans".
The information required by Item 12 is incorporated by reference from the information under the caption "Management Stock Ownership" in our Proxy Statement.
The information required by Item 13 is incorporated by reference from the information under the caption "Certain Relationships and Related Transactions" in our Proxy Statement.
PART IV
Consolidated Statement of Income for the years ended December 31, 1998, 1997 and 1996.
Consolidated Balance Sheet at December 31, 1998 and 1997.
Consolidated Statement of Cash Flows for the years ended December 31, 1998, 1997 and 1996.
Consolidated Statement of Stockholders' Equity for the years ended December 31, 1998, 1997 and 1996.
Notes to Financial Statements
Report of Independent Accountants
The Consolidated Financial Statements, the Notes to Financial Statements and the Report of Independent Accountants listed above are filed as part of this Report and are set forth on pages FS-1 through FS-33 immediately following the signatures pages of this Report.
Designation Description ----------- ----------- Supplemental Schedule Condensed Financial Information of Subsidiary Report of Independent Accountants on Supplemental Schedule |
The Financial Statement Schedule and the Report of Independent Accountants on Supplemental Schedule listed above are filed as part of this Report and are set forth on pages FSS-1 and FSS-2 immediately following page FS-33. The schedules not filed are omitted because the information required to be contained in them is disclosed elsewhere in the Financial Statements or the amounts involved are not sufficient to require submission.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
Designation Description Method of Filing
----------- ----------- ----------------
Exhibit 3-A Restated Certificate of Incorporation, Filed as Exhibit 3.1 to Ford's Quarterly
dated April 9, 1998. Report on Form 10-Q for the quarter
ended March 31, 1998.*
Exhibit 3-B By-Laws as amended through January 1, 1999. Filed with this Report.
Exhibit 4 Form of Deposit Agreement dated as of Filed as Exhibit 4-E to Ford's
October 29, 1992 among Ford, Chemical Registration Statement No. 33-53092.*
Bank, as Depositary, and the holders from
time to time of Depositary Shares, each
representing 1/2,000 of a share of Ford's
Series B Cumulative Preferred Stock.
Exhibit 10-A Amended and Restated Profit Filed with this Report.
Maintenance Agreement, dated as of
January 1, 1999, between Ford
and Ford Credit.
Exhibit 10-B 1985 Stock Option Plan.** Filed as Exhibit 10-D to Ford's
Annual Report on Form 10-K for the
year ended December 31, 1985.*
Exhibit 10-B-1 Amendment dated as of March 8, 1990 Filed as Exhibit 10-C-1 to Ford's
to 1985 Stock Option Plan.** Annual Report on Form 10-K for
the year ended December 31, 1989.*
Exhibit 10-B-2 Amendment to 1985 Stock Option Plan, Filed as Exhibit 4.C to Amendment No.
effective as of January 8, 1998.** 1 to Ford's Registration Statement
No. 33-9722.*
Exhibit 10-C Supplemental Compensation Plan Filed as Exhibit 10-H to Ford's
as amended through May 8, 1986.** Annual Report on Form 10-K for the
year ended December 31, 1986.*
Exhibit 10-C-1 Amendment to Supplemental Filed as Exhibit 10-F-1 to Ford's
Compensation Plan, dated May 12, 1988.** Annual Report on Form 10-K for the
year ended December 31, 1988.*
|
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
Designation Description Method of Filing
----------- ----------- ----------------
Exhibit 10-C-2 Amendment to Supplemental Compensation Plan, Filed as Exhibit 10-D-2 to Ford's
dated July 8, 1992.** Annual Report on Form 10-K for the
year ended December 31, 1992.*
Exhibit 10-C-2A Amendment to Supplemental Compensation Plan, Filed as Exhibit 10-C-2A to Ford's
effective as of March 9, 1994.** Annual Report on Form 10-K for the
year ended December 31, 1996.*
Exhibit 10-C-3 Amendment to Supplemental Compensation Filed as Exhibit 10.1 to Ford's
Plan, effective as of March 8, 1995.** Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995.*
Exhibit 10-C-4 Amendment to Supplemental Filed as Exhibit 10.1 to Ford's
Compensation Plan, effective as of Quarterly Report on Form 10-Q for the
July 13, 1995.** quarter ended June 30, 1995.*
Exhibit 10-C-5 Amendment to Supplemental Filed as Exhibit 10-C-5 to Ford's
Compensation Plan, effective as of Annual Report on Form 10-K for the
January 10, 1996.** year ended December 31, 1995.*
Exhibit 10-C-6 Amendments to Supplemental Filed as Exhibit 10-C-6 to Ford's
Compensation Plan, effective as of Annual Report on Form 10-K for the
October 1, 1997.** year ended December 31, 1997.*
Exhibit 10-C-7 Amendment to Supplemental Filed as Exhibit 10-C-7 to Ford's
Compensation Plan, effective as of Annual Report on Form 10-K for the
December 22, 1997.** year ended December 31, 1997.*
Exhibit 10-C-8 Amendment to Supplemental Filed as Exhibit 10-C-8 to Ford's
Compensation Plan, effective as of Annual Report on Form 10-K for the
May 14, 1998.** year ended December 31, 1997.*
Exhibit 10-C-9 Amendment to Supplemental Filed with this Report.
Compensation Plan, effective as of
October 16, 1998.**
Exhibit 10-D Executive Separation Allowance Plan Filed as Exhibit 10-D to Ford's
as amended through December 9, 1993 Annual Report on Form 10-K for the
for separations on or after January 1, 1981.** year ended December 31, 1994.*
Exhibit 10-E Description of Ford practices regarding Filed as Exhibit 10-I to Ford's
club memberships for executives.** Annual Report on Form 10-K for the
year ended December 31, 1981.*
Exhibit 10-F Description of Ford practices regarding Filed as Exhibit 10-J to Ford's
travel expenses of spouses of certain Annual Report on Form 10-K for the
executives.** year ended December 31, 1980.*
|
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
Designation Description Method of Filing
----------- ----------- ----------------
Exhibit 10-G Deferred Compensation Plan for Filed as Exhibit 10-H-1 to Ford's
Non-Employee Directors, as amended Annual Report on Form 10-K for the
on July 11, 1991.** year ended December 31, 1991.*
Exhibit 10-G-1 Amendments to Deferred Compensation Plan Filed as Ehibit 10-G-1 to Ford's
for Non-Employee Directors, effective as of Annual Report on Form 10-K for the
January 1, 1996.** year ended December 31, 1995.*
Exhibit 10-G-2 Amendment to Deferred Compensation Plan Filed as Exhibit 10-G-2 to Ford's
for Non-Employee Directors, effective as of Annual Report on Form 10-K for the
November 14, 1996.** year ended December 31, 1996.*
Exhibit 10-H Benefit Equalization Plan, as Filed as Exhibit 10-H to Ford's
amended as of January 1, 1989.** Annual Report on Form 10-K for the
year ended December 31, 1994.*
Exhibit 10-H-1 Description of Amendments to Benefit Filed as Exhibit 10-H-1 to Ford's
Equalization Plan, adopted January 11, Annual Report on Form 10-K for the
1996 and January 25, 1996.** year ended December 31, 1995.*
Exhibit 10-I Description of financial counseling Filed as Exhibit 10-N to Ford's
services provided to certain executives.** Annual Report on Form 10-K for the
year ended December 31, 1983.*
Exhibit 10-J 1986 Long-Term Incentive Plan.** Filed as Exhibit 10-Q to Ford's
Annual Report on Form 10-K for the
year ended December 31, 1985.*
Exhibit 10-J-1 Amendment dated as of June 1, 1990 to Filed as Exhibit 10-N-1 to Ford's
1986 Long-Term Incentive Plan. ** Annual Report on Form 10-K for the
year ended December 31, 1990.*
Exhibit 10-K Supplemental Executive Retirement Plan, Filed as Exhibit 10-K to Ford's
as restated and incorporating amendments Annual Report on Form 10-K for the
through December 12, 1995.** year ended December 31, 1995.*
Exhibit 10-L Restricted Stock Plan for Non-Employee Filed as Exhibit 10-P to Ford's
Directors adopted by the Board of Annual Report on Form 10-K for the
Directors on November 10, 1988, year ended December 31, 1988.*
and approved by the stockholders at
the 1989 Annual Meeting.**
|
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
Designation Description Method of Filing
----------- ----------- ----------------
Exhibit 10-L-1 Amendment to Restricted Stock Plan for Filed as Exhibit 10.1 to Ford's
Non-Employee Directors, effective as of Quarterly Report on Form 10-Q for the
August 1, 1996.** quarter ended September 30, 1996.*
Exhibit 10-M 1990 Long-Term Incentive Plan, Filed as Exhibit 10-R to Ford's
amended as of June 1, 1990.** Annual Report on Form 10-K for the
year ended December 31, 1990.*
Exhibit 10-M-1 Amendment to 1990 Long-Term Incentive Filed as Exhibit 10-P-1 to Ford's
Plan, effective as of October 1, 1990.** Annual Report on Form 10-K for the
year ended December 31, 1991.*
Exhibit 10-M-2 Amendment to 1990 Long-Term Incentive Filed as Exhibit 10.2 to Ford's
Plan, effective as of March 8, 1995.** Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995.*
Exhibit 10-M-3 Amendment to 1990 Long-Term Filed as Exhibit 10-M-3 to Ford's
Incentive Plan, effective as of Annual Report on Form 10-K for the
October 1, 1997.** year ended December 31, 1997.*
Exhibit 10-M-4 Amendment to 1990 Long-Term Filed as Exhibit 10-M-4 to Ford's
Incentive Plan, effective as of Annual Report on Form 10-K for the
January 1, 1998.** year ended December 31, 1997.*
Exhibit 10-N Description of Matching Gift Program for Filed as Exhibit 10-Q to Ford's
Non-Employee Directors.** Annual Report on Form 10-K for the
year ended December 31, 1991.*
Exhibit 10-O Non-Employee Directors Life Insurance Filed as Exhibit 10-O to Ford's
and Optional Retirement Plan Annual Report on Form 10-K for the
(as amended as of January 1, 1993).** year ended December 31, 1994.*
Exhibit 10-P Description of Non-Employee Directors Filed as Exhibit 10-S to Ford's
Accidental Death, Dismemberment and Annual Report on Form 10-K for the
Permanent Total Disablement Indemnity.** year ended December 31, 1992.*
Exhibit 10-Q Agreement dated December 10, 1992 Filed as Exhibit 10-T to Ford's
between Ford and William C. Ford.** Annual Report on Form 10-K for the
year ended December 31, 1992.*
Exhibit 10-R Support Agreement dated as of October 1, Filed as Exhibit 10-T to Ford's
1993 between Ford and FCE Bank. Annual Report on Form 10-K for the
year ended December 31, 1993.*
Exhibit 10-R-1 Amendment No. 1 dated as of November Filed as Exhibit 10-R-1 to Ford's
15, 1995 to Support Agreement between Annual Report on Form 10-K for the
Ford and FCE Bank. year ended December 31, 1995.*
|
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
Designation Description Method of Filing
----------- ----------- ----------------
Exhibit 10-S Select Retirement Plan Filed as Exhibit 10-S to Ford's
adopted on June 9, 1994.** Annual Report on Form 10-K for the
year ended December 31, 1996.*
Exhibit 10-T Deferred Compensation Plan, Filed as Exhibit 10.2 to Ford's
effective as of July 13, 1995.** Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995.*
Exhibit 10-T-1 Amendments to Deferred Compensation Filed as Exhibit 10-T-1 to Ford's
Plan, effective as of July 13, 1995 and Annual Report on Form 10-K for the
October 1, 1995.** year ended December 31, 1995.*
Exhibit 10-T-2 Amendments to Deferred Compensation Filed as Exhibit 10.2 to Ford's
Plan, effective as of October 1, 1996.** Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996.*
Exhibit 10-T-3 Amendment to Deferred Compensation Filed as Exhibit 4.4 to Ford's
Plan, effective as of October 1, 1997.** Registration Statement
No. 333-47733.*
Exhibit 10-T-4 Amendments to Deferred Compensation Filed as Exhibit 4.5 to Ford's
Plan, effective as of January 1, 1998.** Registration Statement
No. 333-47733.*
Exhibit 10-T-5 Amendments to Deferred Compensation Plan, Filed as Exhibit 10.1 to Ford's Quarterly
effective as of July 8, 1998.** Report on Form 10-Q/A for the
quarter ended September 30, 1998.*
Exhibit 10-T-6 Amendment to Deferred Compensation Plan, Filed as Exhibit 10.2 to Ford's Quarterly
effective as of September 9, 1998.** Report on Form 10-Q/A for the
quarter ended September 30, 1998.*
Exhibit 10-T-7 Amendments to Deferred Compensation Plan, Filed as Exhibit 10.3 to Ford's Quarterly
effective as of October 16, 1998.** Report on Form 10-Q/A for the
quarter ended September 30, 1998.*
Exhibit 10-T-8 Amendments to Deferred Compensation Filed with this Report.
Plan, effective as of November 11, 1998.**
Exhibit 10-U Description of Amendments to Supplemental Filed as Exhibit 10-U to Ford's
Executive Retirement Plan and Executive Annual Report on Form 10-K for the
Separation Allowance Plan, adopted year ended December 31, 1995.*
January 25, 1996.**
Exhibit 10-U-2 Description of Amendment to Supplemental Filed as Exhibit 10-U-2 to Ford's
Executive Retirement Plan and Executive Annual Report on Form 10-K for the
Separation Allowance Plan, effective as of year ended December 31, 1996.*
July 1, 1996.**
|
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
Designation Description Method of Filing
----------- ----------- ----------------
Exhibit 10-U-3 Description of Amendment to Supplemental Filed with this Report.
Executive Retirement Plan adopted
September 10, 1998. **
Exhibit 10-V Annual Incentive Compensation Plan, Filed as Exhibit 10-V to Ford's
effective as of January 1, 1998.** Annual Report on Form 10-K for the
year ended December 31, 1997.*
Exhibit 10-W 1998 Long-Term Incentive Plan, Filed as Exhibit 10-W to Ford's
effective as of January 1, 1998.** Annual Report on Form 10-K for the
year ended December 31, 1997.*
Exhibit 10-W-1 Amendment to 1998 Long-Term Incentive Filed with this Report.
Plan, effective as of January 1, 1999.**
Exhibit 10-X Agreement dated January 13, 1999 Filed with this Report.
between Ford and Edsel B. Ford II.**
Exhibit 12 Computation of Ratio of Earnings to Filed with this Report.
Combined Fixed Charges and Preferred
Stock Dividends.
Exhibit 21 List of Subsidiaries of Ford Filed with this Report.
as of March 15, 1999.
Exhibit 23 Consent of Independent Certified Public Filed with this Report.
Accountants.
Exhibit 24 Powers of Attorney. Filed with this Report.
--------------------------
* Incorporated by reference as an exhibit to this Report (file number
reference 1-3950, unless otherwise indicated)
** Management contract or compensatory plan or arrangement
|
Instruments defining the rights of holders of certain issues of long-term debt of Ford and of certain consolidated subsidiaries and of any unconsolidated subsidiary, for which financial statements are required to be filed with this Report, have not been filed as exhibits to this Report because the authorized principal amount of any one of such issues does not exceed 10% of the total assets of Ford and our subsidiaries on a consolidated basis. Ford agrees to furnish a copy of each of such instruments to the Commission upon request.
During the quarter ended December 31, 1998, Ford filed no Current Reports on Form 8-K.
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, Ford has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
FORD MOTOR COMPANY
Executive Vice President and
Chief Financial Officer
Date: March 17, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of Ford and in
the capacities on the date indicated.
Signature Title Date
--------- ----- ----
William Clay Ford, Jr.* Director, Chairman of the March 17, 1999
------------------------------ Board and Chairman of the
(William Clay Ford, Jr.) Environmental and Public
Policy Committee, the Finance
Committee and the Organization
Review and Nominating Committee
Jacques A. Nasser* Director and President March 17, 1999
------------------------------ and Chief Executive Officer
(Jacques A. Nasser) (principal executive officer)
Michael D. Dingman* Director and Chairman of the March 17, 1999
------------------------------- Compensation and Option Committee
(Michael D. Dingman)
Edsel B. Ford II* Director March 17, 1999
-------------------------------
(Edsel B. Ford II)
William Clay Ford* Director March 17, 1999
-------------------------------
(William Clay Ford)
Irvine O. Hockaday, Jr.* Director and Chairman of the March 17, 1999
------------------------------- Audit Committee
(Irvine O. Hockaday, Jr.)
-59-
|
Signature Title Date
--------- ----- ----
Marie-Josee Kravis* Director March 17, 1999
------------------------------
(Marie-Josee Kravis)
Ellen R. Marram* Director March 17, 1999
------------------------------
(Ellen R. Marram)
Homer A Neal* Director March 17, 1999
------------------------------
(Homer A. Neal)
Carl E. Reichardt* Director March 17, 1999
------------------------------
(Carl E. Reichardt)
John L. Thornton* Director March 17, 1999
------------------------------
(John L. Thornton)
John M. Devine* Executive Vice President and March 17, 1999
------------------------------ Chief Financial Officer
(John M. Devine) (principal financial officer)
William A. Swift* Vice President and Controller March 17, 1999
------------------------------ (principal accounting officer)
(William A. Swift)
*By: /s/ John M. Rintamaki
-------------------------
(John M. Rintamaki)
Attorney-in-Fact
|
Ford Motor Company and Subsidiaries
-----------------------------------
HIGHLIGHTS
Fourth Quarter Full Year
----------------------- -------------------------
1998 1997 1998 1997
------- ------- -------- --------
(unaudited)
Worldwide vehicle unit sales of
cars and trucks (in thousands)
- North America 1,197 1,118 4,370 4,432
- Outside North America 617 673 2,453 2,515
----- ----- ----- -----
Total 1,814 1,791 6,823 6,947
===== ===== ===== =====
Sales and revenues (in millions)
- Automotive $32,204 $31,897 $119,083 $122,935
- Financial Services 5,699 8,055 25,333 30,692
------- ------- -------- --------
Total $37,903 $39,952 $144,416 $153,627
======= ======= ======== ========
Net income (in millions)
- Automotive $ 820 $ 1,341 $ 4,752 $ 4,714
- Financial Services (excl. The Associates) 223 231 1,187 1,374
------- ------- -------- --------
Subtotal 1,043 1,572 5,939 6,088
- The Associates - 224 177 832
- Gain on spin-off of The Associates - - 15,955 -
------- ------- -------- --------
Total $ 1,043 $ 1,796 $ 22,071 $ 6,920
======= ======= ======== ========
Capital expenditures (in millions)
- Automotive $ 2,445 $ 2,389 $ 8,113 $ 8,142
- Financial Services 106 162 504 575
------- ------- -------- --------
Total $ 2,551 $ 2,551 $ 8,617 $ 8,717
======= ======= ======== ========
Automotive capital expenditures as a
percentage of sales 7.6% 7.5% 6.8% 6.6%
Stockholders' equity at December 31
- Total (in millions) $23,409 $30,734 $ 23,409 $ 30,734
- After-tax return on Common and
Class B stockholders' equity 17.8% 24.1% 25.4% 24.4%
Automotive net cash at December 31
(in millions)
- Cash and marketable securities $23,805 $20,835 $ 23,805 $ 20,835
- Debt 9,834 8,176 9,834 8,176
------- ------- -------- --------
Automotive net cash $13,971 $12,659 $ 13,971 $ 12,659
======= ======= ======== ========
After-tax return on sales
- North American Automotive 4.5% 5.9% 5.3% 5.1%
- Total Automotive 2.6% 4.2% 4.0% 3.9%
Shares of Common and Class B Stock
(in millions)
- Average number outstanding 1,210 1,201 1,211 1,195
- Number outstanding at December 31 1,209 1,202 1,209 1,202
Common Stock price (per share)
(adjusted to reflect The Associates
spin-off)
- High $59-7/8 $33-9/16 $61-7/16 $33-9/16
- Low 38-13/16 27-23/32 28-15/32 20-3/64
AMOUNTS PER SHARE OF COMMON AND
CLASS B STOCK AFTER PREFERRED
STOCK DIVIDENDS
Income assuming dilution
- Automotive $ 0.66 $ 1.08 $ 3.76 $ 3.82
- Financial Services (excl. The Associates) 0.18 0.19 0.96 1.12
------- ------- ------- --------
Subtotal 0.84 1.27 4.72 4.94
- The Associates - 0.18 0.14 0.68
- Gain on spin-off of The Associates - - 12.90 -
------- -------- ------- --------
Total $ 0.84 $ 1.45 $ 17.76 $ 5.62
======= ======= ======= ========
Cash dividends $ 0.46 $ 0.42 $ 1.72 $ 1.645
|
FS-1
Ford Motor Company and Subsidiaries
VEHICLE UNIT SALES
------------------
For the Periods Ended December 31, 1998 and 1997
(in thousands)
Fourth Quarter Full Year
---------------------- ----------------------
1998 1997 1998 1997
------ ------ ------ ------
(unaudited) (unaudited)
North America
United States
Cars 428 409 1,563 1,614
Trucks 654 578 2,425 2,402
----- ----- ----- -----
Total United States 1,082 987 3,988 4,016
Canada 87 91 279 319
Mexico 28 40 103 97
----- ----- ----- -----
Total North America 1,197 1,118 4,370 4,432
Europe
Britain 102 124 498 466
Germany 143 137 444 460
Italy 56 70 205 248
France 54 41 171 153
Spain 46 43 155 155
Other 95 91 377 318
----- ----- ----- -----
Total Europe 496 506 1,850 1,800
Other international
Brazil 34 49 178 214
Australia 35 31 133 132
Argentina 16 35 97 147
Taiwan 12 17 77 79
Japan 5 10 25 40
Other 19 25 93 103
----- ----- ----- -----
Total other international 121 167 603 715
----- ----- ----- -----
Total worldwide vehicle unit sales 1,814 1,791 6,823 6,947
===== ===== ===== =====
|
Vehicle unit sales are reported worldwide on a "where sold" basis and include sales of all Ford-badged units, as well as units manufactured by Ford and sold to other manufacturers.
Prior periods restated to correct reported unit sales.
FS-2
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
For the Years Ended December 31, 1998, 1997 and 1996
(in millions, except amounts per share)
1998 1997 1996
--------- --------- ---------
AUTOMOTIVE
Sales (Note 1) $119,083 $122,935 $118,023
Costs and expenses (Note 1 and 15):
Costs of sales 104,782 108,907 108,882
Selling, administrative and other expenses 7,616 7,082 6,625
-------- -------- --------
Total costs and expenses 112,398 115,989 115,507
Operating income 6,685 6,946 2,516
Interest income 1,331 1,116 841
Interest expense 829 788 695
-------- -------- --------
Net interest income 502 328 146
Equity in net loss of affiliated companies (Note 1) (38) (88) (6)
Net expense from transactions with
Financial Services (Note 1) (191) (104) (85)
-------- -------- --------
Income before income taxes - Automotive 6,958 7,082 2,571
FINANCIAL SERVICES
Revenues (Note 1) 25,333 30,692 28,968
Costs and expenses (Note 1):
Interest expense 8,036 9,712 9,704
Depreciation 8,589 7,645 6,875
Operating and other expenses 4,618 6,621 6,217
Provision for credit and insurance losses 1,798 3,230 2,564
Asset write-downs and dispositions (Note 15) - - 121
-------- -------- --------
Total costs and expenses 23,041 27,208 25,481
Net revenue from transactions with Automotive (Note 1) 191 104 85
Gain on spin-off of The Associates (Note 15) 15,955 - -
Gain on sale of Common Stock of a subsidiary (Note 15) - 269 650
-------- -------- --------
Income before income taxes - Financial Services 18,438 3,857 4,222
-------- -------- --------
TOTAL COMPANY
Income before income taxes 25,396 10,939 6,793
Provision for income taxes (Note 6) 3,176 3,741 2,166
-------- -------- --------
Income before minority interests 22,220 7,198 4,627
Minority interests in net income of subsidiaries 149 278 181
-------- -------- --------
Net income $ 22,071 $ 6,920 $ 4,446
======== ======== ========
Income attributable to Common and Class B Stock
after preferred stock dividends (Note 1) $ 21,964 $ 6,866 $ 4,381
Average number of shares of Common and Class B
Stock outstanding (Note 1) 1,211 1,195 1,179
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK (Note 1)
Basic income $ 18.17 $ 5.75 $ 3.73
Diluted income $ 17.76 $ 5.62 $ 3.64
Cash dividends $ 1.72 $ 1.645 $ 1.47
|
The accompanying notes are part of the financial statements.
FS-3
Ford Motor Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
--------------------------
(in millions)
December 31, December 31,
1998 1997
------------ ------------
ASSETS
Automotive
Cash and cash equivalents $ 3,685 $ 6,316
Marketable securities (Note 2) 20,120 14,519
-------- --------
Total cash and marketable securities 23,805 20,835
Receivables 2,604 3,097
Inventories (Note 4) 5,656 5,468
Deferred income taxes 3,239 3,249
Other current assets (Note 1) 3,405 3,782
Net current receivable from Financial Services (Note 1) 0 416
-------- --------
Total current assets 38,709 36,847
Equity in net assets of affiliated companies (Note 1) 2,401 1,951
Net property (Note 5) 37,320 34,594
Deferred income taxes 3,175 3,712
Other assets (Notes 1 and 8) 7,139 7,975
-------- --------
Total Automotive assets 88,744 85,079
Financial Services
Cash and cash equivalents 1,151 1,618
Investments in securities (Note 2) 968 2,207
Net receivables and lease investments (Note 3) 132,567 175,417
Other assets (Note 1) 13,227 14,776
Net receivable from Automotive (Note 1) 888 0
-------- --------
Total Financial Services assets 148,801 194,018
-------- --------
Total assets $237,545 $279,097
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive
Trade payables $ 13,368 $ 11,997
Other payables 2,755 2,557
Accrued liabilities (Note 7) 16,925 16,250
Income taxes payable 1,404 1,358
Debt payable within one year (Note 9) 1,121 1,129
Net current payable to Financial Services (Note 1) 70 0
-------- --------
Total current liabilities 35,643 33,291
Long-term debt (Note 9) 8,713 7,047
Other liabilities (Note 7) 30,133 28,899
Deferred income taxes 751 1,210
Net payable to Financial Services (Note 1) 818 0
-------- --------
Total Automotive liabilities 76,058 70,447
Financial Services
Payables 3,555 4,539
Debt (Note 9) 122,324 160,071
Deferred income taxes 5,488 4,347
Other liabilities and deferred income 6,034 7,865
Net payable to Automotive (Note 1) 0 416
-------- --------
Total Financial Services liabilities 137,401 177,238
Company-obligated mandatorily redeemable preferred securities of a subsidiary
trust holding solely junior subordinated debentures of the Company (Note 1) 677 678
Stockholders' equity
Capital stock (Notes 10 and 11)
Preferred Stock, par value $1.00 per share (aggregate liquidation preference
of $177 million and $637 million) * *
Common Stock, par value $1.00 per share (1,151 and 1,132 million shares issued) 1,151 1,132
Class B Stock, par value $1.00 per share (71 million shares issued) 71 71
Capital in excess of par value of stock 5,283 5,564
Accumulated other comprehensive income (1,670) (1,228)
ESOP loan and treasury stock (1,085) (39)
Earnings retained for use in business 19,659 25,234
-------- --------
Total stockholders' equity 23,409 30,734
-------- --------
Total liabilities and stockholders' equity $237,545 $279,097
======== ========
- - - - -
*Less than $500,000
The accompanying notes are part of the financial statements.
|
FS-4
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
For the Years Ended December 31, 1998, 1997 and 1996
(in millions)
1998 1997 1996
------------------------- --------------------------- -------------------------
Financial Financial Financial
Automotive Services Automotive Services Automotive Services
------------ ----------- ------------ ---------- ------------ ----------
Cash and cash equivalents at January 1 $ 6,316 $ 1,618 $ 3,578 $ 3,689 $ 5,750 $ 2,690
Cash flows from operating activities
(Note 16) 9,622 13,478 13,984 13,650 6,576 12,681
Cash flows from investing activities
Capital expenditures (8,113) (504) (8,142) (575) (8,209) (442)
Purchase of leased assets (110) - (332) - (195) -
Acquisitions of other companies 0 (344) 0 (40) 0 (166)
Acquisitions of receivables and lease
investments - (78,863) - (117,895) - (109,087)
Collections of receivables and lease
investments - 49,303 - 86,842 - 82,398
Net acquisitions of daily rental vehicles - (1,790) - (958) - (1,759)
Net proceeds from USL Capital asset sales - - - - - 1,157
Purchases of securities (Note 16) (758) (2,102) (43) (3,067) (6) (8,020)
Sales and maturities of securities
(Note 16) 590 2,271 13 3,520 7 9,863
Proceeds from sales of receivables and
lease investments - 8,413 - 5,197 - 2,867
Net investing activity with
Financial Services 642 - 258 - 416 -
Other (468) (463) (285) (569) (586) (45)
------- -------- ------- -------- ------- --------
Net cash used in investing activities (8,217) (24,079) (8,531) (27,545) (8,573) (23,234)
Cash flows from financing activities
Cash dividends (5,348) - (2,020) - (1,800) -
Issuance of Common Stock 157 - 310 - 192 -
Issuance of Common Stock of a subsidiary
(Note 15) - - - 453 - 1,897
Purchase of Ford Treasury Stock (669) - (15) - - -
Preferred stock - Series B repurchase,
Series A redemption (420) - - - - -
Changes in short-term debt 497 7,475 (430) 6,210 151 3,474
Proceeds from issuance of other debt 2,403 21,776 1,100 22,923 1,688 22,342
Principal payments on other debt (1,434) (16,797) (668) (18,215) (1,031) (14,428)
Net financing activity with Automotive - (642) - (258) - (416)
Spin-off of The Associates cash - (508) - - - -
Other (472) (12) 16 (206) 37 (528)
------- ------- ------- -------- ------- --------
Net cash (used in)/provided by
financing activities (5,286) 11,292 (1,707) 10,907 (763) 12,341
Effect of exchange rate changes on cash (54) 146 (119) 28 (85) (116)
Net transactions with Automotive/
Financial Services 1,304 (1,304) (889) 889 673 (673)
------- -------- - ------- -------- ------- --------
Net (decrease)/increase in cash and
cash equivalents (2,631) (467) 2,738 (2,071) (2,172) 999
------- -------- ------- -------- ------- --------
Cash and cash equivalents at December 31 $ 3,685 $ 1,151 $ 6,316 $ 1,618 $ 3,578 $ 3,689
======= ======== ======= ======== ======= ========
|
The accompanying notes are part of the financial statements.
FS-5
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
----------------------------------------------
For the Years Ended December 31, 1996, 1997 and 1998
(in millions)
Capital Other Comprehensive Income
in Excess -------------------------------------
of Par Foreign Minimum Unrealized
Capital Value of Retained Currency Pension Holding
Stock Stock Earnings Translation Liability Gain/Loss Other Total
-------- -------- -------- ----------- --------- ---------- ------- ------
YEAR ENDED DECEMBER 31, 1996
----------------------------
Balance at beginning of year $1,160 $5,105 $17,688 $ 482 $ (108) $220 $ - $24,547
Comprehensive income
Net income 4,446 4,446
Foreign currency translation (408) (408)
Minimum pension liability
(net of tax benefit of $74) (159) (159)
Net unrealized holding loss,
(net of tax benefit of $26) (56) (56)
-------
Comprehensive income 3,823
Common stock issued for Series A
Preferred Stock conversion,
employee benefit plan and other 29 163 192
Cash dividends (1,800) (1,800)
------ ------ ------- ------- ------ ---- ------- -------
Balance at end of year $1,189 $5,268 $20,334 $ 74 $ (267) $164 $ - $26,762
====== ====== ======= ======= ====== ==== ======= =======
YEAR ENDED DECEMBER 31, 1997
----------------------------
Balance at beginning of year $1,189 $5,268 $20,334 $ 74 $ (267) $164 $ - $26,762
Comprehensive income
Net income 6,920 6,920
Foreign currency translation (1,038) (1,038)
Minimum pension liability
(net of tax benefit of $36) (70) (70)
Net unrealized holding loss
(net of tax benefit of $47) (91) (91)
-------
Comprehensive income 5,721
Common stock issued for Series A
Preferred Stock conversion,
employee benefit plans and other 14 296 310
Treasury stock (39) (39)
Cash dividends (2,020) (2,020)
------ ------ ------- ------- ------ ---- ------- -------
Balance at end of year $1,203 $5,564 $25,234 $ (964) $ (337) $ 73 $ (39) $30,734
====== ====== ======= ======= ====== ==== ======= =======
YEAR ENDED DECEMBER 31, 1998
----------------------------
Balance at beginning of year $1,203 $5,564 $25,234 $ (964) $ (337) $ 73 $ (39) $30,734
Comprehensive income
Net income (excluding gain on
spin-off of The Associates) 6,116 6,116
Gain on The Associates spin-off 15,955 15,955
Foreign currency translation (53) (53)
Minimum pension liability
(net of tax benefit of $184) (361) (361)
Net unrealized holding loss
(net of tax benefit of $3) (6) (6)
Reclassification adjustments
for net gains realized in
net income (net of tax of $11) (22) (22)
------
Comprehensive income 21,629
Common stock issued for Series A
Preferred Stock conversion,
employee benefit plans and other 19 139 158
Preferred stock-Series B
repurchase and Series A redemption (420) (420)
ESOP loan and treasury stock (1,046) (1,046)
The Associates spin-off to Ford
Common stockholders (22,298) (22,298)
Cash dividends (5,348) (5,348)
------ ------ ------- -------- ------ ---- ------- -------
Balance at end of year $1,222 $5,283 $19,659 $ (1,017) $ (698) $ 45 $(1,085) $23,409
====== ====== ======= ======== ====== ==== ======= =======
|
The accompanying notes are part of the financial statements.
FS-6
Ford Motor Company and Subsidiaries
Notes to Financial Statements
The consolidated financial statements include all significant majority-owned subsidiaries and reflect the operating results, assets, liabilities and cash flows for the company's two business sectors: Automotive and Financial Services. The assets and liabilities of the Automotive sector are classified as current or noncurrent, and those of the Financial Services sector are unclassified. Affiliates that are 20% to 50% owned, principally Mazda Motor Corporation and AutoAlliance International Inc., and subsidiaries where control is expected to be temporary, principally investments in certain dealerships, are accounted for on an equity basis. Use of estimates and assumptions as determined by management is required in the preparation of consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates and assumptions. For purposes of Notes to Financial Statements, "Ford" or "the company" means Ford Motor Company and its majority-owned consolidated subsidiaries unless the context requires otherwise. Certain amounts for prior periods are reclassified, if required, to conform with present period presentations.
The company's sectors, Automotive and Financial Services, are managed as four primary operating segments. A segment is defined as a component with business activity resulting in revenue and expense that has separate financial information evaluated regularly by the company's chief operating decision maker in determining resource allocation and assessing performance (Note 17). The Automotive sector is comprised of Automotive and Visteon. The Automotive segment consists of the design, manufacture, assembly and sale of cars and trucks; the Visteon segment consists of the design, manufacture and sale of automotive components and systems. The Financial Services sector primarily includes two segments, Ford Motor Credit Company and its subsidiaries ("Ford Credit") and The Hertz Corporation and its subsidiaries ("Hertz"). The Financial Services sector also includes less significant financial services businesses (Note 17). Ford Credit leases and finances the purchase of cars and trucks made by Ford and other companies. It also provides inventory and capital financing to retail car and truck dealerships. Hertz rents cars and trucks and industrial and construction equipment. Both Ford Credit and Hertz also have insurance operations related to their businesses.
Intersector transactions represent principally transactions occurring in the ordinary course of business, borrowings and related transactions between entities in the Financial Services and Automotive sectors, and interest and other support under special vehicle financing programs. These arrangements are reflected in the respective business sectors. Intersegment transactions are described in Note 17.
Sales are recorded by the company when products are shipped to dealers and other customers, except as described below. Estimated costs for approved sales incentive programs normally are recognized as sales reductions at the time of revenue recognition. Estimated costs for sales incentive programs approved subsequent to the time that related sales were recorded are recognized when the programs are approved.
Sales through dealers to certain daily rental companies where the daily rental company has an option to require Ford to repurchase vehicles subject to certain conditions, are recognized over the period of daily rental service in a manner similar to lease accounting. The carrying value of these vehicles, included in other current assets, was $2.1 billion at December 31, 1998, and $2.2 billion at December 31, 1997.
FS-7
Revenue from finance receivables is recognized over the term of the receivable using the interest method. Certain loan origination costs are deferred and amortized, using the interest method, over the term of the related receivable as a reduction in financing revenue. Revenue from operating leases is recognized as scheduled payments become due. Initial direct costs net of acquisition fees related to leases are deferred and amortized over the term of the lease. Agreements between the Automotive sector operations and certain Financial Services sector operations provide for interest supplements and other support costs to be paid by Automotive sector operations on certain financing and leasing transactions. The Financial Services sector recognizes this revenue in income over the period that the related receivables and leases are outstanding; the estimated costs of interest supplements and other support costs are recorded as sales incentives by Automotive sector operations in the same manner as sales incentives described above.
The accrual of interest on loans is discontinued at the time a loan is determined to be impaired. Subsequent amounts of interest collected are recognized in income only if full recovery of the remaining principal is expected. Other amounts collected are generally recognized first as a reduction of principal. Any remaining amounts are treated as a recovery.
The Financial Services sector periodically sells finance receivables through special purpose subsidiaries, retains the servicing rights and certain other beneficial interests, and receives a servicing fee which is recognized as collected over the remaining term of the related sold finance receivables. Estimated gains or losses from the sale of finance receivables are recognized in the period in which the sale occurs. In determining the gain or loss on each qualifying sale of finance receivables, the investment in the sold receivable pool is allocated between the portion sold and the portion retained based on their relative fair values at the date of sale.
Advertising and sales promotion costs are expensed as incurred. Advertising costs were $2.2 billion in 1998, $2.3 billion in 1997 and $2.2 billion in 1996.
Estimated costs related to product warranty are accrued at the time of sale.
Research and development costs are expensed as incurred and were $6.3 billion in 1998, $6.3 billion in 1997 and $6.8 billion in 1996.
Basic income per share of Common and Class B Stock is calculated by dividing the income attributable to Common and Class B Stock by the average number of shares of Common and Class B Stock outstanding during the applicable period, adjusted for shares issuable under employee savings and compensation plans.
The calculation of diluted income per share of Common and Class B Stock takes into account the effect of obligations, such as stock options, considered to be potentially dilutive.
FS-8
Income per share of Common and Class B Stock were as follows (in millions):
1998 1997 1996
----------------- ---------------- ------------------
Income Shares* Income Shares* Income Shares*
------- ------ ------ ------ ------ ------
Net income $22,071 1,211 $6,920 1,195 $4,446 1,179
Preferred stock dividend requirements (22) - (54) - (65) -
Premium on Series B Tender Offer** (85) - - - - -
Issuable and uncommitted ESOP shares - (2) - (1) - (4)
------- ------ ------ ------ ------ -----
Basic income and shares $21,964 1,209 $6,866 1,194 $4,381 1,175
Basic Income Per Share $ 18.17 $ 5.75 $ 3.73
----------------------
Basic income and shares $21,964 1,209 $6,866 1,194 $4,381 1,175
Net dilutive effect of options - 28 - 20 - 16
Convertible preferred stock and other (1) - 8 10 24 19
------- ------ ------ ------ ------ -----
Diluted income and shares $21,963 1,237 $6,874 1,224 $4,405 1,210
Diluted Income Per Share $ 17.76 $ 5.62 $ 3.64
------------------------
|
Ford has operations in over 30 countries and sells vehicles in over 200 markets, and is exposed to a variety of market risks, including the effects of changes in foreign currency exchange rates, interest rates and commodity prices. These financial exposures are monitored and managed by the company as an integral part of the company's overall risk management program, which recognizes the unpredictability of financial markets and seeks to reduce the potentially adverse effect on the company's results. The company uses derivative financial instruments to manage the exposures to fluctuations in exchange rates, interest rates and commodity prices. All derivative financial instruments are classified as "held for purposes other than trading"; company policy specifically prohibits the use of leveraged derivatives or use of any derivatives for speculative purposes.
Ford's primary foreign currency exposures, in terms of net corporate exposure, are in the British Pound Sterling, Japanese Yen, euro, Mexican Peso and Brazilian Real. Agreements to manage foreign currency exposures include forward contracts, swaps and options. The company uses these derivative instruments to hedge assets and liabilities denominated in foreign currencies, firm commitments and certain investments in foreign subsidiaries. Gains and losses on hedges of firm commitments are deferred and recognized with the related transactions. In the case of hedges of net investments in foreign subsidiaries, gains and losses are recognized in other comprehensive income. All other gains and losses are recognized in cost of sales for the Automotive sector and interest expense for the Financial Services sector. These instruments usually mature in two years or less for Automotive sector exposures and longer for Financial Services sector exposures, consistent with the underlying transactions. The effect of changes in exchange rates may not be fully offset by gains or losses on currency derivatives, depending on the extent to which the exposures are hedged.
Interest rate swap agreements are used to manage the effects of interest rate fluctuations by changing the interest rate characteristics of specific debt or pools of debt to match the interest rate characteristics of corresponding assets. These instruments mature consistent with underlying debt issues as identified in Note 9. The differential paid or received on interest rate swaps is recognized on an accrual basis as an adjustment to interest expense. Gains and losses on terminated interest rate swaps are amortized and reflected in interest expense over the remaining term of the underlying debt.
FS-9
Ford has a commodity hedging program that uses primarily forward contracts and options to manage the effects of changes in commodity prices on the Automotive sector's results. The financial instruments used in this program mature in three years or less, consistent with the related purchase commitments. Gains and losses are recognized in cost of sales during the settlement period of the related transactions.
Assets and liabilities of non-U.S. subsidiaries generally are translated to U.S. Dollars at end-of-period exchange rates. The effects of this translation for most non-U.S. subsidiaries are reported in other comprehensive income. Remeasurement of assets and liabilities of non-U.S. subsidiaries that use the U.S. Dollar as their functional currency are included in income as transaction gains and losses. Income statement elements of all non-U.S. subsidiaries are translated to U.S. Dollars at average-period exchange rates and are recognized as part of revenues, costs and expenses. Also included in income are gains and losses arising from transactions denominated in a currency other than the functional currency of the subsidiary involved. Net transaction gains and losses, as described above, increased net income by $97 million in 1998, and decreased net income by $164 million in 1997 and $156 million in 1996.
The company evaluates the carrying value of goodwill for potential impairment on an ongoing basis. Such evaluations compare operating income before amortization of goodwill to the amortization recorded for the operations to which the goodwill relates. The company also periodically evaluates the carrying value of long-lived assets and long-lived assets to be disposed of for potential impairment. The company considers projected future operating results, cash flows, trends and other circumstances in making such estimates and evaluations.
Goodwill represents the excess of the purchase price over the fair value of the net assets of acquired companies and is amortized using the straight-line method principally over 40 years. Total goodwill included in the Automotive sector's other assets was $2.1 billion at December 31, 1998 and $2.1 billion at December 31, 1997. Total goodwill included in the Financial Services sector's other assets was $743 million at December 31, 1998 and $2.7 billion at December 31, 1997. The decrease is related to the spin-off of Associates First Capital Corporation ("The Associates", Note 15).
During 1995, Ford Motor Company Capital Trust I (the "Trust") issued $632 million of its 9% Trust Originated Preferred Securities (the "Preferred Securities") in a one-for-one exchange for 25,273,537 shares of the company's outstanding Series B Depositary Shares (the "Depositary Shares"). Concurrent with the exchange and the related purchase by Ford of the Trust's common securities (the "Common Securities"), the company issued to the Trust $651 million aggregate principal amount of its 9% Junior Subordinated Debentures due December 2025 (the "Debentures"). The sole assets of the Trust are and will be the Debentures. The Debentures are redeemable, in whole or in part, at the company's option on or after December 1, 2002, at a redemption price of $25 per Debenture plus accrued and unpaid interest. If the company redeems the Debentures, or upon maturity of the Debentures, the Trust is required to redeem the Preferred Securities and Common Securities at $25 per share plus accrued and unpaid distributions.
Ford guarantees to pay in full to the holders of the Preferred Securities all distributions and other payments on the Preferred Securities to the extent not paid by the Trust only if and to the extent that Ford has made a payment of interest or principal on the Debentures. This guarantee, when taken together with Ford's obligations under the Debentures and the Indenture relating thereto and its obligations under the Declaration of Trust of the Trust, including its obligation to pay certain costs and expenses of the Trust, constitutes a full and unconditional guarantee by Ford of the Trust's obligations under the Preferred Securities.
FS-10
Trading securities are recorded at fair value with unrealized gains and losses included in income. Available-for-sale securities are recorded at fair value with net unrealized gains and losses reported, net of tax, in other comprehensive income. Held-to-maturity securities are recorded at amortized cost. Equity securities which do not have readily determinable fair values are recorded at cost. The basis of cost used in determining realized gains and losses is specific identification.
The fair value of substantially all securities is determined by quoted market prices. The estimated fair value of securities, for which there are no quoted market prices, is based on similar types of securities that are traded in the market.
Expected maturities of debt securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.
Investments in securities at December 31 were as follows (in millions):
Memo:
Amortized Unrealized Unrealized Fair Book
Cost Gains Losses Value Value
--------- ---------- ---------- ------- -------
1998
-----
Trading securities $19,534 $83 $40 $19,577 $19,577
Available-for-sale securities - Corporate securities 543 - - 543 543
------- --- --- ------- -------
Total investments in securities $20,077 $83 $40 $20,120 $20,120
======= === === ======= =======
1997
----
Trading securities $14,114 $29 $ - $14,143 $14,143
Available-for-sale securities - Corporate securities 395 - 19 376 376
------- --- --- ------- -------
Total investments in securities $14,509 $29 $19 $14,519 $14,519
======= === === ======= =======
|
During 1997, $365 million of bonds issued by affiliates were reclassified from equity in net assets of affiliated companies to available-for-sale marketable securities; $202 million of the bonds matured in 1998. Proceeds from sales of available-for-sale securities were $586 million in 1998 and $8 million in 1997. In 1998, gross losses of $15 million were reported. Other comprehensive income included net unrealized losses of $5 million in 1998 and net unrealized gains of $28 million in 1997 on securities owned by certain unconsolidated affiliates. The available-for-sale securities at December 31, 1998 had contractual maturities between one and five years.
Investments in securities at December 31, 1998 were as follows (in millions):
Memo:
Amortized Unrealized Unrealized Fair Book
Cost Gains Losses Value Value
--------- ---------- ---------- ----- -----
Trading securities $231 $ 3 $4 $230 $230
Available-for-sale securities
-----------------------------
Debt securities issued by the U.S.
government and agencies 153 3 - 156 156
Municipal securities 63 2 - 65 65
Debt securities issued by non-U.S. governments 25 - - 25 25
Corporate securities 192 3 2 193 193
Mortgage-backed securities 198 3 - 201 201
Equity securities 35 56 1 90 90
---- --- -- ---- ----
Total available-for-sale securities 666 67 3 730 730
Held-to-maturity securities
---------------------------
Debt securities issued by the U.S.
government and agencies 6 - - 6 6
Corporate securities 2 - - 2 2
---- --- -- ---- ----
Total held-to-maturity securities 8 - - 8 8
Total investments in securities $905 $70 $7 $968 $968
==== === == ==== ====
|
FS-11
Investments in securities at December 31, 1997 were as follows (in millions):
Memo:
Amortized Unrealized Unrealized Fair Book
Cost Gains Losses Value Value
--------- ---------- ---------- ------ ------
Trading securities $ 267 $ 4 $1 $ 270 $ 270
Available-for-sale securities
-----------------------------
Debt securities issued by the U.S.
government and agencies 385 4 1 388 388
Municipal securities 13 - - 13 13
Debt securities issued by non-U.S. governments 36 - - 36 36
Corporate securities 489 7 1 495 495
Mortgage-backed securities 837 8 1 844 844
Other debt securities 14 - - 14 14
Equity securities 53 65 2 116 116
------ --- -- ------ ------
Total available-for-sale securities 1,827 84 5 1,906 1,906
Held-to-maturity securities
---------------------------
Debt securities issued by the U.S.
government and agencies 7 - - 7 7
Corporate securities 15 - - 15 15
Other debt securities 3 - - 3 3
------ --- -- ------ ------
Total held-to-maturity securities 25 - - 25 25
Total investments in securities with
readily determinable fair value 2,119 $88 $6 $2,201 2,201
=== == ======
Equity securities not practicable to fair value 6 6
------ ------
Total investments in securities $2,125 $2,207
====== ======
|
The amortized cost and fair value of investments in available-for-sale securities and held-to-maturity securities at December 31 by contractual maturity, were as follows (in millions):
Available-for-sale Held-to-maturity
----------------------- -------------------------
Amortized Amortized
1998 Cost Fair Value Cost Fair Value
---- --------- ---------- --------- ----------
Due in one year or less $ 29 $ 29 $ 1 $ 1
Due after one year through five years 165 167 3 3
Due after five years through ten years 101 102 3 3
Due after ten years 138 141 1 1
Mortgage-backed securities 198 200 - -
Equity securities 35 91 - -
------ ------ --- ---
Total $ 666 $ 730 $ 8 $ 8
====== ====== === ===
1997
----
Due in one year or less $ 100 $ 101 $14 $14
Due after one year through five years 443 446 10 10
Due after five years through ten years 273 276 - -
Due after ten years 121 124 1 1
Mortgage-backed securities 837 843 - -
Equity securities 53 116 - -
------ ------ --- ---
Total $1,827 $1,906 $25 $25
====== ====== === ===
|
Proceeds from sales of available-for-sale securities were $2.1 billion in 1998, $2.9 billion in 1997 and $8.4 billion in 1996. In 1998, gross gains of $48 million and gross losses of $3 million were realized on those sales; gross gains of $98 million and gross losses of $8 million were realized in 1997 and gross gains of $43 million and gross losses of $21 million were realized in 1996.
FS-12
Included in net receivables and lease investments at December 31 were net finance receivables, investments in direct financing leases and investments in operating leases. The investments in direct financing and operating leases relate to the leasing of vehicles, various types of transportation and other equipment, and facilities.
Net finance receivables at December 31 were as follows (in millions):
1998 1997
------- --------
Retail $60,653 $ 65,661
Wholesale 22,650 24,520
Real estate 2,507 21,065
Other finance receivables 5,533 19,482
------- --------
Total finance receivables 91,343 130,728
Allowance for credit losses (1,229) (3,021)
------- --------
Total net finance receivables 90,114 127,707
Other 63 85
------- --------
Net finance and other receivables $90,177 $127,792
======= ========
Net finance receivables subject to
fair value* $90,010 $127,595
Fair value $89,847 $130,978
- - - - -
*Excludes certain diversified and other receivables of
$167 million and $197 million at December 31, 1998 and
1997, respectively
|
Included in finance receivables at December 31, 1998 and 1997 were a total of $1.5 billion and $1 billion, respectively, owed by three customers with the largest receivable balances. Other finance receivables consisted primarily of commercial and other collateralized loans and accrued interest. Also included in other finance receivables at December 31, 1998 and 1997 were $3.9 billion and $3.7 billion, respectively, of accounts receivable purchased by certain Financial Services sector operations from Automotive sector operations. Finance receivables that originated outside the United States are $35.6 billion and $28.3 billion at December 31, 1998 and 1997, respectively.
Contractual maturities of total finance receivables are as follows (in millions): 1999 - $56,480; 2000 - $17,930; 2001 - $9,369; thereafter - $7,564. Experience indicates that a substantial portion of the portfolio generally is repaid before the contractual maturity dates.
The fair value of most receivables was estimated by discounting future cash flows using an estimated discount rate that reflected the credit, interest rate and prepayment risks associated with similar types of instruments. For receivables with short maturities, the book value approximated fair value.
The Financial Services sector has sold receivables through special purpose subsidiaries. The servicing portfolio related to these securitized assets amounted to $13.9 billion, $10.9 billion and $10.3 billion at December 31, 1998, 1997 and 1996, respectively. The company retains certain beneficial interests in the sold receivables which are subject to limited recourse provisions. These financial instruments of $1.3 billion at December 31, 1998 and $999 million at December 31, 1997 are included in other assets.
FS-13
Investments in direct financing leases at December 31 were as follows (in
millions):
1998 1997
------ -------
Minimum lease rentals, net
of unearned income $3,359 $ 7,874
Estimated residual values 3,720 2,923
Allowance for credit losses (80) (143)
------ -------
Net investments in direct financing leases $6,999 $10,654
====== =======
|
Minimum direct financing lease rentals are contractually due as follows (in millions): 1999 - $1,506; 2000 - $1,019; 2001 - $599; 2002 - $202; 2003 - $33; thereafter - less than $1 million.
Investments in operating leases, excluding daily rental, at December 31 were as follows (in millions):
1998 1997
------- -------
Vehicles and other equipment, at cost $43,732 $44,705
Lease origination costs 63 65
Accumulated depreciation (8,136) (7,487)
Allowance for credit losses (268) (312)
------- -------
Net investments in operating leases $35,391 $36,971
======= =======
|
Minimum rentals on operating leases are contractually due as follows (in millions): 1999 - $7,150; 2000 - $3,712; 2001 - $1,629; 2002 - $224; 2003 - $76; thereafter - $121.
Depreciation expense for assets subject to operating leases is provided primarily on the straight-line method over the term of the lease in amounts necessary to reduce the carrying amount of the asset to its estimated residual value. Depreciation rates and amounts are based on assumptions as to used car prices at lease termination and the number of vehicles that will be returned to the company. Estimated and actual residual values are reviewed on a regular basis to determine that depreciation amounts are appropriate. Gains and losses upon disposal of the assets also are included in depreciation expense. Depreciation expense was as follows: $8.4 billion in 1998, $7.4 billion in 1997 and $6.6 billion in 1996.
Allowances for credit losses are estimated and established as required based on historical experience and other factors that affect collectibility. The allowance for estimated credit losses includes a provision for certain non-homogeneous impaired loans. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate. Finance receivables and lease investments are charged to the allowances for credit losses when an account is deemed to be uncollectible, taking into consideration the financial condition of the borrower, the value of the collateral, recourse to guarantors and other factors. Recoveries on finance receivables and lease investments previously charged-off as uncollectible are credited to the allowances for credit losses.
Changes in the allowances for credit losses were as follows (in millions):
1998 1997 1996
------- ------- -------
Beginning balance $ 3,476 $ 2,799 $ 2,391
Provision for credit losses 1,489 2,759 2,092
Total charge-offs and recoveries:
Charge-offs (1,640) (2,484) (2,058)
Recoveries 262 238 338
------- ------- -------
Net losses (1,378) (2,246) (1,720)
Other changes (2,010)* 164 36
------- ------- -------
Ending balance $ 1,577 $ 3,476 $ 2,799
======= ======= =======
- - - - -
*Other changes includes $1,892 million to reflect the spin-off of The Associates.
|
FS-14
Inventories at December 31 were as follows (in millions):
1998 1997
------ ------
Raw materials, work-in-process and supplies $2,887 $2,875
Finished products 2,769 2,593
------ ------
Total inventories $5,656 $5,468
====== ======
U.S. inventories $1,832 $1,993
|
Inventories are stated at the lower of cost or market. The cost of most U.S. inventories is determined by the last-in, first-out ("LIFO") method. The cost of the remaining inventories is determined primarily by the first-in, first-out ("FIFO") method.
If the FIFO method had been used instead of the LIFO method, inventories would have been higher by $1.2 billion and $1.4 billion at December 31, 1998 and 1997, respectively.
Net property at December 31 was as follows (in millions):
1998 1997
------- -------
Land $ 409 $ 393
Buildings and land improvements 9,298 8,803
Machinery, equipment and other 43,562 41,510
Construction in progress 2,774 2,377
------- -------
Total land, plant and equipment 56,043 53,083
Accumulated depreciation (26,840) (26,004)
------- -------
Net land, plant and equipment 29,203 27,079
Special tools, net of amortization 8,117 7,515
------- -------
Net property $37,320 $34,594
======= =======
|
Property, equipment and special tools are stated at cost, less accumulated depreciation and amortization. Property and equipment placed in service before January 1, 1993 are depreciated using an accelerated method that results in accumulated depreciation of approximately two-thirds of the asset cost during the first half of the estimated useful life of the asset. Property and equipment placed in service after December 31, 1992 are depreciated using the straight-line method of depreciation over the estimated useful life of the asset. On average, buildings and land improvements are depreciated based on a 30-year life; machinery and equipment are depreciated based on a 14-year life. Special tools are amortized using an accelerated method over periods of time representing the estimated productive life of those tools.
Depreciation and amortization expenses were as follows (in millions):
1998 1997 1996
------ ------ ------
Depreciation $2,804 $2,759 $2,644
Amortization 2,936 3,179 3,272
------ ------ ------
Total $5,740 $5,938 $5,916
====== ====== ======
|
When property and equipment are retired, the general policy is to charge the cost of those assets, reduced by net salvage proceeds, to accumulated depreciation. Maintenance, repairs and rearrangement costs are expensed as incurred and were $2.2 billion in 1998, $2.3 billion in 1997 and $2.3 billion in 1996. Expenditures that increase the value or productive capacity of assets are capitalized. Preproduction costs related to new facilities are expensed as incurred.
FS-15
Income before income taxes for U.S. and non-U.S. operations, excluding equity in
net income/(loss) of affiliated companies and excluding non-taxable gains from
The Associates spin-off (1998) and IPO (1996) and Hertz IPO (1997), was as
follows (in millions):
1998 1997 1996
------ ------- ------
U.S. $8,363 $ 8,353 $5,633
Non-U.S. 1,114 2,404 516
------ ------- ------
Total income before income taxes $9,477 $10,757 $6,149
====== ======= ======
|
The provision for income taxes was estimated as follows (in millions):
1998 1997 1996
------ ------ -----
Currently payable
U.S. federal $1,588 $2,130 $ 655
Non-U.S. 623 830 756
State and local 40 (25) 151
------ ------ ------
Total currently payable 2,251 2,935 1,562
Deferred tax liability/(benefit)
U.S. federal 883 536 642
Non-U.S. (109) 78 (117)
State and local 151 192 79
------ ------ ------
Total deferred 925 806 604
------ ------ ------
Total provision $3,176 $3,741 $2,166
====== ====== ======
|
Deferred taxes are provided for earnings of non-U.S. subsidiaries which are planned to be remitted. No provision for deferred taxes has been made on $2.1 billion of retained earnings (primarily prior to 1998) which are considered to be indefinitely invested in the non-U.S. subsidiaries. Deferred taxes for the undistributed earnings of non-U.S. subsidiaries are not practical to estimate.
A reconciliation of the provision for income taxes compared with the amounts at the U.S. statutory tax rate, excluding the non-taxable gains from The Associates spin-off (1998) and IPO (1996) and Hertz IPO (1997), is shown below:
1998 1997 1996
---- ---- ----
Tax provision at U.S. statutory rate of 35% 35% 35% 35%
Effect of:
Tax on non-U.S. income 0 Pts. 0 Pts. 2 Pts.
State and local income taxes 1 1 2
Other (2) (1) (4)
--- --- ---
Provision for income taxes 34% 35% 35%
=== === ===
|
Deferred income taxes reflect the estimated tax effect of accumulated temporary differences between assets and liabilities for financial reporting purposes and those amounts as measured by tax laws and regulations. The components of deferred income tax assets and liabilities at December 31 were as follows (in millions):
1998 1997
------- -------
Deferred tax assets
-------------------
Employee benefit plans $ 6,591 $ 6,378
Dealer and customer allowances and claims 4,075 4,320
Net operating loss carryforwards 795 859
Allowance for credit losses 1,164 1,270
All other 1,717 1,697
Valuation allowances (256) (308)
------- -------
Total deferred tax assets 14,086 14,216
Deferred tax liabilities
------------------------
Leasing transactions 6,324 5,588
Depreciation and amortization
(excluding leasing transactions) 4,221 4,011
Employee benefit plans 969 997
All other 2,682 2,490
------- -------
Total deferred tax liabilities 14,196 13,086
------- -------
Net deferred tax assets/(liabilities) $ (110) $ 1,130
======= =======
|
FS-16
Non-U.S. net operating loss carryforwards for tax purposes were $2.3 billion at December 31, 1998. A substantial portion of these losses has an indefinite carryforward period; the remaining losses have expiration dates beginning in 2000. For financial statement purposes, the tax benefit of operating losses is recognized as a deferred tax asset, subject to appropriate valuation allowances. The company evaluates the tax benefits of operating loss carryforwards on an ongoing basis. Such evaluations include a review of historical and projected future operating results, the eligible carryforward period and other circumstances.
Included in accrued liabilities at December 31 were the following (in millions):
1998 1997
------- -------
Dealer and customer allowances and claims $ 8,765 $ 8,059
Employee benefit plans 2,530 2,154
Deferred revenue 2,447 2,566
Salaries, wages and employer taxes 740 759
Postretirement benefits other than pensions 275 640
Other 2,168 2,072
------- -------
Total accrued liabilities $16,925 $16,250
======= =======
|
1998 1997
------- -------
Postretirement benefits other than pensions $14,859 $15,407
Dealer and customer allowances and claims 7,401 7,049
Employee benefit plans 3,762 3,137
Unfunded pension obligation 1,528 1,009
Minority interests in net assets of subsidiaries 103 94
Other 2,480 2,203
------- -------
Total other liabilities $30,133 $28,899
======= =======
|
FS-17
The company has two principal retirement plans in the U.S. The Ford-UAW Retirement Plan covers hourly employees represented by the UAW, and the General Retirement Plan covers substantially all other Ford employees of the company in the U.S. The hourly plan provides noncontributory benefits related to employee service. The salaried plan provides similar noncontributory benefits and contributory benefits related to pay and service. Other U.S. and non-U.S. subsidiaries have separate plans that generally provide similar types of benefits for their employees.
In general, the company's plans are funded with the main exceptions of the U.S. defined benefit plans for executives and certain plans in Germany; in such cases an unfunded liability is recorded.
The company's policy for funded plans is to contribute annually, at a minimum, amounts required by applicable law, regulations and union agreements. Plan assets consist principally of investments in stocks, and government and other fixed income securities.
The company and certain of its subsidiaries sponsor unfunded plans to provide selected health care and life insurance benefits for retired employees. The company's U.S. and Canadian employees may become eligible for those benefits if they retire while working for the company; however benefits and eligibility rules may be modified from time to time. The estimated cost for these benefits is accrued over periods of employee service on an actuarially determined basis. In June 1997, the company prepaid certain 1998 and 1999 hourly health benefits by contributing $1.6 billion to a Voluntary Employees' Beneficiary Association ("VEBA") trust. In 1998, a further $1.7 billion was contributed to the VEBA to pre-pay hourly retiree health benefits. At December 31, 1998, $2 billion of the remaining $2.4 billion VEBA assets applied to hourly retirees.
Increasing the assumed health care cost trend rates by one percentage point is estimated to increase the aggregate service and interest cost components of net postretirement benefit expense for 1998 by about $200 million and the accumulated postretirement benefit obligation at December 31, 1998 by about $2.3 billion. A decrease of one percentage point would reduce service and interest costs by $160 million and decrease the December 31, 1998 obligation by $1.9 billion.
FS-18
The company's expense for pensions, retirement health care and life insurance
was as follows (in millions):
Pension Benefits
-------------------------------------------------
U.S. Plans Non-U.S. Plans Other Beneifts*
------------------------- ------------------- ---------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
------ ------ ------ ---- ---- ---- ---- ---- ----
Costs Recognized in Income
--------------------------
Service cost $ 596 $ 551 $ 532 $354 $331 $261 $ 265 $ 242 $ 268
Interest cost 1,999 1,993 1,838 867 857 819 1,183 1,161 1,195
Expected return on plan
assets (2,747) (2,505) (2,310) (986) (931) (790) (45) - -
Amortization of:
Transition (asset)/obligation (22) (22) (21) 13 61 39 - - -
Plan amendments 729 515 599 114 92 103 (42) (44) (48)
(Gains)/losses and other 25 30 30 129 56 95 95 13 (21)
------- ------- ------- ----- ---- ---- ------- ------ ------
Net pension/postretirement
expense $ 580 $ 562 $ 668 $491 $466 $527 $1,456 $1,372 $1,394
======= ======= ======= ===== ===== ===== ======= ======= ======
Discount rate for expense 6.75% 7.25% 7.00% 6.50% 7.10% 7.60% 7.00% 7.50% 7.25%
Assumed long-term rate of
return on assets 9.00% 9.00% 9.00% 9.20% 9.20% 9.20% 6.20% - -
Initial health care cost
trend rate - - - - - - 6.60% 6.60% 9.50%
Ultimate health care cost
trend rate - - - - - - 5.00% 5.00% 5.50%
Number of years to ultimate
trend rate - - - - - - 10 10 10
- - - - -
*Postretirement health care and life insurance benefits
|
Pension expense in 1998 increased for U.S. and non-U.S. plans primarily as a result of the year-to-year change in the cost of special employee separation programs and lower discount rates, partially offset by increased return on plan assets.
FS-19
The year-end status of these plans was as follows (in millions):
Pension Benefits
------------------------------------------
U.S. Plans Non-U.S. Plans Other Benefits*
------------------ ------------------ --------------------
1998 1997 1998 1997 1998 1997
-------- ------- ------- ------- -------- --------
Change in Benefit Obligation
----------------------------
Benefit obligation at January 1 $30,923 $28,245 $13,311 $12,865 $ 17,522 $ 16,503
Service cost 596 551 354 331 265 242
Interest cost 1,999 1,993 867 857 1,183 1,161
Amendments 10 4 26 91 - -
Special programs 278 79 114 37 63 -
Net aquisitions/(sales) (493) 76 - - (130) -
Plan participant contributions 45 43 91 - - -
Benefits paid (1,869) (1,828) (660) (633) (846) (794)
Foreign exchange translation - - 182 (1,029) (22) (15)
Actuarial loss/(gain) 2,046 1,760 2,051 792 1,180 425
------- ------- ------- ------- -------- --------
Benefit obligation at December 31 $33,535 $30,923 $16,336 $13,311 $ 19,215 $ 17,522
======= ======= ======= ======= ======== ========
Change in Plan Assets
---------------------
Fair value of plan assets at January 1 $35,683 $30,933 $11,687 $10,898 $ 736 $ -
Actual return on plan assets 5,746 5,933 1,470 1,533 45 -
Company contributions 2 210 219 246 1,700 736
Special programs (95) (1) (27) - - -
Net sales (473) - - - - -
Plan participant contributions 45 43 91 - - -
Benefits paid (1,869) (1,828) (660) (633) (480) -
Foreign exchange translation - - 26 (652) - -
Other 83 393 449 295 - -
------- ------- ------- ------- -------- --------
Fair value of plan assets at December 31 $39,122 $35,683 $13,255 $11,687 $ 2,001 $ 736
======= ======= ======= ======= ======== ========
Funded Status of the Plan
-------------------------
Plan assets in excess of/(less than) $ 5,587 $ 4,760 $(3,081) $(1,624) $(17,214) $(16,786)
benefit obligations
Unamortized:
Transition (asset)/obligation (68) (87) 744 212 - -
Prior service cost 1,941 2,393 507 570 (119) (162)
Net (gains)/losses (5,704) (4,801) 650 (63) 1,900 757
------- ------- ------- ------- -------- --------
Net amount recognized $ 1,756 $ 2,265 $(1,180) $ (905) $(15,433) $(16,191)
======= ======= ======= ======= ======== ========
Amounts Recognized in the
Balance Sheet Consists of Assets/(Liabilities)
----------------------------------------------
Other non-current assets - Automotive** $ 2,314 $ 2,459 $ 1,558 $ 1,600 $ - $ -
Accrued non-current liabilities - Automotive (611) (515) (3,601) (2,749) (14,859) (15,407)
Deferred income taxes 34 39 376 120 - -
Accumulated other comprehensive income 54 63 644 274 - -
Other (35) 219 (157) (150) (574) (784)
------- ------- ------- ------- -------- --------
Net amount recognized $ 1,756 $ 2,265 $(1,180) $ (905) $(15,433) $(16,191)
======= ======= ======= ======= ======== ========
**Includes intangible asset 16 68 404 455
Pension Plans in Which Accumulated Benefit
Obligation Exceeds Plan Assets at December 31
---------------------------------------------
Projected benefit obligation $ 786 $ 795 $ 6,557 $ 5,358
Accumulated benefit obligation 689 688 6,141 5,024
Fair value of plan assets 14 76 2,820 2,631
Assumptions as of December 31
-----------------------------
Discount rate 6.25% 6.75% 5.70% 6.50% 6.50% 7.00%
Expected return on assets 9.00% 9.00% 9.30% 9.20% 6.00% 6.20%
Average rate of increase in compensation 5.20% 5.50% 5.10% 5.10% - -
Initial health care cost trend rate - - - - 7.00% 6.60%
Ultimate health care cost trend rate - - - - 5.00% 5.00%
Number of years to ultimate trend rate - - - - 9 10
- - - - -
*Postretirement health care and life insurance benefits
|
FS-20
The fair value of debt was estimated based on quoted market prices or current rates for similar debt with the same remaining maturities.
Debt at December 31 was as follows (in millions):
Weighted Average
Interest Rate* Book Value
---------------- -----------------
Maturity 1998 1997 1998 1997
-------- ---- ---- ----- ------
Debt payable within one year
----------------------------
Short-term debt 9.8% 7.9% $ 1,076 $ 592
Long-term debt payable within one year 45 537
------- ------
Total debt payable within one year 1,121 1,129
Long-term debt 2000-2097 8.0% 8.5% 8,713 7,047
------- ------
Total debt $ 9,834 $8,176
======= ======
Fair value $10,809 $8,988
- - - - -
*Excludes the effect of interest rate swap agreements; change in 1998
primarily reflects short-term debt in South America.
|
Long-term debt at December 31, 1998 included maturities as follows (in millions): 1999 - $45 (included in current liabilities); 2000 - $705; 2001 - $222; 2002 - $595; 2003 - $69; thereafter - $7,122.
Included in long-term debt at December 31, 1998 and 1997 were obligations of $7,944 million and $6,864 million, respectively, with fixed interest rates, and $769 million and $183 million, respectively, with variable interest rates (generally based on LIBOR or other short-term rates). Obligations payable in foreign currencies at December 31, 1998 and 1997 were $544 million and $372 million, respectively.
Agreements to manage exposures to fluctuations in interest rates, which include primarily interest rate swap agreements and futures contracts, did not change the December 31, 1998 and December 31, 1997 overall weighted-average interest rates on long-term debt or the obligations subject to variable interest rates.
Debt at December 31 was as follows (in millions):
Weighted Average
Interest Rate* Book Value
------------------ -------------------
Maturity 1998 1997 1998 1997
-------- ------ ------ -------- --------
Debt payable within one year
----------------------------
Unsecured short-term debt $ 2,998 $ 3,684
Commercial paper 49,429 63,834
Other short-term debt 4,046 3,985
-------- --------
Total short-term debt 5.6% 6.0% 56,473 71,503
Long-term debt payable within one year 10,383 15,370
-------- --------
Total debt payable within one year 66,856 86,873
Long-term debt
--------------
Secured indebtedness 2000-2005 10.2% 9.3% 17 64
Unsecured senior indebtedness
Notes and bank debt 2000-2078 6.2% 6.6% 50,449 67,477
Debentures 2001-2006 4.0% 5.6% 1,661 2,313
Unamortized discount (30) (6)
-------- --------
Total unsecured senior indebtedness 52,080 69,784
Unsecured subordinated indebtedness
Notes 2000-2020 7.7% 8.5% 3,381 2,946
Debentures 7.3% 0 425
Unamortized discount (10) (21)
-------- --------
Total unsecured subordinated indebtedness 3,371 3,350
-------- --------
Total long-term debt 55,468 73,198
-------- --------
Total debt $122,324 $160,071
======== ========
Fair value $124,320 $161,872
- - - - -
*Excludes the effect of interest rate swap agreements
|
FS-21
Information concerning short-term borrowings (excluding long-term debt payable within one year) is as follows (in millions):
1998 1997 1996
------- ------- -------
Average amount of short-term borrowings $49,099 $65,592 $62,529
Weighted-average short-term interest rates per annum
(average year) 5.7% 5.3% 5.7%
Average remaining term of commercial paper
at December 31 31 days 30 days 33 days
|
Long-term debt at December 31, 1998 included maturities as follows (in millions): 1999 - $10,383; 2000 - $11,307; 2001 - $12,363; 2002 - $8,577; 2003 - $9,958; thereafter - $13,263.
Included in long-term debt at December 31, 1998 and 1997 were obligations of $38.1 billion and $56.7 billion, respectively, with fixed interest rates and $17.3 billion and $16.5 billion, respectively, with variable interest rates (generally based on LIBOR or other short-term rates). Obligations payable in foreign currencies at December 31, 1998 and 1997 were $30 billion and $27 billion, respectively. These obligations were issued primarily to fund non-U.S. business operations.
Outstanding commercial paper at December 31, 1998 totaled $46.2 billion at Ford Credit and $2.3 billion at Hertz, with an average remaining maturity of 30 days and 52 days, respectively.
Agreements to manage exposures to fluctuations in interest rates include primarily interest rate swap agreements. At December 31, 1998, these agreements decreased the weighted-average interest rate on long-term debt to 6%, compared with 6.2% excluding these agreements, and effectively decreased the obligations subject to variable interest rates to zero; the weighted-average interest rate on short-term debt excluding these agreements did not change materially. At December 31, 1997, these agreements decreased the weighted-average interest rate on long-term debt to 6.5%, compared with 6.6% excluding these agreements, and effectively decreased the obligations subject to variable rates to $11.8 billion; the weighted-average interest rate on short-term debt excluding these agreements did not change materially.
At December 31, 1998, Ford had long-term contractually committed global credit agreements under which $8.6 billion is available from various banks; 94% are available through June 30, 2003. The entire $8.6 billion may be used, at Ford's option, by any affiliate of Ford; however, any borrowing by an affiliate will be guaranteed by Ford. Ford also has the ability to transfer on a nonguaranteed basis $8.3 billion of such credit lines in varying portions to Ford Credit and FCE Bank plc (formerly known as Ford Credit Europe plc). In addition, at December 31, 1998, $628 million of contractually committed credit facilities were available to various Automotive sector affiliates outside the U.S. Approximately $254 million of these facilities were in use at December 31, 1998.
FS-22
At December 31, 1998, the Financial Services sector had a total of $28.2 billion of contractually committed support facilities (excluding the $8.3 billion available under Ford's global credit agreements). Of these facilities, $23.9 billion are contractually committed global credit agreements under which $19.2 billion and $4.7 billion are available to Ford Credit and FCE Bank plc, respectively, from various banks; 58% and 76%, respectively, of such facilities are available through June 30, 2003. The entire $19.2 billion may be used, at Ford Credit's option, by any subsidiary of Ford Credit, and the entire $4.7 billion may be used, at FCE Bank plc's option, by any subsidiary of FCE Bank plc. Any borrowings by such subsidiaries will be guaranteed by Ford Credit or FCE Bank plc, as the case may be. At December 31, 1998, $131 million of the Ford Credit global facilities were in use and $826 million of the FCE Bank plc global facilities were in use. Other than the global credit agreements, the remaining portion of the Financial Services sector support facilities at December 31, 1998 consisted of $2 billion of contractually committed support facilities available to Hertz in the U.S. and $2.3 billion of contractually committed support facilities available to various affiliates outside the U.S.; at December 31, 1998 approximately $1.3 billion of these facilities were in use. Furthermore, banks provide $1.5 billion of liquidity facilities to support the asset-backed commercial paper program of a Ford Credit sponsored special purpose entity.
At December 31, 1998, all general voting power was vested in the holders of Common Stock and the holders of Class B Stock, voting together without regard to class. At that date, the holders of Common Stock were entitled to one vote per share and, in the aggregate, had 60% of the general voting power; the holders of Class B Stock were entitled to such number of votes per share as would give them, in the aggregate, the remaining 40% of the general voting power, as provided in the company's Restated Certificate of Incorporation.
The Restated Certificate of Incorporation provides that all shares of Common Stock and Class B Stock share equally in dividends (other than dividends declared with respect to any outstanding Preferred Stock), except that any stock dividends are payable in shares of Common Stock to holders of that class and in Class B Stock to holders of that class. Upon liquidation, all shares of Common Stock and Class B Stock are entitled to share equally in the assets of the company available for distribution to the holders of such shares.
On January 9, 1998, all outstanding shares of Series A Depositary Shares, representing 1/1,000 of a share of Series A Cumulative Convertible Preferred Stock, were redeemed at a price of $51.68 per Depositary Share plus an amount equal to accrued and unpaid dividends.
Series B Depositary Shares, representing 1/2,000 of a share of Series B Cumulative Preferred Stock, have a liquidation preference of $25 per Depositary Share. Shares outstanding at December 31, 1998 were valued at $177 million and numbered 7,096,688 Depositary Shares. Dividends are payable at a rate of $2.0625 per year per Depositary Share. Series B Cumulative Preferred Stock is not convertible into shares of Common Stock of the company. On and after December 1, 2002, and upon satisfaction of certain conditions, the stock is redeemable forcash at the option of Ford, in whole or in part, at a redemption price equivalent to $25 per Depositary Share, plus an amount equal to the sum of all accrued and unpaid dividends.
On January 22, 1998, the company commenced an offer to purchase all Depositary Shares representing its Series B Cumulative Preferred Stock at a price of $31.40 per Depositary Share. The offer to purchase was in effect until February 26, 1998. Depositary Shares purchased totaled 13,229,775.
The Series B Cumulative Preferred Stock ranks (and any other outstanding Preferred Stock of the company would rank) senior to the Common Stock and Class B Stock in respect of dividends and liquidation rights.
FS-23
Changes to the number of shares of capital stock issued for the periods indicated were as follows (shares in millions):
Series A Series B
Common Class B Preferred Preferred
Stock Stock Stock Stock
------- ------- --------- ---------
Issued at December 31, 1995 1,089 71 0.011 0.010
Changes:
1996 - Conversion of Series A Preferred Stock 23 (0.007)
- Employee benefit plans and other 6
1997 - Conversion of Series A Preferred Stock 4 (0.001)
- Employee benefit plans and other 10
1998 - Conversion and Redemption of Series A 8 (0.003)
Preferred Stock
- Employee benefit plans and other 11
- Repurchase of Series B Preferred Stock (0.006)
----- -- ----- -----
Net change 62 0 (0.011) (0.006)
----- -- ----- -----
Issued at December 31, 1998 1,151 71 0.000 0.004
===== == ===== =====
Authorized at December 31, 1998 3,000 265 -- Total Preferred: 30 --
|
The company has stock options outstanding under the 1985 Stock Option Plan, the 1990 Long-Term Incentive Plan and 1998 Long-Term Incentive Plan. These Plans were approved by the stockholders. No further grants may be made under the 1985 Plan or 1990 Plan. Grants may be made under the 1998 Plan through April 2008. In general, options granted in 1997 under the 1990 Plan and subsequent years under the 1998 Plan become exercisable 33% after one year from the date of grant, 66% after two years and in full after three years. In general, options granted under the 1985 Plan and options granted prior to 1997 under the 1990 Plan become exercisable 25% after one year from the date of grant, 50% after two years, 75% after three years and in full after four years. Options under the Plans expire after 10 years from the date of grant. Certain participants were granted accompanying stock appreciation rights under the Plans which may be exercised in lieu of the related options. Under the Plans, a stock appreciation right entitles the holder to receive, without payment, the excess of the fair market value of the Common Stock on the date of exercise over the option price, either in Common Stock or cash or a combination. In addition, grants of Performance/Contingent Stock Rights were made with respect to 1,354,627 shares in 1998, 936,300 shares in 1997, 865,100 shares in 1996. The number of shares ultimately awarded will depend on the extent to which the Performance Targets specified in each Right is achieved, individual performance of the recipients and other factors, as determined by the Compensation and Option Committee of the Board of Directors.
Under the 1998 Plan, up to 2% of Common Stock issued as of December 31 of any year may be made available for stock options and other plan awards in the next succeeding calendar year. That limit may be increased up to 3% in any year, with a corresponding reduction in shares available for grants in future years. Any unused portion of the 2% limit for any calendar year may be carried forward and made available for Plan awards in succeeding calendar years. At December 31, 1998, the number of unused shares carried forward aggregated to 12,966,146 shares.
FS-24
1998 1997 1996
------------------ ------------------ ------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares subject to option Shares Price Shares Price Shares Price
------------------------ ------ --------- ------ ---------- ------ ---------
Outstanding at beginning of period 50.0 $28.44 50.3 $26.93 48.5 $25.22
New grants (based on fair value of
Common Stock at dates of grant) 12.7 58.07 8.6 32.05 8.0 32.69
Associates adjustment* 24.8 -
Exercised** (13.7) 19.97 (8.3) 23.19 (5.2) 20.32
Surrendered upon exercise of stock
appreciation rights (2.5) 22.79 (0.4) 22.44 (0.7) 23.03
Terminated and expired (0.4) 33.58 (0.2) 30.86 (0.3) 31.14
----- ----- -----
Outstanding at end of period 70.9*** 25.67 50.0 28.44 50.3 26.93
Outstanding but not exercisable (34.9) (21.6) (21.5)
----- ----- -----
Exercisable at end of period 36.0 19.53 28.4 25.84 28.8 23.61
===== ===== =====
|
The estimated fair value as of date of grant of options granted in 1998, 1997 and 1996, using the Black-Scholes option-pricing model, was as follows:
1998 1997 1996
----- ----- -----
Estimated fair value per share of
options granted during the year $9.25 $5.76 $6.93
Assumptions:
Annualized dividend yield 4.1% 4.8% 4.3%
Common Stock price volatility 28.1% 22.1% 25.2%
Risk-free rate of return 5.7% 6.7% 6.2%
Expected option term (in years) 5 5 5
|
The company measures compensation cost using the intrinsic value method. Accordingly, no compensation cost for stock options has been recognized. If compensation cost had been determined based on the estimated fair value of options granted since 1995, the company's net income and income per share would have been reduced to the pro forma amounts indicated below:
1998 1997 1996
--------------------- ------------------- -------------------
As Pro As Pro As Pro
Reported Forma* Reported Forma* Reported Forma*
-------- ------- -------- ------ -------- ------
Net income (in millions) $22,071 $22,014 $6,920 $6,892 $4,446 $4,428
Income per share
----------------
Basic $ 18.17 $ 18.12 $ 5.75 $ 5.73 $ 3.73 $ 3.71
Diluted $ 17.76 $ 17.71 $ 5.62 $ 5.60 $ 3.64 $ 3.63
|
FS-25
Various legal actions, governmental investigations and proceedings and claims are pending or may be instituted or asserted in the future against the company and its subsidiaries, including those arising out of alleged defects in the company's products; governmental regulations relating to safety, emissions and fuel economy; financial services; employment-related matters; dealer, supplier and other contractual relationships; intellectual property rights; product warranties; and environmental matters. Certain of the pending legal actions are, or purport to be, class actions. Some of the foregoing matters involve or may involve compensatory, punitive, or antitrust or other treble damage claims in very large amounts, or demands for recall campaigns, environmental remediation programs, sanctions, or other relief which, if granted, would require very large expenditures.
Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not predictable with assurance. Reserves have been established by the company for certain of the matters discussed in the foregoing paragraph where losses are deemed probable. It is reasonably possible, however, that some of the matters discussed in the foregoing paragraph for which reserves have not been established could be decided unfavorably to the company or the subsidiary involved and could require the company or such subsidiary to pay damages or make other expenditures in amounts or a range of amounts that cannot be estimated at December 31, 1998. The company does not reasonably expect, based on its analysis, that any adverse outcome from such matters would have a material effect on future consolidated financial statements for a particular year, although such an outcome is possible.
At December 31, 1998, the company had the following minimum rental commitments under non-cancelable operating leases (in millions): 1999 - $413; 2000 - $336; 2001 - $272; 2002 - $182; 2003 - $113; thereafter - $187. These amounts include rental commitments related to the sale and leaseback of certain Automotive sector machinery and equipment.
Ford in the U.S. and Ford of Canada have entered into agreements with banks to provide credit card programs that offer rebates that can be applied against the purchase or lease of Ford vehicles. The maximum amount of rebates available to qualified cardholders at December 31, 1998 and 1997 was $1.6 billion and $1.8 billion, respectively. The company has provided for the estimated net cost of these programs as a sales incentive based on the estimated number of participants who ultimately will purchase vehicles. The U.S. program was discontinued December 31, 1997 and the Canadian program was discontinued May 31, 1998; rebates for the U.S. program earned prior to program discontinuance will be valid for up to five years following the calendar year in which earned, subject to certain restrictions.
Estimated fair value amounts have been determined using available market information and various valuation methods depending on the type of instrument. In evaluating the fair value information, considerable judgment is required to interpret the market data used to develop the estimates. The use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts. Accordingly, the estimates of fair value presented herein may not be indicative of the amounts that could be realized in a current market exchange.
FS-26
Information about specific valuation techniques and estimated fair values is provided throughout the Notes to Financial Statements. Book value and estimated fair value amounts at December 31 were as follows (in millions):
1998 1997
----------------------- -----------------------
Book Fair Book Fair Fair Value
Value Value Value Value Reference
-------- -------- -------- ------- ----------
Automotive Sector
-----------------
Marketable securities $ 20,120 $ 20,120 $ 14,519 $ 14,519 Note 2
Debt 9,834 10,809 8,176 8,988 Note 9
Financial Services Sector
-------------------------
Marketable securities $ 968 $ 968 $ 2,201 $ 2,201 Note 2
Receivables 90,010 89,847 127,595 130,978 Note 3
Debt 122,324 124,320 160,071 161,872 Note 9
|
The fair value of foreign currency and interest rate instruments was estimated
using current market prices provided by outside quotation services. The
estimated fair value, notional amount and deferred loss at December 31 were as
follows (in millions):
Fair Value
------------------
1998 1997
------ ------
Foreign currency instruments
Assets $631 $ 289
Liabilities 615 1,207
Interest rate instruments
Assets 944 548
Liabilities 251 182
|
The notional amount represents the contract amount, not the amount at risk. The notional amount for foreign currency instruments was $33.1 billion at December 31, 1998, and $31 billion at December 31, 1997. The deferred gain for foreign currency instruments was $28 million at December 31, 1998, compared to a deferred loss of $63 million at December 31, 1997. The deferred gain for 1998 is the sum of unrecognized gains and losses on the underlying transactions or commitments. The notional amount for interest rate instruments was $97.5 billion at December 31, 1998, and $90.4 billion at December 31, 1997.
Ford manages its foreign currency and interest rate counterparty credit risks by limiting exposure to and by monitoring the financial condition of each counterparty. The amount of exposure Ford may have to a single counterparty on a worldwide basis is limited by company policy. In the unlikely event that a counterparty fails to meet the terms of a foreign currency or an interest rate instrument, the company's risk is limited to the fair value of the instrument.
At December 31, 1998, the notional amount of commodity hedging contracts outstanding totaled $853 million; the notional amount at December 31, 1997 was $496 million. The company also had guaranteed $826 million of debt of unconsolidated subsidiaries, affiliates and others at December 31, 1998. The risk of loss under these financial agreements is not material.
FS-27
Ford recorded a pre-tax charge of $726 million ($472 million after taxes) in the fourth quarter of 1998 for retirement and separation programs. These special voluntary and involuntary programs reduce the workforce by 2,184 persons in North America (all salaried), 1,977 in Europe (1,304 hourly and 673 salaried) and 4,650 in South America (4,400 hourly and 250 salaried). The costs were charged to Automotive segment ($674 million) in cost of sales, Visteon segment ($38 million) in cost of sales, Ford Credit segment ($9 million) in operating and other expenses, and other Financial Services operations ($5 million) in operating and other expenses.
Ford recorded a pre-tax charge of $272 million ($169 million after taxes) in the second quarter of 1997, reflecting actions that were completed during 1997 and 1998. These included primarily the discontinuation of passenger car production at the Lorain Assembly Plant resulting in a write-down of surplus assets. The charge also included employee termination costs related to the elimination of a shift at the Halewood (England) Plant, and a loss on the sale of the heavy truck business.
Cost for special voluntary employee separation programs reduced the Automotive sector's net income for 1996 by $436 million. The programs affected about 3,500 salaried employees, primarily in the U.S.
During the fourth quarter of 1998, Ford recorded a pre-tax charge of $111 million ($86 million after taxes) to write-off its net exposure to Kia Motors Corporation ("Kia"). The write off of Ford's exposure was recorded in cost of sales. Ford's share of Mazda Motor Corporation's ("Mazda") exposure was recorded in equity in net income of affiliates.
During the fourth quarter of 1998, Ford recorded in cost of sales a pre-tax charge of $112 million ($73 million after taxes) related to the fair value transfer of its Batavia (Ohio) Transmission Plant to a new joint venture company formed by Ford and ZF Friedrichshafen AG of Germany. The transaction is expected to be completed in the first quarter of 1999. The new joint venture will be reflected in Ford's consolidated financial statements on an equity basis.
During May 1996, Ford increased its investment in Mazda from its existing 24.5% ownership interest to a 33.4% ownership interest by purchasing from Mazda newly-issued shares of common stock for an aggregate purchase price of $484 million. In connection with the purchase of shares, Mazda agreed to coordinate more closely with Ford its strategies and plans, particularly in the areas of product development, manufacturing and distribution of vehicles, so as to improve the competitiveness and economies of scale of both companies. Ford and Mazda remain separate public companies with separate identities. Ford is not responsible for any of Mazda's liabilities, debts or other obligations, and Mazda's operating results and financial position are not consolidated with those of Ford; Mazda continues to be reflected in Ford's consolidated financial statements on an equity basis.
FS-28
During the second quarter of 1998, the company completed a spin-off of Ford's 80.7% (279.5 million shares) interest in The Associates. As a result of the spin-off of The Associates, Ford recorded a gain of $15,955 million in the first quarter of 1998 based on the fair value of The Associates as of the record date, March 12, 1998. The spin-off qualified as a tax-free transaction for U.S. federal income tax purposes. During the second quarter of 1996, The Associates completed an initial public offering ("IPO") of its common stock representing a 19.3% economic interest in The Associates. Ford recorded a second quarter 1996 gain of $650 million resulting from the IPO; the gain was not subject to income taxes.
In the second quarter of 1997, Hertz, a subsidiary of Ford, completed an IPO of its common stock representing a 19.1% economic interest in Hertz. Ford recorded a second quarter 1997 gain of $269 million resulting from the IPO; the gain was not subject to income taxes.
During the third quarter of 1996, Ford Leasing Corporation, then known as USL Capital Corporation ("USL Capital"), a subsidiary of Ford Holdings, Inc., concluded a series of transactions for the sale of substantially all of its assets, as well as certain assets owned by Ford Credit and managed by USL Capital. Proceeds from the sales were used to pay down related liabilities and debt. Ford recorded a pre-tax gain of $263 million from the sales ($95 million gain after taxes).
The company recorded a pre-tax charge in 1996 totaling $384 million ($233 million after taxes) to recognize the estimated value of its outstanding notes receivable from, and preferred stock investment in, Budget Rent-A-Car Corporation ("BRAC"). The initial provision taken in the second quarter of 1996 totaling $700 million ($437 million after taxes) resulted from conclusions reached in a study of Ford's rental car business strategy. In accordance with SFAS 114, the notes receivable provision reflected primarily the unsecured portion of financing provided to BRAC by Ford. The preferred stock write-down reflected recognition of the fair value of Ford's investment at the time. In the fourth quarter of 1996, the notes receivable provision was reduced by $316 million ($204 million after taxes), reflecting a strengthening of the rental car business, recent sales of rental car franchises, and increased investor interest that led to a reassessment of the value of the outstanding common stock of BRAC; Ford became the owner of approximately 22% of Team Rental as a result of the partial repayment in Team Rental stock of Ford's loans to BRAC. In the fourth quarter of 1997, Ford sold its shares of Budget Group (formerly "Team Rental") stock. The gain on sale was not material.
FS-29
The reconciliation of net income to cash flows from operating activities is as
follows (in millions):
1998 1997 1996
-------------------- -------------------- ---------------------
Financial Financial Financial
Automotive Services Automotive Services Automotive Services
---------- --------- ---------- --------- ---------- ---------
Net income $ 4,752 $17,319 $ 4,714 $ 2,206 $ 1,655 $ 2,791
Adjustments to reconcile net income
to cash flows from operating activities:
Depreciation and amortization 5,740 8,589 5,938 7,645 5,916 6,875
Losses/(earnings) of affiliated
companies in excess of dividends
remitted 82 (2) 127 (1) 44 (16)
Provision for credit and
insurance losses - 1,798 - 3,230 - 2,564
Foreign currency adjustments (208) - (27) - 156 -
Net (purchases)/sales of trading
securities (5,434) (205) (2,307) 67 (5,180) 62
Provision for deferred income taxes 421 504 908 (102) 74 530
Gain on spin-off of The Associates
(Note 15) - (15,955) - - - -
Gain on sale of common stock of a
subsidiary (Note 15) - - - (269) - (650)
Changes in assets and liabilities:
Decrease/(increase) in accounts
receivable and other current assets 1,027 (1,189) (179) 256 (2,183) (1,328)
(Increase)/decrease in inventory (254) - 1,234 - 553 -
Increase/(decrease) in accounts payable
and accrued and other liabilities 3,019 1,728 3,854 (121) 5,447 1,303
Other 477 891 (278) 739 94 550
------- ------- ------- ------- ------- -------
Cash flows from operating activities $ 9,622 $13,478 $13,984 $13,650 $ 6,576 $12,681
======= ======= ======= ======= ======= =======
|
The company considers all highly liquid investments purchased with a maturity of three months or less, including short-term time deposits and government, agency and corporate obligations, to be cash equivalents. Automotive sector cash equivalents at December 31, 1998 and 1997 were $3.4 billion and $5.8 billion, respectively; Financial Services sector cash equivalents at December 31, 1998 and 1997 were $500 million and $800 million, respectively. Cash flows resulting from futures contracts, forward contracts and options that are accounted for as hedges of identifiable transactions are classified in the same category as the item being hedged. Purchases, sales and maturities of trading securities are included in cash flows from operating activities. Purchases, sales and maturities of available-for-sale and held-to-maturity securities are included in cash flows from investing activities.
Cash paid for interest and income taxes was as follows (in millions):
1998 1997 1996
------ ------- ---------
c>
Interest $9,120 $10,430 $10,250
Income taxes 2,027 1,301 1,285
|
FS-30
Ford adopted Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information, effective with year-end 1998. This standard requires companies to disclose selected financial data by operating segment (defined in Note 1). Ford has identified four primary operating segments: Automotive, Visteon, Ford Credit, and Hertz. Segment selection was based upon internal organizational structure, the way in which these operations are managed and their performance evaluated by management and Ford's Board of Directors, the availability of separate financial results, and materiality considerations. Segment detail is summarized as follows (in millions):
Automotive Sector Financial Services Sector
------------------ ----------------------------- Total Total
Auto- Ford Other Elims/ Auto Fin Svcs
motive Visteon Credit Hertz Fin Svcs Other Sector Sector
--------- -------- -------- ------- -------- -------- -------- --------
1998
----
Revenues
External customer revenues $118,017 $ 1,412 a/ $ 19,095 $ 4,241 $ 1,997 $ (346) $119,083 $ 25,333
Intersegment revenues 3,839 16,350 208 9 272 (20,678) 0 0
-------- ------- -------- ------- -------- -------- -------- --------
Total Revenues $121,856 $17,762 $ 19,303 $ 4,250 $ 2,269 $(21,024) $119,083 $ 25,333
======== ======= ======== ======= ======== ======== ======== ========
Income
Income before taxes $ 5,829 $ 1,129 $ 1,812 $ 465 $ 16,161 b/ $ 0 $ 6,958 $ 18,438
Provision for income taxes 1,739 420 680 188 149 0 2,159 1,017
Net income 4,040 712 1,084 277 16,060 b/ (102) 4,752 17,319
Other Disclosures
Depreciation/amortization $ 5,181 $ 559 $ 7,327 $ 1,186 $ 45 $ 31 $ 5,740 $ 8,589
Interest income 1,414 58 - - - (141) 1,331 -
Interest expense 1,089 102 6,910 318 1,114 (668) 829 8,036
Capital expenditures 7,252 861 67 317 120 0 8,113 504
Unusual items 0 0 0 0 15,955 b/ 0 0 15,955
Unconsolidated affiliates
Equity in net income (64) 26 2 0 0 0 (38) 2
Investments in 2,191 214 76 0 0 0 2,405 76
Total assets at year-end 83,556 9,223 137,248 8,873 6,181 (7,536) 88,744 148,801
-------------------------------------------------------------------------------------------------------------------------
1997
----
Revenues
External customer revenues $121,976 $ 1,217 a/ $ 17,144 $ 3,895 $ 9,653 $ (258) $122,935 $ 30,692
Intersegment revenues 4,749 16,003 201 10 266 (21,229) 0 0
-------- ------- -------- ------- -------- -------- -------- --------
Total Revenues $126,725 $17,220 $ 17,345 $ 3,905 $ 9,919 $(21,487) $122,935 $ 30,692
======== ======= ======== ======= ======== ======== ======== ========
Income
Income before taxes $ 6,257 $ 825 $ 1,806 $ 343 $ 1,708 c/ $ 0 $ 7,082 $ 3,857
Provision for income taxes 2,014 308 727 142 550 0 2,322 1,419
Net income 4,196 518 1,031 202 1,205 c/ (232) 4,714 2,206
Other Disclosures
Depreciation/amortization $ 5,346 $ 592 $ 6,188 $ 1,068 $ 364 $ 25 $ 5,938 $ 7,645
Interest income 1,228 17 - - - (129) 1,116 -
Interest expense 904 82 6,268 316 3,523 (593) 788 9,712
Capital expenditures 7,225 917 49 211 315 0 8,142 575
Unusual items 0 0 0 0 269 c/ 0 0 269
Unconsolidated affiliates
Equity in net income (117) 29 1 0 0 0 (88) 1
Investments in 1,782 195 84 0 0 0 1,977 84
Total assets at year-end 82,376 8,409 121,973 7,436 68,348 (9,445) 85,079 194,018
------------------------------------------------------------------------------------------------------------------------
1996
----
Revenues
External customer revenues $116,887 $ 1,368 a/ $ 16,476 $ 3,668 $ 8,913 $ (321) $118,023 $ 28,968
Intersegment revenues 5,001 15,111 229 11 985 (21,337) 0 0
-------- ------- -------- ------- -------- -------- -------- --------
Total Revenues $121,888 $16,479 $ 16,705 $ 3,679 $ 9,898 $(21,658) $118,023 $ 28,968
======== ======= ======== ======= ======== ======== ======== ========
Income
Income before taxes $ 1,973 $ 598 $ 2,240 $ 256 $ 1,726 d/ $ 0 $ 2,571 $ 4,222
Provision for income taxes 642 220 732 98 474 0 862 1,304
Net income 1,274 381 1,441 159 1,318 d/ (127) 1,655 2,791
Other Disclosures
Depreciation/amortization $ 5,406 $ 510 $ 5,538 $ 975 $ 336 $ 26 $ 5,916 $ 6,875
Interest income 895 16 - - - (70) 841 -
Interest expense 749 79 6,260 309 3,378 (376) 695 9,704
Capital expenditures 7,240 969 44 194 204 0 8,209 442
Unusual items 0 0 0 0 529 d/ 0 0 529
Unconsolidated affiliates
Equity in net income (53) 47 0 0 1 (2) (6) (1)
Investments in 2,245 206 76 0 0 0 2,451 76
Total assets at year-end 73,976 7,906 121,696 7,649 58,694 (7,054) 79,658 183,209
- - - - -
|
a/ Includes sales to outside fabricators for inclusion in components sold to
Ford's Automotive segment. These sales are eliminated in total Automotive
sector reporting.
b/ Includes $15,955 non-cash gain (not taxed) on spin-off of The Associates in
the first quarter of 1998 (Note 15).
c/ Includes $269 gain (not taxed) on Hertz IPO in the second quarter of 1997
(Note 15).
d/ Includes $650 gain (not taxed) on The Associates IPO in the second quarter of
1996, $263 gain on sale of USL Capital assets, $384 loss resulting from the
write-down of Budget Rent-A-Car notes receivable in 1996 (Note 15).
FS-31
"Other Financial Services" data is an aggregation of miscellaneous smaller Financial Services Sector business components, including Ford Motor Land Development Corporation, Ford Leasing Development Company, Ford Leasing Corporation, and Granite Management Corporation, and certain unusual transactions (footnoted). Also included is data for The Associates, which was spun-off from Ford in 1998.
"Eliminations/Other" data includes intersegment eliminations and minority interest calculations. Data for "Depreciation/amortization" includes depreciation of fixed assets and assets subject to operating leases and amortization of special tools. Interest income for the operating segments in the Financial Services sector is reported as "Revenue".
Information concerning principal geographic areas was as follows (in millions):
Geographic Areas
----------------
United All Total
States Europe Other Company
--------- -------- ------- ---------
1998
----
External revenues $100,597 $27,026 $16,793 $144,416
Net property 25,761 11,018 7,260 44,039
1997
----
External revenues $105,581 $27,618 $20,428 $153,627
Net property 23,948 9,596 7,090 40,634
1996
----
External revenues $ 98,887 $30,478 $17,626 $146,991
Net property 22,950 9,720 6,868 39,538
NOTE 18. Summary Quarterly Financial Data (Unaudited)
------------------------------------------------------
(in millions, except amounts per share)
1998 1997
---------------------------------------- -----------------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
-------- -------- ------- ------- ------- ------- ------- --------
Automotive
Sales $29,076 $31,309 $26,494 $32,204 $30,037 $32,805 $28,196 $31,897
Operating income 1,806 2,922 777 1,180 1,704 2,444 846 1,952
Financial Services
Revenues 7,508 5,980 6,146 5,699 7,277 7,460 7,900 8,055
Income before income taxes 16,813 590 645 390 830 1,199 912 916
Total Company
Net income 17,646 2,381 1,001 1,043 $ 1,469 $ 2,530 $ 1,125 $ 1,796
Less:
Preferred stock dividend
requirements 95 4 4 4 14 14 13 13
------- ------- ------- ------ ------- ------- ------- -------
Income attributable
to Common and
Class B Stock $17,551 $ 2,377 $ 997 $ 1,039 $ 1,455 $ 2,516 $ 1,112 $ 1,783
======= ======= ======= ======= ======= ======= ======= =======
AMOUNTS PER SHARE OF COMMON
AND CLASS B STOCK AFTER
PREFERRED STOCK DIVIDENDS
Basic income $ 14.48 $ 1.96 $ 0.82 $ 0.86 $ 1.23 $ 2.11 $ 0.93 $ 1.48
Diluted income 14.23 1.91 0.80 0.84 1.20 2.06 0.91 1.45
Cash dividends 0.42 0.42 0.42 0.46 0.385 0.42 0.42 0.42
|
FS-32
PricewaterhouseCoopers LLP
400 Renaissance Center
Detroit, MI 48243-1507
Telephone (313)446-7100
Facsmilie (313)446-7117
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders Ford Motor Company
In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, stockholders' equity and cash flows present fairly, in all material respects, the financial position of Ford Motor Company and Subsidiaries at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP 400 Renaissance Center Detroit, Michigan January 21, 1999 |
FS-33
Ford Motor Company
CONDENSED FINANCIAL INFORMATION OF SUBSIDIARY
---------------------------------------------
(in millions)
FORD CAPITAL B.V.
-----------------
December 31, December 31,
1998 1997
------------ ------------
Current assets $ 621 $2,046
Noncurrent assets 2,388 2,390
------ ------
Total assets $3,009 $4,436
====== ======
Current liabilities $ 394 $1,551
Noncurrent liabilities 2,430 2,433
Minority interests in net
assets of subsidiaries 15 14
Stockholder's equity 170 438
------ ------
Total liabilities and
stockholder's equity $3,009 $4,436
====== ======
|
1998 1997 1996
--------- --------- ---------
Sales and other revenue $2,381 $2,527 $2,760
Operating income 73 47 73
Income before income taxes 63 4 18
Net (loss)/income 52 (21) (4)
|
Ford Capital B.V., a wholly-owned subsidiary of Ford Motor Company, was established primarily for the purpose of raising funds through the issuance of commercial paper and debt securities. Ford Capital B.V. also holds shares of the capital stock of Ford Nederland B.V., Ford Motor Company (Belgium) N.V., Ford Motor Company A/S (Denmark), Ford Poland S.A., and Ford Distribution Sp. z.o.o., Ltd. Substantially all of the assets of Ford Capital B.V., other than its ownership interests in subsidiaries, represent receivables from Ford Motor Company or its consolidated subsidiaries.
FSS-1
PricewaterhouseCoopers LLP
400 Renaissance Center
Detroit, MI 48243-1507
Telephone (313)446-7100
Facsmilie (313)446-7117
Report of Independent Accountants on Financial Statement Schedules
To the Board of Directors of
Ford Motor Company
Our audits of the consolidated financial statements of Ford Motor Company and Subsidiaries referred to in our report dated January 21, 1999 in this Annual Report on Form 10-K also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the consolidated financial statements of Ford Motor Company and Subsidiaries.
/s/PricewaterhouseCoopers LLP 400 Renaissance Center Detroit, Michigan January 21, 1999 |
FSS-2
EXHIBIT INDEX
Designation Description Method of Filing
----------- ----------- ----------------
Exhibit 3-A Restated Certificate of Incorporation, Filed as Exhibit 3.1 to Ford's Quarterly
dated April 9, 1998. Report on Form 10-Q for the quarter
ended March 31, 1998.*
Exhibit 3-B By-Laws as amended through January 1, 1999. Filed with this Report.
Exhibit 4 Form of Deposit Agreement dated as of Filed as Exhibit 4-E to Ford's
October 29, 1992 among Ford, Chemical Registration Statement No. 33-53092.*
Bank, as Depositary, and the holders from
time to time of Depositary Shares, each
representing 1/2,000 of a share of Ford's
Series B Cumulative Preferred Stock.
Exhibit 10-A Amended and Restated Profit Filed with this Report.
Maintenance Agreement, dated as of
January 1, 1999, between Ford
and Ford Credit.
Exhibit 10-B 1985 Stock Option Plan.** Filed as Exhibit 10-D to Ford's
Annual Report on Form 10-K for the
year ended December 31, 1985.*
Exhibit 10-B-1 Amendment dated as of March 8, 1990 Filed as Exhibit 10-C-1 to Ford's
to 1985 Stock Option Plan.** Annual Report on Form 10-K for
the year ended December 31, 1989.*
Exhibit 10-B-2 Amendment to 1985 Stock Option Plan, Filed as Exhibit 4.C to Amendment No.
effective as of January 8, 1998.** 1 to Ford's Registration Statement
No. 33-9722.*
Exhibit 10-C Supplemental Compensation Plan Filed as Exhibit 10-H to Ford's
as amended through May 8, 1986.** Annual Report on Form 10-K for the
year ended December 31, 1986.*
Exhibit 10-C-1 Amendment to Supplemental Filed as Exhibit 10-F-1 to Ford's
Compensation Plan, dated May 12, 1988.** Annual Report on Form 10-K for the
year ended December 31, 1988.*
Exhibit 10-C-2 Amendment to Supplemental Compensation Plan, Filed as Exhibit 10-D-2 to Ford's
dated July 8, 1992.** Annual Report on Form 10-K for the
year ended December 31, 1992.*
Exhibit 10-C-2A Amendment to Supplemental Compensation Plan, Filed as Exhibit 10-C-2A to Ford's
effective as of March 9, 1994.** Annual Report on Form 10-K for the
year ended December 31, 1996.*
|
Designation Description Method of Filing
----------- ----------- ----------------
Exhibit 10-C-3 Amendment to Supplemental Compensation Filed as Exhibit 10.1 to Ford's
Plan, effective as of March 8, 1995.** Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995.*
Exhibit 10-C-4 Amendment to Supplemental Filed as Exhibit 10.1 to Ford's
Compensation Plan, effective as of Quarterly Report on Form 10-Q for the
July 13, 1995.** quarter ended June 30, 1995.*
Exhibit 10-C-5 Amendment to Supplemental Filed as Exhibit 10-C-5 to Ford's
Compensation Plan, effective as of Annual Report on Form 10-K for the
January 10, 1996.** year ended December 31, 1995.*
Exhibit 10-C-6 Amendments to Supplemental Filed as Exhibit 10-C-6 to Ford's
Compensation Plan, effective as of Annual Report on Form 10-K for the
October 1, 1997.** year ended December 31, 1997.*
Exhibit 10-C-7 Amendment to Supplemental Filed as Exhibit 10-C-7 to Ford's
Compensation Plan, effective as of Annual Report on Form 10-K for the
December 22, 1997.** year ended December 31, 1997.*
Exhibit 10-C-8 Amendment to Supplemental Filed as Exhibit 10-C-8 to Ford's
Compensation Plan, effective as of Annual Report on Form 10-K for the
May 14, 1998.** year ended December 31, 1997.*
Exhibit 10-C-9 Amendment to Supplemental Filed with this Report.
Compensation Plan, effective as of
October 16, 1998.**
Exhibit 10-D Executive Separation Allowance Plan Filed as Exhibit 10-D to Ford's
as amended through December 9, 1993 Annual Report on Form 10-K for the
for separations on or after January 1, 1981.** year ended December 31, 1994.*
Exhibit 10-E Description of Ford practices regarding Filed as Exhibit 10-I to Ford's
club memberships for executives.** Annual Report on Form 10-K for the
year ended December 31, 1981.*
Exhibit 10-F Description of Ford practices regarding Filed as Exhibit 10-J to Ford's
travel expenses of spouses of certain Annual Report on Form 10-K for the
executives.** year ended December 31, 1980.*
Exhibit 10-G Deferred Compensation Plan for Filed as Exhibit 10-H-1 to Ford's
Non-Employee Directors, as amended Annual Report on Form 10-K for the
on July 11, 1991.** year ended December 31, 1991.*
Exhibit 10-G-1 Amendments to Deferred Compensation Plan Filed as Ehibit 10-G-1 to Ford's
for Non-Employee Directors, effective as of Annual Report on Form 10-K for the
January 1, 1996.** year ended December 31, 1995.*
|
Designation Description Method of Filing
----------- ----------- ----------------
Exhibit 10-G-2 Amendment to Deferred Compensation Plan Filed as Exhibit 10-G-2 to Ford's
for Non-Employee Directors, effective as of Annual Report on Form 10-K for the
November 14, 1996.** year ended December 31, 1996.*
Exhibit 10-H Benefit Equalization Plan, as Filed as Exhibit 10-H to Ford's
amended as of January 1, 1989.** Annual Report on Form 10-K for the
year ended December 31, 1994.*
Exhibit 10-H-1 Description of Amendments to Benefit Filed as Exhibit 10-H-1 to Ford's
Equalization Plan, adopted January 11, Annual Report on Form 10-K for the
1996 and January 25, 1996.** year ended December 31, 1995.*
Exhibit 10-I Description of financial counseling Filed as Exhibit 10-N to Ford's
services provided to certain executives.** Annual Report on Form 10-K for the
year ended December 31, 1983.*
Exhibit 10-J 1986 Long-Term Incentive Plan.** Filed as Exhibit 10-Q to Ford's
Annual Report on Form 10-K for the
year ended December 31, 1985.*
Exhibit 10-J-1 Amendment dated as of June 1, 1990 to Filed as Exhibit 10-N-1 to Ford's
1986 Long-Term Incentive Plan. ** Annual Report on Form 10-K for the
year ended December 31, 1990.*
Exhibit 10-K Supplemental Executive Retirement Plan, Filed as Exhibit 10-K to Ford's
as restated and incorporating amendments Annual Report on Form 10-K for the
through December 12, 1995.** year ended December 31, 1995.*
Exhibit 10-L Restricted Stock Plan for Non-Employee Filed as Exhibit 10-P to Ford's
Directors adopted by the Board of Annual Report on Form 10-K for the
Directors on November 10, 1988, year ended December 31, 1988.*
and approved by the stockholders at
the 1989 Annual Meeting.**
Exhibit 10-L-1 Amendment to Restricted Stock Plan for Filed as Exhibit 10.1 to Ford's
Non-Employee Directors, effective as of Quarterly Report on Form 10-Q for the
August 1, 1996.** quarter ended September 30, 1996.*
Exhibit 10-M 1990 Long-Term Incentive Plan, Filed as Exhibit 10-R to Ford's
amended as of June 1, 1990.** Annual Report on Form 10-K for the
year ended December 31, 1990.*
Exhibit 10-M-1 Amendment to 1990 Long-Term Incentive Filed as Exhibit 10-P-1 to Ford's
Plan, effective as of October 1, 1990.** Annual Report on Form 10-K for the
year ended December 31, 1991.*
|
Designation Description Method of Filing
----------- ----------- ----------------
Exhibit 10-M-2 Amendment to 1990 Long-Term Incentive Filed as Exhibit 10.2 to Ford's
Plan, effective as of March 8, 1995.** Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995.*
Exhibit 10-M-3 Amendment to 1990 Long-Term Filed as Exhibit 10-M-3 to Ford's
Incentive Plan, effective as of Annual Report on Form 10-K for the
October 1, 1997.** year ended December 31, 1997.*
Exhibit 10-M-4 Amendment to 1990 Long-Term Filed as Exhibit 10-M-4 to Ford's
Incentive Plan, effective as of Annual Report on Form 10-K for the
January 1, 1998.** year ended December 31, 1997.*
Exhibit 10-N Description of Matching Gift Program for Filed as Exhibit 10-Q to Ford's
Non-Employee Directors.** Annual Report on Form 10-K for the
year ended December 31, 1991.*
Exhibit 10-O Non-Employee Directors Life Insurance Filed as Exhibit 10-O to Ford's
and Optional Retirement Plan Annual Report on Form 10-K for the
(as amended as of January 1, 1993).** year ended December 31, 1994.*
Exhibit 10-P Description of Non-Employee Directors Filed as Exhibit 10-S to Ford's
Accidental Death, Dismemberment and Annual Report on Form 10-K for the
Permanent Total Disablement Indemnity.** year ended December 31, 1992.*
Exhibit 10-Q Agreement dated December 10, 1992 Filed as Exhibit 10-T to Ford's
between Ford and William C. Ford.** Annual Report on Form 10-K for the
year ended December 31, 1992.*
Exhibit 10-R Support Agreement dated as of October 1, Filed as Exhibit 10-T to Ford's
1993 between Ford and FCE Bank. Annual Report on Form 10-K for the
year ended December 31, 1993.*
Exhibit 10-R-1 Amendment No. 1 dated as of November Filed as Exhibit 10-R-1 to Ford's
15, 1995 to Support Agreement between Annual Report on Form 10-K for the
Ford and FCE Bank. year ended December 31, 1995.*
Exhibit 10-S Select Retirement Plan Filed as Exhibit 10-S to Ford's
adopted on June 9, 1994.** Annual Report on Form 10-K for the
year ended December 31, 1996.*
Exhibit 10-T Deferred Compensation Plan, Filed as Exhibit 10.2 to Ford's
effective as of July 13, 1995.** Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995.*
Exhibit 10-T-1 Amendments to Deferred Compensation Filed as Exhibit 10-T-1 to Ford's
Plan, effective as of July 13, 1995 and Annual Report on Form 10-K for the
October 1, 1995.** year ended December 31, 1995.*
|
Designation Description Method of Filing
----------- ----------- ----------------
Exhibit 10-T-2 Amendments to Deferred Compensation Filed as Exhibit 10.2 to Ford's
Plan, effective as of October 1, 1996.** Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996.*
Exhibit 10-T-3 Amendment to Deferred Compensation Filed as Exhibit 4.4 to Ford's
Plan, effective as of October 1, 1997.** Registration Statement
No. 333-47733.*
Exhibit 10-T-4 Amendments to Deferred Compensation Filed as Exhibit 4.5 to Ford's
Plan, effective as of January 1, 1998.** Registration Statement
No. 333-47733.*
Exhibit 10-T-5 Amendments to Deferred Compensation Plan, Filed as Exhibit 10.1 to Ford's Quarterly
effective as of July 8, 1998.** Report on Form 10-Q/A for the
quarter ended September 30, 1998.*
Exhibit 10-T-6 Amendment to Deferred Compensation Plan, Filed as Exhibit 10.2 to Ford's Quarterly
effective as of September 9, 1998.** Report on Form 10-Q/A for the
quarter ended September 30, 1998.*
Exhibit 10-T-7 Amendments to Deferred Compensation Plan, Filed as Exhibit 10.3 to Ford's Quarterly
effective as of October 16, 1998.** Report on Form 10-Q/A for the
quarter ended September 30, 1998.*
Exhibit 10-T-8 Amendments to Deferred Compensation Filed with this Report.
Plan, effective as of November 11, 1998.**
Exhibit 10-U Description of Amendments to Supplemental Filed as Exhibit 10-U to Ford's
Executive Retirement Plan and Executive Annual Report on Form 10-K for the
Separation Allowance Plan, adopted year ended December 31, 1995.*
January 25, 1996.**
Exhibit 10-U-2 Description of Amendment to Supplemental Filed as Exhibit 10-U-2 to Ford's
Executive Retirement Plan and Executive Annual Report on Form 10-K for the
Separation Allowance Plan, effective as of year ended December 31, 1996.*
July 1, 1996.**
Exhibit 10-U-3 Description of Amendment to Supplemental Filed with this Report.
Executive Retirement Plan adopted
September 10, 1998. **
Exhibit 10-V Annual Incentive Compensation Plan, Filed as Exhibit 10-V to Ford's
effective as of January 1, 1998.** Annual Report on Form 10-K for the
year ended December 31, 1997.*
Exhibit 10-W 1998 Long-Term Incentive Plan, Filed as Exhibit 10-W to Ford's
effective as of January 1, 1998.** Annual Report on Form 10-K for the
year ended December 31, 1997.*
|
Designation Description Method of Filing
----------- ----------- ----------------
Exhibit 10-W-1 Amendment to 1998 Long-Term Incentive Filed with this Report.
Plan, effective as of January 1, 1999.**
Exhibit 10-X Agreement dated January 13, 1999 Filed with this Report.
between Ford and Edsel B. Ford II.**
Exhibit 12 Computation of Ratio of Earnings to Filed with this Report.
Combined Fixed Charges and Preferred
Stock Dividends.
Exhibit 21 List of Subsidiaries of Ford Filed with this Report.
as of March 15, 1999.
Exhibit 23 Consent of Independent Certified Public Filed with this Report.
Accountants.
Exhibit 24 Powers of Attorney. Filed with this Report.
--------------------------
* Incorporated by reference as an exhibit to this Report (file number
reference 1-3950, unless otherwise indicated)
** Management contract or compensatory plan or arrangement
|
Ford Motor Company
By-Laws
As Amended Through January 1, 1999
BY-LAWS
OF
FORD MOTOR COMPANY
TABLE OF CONTENTS
Page
----
ARTICLE I - Offices......................................................1
ARTICLE II - Stockholders.................................................1
Section 1. Annual Meeting..............................................1
Section 2. Special Meetings............................................1
Section 3. Notice of Meetings..........................................2
Section 4. Quorum......................................................2
Section 5. Organization................................................2
Section 6. Proxies and Voting..........................................2
Section 7. Stock Lists.................................................2
Section 8. Ratification................................................3
Section 9. Judges......................................................3
ARTICLE III - Board of Directors...........................................3
Section 1. Number, Term of Office and Eligibility......................3
Section 2. Meetings....................................................3
Section 3. Notice of Meetings..........................................4
Section 4. Quorum and Organization of Meetings.........................4
Section 5. Powers......................................................5
Section 6. Reliance upon Books, Reports and Records....................6
Section 7. Compensation of Directors...................................6
ARTICLE IV - Committees...................................................7
Section 1. Committees of the Board of Directors........................7
Section 2. Audit Committee.............................................7
Section 3. Compensation and Option Committee...........................8
Section 4. Environmental and Public Policy Committee...................8
Section 5. Finance Committee...........................................8
Section 6. Organization Review and Nominating Committee................9
Section 7. Other Committees............................................9
Section 8. Rules and Procedures........................................9
Section 9. Application of Article.....................................10
ARTICLE V - Officers....................................................10
Section 1. Officers...................................................10
Section 2. President and Chief Executive Officer......................10
Section 3. Chief Operating Officer....................................10
Section 4. Vice Chairmen of the Company, Executive Vice Presidents,
Group Vice Presidents and Vice Presidents............11
Section 5. Treasurer and Assistant Treasurer..........................11
Section 6. Secretary and Assistant Secretary..........................11
Section 7. General Counsel............................................12
Section 8. Controller.................................................12
Section 9. Salaries...................................................12
|
ARTICLE VI - Resignations, Removals and Vacancies.......................12 Section 1. Resignations..............................................12 Section 2. Removals..................................................13 Section 3. Vacancies.................................................13 ARTICLE VII - Capital Stock - Dividends - Seal...........................13 Section 1. Certificates of Shares....................................13 Section 2. Addresses of Stockholders.................................13 Section 3. Lost, Destroyed or Stolen Certificate.....................14 Section 4. Fixing a Record Date......................................14 Section 5. Regulations...............................................14 Section 6. Corporate Seal............................................14 ARTICLE VIII - Execution of Contracts and Other Documents.................15 Section 1. Contracts, etc............................................15 Section 2. Checks, Drafts, etc.......................................15 ARTICLE IX - Fiscal Year................................................15 ARTICLE X - Miscellaneous..............................................15 Section 1. Original Stock Ledger.....................................15 Section 2. Notices and Waivers Thereof...............................16 Section 3. Voting upon Stocks........................................16 ARTICLE XI - Amendments.................................................17 |
CERTIFICATION
The undersigned officer of Ford Motor Company, a Delaware corporation, does hereby certify that the following is a true and correct copy of the By-Laws of the Company in effect on the date hereof.
Witness my hand and the seal of the Company this ______ day of ________ 19
BY-LAWS
OF
FORD MOTOR COMPANY
ARTICLE I
OFFICES
The registered office of the Company shall be in the City of Wilmington, County of New Castle, State of Delaware. The Company may also have an office in the City of Dearborn, State of Michigan, and at such other places as the Board of Directors may from time to time determine or as the business of the Company may require. The books and records of the Company may be kept (except as otherwise provided by law) at the office of the Company in the City of Dearborn, State of Michigan, outside of the State of Delaware, or at such other places as from time to time may be determined by the Board of Directors.
ARTICLE II
STOCKHOLDERS
Section 1. Annual Meeting.
The annual meeting of the stockholders for the purpose of electing directors and of transacting such other business as may come before it shall be held in the City of Detroit, State of Michigan, unless otherwise determined by the Board of Directors, on the second Thursday of May in each and every year, if not a legal holiday, and if a legal holiday then on the next day not a legal holiday. The Board of Directors shall, by resolution duly adopted, fix the place within the City of Detroit, Michigan, or elsewhere if so determined, and the time for the holding of each such meeting. At least twenty (20) days' notice shall be given to each stockholder entitled to vote at such meeting of the place and time so fixed.
Section 2. Special Meetings.
Special meetings of the stockholders shall be held at the office of the Company in the City of Dearborn, State of Michigan, unless otherwise determined by resolution of the stockholders or of the Board of Directors, whenever called in the manner required by law for purposes as to which there are special statutory provisions, and for other purposes whenever called by the Chairman of the Board of Directors or the President, or by resolution of the Board of Directors, and whenever the holders of thirty percent (30%) or more of the total number of outstanding shares of any class of stock the holders of which are entitled to vote on every matter that is to be voted on without regard to class at such meeting shall file with the Secretary a written application for such meeting stating the time and purpose thereof.
Section 3. Notice of Meetings.
Except as otherwise provided by law, at least twenty (20) days' notice of stockholders' meetings stating the time and place and the objects thereof shall be given by the Chairman of the Board of Directors, the President or the Secretary to each stockholder of record having voting power in respect of the business to be transacted thereat. No business other than that stated in the notice shall be transacted at any meeting.
Section 4. Quorum.
At any meeting of the stockholders the number of shares the holders of which shall be present or represented by proxy in order to constitute a quorum for, and the votes that shall be necessary for, the transaction of any business shall be as expressly provided in Article FOURTH of the Certificate of Incorporation, as amended. At any meeting of stockholders at which a quorum is not present, the holders of shares entitled to cast a majority of all of the votes (computed, in the case of each share of Class B Stock, as provided in subsection 1.3 of said Article FOURTH) which could be cast at such meeting by the holders of outstanding shares of stock of the Company who are present in person or by proxy and who are entitled to vote on every matter that is to be voted on without regard to class at such meeting may adjourn the meeting from time to time.
Section 5. Organization.
The Chairman of the Board of Directors shall act as chairman of meetings of the stockholders. The Board of Directors may designate any other officer or director of the Company to act as chairman of any meeting in the absence of the Chairman of the Board of Directors, and the Board of Directors may further provide for determining who shall act as chairman of any stockholders meeting in the absence of the Chairman of the Board of Directors and such designee.
The Secretary of the Company shall act as secretary of all meetings of the stockholders, but in the absence of the Secretary the presiding officer may appoint any other person to act as secretary of any meeting.
Section 6. Proxies and Voting.
Every stockholder entitled to vote at any meeting may vote in person or by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedures established for the meeting. No proxy shall be voted after three years from its date unless such proxy provides expressly for a longer period. Shares of the Company's stock belonging to the Company shall not be voted upon directly or indirectly.
Section 7. Stock Lists.
A complete list of stockholders entitled to vote at any meeting of stockholders shall be prepared, in alphabetical order by class, by the Secretary and shall be open to the examination of any stockholder, at the place where the meeting is to be held, for at least ten days before the meeting and during the whole time of the meeting.
Section 8. Ratification.
Any transaction questioned in any stockholders' derivative suit, or any other suit to enforce alleged rights of the Company or any of its stockholders, on the ground of lack of authority, defective or irregular execution, adverse interest of any director, officer or stockholder, nondisclosure, miscomputation or the application of improper principles or practices of accounting may be approved, ratified and confirmed before or after judgment by the Board of Directors or by the holders of Common Stock and the holders of Class B Stock voting as provided in subsection 1.6 of Article FOURTH of the Certificate of Incorporation, as amended, and, if so approved, ratified or confirmed, shall have the same force and effect as if the questioned transaction had been originally duly authorized, and said approval, ratification or confirmation shall be binding upon the Company and all of its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction.
Section 9. Judges.
All votes by ballot at any meeting of stockholders shall be conducted by two judges appointed for the purpose either by the directors or by the meeting. The judges shall decide upon the qualifications of voters, count the votes and declare the result.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Number, Term of Office and Eligibility.
Except as provided by the laws of the State of Delaware or by the Certificate of Incorporation, as amended, the business and the property of the Company shall be managed by or under the direction of a Board of not less than ten and not more than twenty directors, the exact number of which shall be fixed from time to time by resolution of the Board. Each director shall be elected annually by ballot by the holders of Common Stock and the holders of Class B Stock voting as provided in subsection 1.6 of Article FOURTH of the Certificate of Incorporation, as amended, at the annual meeting of stockholders, to serve until his or her successor shall have been elected and shall have qualified, except as provided in this Section. No person may be elected or re-elected a director of the Company if at the time of his or her election or re-election he or she shall have attained the age of seventy years, and the term of any director who shall have attained such age while serving as a director shall terminate as of the time of the first annual meeting of stockholders following his or her seventieth birthday; provided, however, that the Board by resolution may waive such age limitation in any year and from year to year with respect to any director or directors.
Section 2. Meetings.
The directors may hold their meetings outside of the State of Delaware, at the office of the Company in the City of Dearborn, State of Michigan, or at such other place as from time to time they may determine.
The annual meeting of the Board of Directors, for the election of officers and the transaction of other business, shall be held at the World Headquarters of the Company in Dearborn, Michigan, on the same day as, and as soon as practicable following, the annual meeting of stockholders, or at such other time or place as shall be determined by the Board at its regular meeting next preceding said annual meeting of stockholders. No notice of said annual meeting of the Board shall be required to be given to the directors.
Regular meetings of the Board of Directors may be held at such time and place as shall from time to time be determined by the Board.
Special meetings of the Board of Directors shall be held whenever called by direction of the Chairman of the Board of Directors or the President or by one-third of the directors then in office.
Section 3. Notice of Meetings.
The Secretary or an Assistant Secretary shall give notice of the time and place of holding of meetings of the Board of Directors (excepting the annual meeting of directors) by mailing such notice not later than during the second day preceding the day on which such meeting is to be held, or by sending a cablegram, facsimile transmission, mailgram, radiogram, telegram or other form of recorded communication containing such notice or delivering such notice personally or by telephone not later than during the first day preceding the day on which such meeting is to be held to each director. Unless otherwise stated in the notice thereof any and all business may be transacted at any meeting.
Section 4. Quorum and Organization of Meetings.
A third of the total number of members of the Board of Directors as constituted from time to time, but in no event less than three, shall constitute a quorum for the transaction of business; but if at any meeting of the Board of Directors, there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time, and the meeting may be held as adjourned without further notice or waiver. Except as otherwise provided by law or by the Certificate of Incorporation, as amended, or by these By-Laws, a majority of the directors present at any duly constituted meeting may decide any question brought before such meeting.
The Board of Directors shall elect one of its members to be Chairman of the Board of Directors. The Chairman of the Board of Directors shall lead the Board of Directors in fulfilling its responsibilities as set forth in these By-Laws, including its responsibility to oversee the performance of the Company, and shall determine the agenda and perform all other duties and exercise all other powers which are or from time to time may be delegated to him or her by the Board of Directors.
Meetings of the Board of Directors shall be presided over by the Chairman of the Board of Directors, or in his or her absence, by the President, or in the absence of the Chairman of the Board of Directors and the President by such other person as the Board of Directors may designate or the members present may select.
Section 5. Powers.
In addition to the powers and authorities by these By-Laws expressly conferred upon them, the Board of Directors shall have and may exercise all such powers of the Company and do all such lawful acts and things that are not by statute or by the Certificate of Incorporation, as amended, or by these By-Laws directed or required to be exercised or done by the stockholders. Without prejudice to or limitation of such general powers and any other powers conferred by statute, or by the Certificate of Incorporation, as amended, or by these By-Laws, the Board of Directors shall have the following powers:
(1) To determine, subject to the requirements of law and of Section 5 of Article FOURTH of the Certificate of Incorporation, as amended, what, if any, dividends shall be declared and paid to the stockholders out of net profits, current or accumulated, or out of surplus or other assets of the Company available for dividends.
(2) To fix, and from time to time to vary, the amount of working capital of the Company, and to set aside from time to time out of net profits, current or accumulated, or surplus of the Company such amount or amounts as they in their discretion may deem necessary and proper as, or as a safeguard to the maintenance of, working capital, as a reserve for contingencies, as a reserve for repairs, maintenance, or rehabilitation, or as a reserve for revaluation of profits of the Company or for such other proper purpose as may in the opinion of the directors be in the best interests of the Company; and in their sole discretion to abolish or modify any such provision for working capital or any such reserve, and to credit the amount thereof to net profits, current or accumulated, or to the surplus of the Company.
(3) To purchase, or otherwise acquire for the Company, any business, property, rights or privileges which the Company may at the time be authorized to acquire, at such price or consideration and generally on such terms and conditions as they think fit; and at their discretion to pay therefor either wholly or partly in money, stock, bonds, debentures or other securities of the Company.
(4) To create, make and issue mortgages, bonds, deeds of trust, trust agreements or negotiable or transferable instruments or securities, secured by mortgage or otherwise, and to do every other act and thing necessary to effect the same.
(5) To appoint any person or corporation to accept and hold in trust for the Company any property belonging to the Company, or in which it is interested, or for any other purpose, and to execute such deeds and do all things requisite in relation to any such trust.
(6) To delegate any of the powers of the Board in the course of the business of the Company to any officer, employee or agent, and to appoint any person the agent of the Company, with such powers (including the power to subdelegate) and upon such terms as the Board may think fit.
(7) To remove any officer of the Company with or without cause, and from time to time to devolve the powers and duties of any officer upon any other person for the time being.
(8) To confer upon any officer of the Company the power to appoint, remove and suspend subordinate officers, agents and employees.
(9) To determine who shall be authorized on the Company's behalf, either generally or specifically, to make and sign bills, notes, acceptances, endorsements, checks, releases, receipts, contracts, conveyances, and all other written instruments executed on behalf of the Company.
(10) To make and change regulations, not inconsistent with these By-Laws, for the management of the Company's business and affairs.
(11) To adopt and, unless otherwise provided therein, to amend and repeal, from time to time, a bonus or supplemental compensation plan for employees (including employees who are officers or directors) of the Company or any subsidiary. Power to construe, interpret, administer, modify or suspend such plan shall be vested in the Board of Directors or a committee thereof.
(12) To adopt a retirement plan, or plans, for the purpose of making retirement payments to employees (including employees who are officers or directors) of the Company or of any subsidiary thereof; and to adopt a group insurance plan, or plans, for the purpose of enabling employees (including employees who are officers or directors) of the Company or of any subsidiary thereof to acquire insurance protection; any such retirement plan or insurance plan, unless otherwise provided therein, shall be subject to amendment or revocation by the Board of Directors.
Section 6. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of Directors and each officer, in the performance of his or her duties, shall be fully protected in relying in good faith upon the books of account or reports made to the Company by any of its officials, or by an independent certified public accountant, or by an appraiser selected with reasonable care by the Board of Directors or by any such committee, or in relying in good faith upon other records of the Company.
Section 7. Compensation of Directors.
Directors, as such, may receive, pursuant to resolution of the Board of Directors, fixed fees and other compensation for their services as directors, including, without limitation, services as Chairman of the Board of Directors, or members of committees of the directors or as chairmen thereof; provided, however, that nothing herein contained shall be construed to preclude any director from serving the Company in any other capacity and receiving compensation therefor.
ARTICLE IV
COMMITTEES
Section 1. Committees of the Board of Directors.
There are hereby established as committees of the Board of Directors an Audit Committee, a Compensation and Option Committee, an Environmental and Public Policy Committee, a Finance Committee, and an Organization Review and Nominating Committee, each of which shall have the powers and functions set forth in Sections 2, 3, 4, 5, and 6 hereof, respectively, and such additional powers as may be delegated to it by the Board of Directors. The Board of Directors may from time to time establish additional standing committees or special committees of the Board of Directors, each of which shall have such powers and functions as may be delegated to it by the Board of Directors. The Board of Directors may abolish any committee established by or pursuant to this Section 1 as it may deem advisable. Each such committee shall consist of one or more directors, the exact number being determined from time to time by the Board of Directors; provided, however, that membership on the Audit Committee and on the Compensation and Option Committee shall be limited to directors who are not officers or employees of the Company. Designations of the Chairman and members of each such committee, and, if desired, a Vice Chairman and alternates for members, shall be made by the Board of Directors. Each such committee shall have a secretary who shall be designated by its chairman. A vice chairman of a committee shall act as the chairman of the committee in the absence or disability of the chairman.
Section 2. Audit Committee.
The Audit Committee shall select and engage, on behalf of the Company, independent public accountants to (1) audit the books of account and other corporate records of the Company and (2) perform such other duties as the Committee may from time to time prescribe. The Committee shall transmit financial statements certified by such independent public accountants to the Board of Directors after the close of each fiscal year. The selection of independent public accountants for each fiscal year shall be made in advance of the annual meeting of stockholders in such fiscal year and shall be submitted for ratification or rejection at such meeting. The Committee shall confer with such accountants and review and approve the scope of the audit of the books of account and other corporate records of the Company. The Committee shall have the power to confer with and direct the officers of the Company to the extent necessary to review the internal controls, accounting practices, financial structure and financial reporting of the Company. From time to time the Committee shall report to and advise the Board of Directors concerning the results of its consultation and review and such other matters relating to the internal controls, accounting practices, financial structure and financial reporting of the Company as the Committee believes merit review by the Board of Directors. The Committee also shall perform such other functions and exercise such other powers as may be delegated to it from time to time by the Board of Directors.
Section 3. Compensation and Option Committee.
The Compensation and Option Committee shall fix from time to time the salaries of members of the Board of Directors who are officers or employees of the Company, the President, and of any and all Vice Chairmen of the Company, Executive Vice Presidents, Group Vice Presidents and Vice Presidents of the Company. It also shall perform such functions as may be delegated to it under the provisions of any bonus, supplemental compensation, special compensation or stock option plan of the Company.
Section 4. Environmental and Public Policy Committee.
The Environmental and Public Policy Committee shall review all aspects of the Company's policies and practices that relate to environmental and public policy considerations facing the Company worldwide. From time to time the Committee shall report and make recommendations to the Board of Directors concerning the results of its review and such other matters relating to the foregoing matters as the Committee believes merit consideration by the Board of Directors. The Committee also shall perform such other functions and exercise such other powers as may be delegated to it from time to time by the Board of Directors.
Section 5. Finance Committee.
The Finance Committee shall include the Chairman of the Board of Directors together with such other directors as the Board of Directors shall designate.
The Committee during intervals between meetings of the Board of Directors shall have, and may exercise in such manner as it shall deem to be in the best interests of the Company, all the powers of the Board of Directors (except with respect to matters within the powers of the Audit Committee, the Environmental and Public Policy Committee, or the Compensation and Option Committee) concerning the determination of financial policies of the Company and the management of its financial affairs, not inconsistent, however, with law or with such specific directions as to the conduct of affairs as shall have been given by the Board of Directors. The Committee also shall perform such other functions and exercise such other powers as may be delegated to it from time to time by the Board of Directors. The Committee may redelegate from time to time and to the full extent permitted by law, in writing, to any officer or employee of the Company any of such powers.
During intervals between meetings of the Committee, the Chairman, and, if any, the Vice Chairman, of the Committee shall have and may exercise such of the powers of the Committee as from time to time shall be conferred upon them by resolution of the Board of Directors or of the Finance Committee.
All actions by the Committee shall be reported to the Board of Directors and shall be subject to revision by the Board of Directors, provided no acts or rights of third parties shall be affected thereby.
Section 6. Organization Review and Nominating Committee.
The Organization Review and Nominating Committee from time to time shall consider and make recommendations to the Board of Directors, to the Chairman of the Board of Directors and to the President with respect to the management organization of the Company, the nominations or elections of directors and officers of the Company and the appointments of such other employees of the Company as shall be referred to the Committee.
The Committee from time to time shall consider the size and composition of the Board of Directors and make recommendations to the Board of Directors with respect to such matters. Prior to the annual meeting of stockholders each year, and prior to any special meeting of stockholders at which a director is to be elected, the Committee shall recommend to the Board of Directors persons proposed to constitute the nominees whose election at such meeting will be recommended by the Board of Directors.
The authority vested in the Committee by this section shall not derogate from the power of individual members of the Board of Directors to recommend or place in nomination persons other than those recommended by the Committee.
The Committee also shall perform such other functions and exercise such other powers as may be delegated to it from time to time by the Board of Directors.
Section 7. Other Committees.
The Board of Directors, or any committee, officer or employee of the Company may establish additional standing committees or special committees to serve in an advisory capacity or in such other capacities as may be permitted by law, by the Certificate of Incorporation and by the By-Laws. The members of any such committee need not be members of the Board of Directors. Any committee established pursuant to this Section 7 may be abolished by the person or body by whom it was established as he, she or it may deem advisable. Each such committee shall consist of two or more members, the exact number being determined from time to time by such person or body. Designations of members of each such committee and, if desired, alternates for members, shall be made by such person or body, at whose will all such members and alternates shall serve. The chairman of each such committee shall be designated by such person or body. Each such committee shall have a secretary who shall be designated by the chairman.
Section 8. Rules and Procedures.
Each committee may fix its own rules and procedures and shall meet at such times and places as may be provided by such rules, by resolution of the committee, or by call of the chairman or vice chairman. Notice of meeting of each committee, other than of regular meetings provided for by its rules or resolutions, shall be given to committee members. The presence of one-third of its members, but not less than two, shall constitute a quorum of any committee, and all questions shall be decided by a majority vote of the members present at the meeting. All action taken at each committee meeting shall be recorded in minutes of the meeting.
Section 9. Application of Article.
Whenever any provision of any other document relating to any committee of the Company named therein shall be in conflict with any provision of this Article IV, the provisions of this Article IV shall govern, except that if such other document shall have been approved by the stockholders, voting as provided in the Certificate of Incorporation, or by the Board of Directors, the provisions of such other document shall govern.
ARTICLE V
OFFICERS
Section 1. Officers.
The Officers of the Company may include a President, who shall be chosen from among the directors, and one or more Vice Chairmen of the Company, one or more Executive Vice Presidents, one or more Group Vice Presidents, one or more Vice Presidents, a Treasurer, a Controller and a Secretary, each of whom shall be elected by the Board of Directors to hold office until his or her successor shall have been chosen and shall have qualified. The Board of Directors may elect or appoint one or more Assistant Treasurers, one or more Assistant Secretaries, and such other officers as it may deem necessary, or desirable, each of whom shall have such authority, shall perform such duties and shall hold office for such term as may be prescribed by the Board of Directors from time to time. Any person may hold at one time more than one office.
Section 2. President and Chief Executive Officer.
Subject to the provisions of these By-Laws and to the direction of the Board of Directors, the President shall be the Chief Executive Officer of the Company and shall have ultimate authority for decisions relating to the general management and control of the affairs and business of the Company and shall perform all other duties and exercise all other powers commonly incident to the position of Chief Executive Officer or which are or from time to time may be delegated to him or her by the Board of Directors, or which are or may at any time be authorized or required by law. He or she may redelegate from time to time and to the full extent permitted by law, in writing, to officers or employees of the Company any or all of such duties and powers, and any such redelegation may be either general or specific. Whenever he or she so shall delegate any of his or her authority, he or she shall file a copy of the redelegation with the Secretary of the Company.
Section 3. Chief Operating Officer.
The Chief Operating Officer shall be selected by the Board of Directors. Subject to the provisions of these By-Laws and to the direction of the Board of Directors and of the President, he or she shall have such powers and shall perform such duties as from time to time may be delegated to him or her by the Board of Directors or by the President, or which are or may at any time be authorized or required by law.
Section 4. Vice Chairmen of the Company, Executive Vice Presidents, Group Vice Presidents and Vice Presidents.
Each of the Vice Chairmen of the Company, each of the Executive Vice Presidents, each of the Group Vice Presidents and each of the other Vice Presidents shall have such powers and shall perform such duties as may be delegated to him or her by the Board of Directors, by the President or by the Chief Operating Officer.
In addition, the Board of Directors shall designate one of the Vice Chairmen of the Company, Executive Vice Presidents, Group Vice Presidents, or Vice Presidents as the Chief Financial Officer, who, among his or her other powers and duties, shall provide and maintain, subject to the direction of the Board of Directors and the Finance Committee, financial and accounting controls over the business and affairs of the Company. Such office shall maintain, among others, adequate records of the assets, liabilities and financial transactions of the Company, and shall direct the preparation of financial statements, reports and analyses. The Chief Financial Officer shall perform such other duties and exercise such other powers as are incident to such functions, subject to the control of the Board of Directors.
Section 5. Treasurer and Assistant Treasurer.
The Treasurer, subject to the direction of the Board of Directors, shall have the care and custody of all funds and securities which may come into his or her hands. When necessary or proper he or she shall endorse on behalf of the Company, for collection, checks, notes and other obligations, and shall deposit all funds of the Company in such banks or other depositaries as may be designated by the Board of Directors or by such officers or employees as may be authorized by the Board of Directors so to designate. He or she shall perform all acts incident to the office of Treasurer, subject to the control of the Board of Directors. He or she may be required to give a bond for the faithful discharge of his or her duties, in such sum and upon such conditions as the Board of Directors may require.
At the request of the Treasurer, any Assistant Treasurer, in the case of the absence or inability to act of the Treasurer, temporarily may act in his or her place. In the case of the death of the Treasurer, or in the case of his or her absence or inability to act without having designated an Assistant Treasurer to act temporarily in his or her place, the Assistant Treasurer so to perform the duties of the Treasurer shall be designated by the President, the Chief Operating Officer, a Vice Chairman of the Company or an Executive Vice President.
Section 6. Secretary and Assistant Secretary.
The Secretary shall keep the minutes of the meetings of the stockholders and of the Board of Directors, and, when required, the minutes of meetings of the committees, and shall be responsible for the custody of all such minutes. Subject to the direction of the Board of Directors, the Secretary shall have custody of the stock ledgers and documents of the Company. He or she shall have custody of the corporate seal and shall affix and attest such seal to any instrument whose execution under seal shall have been duly authorized. He or she shall give notice of meetings and, subject to the direction of the Board of Directors, shall perform all other duties and enjoy all other powers commonly incident to his or her office.
At the request of the Secretary, any Assistant Secretary, in the case of the absence or inability to act of the Secretary, temporarily may act in his or her place. In the case of the death of the Secretary, or in the case of his or her absence or inability to act without having designated an Assistant Secretary to act temporarily in his or her place, the Assistant Secretary or other person so to perform the duties of the Secretary shall be designated by the Chairman of the Board of Directors, the President, the Chief Operating Officer, a Vice Chairman of the Company or an Executive Vice President.
Section 7. General Counsel.
The Company may have a General Counsel who shall be appointed by the Board of Directors and who shall have general supervision of all matters of a legal nature concerning the Company.
Section 8. Controller.
The Controller shall have such powers and shall perform such duties as may be delegated to him or her by the Board of Directors, the President, the Chief Operating Officer or the appropriate Vice Chairman of the Company, Executive Vice President, Group Vice President or Vice President.
Section 9. Salaries.
Salaries of officers, agents or employees shall be fixed from time to time by the Board of Directors or by such committee or committees, or person or persons, if any, to whom such power shall have been delegated by the Board of Directors. An employment contract, whether with an officer, agent or employee, if expressly approved or specifically authorized by the Board of Directors, may fix a term of employment thereunder; and such contract, if so approved or authorized, shall be valid and binding upon the Company in accordance with the terms thereof, provided that this provision shall not limit or restrict in any way the right of the Company at any time to remove from office, discharge or terminate the employment of any such officer, agent or employee prior to the expiration of the term of employment under any such contract, except that the Company shall not thereby be relieved of any continuing liability for salary or other compensation provided for in such contract.
ARTICLE VI
RESIGNATIONS, REMOVALS AND VACANCIES
Section 1. Resignations.
Any director, officer or agent of the Company, or any member of any committee, may resign at any time by giving written notice to the Board of Directors, to the Chairman of the Board of Directors, to the President or to the Secretary of the Company. Any such resignation shall take effect at the time specified therein, or if the time be not specified therein, then upon receipt thereof. The acceptance of such resignation shall not be necessary to make it effective.
Section 2. Removals.
At any meeting thereof called for the purpose, the holders of Common Stock and the holders of Class B Stock voting as provided in subsection 1.6 of Article FOURTH of the Certificate of Incorporation, as amended, may remove from office or terminate the employment of any director, officer or agent with or without cause; and the Board of Directors, by vote of not less than a majority of the entire Board at any meeting thereof called for the purpose, may, at any time, remove from office or terminate the employment of any officer, agent or member of any committee.
Section 3. Vacancies.
Subject to the last sentence of Section 1 of Article III, any vacancy in the office of any director, officer or agent through death, resignation, removal, disqualification, increase in the number of directors or other cause may be filled by the Board of Directors (in the case of vacancies in the Board, by the affirmative vote of a majority of the directors then in office, even though less than a quorum remains) and the person so elected shall hold office until his or her successor shall have been elected and shall have qualified.
ARTICLE VII
CAPITAL STOCK-DIVIDENDS-SEAL
Section 1. Certificates of Shares.
The certificates for shares of the capital stock of the Company shall be in such form, not inconsistent with the Certificate of Incorporation, as amended, as shall be approved by the Board of Directors. The certificates shall be signed by the Chairman of the Board of Directors, the President, a Vice Chairman of the Company, an Executive Vice President, a Group Vice President or a Vice President, and also by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary. Any and all signatures may be facsimiles.
All certificates shall bear the name of the person owning the shares represented thereby, shall state the number of shares represented by such certificate and the date of issue; and such information shall be entered in the Company's original stock ledger.
Section 2. Addresses of Stockholders.
It shall be the duty of every stockholder to notify the Company of his or her post office address and of any change therein. The latest address furnished by each stockholder shall be entered on the original stock ledger of the Company and the latest address appearing on such original stock ledger shall be deemed conclusively to be the post office address and the last-known post office address of such stockholder. If any stockholder shall fail to notify the Company of his or her post office address, it shall be sufficient to send corporate notices to such stockholder at the address, if any, understood by the Secretary to be his or her post office address, or in the absence of such address, to such stockholder, at the General Post Office in the City of Wilmington, State of Delaware.
Section 3. Lost, Destroyed or Stolen Certificate.
Any person claiming a stock certificate in lieu of one lost, destroyed or stolen, shall give the Company an affidavit as to his, her or its ownership of the certificate and of the facts which go to prove that it has been lost, destroyed or stolen. If required by the Board of Directors, he, she or it also shall give the Company a bond, in such form as may be approved by the Board of Directors, sufficient to indemnify the Company against any claim that may be made against it on account of the alleged loss of the certificate or the issuance of a new certificate.
Section 4. Fixing a Record Date.
The Board of Directors may fix in advance a date not exceeding (i) sixty (60) days preceding the date of any meeting of stockholders, or the date for payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of stock shall go into effect (other than conversions or exchanges pursuant to Sections 2, 3 or 4 of Article FOURTH of the Certificate of Incorporation, as amended), as a record date for the determination of the stockholders entitled to notice of and to vote at any such meeting and any adjournment thereof, or entitled to payment of any such dividend or to any such allotment of rights or to exercise the rights in respect of any such change, or conversion or exchange of stock (other than conversions or exchanges pursuant to Sections 2, 3 or 4 of Article FOURTH of the Certificate of Incorporation, as amended), or (ii), ten (10) days after adoption of the resolution fixing such date, as a record date for the determination of the stockholders entitled to consent in writing to corporate action; and in any such case, such stockholders and only such stockholders, as shall be stockholders of record on the date so fixed, shall be entitled, subject to the provisions of Article FOURTH of the Certificate of Incorporation, as amended, to such notice of and to vote at such meeting and any adjournment thereof or to receive payment of such dividend or to receive such allotment of rights or to exercise such rights or to give such consent, as the case may be, notwithstanding any transfer of any stock on the books of the Company after such record date.
Section 5. Regulations.
The Board of Directors shall have power and authority to make all such rules and regulations not inconsistent with any of the provisions of Sections 2, 3, 4 or 5 of Article FOURTH of the Certificate of Incorporation, as amended, as it may deem expedient, concerning the issue, transfer and registration of certificates for shares of the stock of the Company.
Section 6. Corporate Seal.
The corporate seal shall have inscribed thereon the name of the Company, the year of its organization, and the words "Corporate Seal" and "Delaware." If and when so authorized by the Board of Directors, a duplicate of the seal may be kept and used by the Secretary or Treasurer or by any Assistant Secretary or Assistant Treasurer.
ARTICLE VIII
EXECUTION OF CONTRACTS AND OTHER DOCUMENTS
Section 1. Contracts, etc.
Except as otherwise prescribed in these By-Laws, such officers, employees or agents of the Company as shall be specified by the Board of Directors shall sign, in the name and on behalf of the Company, all deeds, bonds, contracts, mortgages and other instruments or documents, the execution of which shall be authorized by the Board of Directors; and such authority may be general or confined to specific instances. Except as so authorized by the Board of Directors, no officer, agent or employee of the Company shall have power or authority to bind the Company by any contract or engagement or to pledge, mortgage, sell or otherwise dispose of its credit or any of its property or to render it pecuniarily liable for any purpose or in any amount.
Section 2. Checks, Drafts, etc.
Except as otherwise provided in these By-Laws, all checks, drafts, notes, bonds, bills of exchange or other orders, instruments or obligations for the payment of money shall be signed by such officer or officers, employee or employees, or agent or agents, as the Board of Directors shall by resolution direct. The Board of Directors may, in its discretion, also provide by resolution for the countersignature or registration of any or all such orders, instruments or obligations for the payment of money.
ARTICLE IX
FISCAL YEAR
The fiscal year of the Company shall begin the first day of January in each year.
ARTICLE X
MISCELLANEOUS
Section 1. Original Stock Ledger.
As used in these By-Laws and in the Certificate of Incorporation, as amended, the words "original stock ledger" shall mean the record maintained by the Secretary of the Company of the name and address of each of the holders of shares of any class of stock of the Company, and the number of shares and the numbers of the certificates for such shares held by each of them, taking into account transfers at the time made by and recorded on the transfer sheets of each of the Transfer Agents of the Company although such transfers may not then have been posted in the record maintained by the Secretary.
Section 2. Notices and Waivers Thereof.
Whenever any notice whatever is required by these By-Laws or by the Certificate of Incorporation, as amended, or by any of the laws of the State of Delaware to be given to any stockholder, director or officer, such notice, except as otherwise provided by the laws of the State of Delaware, may be given personally or by telephone or be given by cablegram, facsimile transmission, mailgram, radiogram, telegram or other form of recorded communication, addressed to such stockholder at the address set forth as provided in Section 2 of Article VII, or to such director or officer at his or her Company location, if any, or at such address as appears on the books of the Company, or the notice may be given in writing by depositing the same in a post office, or in a regularly maintained letter box, in a postpaid, sealed wrapper addressed to such stockholder at the address set forth in Section 2 of Article VII, or to such director or officer at his or her Company location, if any, or such address as appears on the books of the Company.
Any notice given by cablegram, mailgram, radiogram or telegram shall be deemed to have been given when it shall have been delivered for transmission. Any notice given by facsimile transmission or other form of recorded communication shall be deemed to have been given when it shall have been transmitted. Any notice given by mail shall be deemed to have been given when it shall have been mailed.
A waiver of any such notice in writing, including by cablegram, facsimile transmission, mailgram or telegram, signed or dispatched by the person entitled to such notice or by his or her duly authorized attorney, whether before or after the time stated therein, shall be deemed equivalent to the notice required to be given, and the presence at any meeting of any person entitled to notice thereof shall be deemed a waiver of such notice as to such person.
Section 3. Voting upon Stocks.
The Board of Directors (whose authorization in this connection shall be necessary in all cases) may from time to time appoint an attorney or attorneys or agent or agents of the Company, or may at any time or from time to time authorize the Chairman of the Board of Directors, the President, any Vice Chairman of the Company, any Executive Vice President, any Group Vice President, any Vice President, the Treasurer or the Secretary to appoint an attorney or attorneys or agent or agents of the Company, in the name and on behalf of the Company, to cast the votes which the Company may be entitled to cast as a stockholder or otherwise in any other corporation or association, any of the stock or securities of which may be held by the Company, at meetings of the holders of the stock or other securities of such other corporation or association, or to consent in writing to any action by any such other corporation or association, and the Board of Directors or any aforesaid officer so authorized may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and the Board of Directors or any aforesaid officer so authorized may from time to time authorize the execution and delivery, on behalf of the Company and under its corporate seal, or otherwise, of such written proxies, consents, waivers or other instruments as may be deemed necessary or proper in the premises.
ARTICLE XI
AMENDMENTS
The Board of Directors shall have power to make, alter, amend or repeal the By-Laws of the Company by vote of not less than a majority of the entire Board at any meeting of the Board. The holders of Common Stock and the holders of Class B Stock voting as provided in subsection 1.6 of Article FOURTH of the Certificate of Incorporation, as amended, shall have power to make, alter, amend or repeal the By-Laws at any regular or special meeting, if the substance of such amendment be contained in the notice of such meeting of stockholders.
This AMENDED AND RESTATED PROFIT MAINTENANCE AGREEMENT is dated as of January 1, 1999 between Ford Motor Company, a Delaware corporation ("Ford"), and Ford Motor Credit Company, a Delaware corporation ("Ford Credit").
WITNESSETH:
WHEREAS, Ford and Ford Credit (i) entered into a profit maintenance agreement dated as of December 12, 1974, as amended by amendments dated as of April 14, 1978, January 15, 1980, March 28, 1989, March 15, 1990 and July 1, 1993; and (ii) desire to further amend and restate the same to read as set forth below (such agreement as amended and restated hereby being hereinafter called the "Agreement").
NOW, THEREFORE, in consideration of the foregoing and of the mutual agreements hereinafter provided, the parties hereto hereby agree as follows:
1. As used herein, "Invested Capital" shall mean an amount equal to Ford Credit's total stockholder's equity, less any equity in the net assets of unconsolidated subsidiaries, as shown on the balance sheet of Ford Credit and its consolidated subsidiaries as of December 31 of the year preceding the calendar year for which any computation is made hereunder.
2. (a) To the extent necessary, Ford shall make a payment to Ford Credit, as of the end of each calendar quarter during the years 1999 through 2001 (beginning with the first quarter of 1999), equal to the greater of (i) an amount sufficient to cause the income before income taxes of Ford Credit and its consolidated subsidiaries for such calendar quarter, as shown on a consolidated statement of income of Ford Credit and its consolidated subsidiaries for such calendar quarter, to be not less than 2% on an annualized basis of Invested Capital, or (ii) an amount sufficient to cause the net income of Ford Credit and its consolidated subsidiaries for such calendar quarter, as shown on such statement of income, to be not less than 1% on an annualized basis of Invested Capital. In the event that the amounts computed under clauses (i) and (ii) above shall be equal, Ford shall make a payment to Ford Credit equal to such amount. The determination of whether and the extent to which any payment is required to be made as of the end of a calendar quarter shall be based on the latest available earnings forecast of Ford Credit and its consolidated subsidiaries for such calendar quarter.
(b) In the event that Ford shall have made a payment to Ford Credit under paragraph 2(a) with respect to any calendar quarter, and Ford Credit thereafter shall have for any subsequent calendar quarter during the same calendar year, both (i) income before income taxes of Ford Credit and its consolidated subsidiaries in an amount in excess of 2% on an annualized basis of Invested Capital, and (ii) net income of Ford Credit and its consolidated subsidiaries in an amount in excess of 1% on an annualized basis of Invested Capital, Ford Credit shall repay to Ford an amount equal to the lesser of (A) an amount sufficient to reduce income before income taxes of Ford Credit and its consolidated subsidiaries to 2% on an annualized basis of Invested Capital, or (B) an amount sufficient to reduce net income of Ford Credit and its consolidated subsidiaries to 1% on an annualized basis of Invested Capital (but not to exceed the aggregate of any payments made to Ford Credit under paragraph 2(a) during such year less any prior repayments made by Ford Credit during such year under this paragraph 2(b)). In the event that the amounts computed under clauses (A) and (B) above shall be equal, Ford Credit shall make a repayment to Ford equal to such amount.
3. During the years 1999 through 2001, Ford Credit shall continue to make inventory and capital financing generally available to dealers of vehicles manufactured or sold by Ford and shall continue to make retail and lease financing generally available to such dealers' customers to no less an extent than Ford Credit made such services available during 1998.
4. All determinations hereunder shall be made in accordance with generally accepted accounting principles.
5. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated hereby and shall supersede all prior agreements between the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
FORD MOTOR COMPANY
By:/s/Malcolm S. Macdonald -------------------------- Name: Malcolm S. Macdonald Title: Vice President and Treasurer |
FORD MOTOR CREDIT COMPANY
By:/s/David P. Cosper -------------------------- Name: David P. Cosper Title: Vice President - Treasurer |
Paragraph 10 is amended by adding the following new Paragraph 10i at the end thereof:
"10i. Transfer of Deferral Accounts and Complete Termination of the Plan. Anything in this Plan to the contrary notwithstanding, all outstanding book entry deferral accounts maintained under the Plan in the form of contingent credits for cash and/or Common Stock shall be transferred to the Company's Deferred Compensation Plan and governed by the provisions of that plan, effective as of the close of business on October 16, 1998. Upon such transfer, contingent credits for cash shall be valued based on the Fidelity Retirement Money Market Portfolio and contingent credits for Common Stock shall be valued based on the Ford Stock Fund until such time, if any, as all or part of such amounts are transferred by the applicable participants to other investment options available under the Deferred Compensation Plan. Ultimate payout of a transferred deferral account shall be in cash, except that, to the extent that the transferred account is valued based on the Ford Stock Fund, the participant may make an election prior to the transfer of the account to receive the ultimate payout in whole shares of Common Stock. Upon completion of the transfer of the deferral accounts to the Deferred Compensation Plan from the Plan, the Plan shall terminate in its entirety."
Exhibit 10-T-8
The following new paragraph (q) is added to Section 2:
"(q) The term 'ARC Plan' shall mean the Automotive Rental Corporation Executive Management Incentive Plan, as amended."
Paragraph (f) of Section 4 is amended to read as follows:
"(f) Deferrals of Awards Under AIC Plan, RPM Plan or ARC Plan. Notwithstanding anything contained in the Plan to the contrary, subject to any limitations determined under paragraph (a) or paragraph (e) of this Section 4, U.S. employees who receive an award payable only in cash under the AIC Plan, the RPM Plan or the ARC Plan are eligible to defer payment under the Plan from 1% to 100%, in 1% increments, of such amount net of applicable taxes, but not less than $1,000, provided that such employees are actively employed by the Company in salary grade 11 or above or the equivalent at the time of the election to defer. Unless otherwise determined by the Compensation and Option Committee, deferrals of cash awards under the AIC Plan, the RPM Plan or the ARC Plan shall be subject to the same terms and conditions of the Plan that apply to deferrals of awards of supplemental compensation under the SC Plan. For purposes of the Plan, any references to awards or payments of supplemental compensation shall be deemed to cover cash awards or cash payments under the AIC Plan, the RPM Plan and the ARC Plan."
The fifth sentence of paragraph (e) of Section 5 is amended and replaced by the following two sentences:
"In addition, with respect to any particular deferral under the Plan, the participant shall elect (i) the year in which distribution shall be made or distribution upon retirement and (ii) the method of distribution desired with respect to any such deferral election if the participant elected distribution upon retirement, i.e., in a lump sum payment or in up to ten annual installments."
The first sentence of Paragraph (a) of Section 10 is amended to read as follows:
"Except as otherwise provided in paragraph (b) of this Section 10 or in Section 12, or as otherwise determined by the Committee, distribution of all or any part of a participant's Deferred Compensation Account shall be made on, or as soon thereafter as practicable, (i) March 15 of the year selected by the participant for distribution with respect to the particular deferral if the participant is an active employee of the Company on the distribution date, (ii) the March 15 following death or termination for reasons other than retirement, notwithstanding any prior selection by the participant of a subsequent year for distribution with respect to the
particular deferral, (iii) the March 15 following retirement if the participant selected distribution upon retirement with respect to the particular deferral and a lump sum distribution was selected, or if the participant selected a particular year for distribution with respect to the particular deferral but retired prior to the year selected, or (iv) the March 15 following retirement with respect to the first annual installment and continuing on the applicable number of consecutive anniversaries of such date if no more than ten annual installments were selected by the participant with respect to the particular deferral."
Description of Amendment to the Supplemental Executive Retirement Plan adopted September 10, 1998
The Supplemental Executive Retirement Plan (SERP) was amended September 10, 1998 to provide to Company U.S. Vice Presidents and above whose careers include subsidiary service a comparable retirement benefit under the General Retirement Plan (GRP) and Benefit Equilization Plan (BEP) as if they had been a participant under those plans for their entire career. Generally, the executive's additional SERP retirement benefit will be the difference between (i) the GRP/BEP contributory benefit calculated as if the executive's total service had been recognized as contributory service under the plans (less any years the executive could have contributed to a Company sponsored retirement plan but failed to do so), and (ii) the amount of all retirement income payable from Company sponsored retirement plans. The amendment is effective for retirements beginning October 1, 1998.
Exhibit 10-W-1
The following paragraph (d) is added to Article 6:
"6. (d) Salaried Employee. Notwithstanding anything contained in the Plan to the contrary, the term 'salaried employee', for purposes of this Article 6, shall be deemed to include any salaried employee of the Company or any other person designated by the Committee for an award under this Article 6."
Ford Motor Company The American Road P.O. Box 1899 Dearborn, Michigan 48121-1899
January 13, 1999
Mr. Edsel B. Ford II
Ford Motor Company
The American Road
Dearborn, MI 48121
Dear Mr. Ford:
This will confirm the agreement between you and the Company with respect to consulting and related services.
1. During the term of the agreement, you will be available for consultation and representation of the Company in various matters, generally as outlined in the attachment, as well as for such other appropriate duties as you and the Company may agree upon, and you will make yourself available to serve as a Director of the Company. Your consulting activities under this agreement shall be coordinated by a Company Representative. The Company Representative shall be the Vice Chairman - Chief of Staff or such other person as the Company shall nominate in writing.
2. The agreement will commence on January 13, 1999 and will continue in effect until terminated by either party upon 30 days' written notice to the other.
3. As a condition of the Company's obligations under this agreement, during its term you will not, without the written permission of the Company, engage in any activity that is directly or indirectly in competition with any activity of the Company or any subsidiary or in conduct that is inimical to the best interests of the Company, and will hold in confidence product plans and other proprietary information which you have concerning the Company.
4. In consideration of your agreement described above, the Company will, during the term of the agreement, pay you at the rate of $500,000 per year, payable quarterly, in the form of restricted shares of Ford Motor Company Common Stock, reimburse you for travel-related expenses incurred in connection with work performed under this agreement and provide you with the following facilities: (i) an office within the Company's World Headquarters and a secretary assigned to that office; and (ii) the club memberships for which the Company reimburses you.
5. This shall not affect your right, as long as you continue to serve as a member of the Board of Directors or any committee thereof, to be paid whatever fees are established from time to time for services in those capacities.
If the foregoing correctly sets forth the agreement between you and the Company, please sign and return the enclosed copy of this letter.
FORD MOTOR COMPANY
By /s/John M. Rintamaki |
AGREED:
/s/Edsel B. Ford II --------------------- Edsel B. Ford II |
Attachment to Consulting Agreement
Community Relations
Dealer Relations
Education Projects
Heritage Events
Motorsports
Exhibit 12
Ford Motor Company and Subsidiaries
CALCULATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
----------------------------------------------------------------------------------------
(in millions)
For the Years Ended December 31
-----------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- -------
Earnings
--------
Income/(Loss) before income taxes
and cumulative effects of changes
in accounting principles $25,396 $10,939 $ 6,793 $ 6,705 $ 8,789
Equity in net loss/(income) of
affiliates plus dividends from
affiliates 78 121 36 179 (182)
Adjusted fixed charges a/ 9,215 10,911 10,801 10,556 8,122
------- ------- ------- ------- -------
Earnings $34,689 $21,971 $17,630 $17,440 $16,729
======= ======= ======= ======= =======
Combined Fixed Charges and
Preferred Stock Dividends
--------------------------
Interest expense b/ $ 8,919 $10,570 $10,464 $10,121 $ 7,787
Interest portion of rental expense c/ 245 309 300 396 265
Preferred stock dividend requirements
of majority owned subsidiaries and
trusts d/ 55 55 55 199 160
------- ------- ------- ------- -------
Fixed charges 9,219 10,934 10,819 10,716 8,212
Ford preferred stock dividend
requirements e/ 122 82 95 459 472
------- ------- ------- ------- -------
Total combined fixed charges
and preferred stock dividends $ 9,341 $11,016 $10,914 $11,175 $ 8,684
======= ======= ======= ======= =======
Ratios
------
Ratio of earnings to fixed charges f/ 3.8 2.0 1.6 1.6 2.0
Ratio of earnings to combined fixed
charges and preferred stock dividends f/ 3.7 2.0 1.6 1.6 1.9
|
is 2.0.
Exhibit 21
SUBSIDIARIES OF FORD MOTOR COMPANY AS OF MARCH 15, 1999*
--------------------------------------------------------
Organization Jurisdiction
------------ ------------
Cadiz Electronica, S.A. Spain
Carplastic S.A. de C.V. Mexico
Ford Argentina S.A. Argentina
Ford Automotive Holdings England
Ford Motor Company Limited England
Jaguar Limited England
Ford Brasil Ltda. Brazil
Ford Capital B.V. The Netherlands
Ford Electronica Portuguesa, Ltd. Bermuda
Ford Electronics and Refrigeration LLC Delaware, U.S.A.
Ford Electronics Manufacturing Corporation Canada
Ford Enhanced Investment Partnership Michigan, U.S.A.
Ford Enhanced Return Partnership Michigan, U.S.A.
Ford Espana S.A. Spain
Ford Export Services B.V. The Netherlands
Ford European Holdings, Inc. Delaware, U.S.A.
Ford Deutschland Holding, GmbH Germany
Ford Werke AG Germany
Ford FSG, Inc. Delaware, U.S.A.
Ford Motor Credit Company Delaware, U.S.A.
The American Road Insurance Company Michigan, U.S.A.
Ford Credit Auto Receivables Corporation Delaware, U.S.A.
Ford Credit Auto Receivables LLC Delaware, U.S.A.
Ford Credit International, Inc. Delaware, U.S.A.
Ford Credit Canada Limited Canada
FCE Bank plc England
Primus Automotive Financial Services, Inc. New York, U.S.A.
Ford Global Technologies, Inc. Michigan, U.S.A.
Ford Holdings, Inc. Delaware, U.S.A.
Ford Motor Land Development Corporation Delaware, U.S.A.
Ford International Capital Corporation Delaware, U.S.A.
Ford Investment Partnership Michigan, U.S.A.
Ford Italiana S.p.A. Italy
Ford Motor Company (Austria) K.G. Austria
Ford Motor Company (Belgium) N.V. Belgium
Ford Motor Company of Canada, Limited Ontario, Canada
Essex Manufacturing Ontario, Canada
Ford Motor Company of Australia Limited Australia
Ford Lio Ho Motor Company Ltd. Taiwan
Ford Motor Company (Japan), Ltd. Japan
Ford Motor Company, S.A. de C.V. Mexico
Ford Motor de Venezuela, S.A. Venezuela
Ford Nederland B.V. The Netherlands
Ford Super Enhanced Return Partnership Michigan, U.S.A.
Ford Treasury Services Dublin Ireland
Groupe Ford France SAS France
Ford Aquitaine Industrie SAS France
Ford Ardennes Industrie SAS France
Ford France Automobile SAS France
The Hertz Corporation Delaware, U.S.A.
Transcon Insurance Limited
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284 Other U.S. Subsidiaries
301 Other Non-U.S. Subsidiaries
* Subsidiaries are not shown by name in the above list if, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary.
PricewaterhouseCoopers LLP
400 Renaissance Center
Detroit, MI 48243-1507
Telephone (313)446-7100
Facsmilie (313)446-7117
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
Re: Ford Motor Company Registration Statements Nos. 33-9722, 333-46295, 333-47443, 333-47445, 333-47451, 333-47733, 333-47735, 333-49545, 333-49547, 333-49551, 333-52399, 333-58695, 333-58697, 333-58701, 333-65703, and 333-70447 on Form S-8, and 333-52485, 333-67209, and 333-67211 on Form S-3
We consent to the incorporation by reference in the above Registration Statements of our report dated January 21, 1999 on our audits of the consolidated financial statements of Ford Motor Company and Subsidiaries as of December 31, 1998 and 1997, and for the years ended December 31, 1998, 1997 and 1996, which report is included in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which report is also included in this Annual Report on Form 10-K.
/s/PricewaterhouseCoopers LLP 400 Renaissance Center Detroit, Michigan March 16, 1999 |
Exhibit 24
The undersigned, Peter Sherry, Jr., an Assistant Secretary of FORD MOTOR COMPANY, a Delaware corporation (the "Company"), DOES HEREBY CERTIFY that the following resolutions were adopted at a meeting of the Board of Directors of the Company duly called and held on March 11, 1999 and that the same are in full force and effect:
RESOLVED, That preparation of an Annual Report of the Company on Form 10-K for the year ended December 31, 1998 (the "10-K Report"), including exhibits and other documents, to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended, be and hereby is in all respects authorized and approved; that the draft 10-K Report presented to this meeting be and hereby is approved in all respects; that the directors and appropriate officers of the Company, and each of them, be and hereby are authorized to sign and execute in their own behalf, or in the name and on behalf of the Company, or both, as the case may be, the 10-K Report, and any and all amendments thereto, with such changes therein as such directors and officers may deem necessary, appropriate or desirable, as conclusively evidenced by their execution thereof; and that the appropriate officers of the Company, and each of them, be and hereby are authorized to cause the 10-K Report and any such amendments, so executed, to be filed with the Commission.
RESOLVED, That each officer and director who may be required to sign and execute the 10-K Report or any amendment thereto or document in connection therewith (whether in the name and on behalf of the Company, or as an officer or director of the Company, or otherwise), be and hereby is authorized to execute a power of attorney appointing J. M. Devine, W. A. Swift, J. M. Rintamaki, L. J. Ghilardi and N. A. Patino, and each of them, severally, his or her true and lawful attorney or attorneys to sign in his or her name, place and stead in any such capacity the 10-K Report and any and all amendments thereto and documents in connection therewith, and to file the same with the Commission, each of said attorneys to have power to act with or without the other, and to have full power and authority to do and perform in the name and on behalf of each of said officers and directors who shall have executed such power of attorney, every act whatsoever which such attorneys, or any of them, may deem necessary, appropriate or desirable to be done in connection therewith as fully and to all intents and purposes as such officers or directors might or could do in person.
WITNESS my hand as of this 11th day of March, 1999.
/s/Peter Sherry, Jr. ---------------------------- Peter Sherry, Jr. Assistant Secretary |
(SEAL)
Each of the undersigned, a director or officer of FORD MOTOR COMPANY, appoints each of J. M. Devine, W. A. Swift, J. M. Rintamaki, L. J. Ghilardi and N. A. Patino his or her true and lawful attorney and agent to do any and all acts and things and execute any and all instruments which the attorney and agent may deem necessary or advisable in order to enable FORD MOTOR COMPANY to comply with the Securities Exchange Act of 1934, and any requirements of the Securities and Exchange Commission, in connection with the Annual Report of FORD MOTOR COMPANY on Form 10-K for the year ended December 31, 1998 and any and all amendments thereto, as authorized at a meeting of the Board of Directors of FORD MOTOR COMPANY held on March 11, 1999, including, but not limited to, power and authority to sign his or her name (whether on behalf of FORD MOTOR COMPANY, or as a director or officer of FORD MOTOR COMPANY, or by attesting the seal of FORD MOTOR COMPANY, or otherwise) to such instruments and to such Annual Report and any amendments thereto, and to file them with the Securities and Exchange Commission. The undersigned ratifies and confirms all that any of the attorneys and agents shall do or cause to be done by virtue hereof. Any one of the attorneys and agents shall have, and may exercise, all the powers conferred by this instrument.
Each of the undersigned has signed his or her name as of the 11th day of March, 1999.
/s/ William Clay Ford, Jr. /s/ Jacques A. Nasser -------------------------------- ----------------------------- (William Clay Ford, Jr.) (Jacques A. Nasser) /s/ Michael D. Dingman /s/ Edsel B. Ford II -------------------------------- ----------------------------- (Michael D. Dingman) (Edsel B. Ford II) /s/ William Clay Ford /s/ Irvine O. Hockaday, Jr. -------------------------------- ------------------------------ (William Clay Ford) (Irvine O. Hockaday, Jr.) /s/ Marie-Josee Kravis /s/ Ellen R. Marram -------------------------------- ------------------------------ (Marie-Josee Kravis) (Ellen R. Marram) /s/ Homer A. Neal /s/ Carl E. Reichardt -------------------------------- ------------------------------ (Homer A. Neal) (Carl E. Reichardt) /s/ John L. Thornton /s/ John M. Devine -------------------------------- ------------------------------ (John L. Thornton) (John M. Devine) /s/ William A. Swift -------------------------------- (William A. Swift) |