UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
- --- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000 OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-3950
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FORD MOTOR COMPANY
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(Exact name of registrant as specified in its charter)
Incorporated in Delaware 38-0549190
------------------------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One American Road, Dearborn, Michigan 48126
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 313-322-3000
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Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date: As of June 30, 2000, the Registrant had outstanding 1,134,011,618 shares
of Common Stock and 70,852,076 shares of Class B Stock.
Exhibit index located on sequential page number 24
Ford Motor Company and Subsidiaries
HIGHLIGHTS
----------
Second Quarter First Half
---------------------------- ---------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(unaudited) (unaudited)
Worldwide vehicle unit sales of
cars and trucks (in thousands)
- - North America 1,304 1,237 2,613 2,457
- - Outside North America 687 691 1,289 1,246
----- ----- ----- -----
Total 1,991 1,928 3,902 3,703
===== ===== ===== =====
Sales and revenues (in millions)
- - Automotive $ 37,366 $ 35,546 $ 73,541 $ 67,143
- - Financial Services 7,153 6,361 13,872 12,313
--------- --------- --------- ---------
Total $ 44,519 $ 41,907 $ 87,413 $ 79,456
========= ========= ========= =========
Net income (loss) (in millions)
- - Automotive $ 1,052 $ 1,651 $ 2,604 $ 3,097
- - Financial Services 461 407 841 735
--------- --------- --------- ---------
Income from continuing operations 1,513 2,058 3,445 3,832
- - Discontinued operation (Visteon) 162 280 309 485
- - Loss on spin-off of Visteon (2,252) - (2,252) -
--------- --------- --------- ---------
Total $ (577) $ 2,338 $ 1,502 $ 4,317
========= ========= ========= =========
Capital expenditures (in millions)
- - Automotive $ 1,453 $ 1,566 $ 2,952 $ 2,709
- - Financial Services 158 140 464 284
--------- --------- --------- ---------
Total $ 1,611 $ 1,706 $ 3,416 $ 2,993
========= ========= ========= =========
Automotive capital expenditures as a
percentage of sales 3.9% 4.4% 4.0% 4.0%
Stockholders' equity at June 30
- - Total (in millions) $ 24,643 $ 26,327 $ 24,643 $ 26,327
- - Annualized after-tax return on Common
and Class B stockholders' equity 26.6% 38.7% 22.0% 35.0%
Automotive net cash at June 30
(in millions)
- - Cash and marketable securities $ 25,557 $ 22,395 $ 25,557 $ 22,395
- - Debt 10,804 11,177 10,804 11,177
--------- --------- --------- ---------
Automotive net cash $ 14,753 $ 11,218 $ 14,753 $ 11,218
========= ========= ========= =========
After-tax return on sales
- - North American Automotive 6.7% 6.7% 6.4% 6.2%
- - Total Automotive 2.9% 4.7% 3.6% 4.7%
Shares of Common and Class B Stock
(in millions)
- - Average number outstanding 1,205 1,211 1,206 1,211
- - Number outstanding at June 30 1,205 1,210 1,205 1,210
Common Stock price (per share)
(adjusted to reflect Visteon spin-off)
- - High $55 $65-1/4 $55 $65-1/4
- - Low 40-3/8 50-1/2 39-3/8 50-1/2
AMOUNTS PER SHARE OF COMMON AND
CLASS B STOCK AFTER PREFERRED
STOCK DIVIDENDS
Income assuming dilution
- - Automotive $ 0.86 $ 1.33 $ 2.12 $ 2.50
- - Financial Services 0.38 0.33 0.69 0.59
--------- --------- --------- ---------
Subtotal 1.24 1.66 2.81 3.09
- - Discontinued operation (Visteon) 0.13 0.23 0.25 0.39
- - Loss on spin-off of Visteon (1.84) - (1.84) -
--------- --------- --------- ---------
Total $ (0.47) $ 1.89 $ 1.22 $ 3.48
========= ========= ========= =========
Cash dividends $ 0.50 $ 0.46 $ 1.00 $ 0.92
-1-
Ford Motor Company and Subsidiaries
VEHICLE UNIT SALES
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For the Periods Ended June 30, 2000 and 1999
(in thousands)
Second Quarter First Half
------------------------ --------------------------
2000 1999 2000 1999
-------- -------- -------- --------
(unaudited) (unaudited)
North America
United States
Cars 445 448 925 852
Trucks 742 679 1,464 1,419
----- ----- ----- -----
Total United States 1,187 1,127 2,389 2,271
Canada 80 80 159 137
Mexico 37 30 65 49
----- ----- ----- -----
Total North America 1,304 1,237 2,613 2,457
Europe
Britain 139 136 254 262
Germany 83 111 174 201
Italy 58 61 107 111
Spain 54 54 94 97
France 41 53 83 91
Other countries 168 154 308 253
----- ----- ----- -----
Total Europe 543 569 1,020 1,015
Other international
Brazil 35 34 63 56
Australia 37 33 61 64
Taiwan 19 15 41 32
Argentina 12 14 27 29
Japan 8 9 17 16
Other countries 33 17 60 34
----- ----- ----- -----
Total other international 144 122 269 231
----- ----- ----- -----
Total worldwide vehicle unit sales 1,991 1,928 3,902 3,703
===== ===== ===== =====
Vehicle unit sales generally 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.
-2-
Part I. Financial Information
------------------------------
Item 1. Financial Statements
- -----------------------------
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
For the Periods Ended June 30, 2000 and 1999
(in millions)
Second Quarter First Half
-------------------------- --------------------------
2000 1999 2000 1999
---------- ----------- ----------- ----------
(unaudited) (unaudited)
AUTOMOTIVE
Sales $37,366 $35,546 $73,541 $67,143
Costs and expenses (Notes 5 & 6)
Costs of sales 33,515 30,796 65,093 58,533
Selling, administrative and other expenses 2,458 2,296 4,723 4,073
------- ------- ------- -------
Total costs and expenses 35,973 33,092 69,816 62,606
Operating income 1,393 2,454 3,725 4,537
Interest income 389 346 757 685
Interest expense 327 337 645 622
------- ------- ------- -------
Net interest income 62 9 112 63
Equity in net income (loss) of affiliated companies 29 (12) (3) 22
Net revenue (expense) from transactions with
Financial Services 20 (17) 10 (45)
------- ------- ------- -------
Income before income taxes - Automotive 1,504 2,434 3,844 4,577
FINANCIAL SERVICES
Revenues 7,153 6,361 13,872 12,313
Costs and expenses
Interest expense 2,311 1,825 4,524 3,713
Depreciation 2,398 2,391 4,606 4,548
Operating and other expenses 1,249 1,101 2,460 2,098
Provision for credit and insurance losses 411 372 865 763
------- ------- ------- -------
Total costs and expenses 6,369 5,689 12,455 11,122
Net revenue (expense) from transactions with
Automotive (20) 17 (10) 45
------- ------- ------- -------
Income before income taxes - Financial Services 764 689 1,407 1,236
------- ------- ------- -------
TOTAL COMPANY
Income before income taxes 2,268 3,123 5,251 5,813
Provision for income taxes 728 1,034 1,750 1,927
------- ------- ------- -------
Income before minority interests 1,540 2,089 3,501 3,886
Minority interests in net income of subsidiaries 27 31 56 54
------- ------- ------- -------
Net income from continuing operations 1,513 2,058 3,445 3,832
Net income from discontinued operation (Note 2) 162 280 309 485
Loss on spin-off of discontinued operation (Note 2) 2,252 - 2,252 -
------- ------- ------- -------
Net income (loss) $ (577) $ 2,338 $ 1,502 $ 4,317
======= ======= ======= =======
Income (loss) attributable to Common and Class B
Stock after preferred stock dividends $ (580) $ 2,335 $1,495 $ 4,310
Average number of shares of Common and Class B
Stock outstanding 1,205 1,211 1,206 1,211
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
Basic Income (Note 10)
Net income (loss) from continuing operations $ 1.26 $ 1.70 $ 2.87 $ 3.17
Net income (loss) (0.48) 1.93 1.25 3.57
Diluted Income (Note 10)
Net income (loss) from continuing operations $ 1.24 $ 1.66 $ 2.81 $ 3.09
Net income (loss) (0.47) 1.89 1.22 3.48
Cash dividends $ 0.50 $ 0.46 $ 1.00 $ 0.92
The accompanying notes are part of the financial statements.
-3-
Ford Motor Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
--------------------------
(in millions)
June 30, December 31,
2000 1999
-------------- ---------------
(unaudited)
ASSETS
Automotive
Cash and cash equivalents $ 6,989 $ 2,793
Marketable securities 18,568 18,943
-------- --------
Total cash and marketable securities 25,557 21,736
Receivables 3,897 5,267
Inventories (Note 7) 6,251 5,684
Deferred income taxes 2,886 3,762
Other current assets 5,022 3,831
Current receivable from Financial Services 1,869 2,304
-------- --------
Total current assets 45,482 42,584
Equity in net assets of affiliated companies (Note 3) 5,349 2,539
Net property 34,677 36,528
Deferred income taxes 3,587 2,454
Net assets of discontinued operation (Note 2) - 1,566
Other assets 12,262 13,530
-------- --------
Total Automotive assets 101,357 99,201
Financial Services
Cash and cash equivalents 1,675 1,588
Investments in securities 582 733
Finance receivables, net 121,217 113,298
Net investment in operating leases 46,385 42,471
Other assets 10,919 11,123
Receivable from Automotive 2,445 1,835
-------- --------
Total Financial Services assets 183,223 171,048
-------- --------
Total assets $284,580 $270,249
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive
Trade payables $ 14,840 $ 14,292
Other payables 3,933 3,778
Accrued liabilities 21,372 18,488
Income taxes payable 2,240 1,709
Debt payable within one year 862 1,338
-------- --------
Total current liabilities 43,247 39,605
Long-term debt 9,942 10,398
Other liabilities 31,906 29,283
Deferred income taxes 684 1,223
Payable to Financial Services 2,445 1,835
-------- --------
Total Automotive liabilities 88,224 82,344
Financial Services
Payables 5,054 3,550
Debt 149,063 139,919
Deferred income taxes 8,137 7,078
Other liabilities and deferred income 6,916 6,775
Payable to Automotive 1,869 2,304
-------- --------
Total Financial Services liabilities 171,039 159,626
Company-obligated mandatorily redeemable preferred securities of a subsidiary
trust holding solely junior subordinated debentures of the Company (Note 8) 674 675
Stockholders' equity
Capital stock
Preferred Stock, par value $1.00 per share (aggregate liquidation preference
of $177 million) * *
Common Stock, par value $1.00 per share (1,151 million shares issued) 1,151 1,151
Class B Stock, par value $1.00 per share (71 million shares issued) 71 71
Capital in excess of par value of stock 4,936 5,049
Accumulated other comprehensive income (2,934) (1,856)
ESOP loan and treasury stock (1,404) (1,417)
Earnings retained for use in business 22,823 24,606
-------- --------
Total stockholders' equity 24,643 27,604
-------- --------
Total liabilities and stockholders' equity $284,580 $270,249
======== ========
- - - - -
*Less than $1 million
The accompanying notes are part of the financial statements.
Visteon is reflected as a discontinued operation (Note 2)
-4-
Ford Motor Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
For the Periods Ended June 30, 2000 and 1999
(in millions)
First Half 2000 First Half 1999
--------------------------- --------------------------
Financial Financial
Automotive Services Automotive Services
------------- ----------- ------------- -----------
(unaudited) (unaudited)
Cash and cash equivalents at January 1 $ 2,793 $ 1,588 $ 3,143 $ 1,151
Cash flows from operating activities before securities trading 9,181 9,466 8,572 4,074
Net sales (purchases) of trading securities 419 60 762 (86)
------- -------- ------- --------
Net cash flows from operating activities 9,600 9,526 9,334 3,988
Cash flows from investing activities
Capital expenditures (2,952) (464) (2,709) (284)
Acquisitions of receivables and lease investments - (44,986) - (39,237)
Collections of receivables and lease investments - 22,211 - 25,292
Net acquisitions of daily rental vehicles - (2,469) - (1,901)
Purchases of securities (2,261) (302) (878) (533)
Sales and maturities of securities 2,217 312 669 609
Proceeds from sales of receivables and lease investments - 7,704 - 5,005
Net investing activity with Financial Services 45 - (100) -
Cash paid for acquisitions (Note 3) (2,060) (76) (5,834) -
Other - 190 (57) (6)
------- -------- ------- -------
Net cash used in investing activities (5,011) (17,880) (8,909) (11,055)
Cash flows from financing activities
Cash dividends (1,578) - (1,122) (2)
Issuance (purchases) of Common Stock (192) - (246) -
Changes in short-term debt (707) (5,588) 84 6,263
Proceeds from issuance of other debt 205 22,321 1,619 13,874
Principal payments on other debt (424) (7,574) (117) (13,596)
Net debt repayments (new debt) with discontinued operations 650 - (961) -
Net cash distribution (to) from discontinued operations (85) - 232 -
Net financing activity with Automotive - (45) - 100
Other 694 517 539 (26)
------- -------- ------- --------
Net cash (used in)/provided by financing activities (1,437) 9,631 28 6,613
Effect of exchange rate changes on cash (1) (145) (43) (187)
Net transactions with Automotive/Financial Services 1,045 (1,045) (717) 717
------- -------- ------- --------
Net increase (decrease) in cash and cash equivalents 4,196 87 (307) 76
------- -------- ------- --------
Cash and cash equivalents at June 30 $ 6,989 $ 1,675 $ 2,836 $ 1,227
======= ======== ======= ========
Visteon is reflected as a discontinued operation (Note 2)
The accompanying notes are part of the financial statements.
-5-
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
1. Financial Statements - The financial data presented herein are unaudited,
but in the opinion of management reflect those adjustments necessary for a
fair presentation of such information. Results for interim periods should
not be considered indicative of results for a full year. Reference should
be made to the financial statements contained in the registrant's Annual
Report on Form 10-K (the "10-K Report") for the year ended December 31,
1999. For purposes of Notes to Financial Statements, "Ford" or the
"Company" means Ford Motor Company and its majority owned subsidiaries
unless the context requires otherwise. Certain amounts for prior periods
were reclassified to conform with present period presentation.
2. Discontinued Operation - On June 28, 2000, Ford distributed 130 million
shares of Visteon which represented its 100% ownership interest by means of
a tax-free spin-off in the form of a dividend on Ford Common and Class B
Stock.
Holders of Ford Common and Class B Stock on the record date received
0.130933 shares of Visteon common stock for each share of Ford stock, and
participants in U.S. employee savings plans on the record date received
$1.72 in cash per share of Ford stock, based on the volume-weighted average
price of Visteon stock of $13.1326 per share on June 28, 2000. The total
value of the distribution (including the $365 million cash dividend) was
$2.1 billion or $1.72 per diluted share of Ford stock.
As a result of the spin-off of Visteon, Ford recorded an after-tax loss of
$2.3 billion. This represents the excess of the carrying value of Ford's
net investment in Visteon over the market value of Visteon on the
distribution date. Our financial statements have been restated to reflect
Visteon as a "discontinued operation" for all periods shown. The balance
sheet at June 30, 2000 no longer includes Visteon.
Sales and selected income data for Visteon were (in millions):
Second Quarter First Half
------------------------- --------------------------
2000 1999 2000 1999
----------- ---------- ---------- ----------
Revenues $5,309 $5,063 $10,534 $9,835
Income before income taxes $ 266 $ 449 $ 503 $ 762
Provision for income taxes (96) (164) (182) (276)
Minority interest in net income of
subsidiaries (8) (5) (12) (1)
------ ------ ------ ------
Net income $ 162 $ 280 $ 309 $ 485
====== ====== ====== ======
3. Purchase of BMW's Land Rover business - On June 30, 2000, we purchased the
Land Rover business from the BMW Group for a purchase price of
approximately three billion euros. Approximately two-thirds of the purchase
price (equivalent of $1.9 billion at June 30) was paid at time of closing.
The remainder will be paid in 2005. The acquisition involves the entire
Land Rover line of products, and related assembly and engineering
facilities. It does not include Rover's passenger car business or financial
services business.
The acquisition will be accounted for as a purchase. The assets purchased,
liabilities assumed and the results of operations of Land Rover will be
included in our financial statements on a consolidated basis beginning in
the third quarter of 2000. Our investment in Land Rover at June 30, 2000 is
included in Equity in net assets of affiliated companies.
4. Value Enhancement Plan - In April, 2000, our Board of Directors approved in
principle a recapitalization of the Company, known as the Value Enhancement
Plan. The recapitalization will be effected through the merger of Ford
Value Corporation, a wholly owned subsidiary of the Company, with and into
the Company pursuant to a Recapitalization Agreement and Plan of Merger,
dated as of June 27, 2000 (the "Agreement"). On June 27, 2000, our Board of
Directors approved the Agreement. The recapitalization is subject to
shareholder approval; shareholders of record on June 27, 2000 will be
eligible to vote on the recapitalization at a special meeting of
shareholders scheduled for August 2, 2000.
In the recapitalization, holders of the Company's Common and Class B Stock
will exchange each share of Common or Class B Stock for one share of a new
class of Common or Class B Stock (depending on the class owned before the
recapitalization) and, at the holders' option, one of the following: (1)
$20 in cash, subject to adjustment, (2) approximately 0.748 shares of a new
class of common stock with a value of $20, calculated as provided in the
Agreement, or (3) a combination of cash and a new class of common stock,
with an aggregate value of $20, also calculated as provided in the
Agreement, with the relative cash and stock portions determined pursuant to
a formula intended to result in a stockholder maintaining approximately 99%
of his or her percentage ownership interest in the Company. The total cash
distributed in the recapitalization will be limited to $10 billion.
-6-
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
5. Selected Automotive costs and expenses are summarized as follows (in
millions):
Second Quarter First Half
--------------------- ---------------------
2000 1999 2000 1999
--------- -------- --------- --------
Depreciation $718 $668 $1,412 $1,284
Amortization 628 572 1,202 1,133
Pension benefit (52) 103 14 206
Acquisition of AB Volvo's worldwide passenger car business ("Volvo Car")-
Second quarter 1999 financial results include a one-time profit reduction
of $146 million, or $0.11 per share of diluted Common and Class B Stock,
related to the acquisition of Volvo Car. Under U.S. accounting rules, we
were required to write-up inventory acquired to fair value, resulting in a
one-time increase to cost of sales.
Dissolution of AutoEuropa Joint Venture - Effective January 1, 1999, our
joint venture for the production of mini-vans with Volkswagon AG in
Portugal (AutoEuropa) was dissolved resulting in a $255 million pre-tax
gain ($165 million after-tax) in the first quarter of 1999.
6. European Charges - Following an extensive business review of the Ford Brand
operations in Europe, the Company recorded a pre-tax charge in Automotive
cost of sales of $1,568 million in the second quarter of 2000. This charge
included $1.1 billion for asset impairments and $468 million for
restructuring costs. The effect on after-tax earnings was $1,019 million.
The asset impairment charge, attributable to excess capacity related to
Ford's performance in the competitive and regulatory environment in Europe,
reflected the write-down of certain long-lived assets from their carrying
value to their estimated fair value, as determined by an independent
valuation of Automotive Ford Brand operations in Europe.
The restructuring charge included employee separation costs of $426 million
and other exit-related costs of $42 million. Employee separation includes a
workforce reduction of about 3,300 employees (2,900 hourly and 400
salaried) related to the planned cessation of vehicle production at the
Dagenham (U.K.) Body and Assembly Plant, which will occur in two phases (in
the third quarter 2000 and by first quarter 2002).
7. Automotive Inventories are summarized as follows (in millions):
June 30, December 31,
2000 1999
----------- ------------
Raw materials, work in process and supplies $2,159 $2,035
Finished products 4,092 3,649
------ ------
Total inventories $6,251 $5,684
====== ======
U.S. inventories $1,944 $1,811
8. Company-Obligated Mandatorily Redeemable Preferred Securities of a
Subsidiary Trust - The sole asset of Ford Motor Company Capital Trust I
(the "Trust"), which is the obligor on the Preferred Securities of such
Trust, is $632 million principal amount of 9% Junior Subordinated
Debentures due 2025 of Ford Motor Company.
9. Comprehensive Income - Other comprehensive income includes foreign currency
translation adjustments, minimum pension liability adjustments, and net
unrealized gains and losses on investments in equity securities. Total
comprehensive income is summarized as follows (in millions):
Second Quarter First Half
------------------------ -------------------------
2000 1999 2000 1999
---------- --------- ---------- ----------
Net income (loss) $ (577) $2,338 $ 1,502 $ 4,317
Other comprehensive income (481) (335) (1,078) (443)
------- ------ ------- -------
Total comprehensive income $(1,058) $2,003 $ 424 $ 3,874
======= ====== ======= =======
Effective January 1, 2000, the functional currency for Ford's automotive
operations in Brazil was changed from the U.S. dollar to the Brazilian real
in recognition of the primary currency of the environment in which Ford
will operate. The lower translated value of fixed assets and inventories in
the first half reduced other comprehensive income by about $350 million.
-7-
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
10. Income (loss) Per Share of Common and Class B Stock - 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 dilutive potential common stock, such as
stock options.
Income (loss) per share of Common and Class B Stock was as follows (in
millions, except per share amounts):
Second Quarter 2000 Second Quarter 1999
--------------------- ----------------------
Income Shares Income Shares
---------- --------- ---------- ----------
Net income from continuing operations $1,513 1,205 $2,058 1,211
Preferred stock dividend requirements (3) - (3) -
Issuable and uncommitted ESOP shares - (9) - (3)
------ ----- ------ -----
Basic income and shares from continuing operations $1,510 1,196 $2,055 1,208
Basic income per share from continuing operations $ 1.26 $ 1.70
Basic income per share from discontinued operation 0.14 0.23
Basic loss per share on spin-off of discontinued operation (1.88) -
------ ------
Basic income (loss) per share $(0.48) $ 1.93
Basic income and shares from continuing operations $1,510 1,196 $2,055 1,208
Net dilutive effect of options - 26 - 29
------ ----- ------ -----
Diluted income and shares from continuing operations $1,510 1,222 $2,055 1,237
Diluted income per share from continuing operations $ 1.24 $ 1.66
Diluted income per share from discontinued operation 0.13 0.23
Diluted loss per share on spin-off of discontinued operation (1.84) -
------ ------
Diluted income (loss) per share $(0.47) $ 1.89
First Half 2000 First Half 1999
--------------------- ----------------------
Income Shares Income Shares
---------- --------- ---------- ----------
Net income from continuing operations $3,445 1,206 $3,832 1,211
Preferred stock dividend requirements (7) - (7) -
Issuable and uncommitted ESOP shares - (8) - (4)
------ ----- ------ -----
Basic income and shares from continuing operations $3,438 1,198 $3,825 1,207
Basic income per share from continuing operations $ 2.87 $ 3.17
Basic income per share from discontinued operation 0.26 0.40
Basic loss per share on spin-off of discontinued operation (1.88) -
------ ------
Basic income per share $ 1.25 $ 3.57
Basic income and shares from continuing operations $3,438 1,198 $3,825 1,207
Net dilutive effect of options - 25 - 30
------ ----- ------ -----
Diluted income and shares from continuing operations $3,438 1,223 $3,825 1,237
Diluted income per share from continuing operations $ 2.81 $ 3.09
Diluted income per share from discontinued operation 0.25 0.39
Diluted loss per share on spin-off of discontinued operation (1.84) -
------ ------
Diluted income per share $ 1.22 $ 3.48
-8-
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
11. Segment Information - Ford's business is divided into two business
sectors - Automotive and Financial Services (including Ford Credit and
Hertz); detail is summarized as follows (in millions):
Financial Services Sector
---------------------------------
Second Auto Ford Other Elims/
Quarter Sector Credit Hertz Fin Svcs Other Total
----------- ----------- ---------- ---------- ---------- ------------
2000
- ----
Revenues
External customer $ 37,366 $ 5,778 $ 1,271 $ 84 $ 20 $ 44,519
Intersegment 1,338 41 7 62 (1,448) -
-------- -------- ------- ------ ------- --------
Total Revenues $ 38,704 $ 5,819 $ 1,278 $ 146 $(1,428) $ 44,519
======== ======== ======= ====== ======= ========
Net income from continuing
operations $ 1,052 $ 388 $ 104 $ (18) $ (13) $ 1,513
1999
- ----
Revenues
External customer $ 35,546 $ 4,961 $ 1,162 $ 247 $ (9) $ 41,907
Intersegment 1,398 58 8 46 (1,510) -
-------- -------- ------- ------ ------- --------
Total Revenues $ 36,944 $ 5,019 $ 1,170 $ 293 $(1,519) $ 41,907
======== ======== ======= ====== ======= ========
Net income from continuing
operations $ 1,651 $ 335 $ 88 $ 2 $ (18) $ 2,058
Financial Services Sector
---------------------------------
First Auto Ford Other Elims/
Half Sector Credit Hertz Fin Svcs Other Total
----------- ---------------------- ---------- ---------- -------------
2000
- ----
Revenues
External customer $ 73,541 $ 11,269 $ 2,402 $ 182 $ 19 $ 87,413
Intersegment 2,496 80 15 104 (2,695) -
-------- -------- ------- ------ ------- --------
Total Revenues $ 76,037 $ 11,349 $ 2,417 $ 286 $(2,676) $ 87,413
======== ======== ======= ====== ======= ========
Net income from continuing
operations $ 2,604 $ 741 $ 160 $ (29) $ (31) $ 3,445
Total assets $104,363 $167,821 $11,451 $8,002 $(7,057) $284,580
1999
- ----
Revenues
External customer $ 67,143 $ 9,824 $ 2,189 $ 303 $ (3) $ 79,456
Intersegment 2,467 115 16 93 (2,691) -
-------- -------- ------- ------ ------- --------
Total Revenues $ 69,610 $ 9,939 $ 2,205 $ 396 $(2,694) $ 79,456
======== ======== ======= ====== ======== ========
Net income from continuing
operations $ 3,097 $ 635 $ 137 $ (10) $ (27) $ 3,832
Total assets a/ $ 96,843 $147,996 $10,123 $7,684 $(6,481) $256,165
- - - - -
a/ Net assets of discontinued operation of $1,938 as of June 30, 1999 is
included in Auto Sector total assets.
"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.
"Eliminations/Other" data includes intersegment eliminations and minority
interests. Interest income for the operating segments in the Financial
Services Sector is reported as "Revenue".
-9-
[PricewaterhouseCoopers LLP letterhead]
Report of Independent Accountants
To the Board of Directors and Stockholders
Ford Motor Company
We have reviewed the accompanying consolidated balance sheet of Ford Motor
Company and its subsidiaries as of June 30, 2000, and the related consolidated
statement of income for each of the three-month and six-month periods ended June
30, 2000 and 1999 and the condensed consolidated statement of cash flows for the
six-month periods ended June 30, 2000 and 1999. These financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated interim financial statements for them
to be in conformity with accounting principles generally accepted in the United
States.
We previously audited in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1999, and the related
consolidated statements of income, stockholders' equity and of cash flows for
the year then ended (not presented herein), and in our report dated January 24,
2000, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1999, is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.
/s/PricewaterhouseCoopers LLP
Detroit, Michigan
July 18, 2000
-10-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- -------------------------------------------------------------------------
In addition to specific explanations discussed below, comparisons between
Ford's 2000 and 1999 second quarter and first half results are influenced by two
important events:
o On June 28, 2000, Ford distributed 130 million shares of Visteon, which
represented its 100% ownership interest, by means of a tax-free spin-off in
the form of a dividend on Ford Common and Class B Stock. Throughout this
discussion, Visteon is reflected as a discontinued operation. Visteon's
results and financial condition have been excluded from all amounts except
total net income and total earnings per share.
o On March 31, 1999, we purchased AB Volvo's worldwide passenger car business
("Volvo Car"). Volvo Car's results and financial condition have been
included in our financial statements on a consolidated basis since the
second quarter of 1999.
SECOND QUARTER RESULTS OF OPERATIONS
Our worldwide results were a net loss of $577 million in the second quarter
of 2000, or $(0.47) per diluted share of Common and Class B Stock. This compares
with second quarter earnings in 1999 of $2,338 million, or $1.89 per diluted
share (second quarter 1999 earnings included a one-time inventory-related profit
reduction of $146 million for Volvo Car). Second quarter 2000 earnings include a
one-time, non-cash charge of $2,252 million resulting from the spin-off of
Visteon and charges of $1,019 million for asset impairment and restructuring
costs related to our Ford brand operations in Europe. As supplemental
information, excluding these one-time charges, our earnings in the second
quarter would have been $2,694 million, or $2.20 per diluted share. Worldwide
sales revenue was $44.5 billion in the second quarter of 2000, up $2.6 billion
from a year ago. Unit sales of cars and trucks were 1,991,000, up 63,000 units.
Results by business sector for the second quarter of 2000 and 1999 are
shown below (in millions).
Second Quarter
Net Income/(Loss)
--------------------------------------
2000
O/(U)
2000 1999 1999
------------ ----------- -----------
Automotive Sector $1,052 $1,651 $ (599)
Financial Services Sector 461 407 54
------ ------ --------
Total continuing operations 1,513 2,058 (545)
Net income from discontinued operation 162 280 (118)
Loss on spin-off of discontinued operation (2,252) - (2,252)
------ ------ -------
Total Company $ (577) $2,338 $(2,915)
====== ====== =======
-11-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
- -------------------------------------------------------------------------------
Automotive Sector
- -----------------
Worldwide earnings for our Automotive sector were $1,052 million in the
second quarter of 2000, on sales of $37.4 billion. Earnings in the second
quarter of 1999 were $1,651 million, on sales of $35.5 billion.
Details of second quarter Automotive sector earnings from continuing
operations are shown below (in millions).
Second Quarter
Net Income/(Loss)
--------------------------------------
2000
O/(U)
2000 1999 1999
------------ ----------- -----------
North American Automotive $1,843 $1,698 $ 145
Automotive outside North America
- Europe (863) 81 (944)
- South America (63) (117) 54
- Rest of World 135 (11) 146
------ ------ ------
Total Automotive outside North America (791) (47) (744)
------ ------ ------
Total Automotive Sector $1,052 $1,651 $ (599)
====== ====== ======
Automotive sector earnings in North America were $1,843 million in the
second quarter of 2000, on sales of $27.7 billion. In the second quarter of
1999, earnings were $1,698 million, on sales of $25.5 billion. The increase in
earnings reflects primarily increased volume and higher net revenue. The
after-tax return on sales for our Automotive sector in North America was 6.7% in
the second quarter of 2000, unchanged from a year ago.
In the second quarter of 2000, 4.9 million new cars and trucks were sold in
the United States, up from 4.7 million units a year ago. Our share of those unit
sales was 24.9% in the second quarter of 2000, up 2/10 of a percentage point
from a year ago. The improvement in market share reflects primarily strong
market acceptance of our brands.
Our Automotive sector losses in Europe were $863 million in the second
quarter of 2000, compared with earnings of $81 million a year ago (second
quarter 1999 European earnings included a one-time inventory-related profit
reduction of $125 million for Volvo Car). As an additional step toward our goal
to improve results outside the U.S., Ford performed an extensive business review
of the Ford brand operations in Europe in the second quarter of 2000. The review
was performed to address the Company's performance in the competitive and
regulatory environment in Europe and its concern regarding overcapacity. The
review included an assessment of operating costs and Ford brand manufacturing
requirements in Europe. As a result if this review, we recorded an after-tax
charge of $1,019 million in the second quarter of 2000. This charge included
$715 million for asset impairments and $304 million for restructuring costs. The
restructuring charge included employee separation costs of $277 million and
other exit-related costs of $27 million. Employee separation includes a
workforce reduction of about 3,300 employees (2,900 hourly and 400 salaried)
related to the planned cessation of vehicle production at the Dagenham (U.K.)
Body and Assembly Plant, which will occur in two phases (in the third quarter
2000 and by first quarter 2002). Excluding this charge, our European results, as
a whole, would have been a profit of $156 million.
In the second quarter of 2000, 4.8 million new cars and trucks were sold in
our nineteen primary European markets, down 25,000 units from a year ago. Our
share of those unit sales was 9.6% in the second quarter of 2000, down 1.4
percentage points from a year ago, reflecting a decrease in demand for Ford
branded vehicles.
Our Automotive sector results in South America were a loss of $63 million
in the second quarter of 2000, compared with a loss of $117 million a year ago.
The improvement reflects primarily improved vehicle margins resulting from cost
reductions, product mix, and improved pricing.
-12-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
- -------------------------------------------------------------------------------
In the second quarter of 2000, approximately 350,000 new cars and trucks
were sold in Brazil, compared with 336,000 a year ago. Our share of those unit
sales was 9.3% in the second quarter of 2000, down 1.1 percentage points from a
year ago. The decline in market share reflects primarily aggressive marketing
actions by competitors.
Automotive sector earnings outside North America, Europe and South America
("Rest of World") were $135 million in the second quarter of 2000, compared with
losses of $11 million in the second quarter of 1999. The improvement in earnings
reflects primarily improved results at Mazda and other Asia Pacific operations.
Financial Services Sector
- -------------------------
Earnings of our Financial Services sector consist primarily of two
segments, Ford Credit and Hertz. Details of second quarter Financial Services
sector earnings are shown below (in millions).
Second Quarter
Net Income/(Loss)
--------------------------------------
2000
O/(U)
2000 1999 1999
----------- ----------- -----------
Ford Credit $388 $335 $53
Hertz 104 88 16
Minority Interests, Eliminations,
and Other (31) (16) (15)
---- ---- ---
Total Financial Services Sector $461 $407 $54
==== ==== ===
Memo: Ford's share of earnings in Hertz $ 84 $ 71 $13
Ford Credit's consolidated net income in the second quarter of 2000 was
$388 million, up $53 million or 16% from 1999. Compared with 1999, the increase
in earnings reflects primarily improved net financing margins and a higher level
of receivables, offset partially by higher operating costs, including employee
separation programs associated with the restructuring of North American
operations.
Earnings at Hertz in the second quarter of 2000 were $104 million (of which
$84 million was Ford's share), compared with earnings of $88 million (of which
$71 million was Ford's share) a year ago. The increase in earnings reflects
primarily strong volume performance in the worldwide car rental market.
Discontinued Operation - Visteon
- --------------------------------
Visteon's second quarter 2000 earnings were $162 million, compared with
$280 million in the same period a year ago. The decrease in earnings reflects
primarily a one-time price realignment of 5 percent with respect to products
sold to Ford that resulted from a joint Ford-Visteon competitive pricing study.
-13-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
- -------------------------------------------------------------------------------
FIRST HALF RESULTS OF OPERATIONS
Results of our operations by major business sector for the first half of
2000 and 1999 are shown below (in millions).
First Half
Net Income/(Loss)
--------------------------------------
2000
O/(U)
2000 1999 1999
------------ ------------ ------------
Automotive Sector $ 2,604 $ 3,097 $ (493)
Financial Services Sector 841 735 106
------- ------- --------
Total continuing operations $ 3,445 $ 3,832 $ (387)
Net income from discontinued operation 309 485 (176)
Loss on spin-off of discontinued operation (2,252) - (2,252)
------- ------- --------
Total Company $ 1,502 $ 4,317 $ (2,815)
======= ======= ========
Our worldwide net income in the first half of 2000 was $1,502 million,
compared with first half 1999 net income of $4,317 million. First half 2000
earnings include the one-time charges of $3.3 billion included in our second
quarter discussion.
Worldwide sales and revenues in the first half of 2000 were $87.4 billion,
up $8.0 billion from a year ago. Vehicle unit sales of cars and trucks were
3,902,000, up 199,000 units.
Automotive Sector
- -----------------
Worldwide earnings for our Automotive sector were $2,604 million in the
first half of 2000 on sales of $73.5 billion. Earnings in the first half of 1999
were $3,097 million on sales of $67.1 billion. First half 2000 results include
the one-time European charges of $1,019 million included in our second quarter
discussion. Adjusted for constant volume and mix, total automotive costs were
down $100 million compared with the first half of 1999.
Automotive sector earnings in the first half of 2000 and 1999 are shown
below (in millions).
First Half
Net Income/(Loss)
----------------------------------------
2000
O/(U)
2000 1999 1999
------------ ----------- -----------
North American Automotive $3,510 $3,077 $ 433
Automotive Outside North America
- Europe (866) 236 (1,102)
- South America (145) (258) 113
- Rest of World 105 42 63
------ ------ ------
Total Automotive Outside
North America (906) 20 (926)
------ ------ ------
Total Automotive Sector $2,604 $3,097 $ (493)
====== ====== ======
Automotive sector earnings in North America were $3,510 million in the
first half of 2000, up $433 million from the first half of 1999. The increase
reflects primarily higher net revenue and increased volume. The North American
Automotive after-tax return on sales was 6.4% in the first half of 2000, up 2/10
of a percentage point from a year ago.
-14-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
- -------------------------------------------------------------------------------
In the first half of 2000, 9.4 million new cars and trucks were sold in the
United States, up from 8.8 million units a year ago. Our share of those unit
sales was 24.4% in the first half of 2000, down 3/10 of a percentage point from
a year ago. The decline in market share reflects primarily strong industry
demand and capacity limitations.
Automotive sector losses in Europe in the first half of 2000 were $866
million, compared to earnings of $236 million in the first half of 1999. The
deterioration reflects primarily the one-time after-tax charges of $1,019
million after tax in the second quarter of 2000, which is included in our second
quarter discussion.
In the first half of 2000, 9.9 million new cars and trucks were sold in our
nineteen primary European markets, up 177,000 units from a year ago. Our share
of those unit sales was 9.6% in the first half of 2000, down 6/10 of a
percentage point from a year ago. Our market share decrease reflects increasing
competitive activity impacting Fiesta and Mondeo models and limited Transit
availability after the new model introduction at the end of March.
Automotive sector results in South America were a loss of $145 million in
the first half of 2000, compared with a loss of $258 million in the first half a
year ago. The improvement reflects primarily improved vehicle margins resulting
from cost reductions, product mix, and improved pricing. In the first half of
2000, 660,000 new cars and trucks were sold in Brazil, compared with 612,000 a
year ago. Our share of those unit sales was 9.4% in the first half of 2000, down
3/10 of a percentage point from a year ago.
Automotive sector earnings outside North America, Europe and South America
("Rest of World") were $105 million in the first half of 2000, compared with
$42 million in the first half of 1999.
Financial Services Sector
- -------------------------
Higher earnings at Ford Credit and Hertz in the first half of 2000,
compared with the first half of 1999, reflect primarily the same factors as
those described in the discussion of second quarter results of operations.
Details of Financial Services sector earnings in the first half of 2000 and 1999
are shown below (in millions).
First Half
Net Income/(Loss)
----------------------------------------
2000
O/(U)
2000 1999 1999
------------ ------------ ------------
Ford Credit $741 $635 $106
Hertz 160 137 23
Minority interests, Eliminations,
and Other (60) (37) (23)
---- ---- ----
Total Financial Services Sector $841 $735 $106
==== ==== ====
Memo: Ford's share of earnings in Hertz $130 $111 $ 19
Discontinued Operation - Visteon
- --------------------------------
Visteon's first half 2000 earnings were $309 million, compared with
$485 million in the same period a year ago. The decrease in earnings reflects
primarily the one-time price realignment of 5 percent with respect to products
sold to Ford that resulted from a joint Ford-Visteon competitive pricing study.
-15-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
- -------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Automotive Sector
- -----------------
At June 30, 2000, our Automotive sector had $25.6 billion of cash and
marketable securities, up $3.8 billion from December 31, 1999. The increase in
cash reflects primarily cash flow from operations. Automotive capital
expenditures totaled $3.0 billion in the first half of 2000, up $243 million
from the same period a year ago. During the first half of 2000, the Company paid
quarterly cash dividends on its Common Stock, Class B Stock, and Preferred Stock
totaling $1,213 million. In addition, the Company paid $365 million in cash
dividends related to the Visteon spin-off.
At June 30, 2000, our Automotive sector had total debt of $10.8 billion,
compared with $11.7 billion at December 31, 1999. Automotive debt at June 30,
2000 was 31% of total capital (the sum of our stockholders' equity and
Automotive debt), up one percentage point from December 31, 1999.
At July 1, 2000, Ford had long-term contractually committed global credit
agreements under which $8.4 billion is available from various banks; 87% are
available through June 30, 2005. The entire $8.4 billion may be used, at our
option, by any affiliate of Ford; however, any borrowing by an affiliate under
these agreements will be guaranteed by Ford. We also have the ability to
transfer on a non-guaranteed basis $8.1 billion of such credit lines in varying
portions to Ford Credit and FCE Bank plc. In addition, at July 1, 2000, $226
million of contractually committed credit facilities were available to various
Automotive sector affiliates outside the U.S. Approximately $61 million of these
facilities were in use at July 1, 2000.
Financial Services Sector
- -------------------------
At June 30, 2000, our Financial Services sector had cash and cash
equivalents of $1.7 billion, up $87 million from December 31, 1999. Finance
receivables and net investments in operating leases were $167.6 billion at June
30, 2000, up from $155.8 billion at December 31, 1999.
Total debt was $149.1 billion at June 30, 2000, up $9.1 billion from
December 31, 1999. This includes outstanding commercial paper at June 30, 2000
of $37.3 billion at Ford Credit, and $2.3 billion at Hertz, with an average
remaining maturity of 27 days and 15 days, respectively.
At July 1, 2000, Financial Services sector had a total of $27.3 billion of
contractually committed support facilities (excluding the $8.1 billion available
under Ford's global credit agreements). Of these facilities, $23.7 billion are
contractually committed global credit agreements under which $19.1 billion and
$4.6 billion are available to Ford Credit and FCE Bank plc, respectively, from
various banks; 55% and 65%, respectively, of such facilities are available
through June 30, 2005. The entire $19.1 billion may be used, at Ford Credit's
option, by any subsidiary of Ford Credit, and the entire $4.6 billion may be
used, at FCE Bank plc's option, by any subsidiary of FCE Bank plc. Any
borrowings of such subsidiaries under these agreements will be guaranteed by
Ford Credit or FCE Bank plc, as the case may be. At July 1, 2000, $237 million
of the Ford Credit global facilities were in use and $279 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
July 1, 2000 consisted of $2.7 billion of contractually committed support
facilities available to Hertz in the U.S. and $800 million of contractually
committed support facilities available to various affiliates outside the U.S.;
at July 1, 2000, approximately $600 million of these facilities were in use.
Furthermore, banks provide $1,425 million of liquidity facilities to support the
asset-backed commercial paper program of a Ford Credit sponsored special purpose
entity.
-16-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
- -------------------------------------------------------------------------------
VALUE ENHANCEMENT PLAN
In April, 2000, our Board of Directors approved in principle a
recapitalization of the Company, known as the Value Enhancement Plan. The
recapitalization will be effected through the merger of Ford Value Corporation,
a wholly owned subsidiary of the Company, with and into the Company pursuant to
a Recapitalization Agreement and Plan of Merger, dated as of June 27, 2000 (the
"Agreement"). On June 27, 2000, our Board of Directors approved the Agreement.
The recapitalization is subject to shareholder approval; shareholders of record
on June 27, 2000 are eligible to vote on the recapitalization at a special
meeting of shareholders scheduled for August 2, 2000.
In the recapitalization, holders of the Company's Common and Class B stock
will exchange each share of Common or Class B stock for one share of a new class
of Common or Class B stock (depending on the class owned before the
recapitalization) and, at the holders' option, one of the following: (1) $20 in
cash, subject to adjustment, (2) approximately 0.748 shares of a new class of
common stock with a value of $20, calculated as provided in the Agreement, or
(3) a combination of cash and a new class of common stock, with an aggregate
value of $20, also calculated as provided in the Agreement, with the relative
cash and stock portions determined pursuant to a formula intended to result in a
shareholder maintaining approximately 99% of his or her percentage ownership
interest in the Company. The total cash distributed in the recapitalization will
be limited to $10 billion.
LAND ROVER
On June 30, 2000, we purchased the Land Rover business from the BMW Group
for a purchase price of approximately three billion euros. Approximately
two-thirds of the purchase price (equivalent to $1.9 billion at June 30, 2000)
was paid at the time of closing. The remainder will be paid in 2005. The
acquisition involves the entire Land Rover line of products, and related
assembly and engineering facilities. It does not include Rover's passenger car
business or financial services business.
The acquisition will be accounted for as a purchase. The assets purchased,
liabilities assumed and the results of operations of Land Rover will be included
in our financial statements on a consolidated basis beginning in the third
quarter of 2000. We expect the Land Rover acquisition to be accretive to
earnings in 2002, but have a negative impact on earnings in the near-term. We
expect the impact of the Land Rover acquisition on earnings to be adverse by
approximately 10-15 cents per share in the second half of 2000, plus there is
the potential for an inventory-related profit reduction in the third quarter of
2000.
NEW ACCOUNTING STANDARD
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, 2001. We have not yet determined the effect of adopting SFAS 133.
-17-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
- -------------------------------------------------------------------------------
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
The Company is required to adopt SAB 101 in the fourth quarter of 2000
(retroactive to January 1, 2000) and is awaiting interpretive guidance, not yet
issued by the SEC, to complete its assessment of the impact SAB 101 may have on
the Company's financial statements.
OTHER FINANCIAL INFORMATION
PricewaterhouseCoopers LLP, our independent public accountants, performed a
limited review of the financial data presented on pages 2 through 10 inclusive.
The review was performed in accordance with standards for such reviews
established by the American Institute of Certified Public Accountants. The
review did not constitute an audit; accordingly, PricewaterhouseCoopers LLP did
not express an opinion on the aforementioned data. The financial data include
any material adjustments or disclosures proposed by PricewaterhouseCoopers LLP
as a result of their review
-18-
Part II. Other Information
Item 1. Legal Proceedings
- --------------------------
Class Actions
- -------------
Paint Class Actions. (Previously discussed on page 24 of Ford's Annual
Report on Form 10-K for year ended December 31, 1999 (the "10-K Report").) On
May 11, 2000, the Texas Supreme Court in the Sheldon case reversed the trial
court, decertified the class, and remanded the case to the trial court for
further proceedings.
Ignition Switch Class Action. (Previously discussed on page 24 of the 10-K
Report.) The renewed motion for class certification in Snodgrass has been
denied. Plaintiffs' motion for reconsideration is pending.
Flat Glass Class Action. (Previously discussed on page 25 of the 10-K
Report.) In connection with the spin-off by Ford to its stockholders of Ford's
ownership interest in Visteon Corporation ("Visteon"), as between Ford and
Visteon, Visteon has agreed to assume responsibility for the defense of, and any
prospective liability that may result from, these lawsuits.
Seat Back Class Actions. (Previously discussed on page 27 of the 10-K
Report and on page 17 of Ford's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000 (the "First Quarter 10-Q Report").) The New Jersey Supreme
Court has refused to review the denial of our motion to dismiss in that state.
However, the trial courts in Maryland and New York have each granted our motions
to dismiss. Plaintiffs have filed appeals in both cases.
Head Gasket Class Action. (Previously discussed on page 27 of the 10-K
Report) The Illinois case has been remanded to state court. A third purported
class action has been filed in Indiana. Plaintiffs in the Indiana case allege
that the 3.8 liter engine in the 1996 Windstar was identical to the engines used
in vehicles covered by the Owner Notification Program ("ONP") that extended
warranty coverage on 1994-1995 vehicles with the 3.8 liter engine to 5 years or
60,000 miles. The action essentially challenges the Company's failure to include
1996 Windstars in the ONP.
Late Charges Class Action. (Previously discussed on page 28 of the 10-K
Report) As previously reported, a California trial court certified a nationwide
class action on behalf of persons alleging that Ford Credit lease contract late
fees are excessive. The California Supreme Court recently declined to review the
trial court's certification order, and trial is expected to commence in 2001.
Wartime Labor. (Previously discussed on page 28 of the 10-K Report and on
page 17 the First Quarter 10-Q Report.) On July 17, 2000, the U.S., Germany and
other countries signed agreements establishing a DM10 billion Foundation to
provide humanitarian assistance to victims of the WWII Nazi forced labor program
and other wrongdoing. Separately, the U.S. and Germany signed an Executive
Agreement pursuant to which the U.S. will seek the dismissal of any lawsuits
against German companies and their affiliates for wrongs arising out of WWII and
the Nazi era. It is anticipated that the Agreement will result in the dismissal
of all class action litigation against Ford and Ford Germany, relating to the
use of civilian forced labor at the Cologne plant during WWII.
5.4 Liter Engine Class Action. A purported class action was filed in April
2000 in New Jersey alleging that Ford fraudulently sold F-Series trucks with
defective 5.4 liter engines. Plaintiffs allege that the engines "knocked," and
that customers who complained were offered remanufactured engines instead of new
engines. The complaint also contains an allegation of odor emitting from the
defroster or air conditioner. The complaint seeks treble damages, rescission,
refund, attorney fees and other relief. Ford recently removed the case to
federal court and filed a motion to dismiss.
-19-
Item 1. Legal Proceedings (Continued)
- -------------------------------------
Throttle Body Assemblies Class Action. A purported nationwide class action
has been filed in Ohio on behalf of all persons who own or lease 1999 Mercury
Villagers. The complaint alleges that the vehicle has a defective throttle body
assembly that causes the gas pedal to intermittently lock. The Complaint alleges
breach of warranty, negligence, and violation of consumer protection statutes.
Plaintiffs seek an order requiring Ford to recall the vehicles. They also seek
unspecified compensatory damages, treble damages, attorneys fees, and costs.
Ford recently removed the case to federal court.
Bankruptcy Discharge Class Actions. Three class actions have been filed
against Ford Motor Credit Company ("Ford Credit") and PRIMUS Automotive
Financial Services, Inc. ("PRIMUS") alleging violations of the discharge
provisions of the bankruptcy laws. In Pertuso v. Ford Credit, Plaintiffs allege
that our policies and practices for obtaining reaffirmation agreements violate
Federal law and constitute an unfair collection practice. Specifically, they
allege that debtors sign and return reaffirmation agreements to Ford Credit that
are never filed with the court. The case was dismissed at the trial court level
and is now on appeal before the United States Sixth Circuit Court of Appeals.
Molloy v. PRIMUS and DuBois v. Ford Credit are nationwide class action lawsuits.
Both lawsuits allege that Ford Credit attempts to collect on discharged,
non-reaffirmed debts. Such practices violate both the Bankruptcy Code and the
Fair Debt Collections Practices Act. In the Molloy case, our motion to dismiss
was denied and we are proceeding with discovery. The DuBois case was recently
filed and we are preparing an answer.
Other Matters
- -------------
Red Carpet Lease Terminations. (Previously discussed on page 29 of the 10-K
Report) As previously reported, numerous states have been investigating Ford
Credit's early lease termination charges, and the alleged improper failure to
itemize those charges. We have reached a settlement with the State of California
at an estimated cost of approximately $200,000. In order to preclude future
private claims of this nature, we have agreed that the State of California will
file a class action complaint relating to this matter. Ford Credit will then
agree to the entry of a judgment in that case that incorporates the settlement
terms. With respect to the 39 other states that are investigating similar
issues, the Florida Attorney General's Office continues to coordinate
negotiations, and we are optimistic that a similar favorable resolution will
soon be reached.
Rouge Powerhouse Insurance Litigation. (Previously discussed on page 17 of
the First Quarter 10-Q Report.) In early June 2000, Ford filed an action in
state court against Factory Mutual Insurance Company and a number of other Ford
property insurance carriers for breach of contract under property insurance
policies for failure to pay claims in respect of losses incurred by Ford related
to the February 1, 1999 Rouge Powerhouse explosion. As reported earlier,
insurers of Rouge Steel Company (including Factory Mutual) had previously filed
two subrogation actions against the Company. One of these subrogation actions is
still pending in state court. The other subrogation action, which Factory Mutual
filed in federal court and dismissed without prejudice, has been re-filed as a
counterclaim in the Company's coverage action against Factory Mutual in state
court. Factory Mutual's subrogation counterclaim seeks recovery in excess of
$134 million. Additionally, several insurers of a supplier to Rouge Steel
Company (Cleveland Cliffs, Inc.) have filed a subrogation action against Ford
seeking recovery of an undisclosed amount.
-20-
Item 4. Submission of Matters to a Vote of the Security-Holders
- ----------------------------------------------------------------
On May 11, 2000, the 2000 Annual Meeting of Stockholders of the Company was
held. The following is a brief description of the matters voted upon at the
meeting and tabulation of the voting therefor:
Number of Votes
------------------------------------------------------
Nominee For Not For
Michael D. Dingman 1,702,861,259 16,357,379
Edsel B. Ford II 1,699,213,331 20,005,307
William C. Ford 1,698,416,603 20,802,035
William C. Ford, Jr. 1,705,522,920 13,695,718
Irvine O. Hockaday, Jr. 1,705,434,359 13,784,279
Marie-Josee Kravis 1,704,214,815 15,003,823
Ellen R. Marram 1,705,190,798 14,027,840
Jacques A. Nasser 1,597,440,299 121,778,339
Homer A. Neal 1,704,246,638 14,972,000
Jorma J. Ollila 1,705,527,483 13,691,155
Carl E. Reichardt 1,696,602,766 22,615,872
Robert E. Rubin 1,700,277,250 18,941,388
John L. Thornton 1,684,084,262 35,134,376
There were no broker non-votes with respect to the election of directors.
Proposal 2 Ratification of Selection of Independent Public Accountants. A
proposal to ratify the selection of PricewaterhouseCoopers LLP as independent
public accountants to audit the books of account and other corporate records of
the Company for 2000 was adopted, with 1,707,603,689 votes cast for, 5,508,376
votes cast against, 6,106,573 votes abstained and 144,219,129 broker non-votes.
Proposal 3 Relating to Prior Governmental Affiliation of Officers,
Directors, and Consultants. A proposal relating to requiring the Company to
disclose the prior governmental affiliation of officers, directors, and
consultants was rejected, with 1,501,156,349 votes cast against, 32,914,404
votes cast for, 40,928,756 votes abstained and 144,219,129 broker non-votes.
Proposal 4 Relating to Independence of Directors on Key Board Committees. A
proposal relating to the independence of directors on key committees of the
Company's Board of Directors was rejected, with 1,307,167,173 votes cast
against, 244,253,034 votes cast for, 23,579,302 votes abstained and 144,219,129
broker non-votes.
Proposal 5 Relating to an Amendment to the Company's Certificate of
Incorporation to Restrict By-Law Amendments. A proposal relating to a proposed
amendment to the Company's Certificate of Incorporation to restrict By-Law
amendments was rejected, with 1,484,926,885 votes cast against, 57,110,971 votes
cast for, 32,961,653 votes abstained and 144,219,129 broker non-votes.
Proposal 6 Relating to a Proposed Study to Add Ford Employee(s) to the
Board of Directors. A proposal relating to a proposed study to add Ford
employee(s) to the Board of Directors was rejected, with 1,490,827,676 votes
cast against, 59,130,006 votes cast for, 25,041,827 votes abstained and
144,219,129 broker non-votes.
Proposal 7 Relating to Stockholder Approval of Stock Buyback Programs. A
proposal relating to stockholder approval of stock buyback programs was
rejected, with 1,513,855,450 votes cast against, 38,818,854 votes cast for,
22,325,205 votes abstained and 144,219,129 broker non-votes.
-21-
Supplemental Schedule
Ford Motor Company
CONDENSED FINANCIAL INFORMATION OF SUBSIDIARY
---------------------------------------------
(in millions)
Ford Capital B.V.
June 30, December 31,
2000 1999
---------------- --------------
(unaudited)
Current assets $ 694 $ 579
Noncurrent assets 2,240 2,372
------ ------
Total assets $2,934 $2,951
====== ======
Current liabilities $1,389 $1,088
Noncurrent liabilities 1,269 1,680
Minority interests in net
assets of subsidiaries 1 2
Stockholder's equity 275 181
------ ------
Total liabilities and
stockholder's equity $2,934 $2,951
====== ======
Second Quarter First Half
--------------------- ----------------------
2000 1999 2000 1999
-------- --------- -------- ---------
(unaudited) (unaudited)
Sales and other revenue $646 $699 $1,216 $1,382
Operating income 44 47 106 131
Income before income taxes 38 35 89 104
Net income/(loss) 26 20 44 61
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. 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., Ford Distribution Sp. z.o.o.,
Ltd, and Oyj Ford Abp (Finland). Ford Capital B.V. also has an investment in
Detroit Downtown Properties, Inc. 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.
-22-
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
--------
Please refer to the Exhibit Index on Page 24.
(b) Reports on Form 8-K
-------------------
The Registrant filed the following Current Reports on Form 8-K during
the quarter ended June 30, 2000:
Current Report on Form 8-K dated April 14, 2000 included information
relating to major shareholder value actions to be taken by Ford,
including a Value Enhancement Plan and the spin-off of Visteon
Corporation.
Current Report on Form 8-K dated April 17, 2000 included information
relating to Ford's first quarter 2000 financial results.
Current Report on Form 8-K dated May 24, 2000 included information
relating to Ford's restructuring of its European operations and the
signing of a definitive agreement to buy Land Rover from the BMW
Group.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FORD MOTOR COMPANY
-------------------------
(Registrant)
Date: July 31, 2000 By: /s/ W. A. Swift
------------- --------------------------
W. A. Swift
Vice President & Controller
(principal accounting officer)
-23-
EXHIBIT INDEX
-------------
Designation Description
------------------------- -----------------------------------------------------------------------------------------
Exhibit 3-B Ford Motor Company By Laws
(as amended through July 14, 2000).
Exhibit 12 Ford Motor Company and Subsidiaries Calculation of Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends
Exhibit 15 Letter of PricewaterhouseCoopers LLP, Independent Public Accountants, dated
July 31, 2000, relating to Financial Information.
Exhibit 27.1 Financial Data Schedule, Automotive Sector, for the Six Months Ended
June 30, 2000 (included with electronic EDGAR filing only).
Exhibit 27.2 Financial Data Schedule, Financial Services Sector, for the Six Months Ended
June 30, 2000 (included with electronic EDGAR filing only).
Exhibit 27.3 Financial Data Schedule, Conglomerate Totals, for the Six Months Ended June 30,
2000 (included with electronic EDGAR filing only).