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, 1997 OR
----------------------------
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
------------------
(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)
The American Road, Dearborn, Michigan 48121
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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, 1997, the Registrant had outstanding 1,123,519,937 shares
of Common Stock and 70,852,076 shares of Class B Stock.
Page 1 of 23
Exhibit index located on sequential page number 19
Ford Motor Company and Subsidiaries
HIGHLIGHTS
----------
Second Quarter First Half
------------------------- --------------------------
1997 1996 1997 1996
------- -------- -------- -------
(unaudited) (unaudited)
Worldwide vehicle unit sales of
cars and trucks (in thousands)
- - United States 1,110 1,067 2,089 2,007
- - Outside United States 769 743 1,471 1,441
----- ----- ----- -----
Total 1,879 1,810 3,560 3,448
===== ===== ===== =====
Sales and revenues (in millions)
- - Automotive $32,805 $31,762 $61,730 $60,059
- - Financial Services 7,460 7,211 14,737 14,139
------- ------- ------- -------
Total $40,265 $38,973 $76,467 $74,198
======= ======= ======= =======
Net income (in millions)
- - Automotive $ 1,735 $ 1,108 $ 2,739 $ 1,250
- - Financial Services 795 795 1,260 1,306
------- ------- ------- -------
Total $ 2,530 $ 1,903 $ 3,999 $ 2,556
======= ======= ======= =======
Capital expenditures (in millions)
- - Automotive $ 1,872 $ 1,779 $ 3,485 $ 3,568
- - Financial Services 140 87 266 200
------- ------- ------- -------
Total $ 2,012 $ 1,866 $ 3,751 $ 3,768
======= ======= ======= =======
Automotive capital expenditures as a
percentage of sales 5.7% 5.6% 5.6% 5.9%
Stockholders' equity at June 30
- - Total (in millions) $29,113 $25,840 $29,113 $25,840
- - After-tax return on Common and
Class B stockholders' equity 36.5% 30.9% 29.5% 21.0%
Automotive cash and marketable
securities at June 30 (in millions) $18,184 $15,240 $18,184 $15,240
Automotive debt at June 30
(in millions) $ 8,319 $ 6,828 $ 8,319 $ 6,828
After-tax return on sales
- - U.S. Automotive 5.5% 3.5% 5.1% 2.0%
- - Total Automotive 5.3 3.5 4.5 2.1
Shares of Common and Class B Stock
(in millions)
- - Average number outstanding 1,193 1,178 1,191 1,173
- - Number outstanding at June 30 1,194 1,182 1,194 1,182
AMOUNTS PER SHARE OF COMMON AND
CLASS B STOCK AFTER PREFERRED
STOCK DIVIDENDS
Income assuming full dilution
- - Automotive $ 1.41 $ 0.91 $ 2.22 $ 1.02
- - Financial Services 0.65 0.65 1.03 1.08
------- ------- ------- -------
Total $ 2.06 $ 1.56 $ 3.25 $ 2.10
======= ======= ======= =======
Cash dividends $ 0.42 $ 0.35 $ 0.805 $ 0.70
-2-
Ford Motor Company and Subsidiaries
VEHICLE UNIT SALES
------------------
For the Periods Ended June 30, 1997 and 1996
(in thousands)
Second Quarter First Half
---------------------- -----------------------
1997 1996 1997 1996
------ ------ ------ ------
(unaudited) (unaudited)
North America
United States
Cars 439 463 806 841
Trucks 671 604 1,283 1,166
----- ----- ----- -----
Total United States 1,110 1,067 2,089 2,007
Canada 86 72 155 122
Mexico 19 14 37 26
----- ----- ----- -----
Total North America 1,215 1,153 2,281 2,155
Europe
Britain 138 158 236 276
Germany 108 128 223 246
Italy 71 43 135 99
France 40 54 76 105
Spain 38 39 84 87
Other countries 85 85 182 169
----- ----- ----- -----
Total Europe 480 507 936 982
Other international
Brazil 77 46 130 93
Australia 36 35 66 67
Argentina 20 15 37 31
Taiwan 17 21 42 52
Japan 11 12 21 28
Other countries 23 21 47 40
----- ----- ----- -----
Total other international 184 150 343 311
----- ----- ----- -----
Total worldwide vehicle unit sales 1,879 1,810 3,560 3,448
===== ===== ===== =====
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
-3-
Part I. Financial Information
-----------------------------
Item 1. Financial Statements
- ----------------------------
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
For the Periods Ended June 30, 1997 and 1996
(in millions)
Second Quarter First Half
----------------------- -----------------------
1997 1996 1997 1996
------- -------- -------- --------
(unaudited) (unaudited)
AUTOMOTIVE
Sales $32,805 $31,762 $61,730 $60,059
Costs and expenses (Note 2)
Costs of sales 28,659 28,505 54,342 55,015
Selling, administrative and other expenses 1,702 1,633 3,240 3,105
------- ------- ------- -------
Total costs and expenses 30,361 30,138 57,582 58,120
Operating income 2,444 1,624 4,148 1,939
Interest income 300 217 549 401
Interest expense 206 210 400 382
------- ------- ------- -------
Net interest income 94 7 149 19
Equity in net income/(loss) of affiliated companies 79 77 (65) 25
Net expense from transactions with
Financial Services (34) (17) (53) (37)
------- ------- ------- -------
Income before income taxes - Automotive 2,583 1,691 4,179 1,946
FINANCIAL SERVICES
Revenues 7,460 7,211 14,737 14,139
Costs and expenses
Interest expense 2,422 2,439 4,778 4,860
Depreciation 1,774 1,675 3,539 3,366
Operating and other expenses 1,574 1,507 3,074 2,935
Provision for credit and insurance losses 794 610 1,639 1,186
Write-down of investment in
Budget Rent a Car Corporation - 700 - 700
------- ------- ------- -------
Total costs and expenses 6,564 6,931 13,030 13,047
Net revenue from transactions with Automotive 34 17 53 37
Gain on sale of Common Stock
of a subsidiary (Note 3) 269 650 269 650
------- ------- ------- -------
Income before income taxes - Financial Services 1,199 947 2,029 1,779
------- ------- ------- -------
TOTAL COMPANY
Income before income taxes 3,782 2,638 6,208 3,725
Provision for income taxes 1,182 694 2,080 1,107
------- ------- ------- -------
Income before minority interests 2,600 1,944 4,128 2,618
Minority interests in net income of subsidiaries 70 41 129 62
------- ------- ------- -------
Net income $ 2,530 $ 1,903 $ 3,999 $ 2,556
======= ======= ======= =======
Income attributable to Common and Class B Stock
after preferred stock dividends $ 2,516 $ 1,887 $ 3,971 $ 2,521
Average number of shares of Common and Class B
Stock outstanding 1,193 1,178 1,191 1,173
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
Income $ 2.11 $ 1.60 $ 3.33 $ 2.15
Income assuming full dilution $ 2.06 $ 1.56 $ 3.25 $ 2.10
Cash dividends $ 0.42 $ 0.35 $ 0.805 $ 0.70
The accompanying notes are part of the financial statements.
-4-
Ford Motor Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
--------------------------
(in millions)
June 30, December 31,
1997 1996
---------- ------------
ASSETS (unaudited)
Automotive
Cash and cash equivalents $ 3,206 $ 3,578
Marketable securities 14,978 11,836
-------- --------
Total cash and marketable securities 18,184 15,414
Receivables 3,364 3,133
Inventories (Note 5) 6,136 6,656
Deferred income taxes 3,182 3,296
Other current assets 3,610 3,193
Net current receivable from Financial Services 190 0
-------- --------
Total current assets 34,666 31,692
Equity in net assets of affiliated companies 2,283 2,483
Net property 33,491 33,527
Deferred income taxes 4,267 4,429
Other assets 8,621 7,527
-------- --------
Total Automotive assets 83,328 79,658
Financial Services
Cash and cash equivalents 1,859 3,689
Investments in securities 2,719 2,307
Net receivables and lease investments 168,319 161,906
Other assets 15,191 14,834
Net receivable from Automotive 0 473
-------- --------
Total Financial Services assets 188,088 183,209
-------- --------
Total assets $271,416 $262,867
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive
Trade payables $ 11,521 $ 11,735
Other payables 2,435 2,206
Accrued liabilities 17,387 16,587
Income taxes payable 1,213 508
Debt payable within one year 1,624 1,661
Net current payable to Financial Services 0 473
-------- --------
Total current liabilities 34,180 33,170
Long-term debt 6,695 6,495
Other liabilities 27,960 26,793
Deferred income taxes 1,162 1,225
-------- --------
Total Automotive liabilities 69,997 67,683
Financial Services
Payables 4,258 4,695
Debt 155,531 150,205
Deferred income taxes 3,912 4,338
Other liabilities and deferred income 7,736 8,504
Net payable to Automotive 190 0
--------- --------
Total Financial Services liabilities 171,627 167,742
Company-obligated mandatorily redeemable preferred securities of a subsidiary
trust holding solely junior subordinated debentures of the Company (Note 6) 679 680
Stockholders' equity
Capital stock
Preferred Stock, par value $1.00 per share (aggregate
liquidation preference of $655 million and $694 million) * *
Common Stock, par value $1.00 per share (1,125 and 1,118 million shares issued) 1,125 1,118
Class B Stock, par value $1.00 per share (71 million shares issued) 71 71
Capital in excess of par value of stock 5,339 5,268
Foreign currency translation adjustments and other (768) (29)
Earnings retained for use in business 23,346 20,334
-------- --------
Total stockholders' equity 29,113 26,762
-------- --------
Total liabilities and stockholders' equity $271,416 $262,867
======== ========
- - - - - -
*Less than $1 million
The accompanying notes are part of the financial statements.
-5-
Ford Motor Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
For the Periods Ended June 30, 1997 and 1996
(in millions)
First Half 1997 First Half 1996
------------------------ ------------------------
Financial Financial
Automotive Services Automotive Services
---------- --------- ---------- ---------
(unaudited) (unaudited)
Cash and cash equivalents at January 1 $ 3,578 $ 3,689 $ 5,750 $ 2,690
Cash flows from operating activities before securities trading 7,675 5,559 8,497 6,236
Net (purchases)/sales of trading securities (3,142) (309) (2,085) (242)
------- -------- ------- --------
Net cash flows from operating activities 4,533 5,250 6,412 5,994
Cash flows from investing activities
Capital expenditures (3,485) (266) (3,568) (200)
Acquisitions of receivables and lease investments - (58,064) - (57,024)
Collections of receivables and lease investments - 43,026 - 39,628
Net acquisitions of daily rental vehicles - (1,329) - (1,946)
Purchases of securities 0 (1,783) (6) (4,757)
Sales and maturities of securities 0 2,167 7 4,327
Proceeds from sales of receivables and lease investments - 1,547 - 2,764
Net investing activity with Financial Services 7 - 9 -
Other 35 (95) (557) 96
------- -------- ------- --------
Net cash used in investing activities (3,443) (14,797) (4,115) (17,112)
Cash flows from financing activities
Cash dividends (987) - (857) -
Issuance of Common Stock 77 - 116 -
Issuance of Common Stock of a subsidiary (Note 3) - 453 - 1,897
Changes in short-term debt (380) 2,406 176 4,890
Proceeds from issuance of other debt 1,150 12,313 0 11,239
Principal payments on other debt (606) (8,042) (651) (7,051)
Net financing activity with Automotive - (7) - (9)
Other 0 (10) (13) 29
------- -------- ------- --------
Net cash (used in)/provided by financing activities (746) 7,113 (1,229) 10,995
Effect of exchange rate changes on cash (53) (59) (64) (168)
Net transactions with Automotive/Financial Services (663) 663 (255) 255
------- -------- ------- --------
Net (decrease)/increase in cash and cash equivalents (372) (1,830) 749 (36)
------- -------- ------- --------
Cash and cash equivalents at June 30 $ 3,206 $ 1,859 $ 6,499 $ 2,654
======= ======== ======= ========
The accompanying notes are part of the financial statements.
-6-
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,
1996. For purposes hereof, "Ford" or the "Company" means Ford Motor Company
and its majority owned subsidiaries unless the context requires otherwise.
Certain amounts for prior periods have been reclassified to conform with
1997 presentations, including additional elimination of intercompany sales.
2. Selected Automotive costs and expenses are summarized as follow
(in millions):
Second Quarter First Half
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
Depreciation $667 $643 $1,350 $1,279
Amortization 719 686 1,506 1,450
3. Sale of The Hertz Corporation ("Hertz") Common Stock - During April 1997,
Hertz completed an initial public offering ("IPO") of its common stock
representing a 19.1% economic interest in Hertz. The Company recognized in
second quarter earnings a non-operating gain of $269 million resulting from
the IPO; the gain was not subject to income taxes.
4. Restructurings and Dispositions - The Company recorded a pre-tax charge in
second quarter totaling $272 million ($169 million after taxes) reflecting
actions that will be completed during 1997 and 1998. These include
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.
5. Automotive inventories are summarized as follows (in millions):
June 30, December 31,
1997 1996
---------- ------------
Raw materials, work in process
and supplies $2,986 $3,374
Finished products 3,150 3,282
------ ------
Total inventories $6,136 $6,656
====== ======
U.S. inventories $1,976 $2,280
6. 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.
-7-
[Coopers & Lybrand L.L.P. letterhead]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Ford Motor Company
We have reviewed the consolidated balance sheet of Ford Motor Company and
Subsidiaries at June 30, 1997 and the related consolidated statement of income
and condensed consolidated statement of cash flows for the periods set forth in
the Ford Motor Company Quarterly Report on Form 10-Q for the quarter ended June
30, 1997. 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 financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet at December 31, 1996 and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended (not presented herein); and in our report dated January 27,
1997, we expressed an unqualified opinion on those consolidated financial
statements.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
July 14, 1997
-8-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- ------------------------------------------------------------------------
OVERVIEW
The company's worldwide net income was $2,530 million in second quarter 1997, or
$2.06 per share of Common and Class B Stock (fully diluted), compared with
$1,903 million, or $1.56 per share (fully diluted) in second quarter 1996. The
company's worldwide sales and revenues were $40.3 billion, up $1.3 billion from
a year ago. Vehicle unit sales of cars and trucks were 1,879,000, up 69,000
units. Stockholders' equity was $29.1 billion at June 30, 1997, up $2.4 billion
compared with December 31, 1996. Results in second quarter and first half 1997
and 1996 included several one-time actions (see below).
Although second quarter results were a record for the company, there are some
cautions for second half 1997. There is some risk that U.S. industry volumes
will soften, particularly if interest rates rise. In addition, the industry is
experiencing immense competitive pressure in North America and Europe, including
escalating marketing incentives and the prospect of many new competitive product
entries scheduled for the remainder of the year.
ONE-TIME ACTIONS
Net income in second quarter 1997 and 1996 and first half 1997 and 1996 included
several one-time actions, as follows (in millions):
Second Quarter First Half
------------------- ---------------------
1997 1996 1997 1996
------ ------ ------ ------
Automotive
- - Restructuring actions $(169) $ (21) $(169) $ (49)
Financial Services
- - Sale of The Hertz Corporation common stock 269 - 269 -
- - Sale of The Associates' common stock - 650 - 650
- - Sale of USL Capital's assets - 19 - 19
- - Net write-down for Budget Rent a
Car Corporation - (437) - (437)
----- ----- ----- -----
Total Financial Services 269 232 269 232
----- ----- ----- -----
Total Company $ 100 $ 211 $ 100 $ 183
===== ===== ===== =====
Per share $0.08 $0.17 $0.08 $0.15
See Note 3 and Note 4 (page 7) of the Notes to Financial Statements for further
information on second quarter 1997 one-time actions.
RESULTS OF OPERATIONS
The company's net income for worldwide Automotive operations in second quarter
1997 and 1996 and first half 1997 and 1996 was as follows (in millions):
Second Quarter First Half
----------------- ----------------
1997 1996 1997 1996
------ ------ ------ ------
U.S. Automotive $1,192 $ 697 $2,028 $ 745
Automotive Outside U.S.
- Europe 157 196 262 269
- South America 25 (69) (22) (129)
- Other 361 284 471 365
------ ------ ------ ------
Total Automotive Outside U.S. 543 411 711 505
------ ------ ------ ------
Total Automotive $1,735 $1,108 $2,739 $1,250
====== ====== ====== ======
-9-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
- ------------------------------------------------------------------------
The company's net income for worldwide Financial Services operations in second
quarter 1997 and 1996 and first half 1997 and 1996 was as follows (in millions):
Second Quarter First Half
--------------- ----------------
1997 1996 1997 1996
----- ----- ------ ------
Ford Credit $279 $376 $ 555 $ 715
The Associates 245 200 483 392
USL Capital - 41 - 81
Hertz 54 40 74 48
One-Time Actions 269 232 269 232
Minority Interests, Eliminations,
and Other (52) (94) (121) (162)
---- ---- ------ ------
Total Financial Services $795 $795 $1,260 $1,306
==== ==== ====== ======
Memo: Ford's share of earnings in
----------------------------------
The Associates $197 $177 $389 $369
Hertz 45 40 65 48
SECOND QUARTER 1997 COMPARED WITH SECOND QUARTER 1996
Automotive Operations
- ---------------------
Ford's worldwide Automotive operations earned $1,735 million in second quarter
1997 on sales of $32.8 billion, compared with $1,108 million in second quarter
1996 on sales of $31.8 billion. The increase in earnings was explained primarily
by improved results in the U.S.
Earnings for Automotive operations in the U.S. were up $495 million in second
quarter 1997 compared with a year ago. The increase reflected primarily
continuing cost and quality improvements, and improving product mix. A partial
offset was higher restructuring costs. U.S. Automotive after-tax return on sales
was 5.5% in second quarter 1997, up 2 points from a year ago.
The U.S. economy slowed somewhat in second quarter 1997, compared with a strong
first quarter. Interest rates and inflation remained at relatively low levels.
The seasonally-adjusted annual selling rate for the U.S. car and truck industry
was 14.8 million units in second quarter, down from 15.6 million units in second
quarter 1996. The company expects car and truck industry sales in full-year 1997
to be slightly lower than 1996. Ford's combined U.S. car and truck share was
25.6%, up 8/10 of a point from a year ago, reflecting strong acceptance of new
products, and up 4/10 of a point from full year 1996.
Lower earnings for Automotive operations in Europe reflected lower volume and
higher marketing and restructuring costs, offset partially by lower operating
costs. The European automotive industry continues to be extremely competitive as
a result of excess industry capacity; this trend is expected to continue in
second half 1997 and beyond.
The seasonally-adjusted annual selling rate for the European car and truck
industry was 14.6 million units in second quarter 1997, up from 14.3 million
units in second quarter 1996. Ford's combined European car and truck market
share was 11.6% in second quarter 1997, down 4/10 of a point from a year ago,
reflecting the highly competitive market, and down 2/10 of a point from full
year 1996. The company expects car and truck industry sales in full-year 1997 to
be about equal to 1996.
Automotive operations in South America earned a profit in second quarter 1997,
compared with a loss a year ago. The improvement reflected primarily higher
industry volumes and market share, lower material costs and favorable tax
adjustments, offset partially by price reductions in response to the highly
competitive market. For full year 1997, Ford still expects to incur a loss in
South America.
-10-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
- ------------------------------------------------------------------------
Financial Services Operations
- -----------------------------
Earnings for Financial Services operations in second quarter 1997 were equal to
a year ago. Excluding one-time actions shown above, earnings were down $37
million. The reduction reflects a decline in earnings at Ford Credit, and the
absence of earnings from USL Capital, substantially all of the assets of which
were sold last year.
Ford Credit's earnings were down $97 million from a year ago, reflecting
primarily higher credit losses and loss reserve requirements, higher taxes and
lower net financing margins. Higher levels of earning assets were a partial
offset. Credit losses as a percent of average net finance receivables (including
net investment in operating leases) were 0.76% in second quarter 1997, compared
with 0.60% in second quarter a year ago, reflecting an increase in repossession
rates and higher losses per repossession. Net financing margins have
deteriorated from a year ago. Higher depreciation costs on leased vehicles
(reflecting lower-than-anticipated residuals) were offset partially by improved
yields and borrowing costs (6.5% net borrowing rate in 1997 compared with 6.68%
in 1996). Higher depreciation costs on leased vehicles are expected to continue
to depress Ford Credit's earnings in second half 1997.
Record earnings at the Associates in second quarter 1997 reflected primarily
higher levels of earning assets, lower operating costs, and improved net
interest margins, offset partially by higher credit losses. Credit losses as a
percent of average net receivables were 2.45% in second quarter 1997, compared
with 1.95% in second quarter 1996. The Associates believes the higher levels of
credit losses may continue.
Record earnings at Hertz reflected strong rental demand and price improvement in
the domestic car rental market.
FIRST HALF 1997 COMPARED WITH FIRST HALF 1996
Ford earned $3,999 million, or $3.25 per share of Common and Class B Stock
(fully diluted), in first half 1997, compared with $2,556 million, or $2.10 per
share (fully diluted) in first half 1996. Results for first half 1997 and first
half 1996 included several one-time actions (see above). The company's worldwide
sales and revenues were $76.5 billion, up $2.3 billion from a year ago. Vehicle
unit sales of cars and trucks were 3,560,000, up 112,000 units.
Automotive Operations
- ---------------------
Ford's worldwide Automotive operations earned $2,739 million in first half 1997
on sales of $61.7 billion, compared with $1,250 million in first half 1996 on
sales of $60.1 billion. The increase was explained primarily by improved
earnings in the U.S.
Earnings on Automotive operations in the U.S. were up $1,283 million in first
half 1997 compared with a year ago. The increase reflected primarily higher
margins from on-going cost and quality improvements, vehicle mix improvements
and higher volumes. A partial offset was higher restructuring costs. U.S.
Automotive after-tax return on sales was 5.1% in first half 1997, up 3.1 points
from a year ago.
The seasonally-adjusted annual selling rate for the U.S. car and truck industry
was 15.3 million units in first half 1997, compared with 15.6 million units in
first half 1996. Ford's combined U.S. car and truck market share was 25.3%,
equal to a year ago, and up 1/10 of a point from full year 1996.
Earnings on Automotive operations in Europe in first half 1997 were down $7
million from a year ago, reflecting primarily lower volumes and one-time
restructuring costs, offset largely by lower operating costs.
-11-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
- ------------------------------------------------------------------------
The seasonally-adjusted annual selling rate for the European car and truck
industry was 14.4 million units in first half 1997, up from 14.2 million units
in first half 1996. Ford's combined European car and truck market share was
11.5% in first half 1997, down 6/10 of a point from a year ago, reflecting the
highly competitive market, and down 3/10 of a point from full year 1996.
Lower losses in first half 1997 incurred by Automotive operations in South
America, compared to a year ago, reflected primarily higher volume and lower
material costs, offset partially by price reductions in response to the highly
competitive market.
Financial Services Operations
- -----------------------------
Earnings for Financial Services operations were down $46 million in first half
1997, compared with a year ago. Results in first half 1997 and first half 1996
included the one-time actions shown above; excluding these one-time actions,
earnings were down $83 million.
Lower consolidated net income at Ford Credit in first half 1997, compared with
first half 1996, resulted primarily from the same factors as those described in
the discussion of second quarter results of operations.
Higher earnings at The Associates and at Hertz in first half 1997, compared with
first half 1996, reflected primarily the same factors as those described in the
discussion of second quarter results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Automotive Operations
- ---------------------
Automotive cash and marketable securities were $18.2 billion at June 30, 1997,
up $2.8 billion from December 31, 1996. The amount of cash and marketable
securities is expected to decline during third quarter 1997, reflecting normal
seasonal patterns. The company paid $987 million in cash dividends on its Common
Stock, Class B Stock and Preferred Stock during first half 1997.
Automotive capital expenditures were $3.5 billion in first half 1997, down $83
million from the same period a year ago. For full year 1997, Ford's capital
spending is expected to be about the same as it was in 1996; however, as a
percentage of sales, spending is expected to be lower.
Automotive debt at June 30, 1997 totaled $8.3 billion, which was 22% of total
capitalization (stockholders' equity and Automotive debt), essentially unchanged
from year-end 1996.
At July 1, 1997, Ford had long-term contractually committed global credit
agreements under which $8.4 billion is available from various banks at least
through June 30, 2002. The entire $8.4 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 $8.1
billion of such credit lines in varying portions to Ford Credit and Ford Credit
Europe. In addition, at July 1, 1997, $510 million of contractually committed
credit facilities were available to various Automotive affiliates outside the
U.S. Approximately $60 million of these facilities were in use at July 1, 1997.
Financial Services Operations
- -----------------------------
Financial Services cash and investments in securities totaled $4.6 billion at
June 30, 1997, down $1.4 billion from December 31, 1996.
Net receivables and lease investments were $168.3 billion at June 30, 1997, up
$6.4 billion from December 31, 1996.
-12-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
- ------------------------------------------------------------------------
Total debt was $155.5 billion at June 30, 1997, up $5.3 billion from December
31, 1996.
Outstanding commercial paper at June 30, 1997 totaled $38.5 billion at Ford
Credit, $19.3 billion at The Associates, and $2 billion at Hertz, with an
average remaining maturity of 35 days, 23 days, and 24 days, respectively.
At July 1, 1997, Financial Services had a total of $42.5 billion of
contractually committed support facilities (excluding the $8.1 billion available
under Ford's global credit agreements). Of these facilities, $24 billion are
contractually committed global credit agreements under which $19.3 billion and
$4.7 billion are available to Ford Credit and Ford Credit Europe, respectively,
from various banks; 61% and 77%, respectively, of such facilities are available
through June 30, 2002. The entire $19.3 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 Ford Credit Europe's option, by any subsidiary of Ford Credit Europe.
Any borrowings by such subsidiaries will be guaranteed by Ford Credit or Ford
Credit Europe, as the case may be. At July 1, 1997, $73 million of the Ford
Credit global facilities were in use and $627 million of the Ford Credit Europe
global facilities were in use. Other than the global credit agreements, the
remaining portion of the Financial Services support facilities at July 1, 1997
consisted of $16.4 billion of contractually committed support facilities
available to various affiliates in the U.S, and $2.1 billion of contractually
committed support facilities available to various affiliates outside the U.S.;
at July 1, 1997, approximately $1.3 billion of these facilities were in use.
Furthermore, banks provide $1.6 billion of liquidity facilities to support the
asset-backed commercial paper program of a Ford Credit sponsored special purpose
entity.
ACCOUNTING CHANGES
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), Reporting
Comprehensive Income, was issued by the Financial Accounting Standards Board in
June 1997. This Statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. Ford will adopt SFAS 130 beginning January 1, 1998.
The effect of adopting this standard is not expected to be material.
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. This Statement establishes
standards for reporting information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. Ford will adopt SFAS 131 beginning
January 1, 1998. The effect of adopting this standard is not expected to be
material.
OTHER FINANCIAL INFORMATION
Coopers & Lybrand L.L.P., Ford's independent public accountants, performed a
limited review of the financial data presented on pages 4 through 7 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, Coopers & Lybrand L.L.P. did
not express an opinion on the aforementioned data. The financial data include
any material adjustments or disclosures proposed by Coopers & Lybrand L.L.P. as
a result of its review.
-13-
Part II. Other Information
--------------------------
Item 1. Legal Proceedings
- --------------------------
Environmental Matters
- ---------------------
In the sixth paragraph on page 18 of Ford's Annual Report on Form 10-K for the
year ended December 31, 1996 (the "10-K Report"), Ford referred to two
environmental matters involving governmental agencies and potential monetary
sanctions exceeding $100,000. In July 1997, one of those matters was resolved.
However, there since has arisen a new environmental investigation by a
governmental agency which involves possible sanctions in excess of $100,000.
The Corporation for Clean Air, Inc. ("CCA", a California non-profit group) has
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.
Other Matters
- -------------
In the second paragraph on page 19 of the 10-K Report, Ford discussed the suit
by an individual patent owner (Lemelson) alleging Ford's infringement of certain
patents concerning machine vision inspection technologies. Ford reported that
the district court judge had dismissed the case based on one of Ford's defenses.
That defense was that the patents were unenforceable because Lemelson engaged in
"undue delay" in taking 35 years and more to prosecute the patent applications.
In April 1997, however, the judge reversed his decision and granted Lemelson's
motion to dismiss the "undue delay" defense by Ford. At Ford's request, the
judge certified the issue for appeal and stayed all further proceedings until
the appeal is concluded. In June Ford filed a petition with the Court of Appeals
for the Federal Circuit in Washington, D.C. requesting an appeal; Ford awaits a
decision on its petition.
With respect to the paint-related class actions discussed in the third paragraph
on page 19 of the 10-K Report, the plaintiffs voluntarily dismissed in May 1997
one of the nationwide cases (Jones) that had been consolidated in federal court
in Louisiana. In addition, in July 1997 a statewide class action (Stallbaumer)
that had been filed in Kansas, but was subsequently consolidated with the cases
in Louisiana, was also voluntarily dismissed by the plaintiffs.
In the first paragraph on page 20 of the 10-K Report, Ford discussed various
class actions relating to an allegedly defective ignition switch. In June 1997,
State Farm Insurance Company moved to intervene as a named plaintiff in one of
the purported nationwide class actions. State Farm argued that it acquired
subrogation rights because of payments to members of the putative class arising
out of vehicle fires allegedly caused by the purportedly defective ignition
switch. Ford will oppose this motion.
With respect to the airbag class actions reported in the third paragraph on page
13 of Ford's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997,
an additional class action was filed in state court in Alabama, bringing the
total of such lawsuits to three. Plaintiffs in these lawsuits seek economic
damages, claiming that the airbags in their vehicles are defective because they
can injure children and small adults. The Alabama court has conditionally
certified a nationwide class of owners of Ford, Chrysler, and General Motors
1993 to 1996 model passenger vehicles and 1993 to 1997 model light trucks, vans,
and sport utility vehicles containing front passenger air bags.
-14-
Item 1. Legal Proceedings (Continued)
- --------------------------------------
In July 1997 two new purported nationwide class actions were filed in state
courts (and subsequently removed to Federal courts) in Illinois and Washington
against Ford and Citibank on behalf of all persons who are holders of Ford
Citibank Visa credit cards. 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.
-15-
Item 4. Submission of Matters to a Vote of Security-Holders
- ------------------------------------------------------------
On May 8, 1997, the 1997 Annual Meeting of Stockholders of the Company was held.
Following is a brief description of the matters voted upon at the meeting and a
tabulation of the voting therefor:
Election of Directors. The following persons were elected directors of the
Company based on the number of votes set forth opposite their respective names:
Number of Votes
-----------------------------------
Nominee For Not For
----------------------- ------------- ----------
Michael D. Dingman 1,701,038,351 14,454,457
Edsel B. Ford II 1,702,531,899 12,960,909
William C. Ford 1,701,835,075 13,657,733
William C. Ford, Jr. 1,702,265,852 13,226,956
Roberto C. Goizueta 1,701,465,392 14,027,416
Irvine O. Hockaday, Jr. 1,702,509,753 12,983,055
Marie-Josee Kravis 1,701,520,716 13,972,092
Ellen R. Marram 1,701,999,724 13,493,084
Homer A. Neal 1,701,216,106 14,276,702
Carl E. Reichardt 1,701,864,682 13,628,126
John L. Thornton 1,698,858,480 16,634,328
Alex Trotman 1,699,569,389 15,923,419
There were no broker non-votes with respect to the election of directors.
Proposal 1 Ratification of Selection of Independent Public Accountants.
- ----------------------------------------------------------------------------
A proposal to ratify the selection of Coopers & Lybrand as independent public
accountants to audit the books of account and other corporate records of the
Company for 1997 was adopted, with 1,697,643,329 votes cast for, 12,011,826
votes cast against, 5,837,653 votes abstained and no broker non-votes.
Proposal 2 Relating to the Establishment of Term Limits for Outside Directors.
- -----------------------------------------------------------------------------
A proposal relating to the establishment of term limits for outside directors
was rejected, with 1,490,883,812 votes cast against, 70,059,001 votes cast for,
12,560,570 votes abstained and 141,989,425 broker non-votes.
Proposal 3 Relating to the Discontinuance of Options, Rights and Stock
Appreciation Rights for Management and the Board of Directors.
- --------------------------------------------------------------------------------
A proposal relating to the discontinuance of all options, rights, and stock
appreciation rights for management and the Board of Directors was rejected, with
1,483,310,593 votes cast against, 74,989,306 votes cast for, 15,203,484 votes
abstained and 141,989,425 broker non-votes.
Proposal 4 Relating to Salary Increases and Stock Option Grants in the Event the
Dividend is Cut.
- --------------------------------------------------------------------------------
A proposal relating to salary increases and stock option grants for executive
officers and directors in the event of a decrease in the dividend was rejected,
with 1,459,930,880 votes cast against, 99,577,416 votes cast for, 13,995,087
votes abstained and 141,989,425 broker non-votes.
Proposal 5 Relating to a Proposed Review of Executive Compensation.
- -------------------------------------------------------------------
A proposal relating to a review and report on the Company's executive
compensation was rejected, with 1,409,600,413 votes cast against, 118,080,448
votes cast for, 45,822,522 votes abstained and 141,989,425 broker non-votes.
Proposal 6 Relating to Independent Directors.
- --------------------------------------------
A proposal relating to independent directors was rejected, with 1,447,481,344
votes cast against, 108,075,782 votes cast for, 17,946,257 votes abstained and
141,989,425 broker non-votes.
-16-
Supplemental Schedule
Ford Motor Company
CONDENSED FINANCIAL INFORMATION OF SUBSIDIARY
---------------------------------------------
(in millions)
Ford Capital B.V.
- -----------------
June 30, December 31,
1997 1996
---------- ------------
(unaudited)
Current assets $1,338 $1,660
Noncurrent assets 3,110 3,491
------ ------
Total assets $4,448 $5,151
====== ======
Current liabilities $1,579 $1,116
Noncurrent liabilities 2,391 3,544
Minority interests in net
assets of subsidiaries 16 18
Stockholder's equity 462 473
------ ------
Total liabilities and
stockholder's equity $4,448 $5,151
====== ======
Second Quarter First Half
------------------------ ------------------------
1997 1996 1997 1996
-------- -------- -------- --------
(unaudited) (unaudited)
Sales and other revenue $637 $753 $1,381 $1,575
Operating income 12 14 46 11
Income/(loss) before income taxes 0 1 21 (16)
Net (loss) (11) (14) (3) (43)
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.
-17-
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
Please refer to the Exhibit Index on page 19.
(b) Reports on Form 8-K
-------------------
The Registrant filed the following Current Reports on Form 8-K during
the quarter ended June 30, 1997:
Current Report on Form 8-K dated April 16, 1997 included information
relating to Ford's first quarter 1997 financial results.
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: August 7, 1997 By: /s/ W. J. Cosgrove
-------------- ------------------------
W. J. Cosgrove
Corporate Controller
(principal accounting officer)
-18-
EXHIBIT INDEX
-------------
Sequential
Page Number
Designation Description at Which Found
- ------------- ----------------------------------------------------------------- --------------
Exhibit 11 Ford Motor Company and Subsidiaries Computation of Primary 20-21
and Fully Diluted Earnings Per Share in Accordance with
Opinion 15 of the Accounting Principles Board.
Exhibit 12 Ford Motor Company and Subsidiaries Calculation of Ratio of 22
Earnings to Combined Fixed Charges and Preferred Stock Dividends.
Exhibit 15 Letter of Coopers & Lybrand L.L.P., Independent Public 23
Accountants, dated August 7, 1997, relating to Financial
Information.
-19-