SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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 numbers 1-6368
FORD MOTOR CREDIT COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 38-1612444
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(State of Incorporation) (I.R.S. employer identification no.)
One American Road, Dearborn, Michigan 48126
- --------------------------------------- ---------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (313) 322-3000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number
of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: 250,000 shares
of common stock as of September 30, 2000.
The registrant meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing
this Form in reduced disclosure format.
PAGE 1 OF 34
EXHIBIT INDEX APPEARS AT PAGE 30.
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements - The interim financial data presented herein are
unaudited, but in the opinion of management reflect all 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 for the year ended December 31, 1999 (the "10-K Report"). Information
relating to earnings per share is not presented because the registrant, Ford
Motor Credit Company ("Ford Credit"), is an indirect wholly owned subsidiary of
Ford Motor Company ("Ford" or the "Company"). Certain amounts in prior years'
financial statements have been reclassified to conform with current year
presentation.
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Consolidated Statement of Income
and of Earnings Retained for Use in the Business
For the Periods Ended September 30, 2000 and 1999
(in millions)
Third Quarter Nine Months
-------------------------------- --------------------------------
2000 1999 2000 1999
------------- ------------- ------------- --------------
(Unaudited) (Unaudited)
Financing revenue
Operating leases $ 2,820.7 $ 2,422.2 $ 8,042.6 $ 7,345.2
Retail 2,129.7 1,827.4 6,119.3 5,126.8
Wholesale 594.7 403.1 1,723.0 1,217.8
Other 133.1 105.7 400.8 299.2
--------- --------- --------- ---------
Total financing revenue 5,678.2 4,758.4 16,285.7 13,989.0
Depreciation on operating leases (1,982.5) (1,864.8) (5,859.0) (5,660.2)
Interest expense (2,300.4) (1,836.9) (6,565.3) (5,305.1)
--------- --------- --------- ---------
Net financing margin 1,395.3 1,056.7 3,861.4 3,023.7
Other revenue
Insurance premiums earned 49.5 75.3 169.8 178.1
Investment and other income 263.0 298.3 884.0 903.6
--------- --------- --------- ---------
Total financing margin and revenue 1,707.8 1,430.3 4,915.2 4,105.4
Expenses
Operating expenses 619.7 539.0 1,799.0 1,453.9
Provision for credit losses 409.7 301.4 1,097.6 907.9
Other insurance expenses 44.1 73.8 175.1 172.0
--------- --------- --------- ---------
Total expenses 1,073.5 914.2 3,071.7 2,533.8
--------- --------- --------- ---------
Income before income taxes and minority interests 634.3 516.1 1,843.5 1,571.6
Provision for income taxes 235.3 193.7 683.9 587.3
--------- --------- --------- ---------
Income before minority interests 399.0 322.4 1,159.6 984.3
Minority interests in net income of subsidiaries 13.5 5.5 33.3 32.3
--------- --------- --------- ---------
Net income 385.5 316.9 1,126.3 952.0
Earnings retained for use in the business
Beginning of period 7,590.9 8,446.5 6,855.5 7,911.4
Dividends (0.2) (350.0) (5.6) (450.0)
--------- --------- --------- ---------
End of period $ 7,976.2 $ 8,413.4 $ 7,976.2 $ 8,413.4
=========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
-2-
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Consolidated Balance Sheet
(in millions)
September 30, December 31, September 30,
2000 1999 1999
---------------- ---------------- ----------------
(Unaudited) (Unaudited)
Assets
Cash and cash equivalents $ 1,959.7 $ 942.2 $ 791.9
Investments in securities 530.0 524.4 494.3
Finance receivables, net 118,929.1 108,753.8 100,088.4
Net investment, operating leases 38,442.4 32,838.2 33,891.0
Retained interest in securitized assets 3,188.8 3,442.8 3,698.1
Notes and accounts receivable from affiliated companies 2,766.2 6,128.2 5,728.8
Other assets 4,078.1 4,001.1 3,184.7
---------- ---------- ----------
Total assets $ 169,894.3 $ 156,630.7 $ 147,877.2
Liabilities and Stockholder's Equity
Liabilities
Accounts payable
Trade, customer deposits, and dealer reserves $ 4,027.0 $ 2,908.3 $ 2,922.8
Affiliated companies 1,855.0 1,235.2 1,432.0
---------- ---------- ----------
Total accounts payable 5,882.0 4,143.5 4,354.8
Debt 141,895.6 133,073.7 124,315.8
Deferred income taxes 4,338.4 3,564.0 3,584.8
Other liabilities and deferred income 5,393.1 4,511.0 4,182.6
---------- ---------- ----------
Total liabilities $ 157,509.1 $ 145,292.2 $ 136,438.0
Minority interests in net assets of subsidiaries 401.1 414.4 408.3
Stockholder's Equity
Capital stock, par value $100 a share, 250,000 shares
authorized, issued and outstanding 25.0 25.0 25.0
Paid-in surplus (contributions by stockholder) 4,551.5 4,341.6 4,341.2
Note receivable from affiliated company - - (1,517.0)
Accumulated other comprehensive loss (568.6) (298.0) (231.7)
Retained earnings 7,976.2 6,855.5 8,413.4
---------- ---------- ----------
Total stockholder's equity 11,984.1 10,924.1 11,030.9
---------- ---------- ----------
Total liabilities and stockholder's equity $ 169,894.3 $ 156,630.7 $ 147,877.2
=========== =========== ============
The accompanying notes are an integral part of the financial statements.
-3-
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the Periods Ended September 30, 2000 and 1999
(in millions)
Nine Months
-----------------------------
2000 1999
----------- -------------
(Unaudited)
Cash flows from operating activities
Net income $ 1,126.3 $ 952.0
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for credit losses 1,097.6 907.9
Depreciation and amortization 6,229.6 5,997.3
Gain on sales of finance receivables (0.1) (57.1)
Increase in deferred income taxes 619.3 425.1
Decrease/(increase) in other assets 128.3 (272.8)
(Decrease)/increase in other liabilities (269.8) 470.8
Other 320.7 103.6
------- -------
Net cash provided by operating activities 9,251.9 8,526.8
======= =======
Cash flows from investing activities
Purchase of finance receivables (other than wholesale) (47,636.7) (41,546.3)
Collection of finance receivables (other than wholesale) 26,965.4 25,329.7
Purchase of operating lease vehicles (21,379.4) (18,071.8)
Liquidation of operating lease vehicles 12,072.4 12,833.5
Increase in wholesale receivables (1,292.8) (194.6)
Decrease/(increase) in notes receivable with affiliates 3,645.0 (4,633.9)
Proceeds from sale of receivables 12,499.7 9,520.2
Purchase of investment securities (412.3) (753.1)
Proceeds from sale/maturity of investment securities 406.7 984.6
Other (258.2) (156.0)
--------- ---------
Net cash used in investing activities (15,390.2) (16,687.7)
========== ==========
Cash flows from financing activities
Proceeds from issuance of long-term debt 30,736.5 24,500.7
Principal payments on long-term debt (13,885.0) (9,303.7)
Decrease in short-term debt (9,270.5) (6,351.3)
Cash dividends paid (150.0) (450.0)
Other (4.7) (35.9)
--------- ---------
Net cash provided by financing activities 7,426.3 8,359.8
========= =========
Effect of exchange rate changes on cash and cash equivalents (270.5) (187.8)
--------- ---------
Net change in cash and cash equivalents 1,017.5 11.1
Cash and cash equivalents, beginning of period 942.2 780.8
--------- ---------
Cash and cash equivalents, end of period $ 1,959.7 $ 791.9
========== ==========
Supplementary cash flow information
Interest paid $ 4,207.5 $ 5,075.4
Taxes paid 105.0 142.8
The accompanying notes are an integral part of the financial statements.
-4-
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes To Financial Statements
Note 1. Finance Receivables, Net (in millions)
September 30, December 31, September 30,
2000 1999 1999
---------------- --------------- --------------
(Unaudited) (Unaudited)
Retail $ 82,940.7 $ 76,181.6 $ 70,696.4
Wholesale 28,342.2 26,450.0 22,668.6
Other 8,837.3 7,244.3 7,822.1
---------- ---------- ----------
Total finance receivables, net of unearned income 120,120.2 109,875.9 101,187.1
Less: Allowance for credit losses (1,191.1) (1,122.1) (1,098.7)
---------- ---------- ----------
Finance receivables, net $ 118,929.1 $ 108,753.8 $ 100,088.4
========== ========== ==========
Note 2. Debt (in millions)
September 30, 2000
----------------------------------
Weighted Average
September 30, December 31, September 30,
Interest Rates (A) Maturities 2000 1999 1999
-------------------- ------------ ----------------- --------------- --------------
(Unaudited) (Unaudited)
Payable Within One Year:
Commercial paper (B) $ 34,622.8 $ 43,077.9 $ 41,006.9
Other short-term debt (C) 7,020.0 6,769.8 6,414.0
---------- --------- ---------
Total short-term debt 41,642.8 49,847.7 47,420.9
Long-term indebtedness payable within
one year (D) 18,177.2 19,893.4 14,228.1
---------- ---------- ----------
Total payable within one year 59,820.0 69,741.1 61,649.0
Payable After One Year:
Unsecured senior indebtedness
Notes (E) 6.85% 2001-2078 80,687.4 61,271.1 60,733.8
Debentures 2.16% 2001-2006 1,410.0 2,051.4 1,908.5
Unamortized discount (104.5) (84.2) (75.6)
---------- ---------- ----------
Total unsecured senior indebtedness 81,992.9 63,238.3 62,566.7
Unsecured long-term subordinated notes 8.49% 2005 82.7 94.3 100.1
---------- ---------- ----------
Total payable after one year 82,075.6 63,332.6 62,666.8
--------- ---------- ----------
Total debt $ 141,895.6 $ 133,073.7 $ 124,315.8
============ =========== ===========
A) The agreements effectively converted all long-term obligations payable
after one year subject to variable interest rates to fixed rates as of
September 30, 2000, December 31, 1999 and September 30, 1999.
B) Includes commercial paper of $1,031 million with an affiliated company at
December 31, 1999.
C) Includes $565.3 million, $717.5 million, and $840.3 million with affiliated
companies at September 30, 2000, December 31, 1999, and September 30, 1999,
respectively.
D) Includes $1,282.5 million, $763.6 million, and $312.9 million with
affiliated companies at September 30, 2000, December 31, 1999, and
September 30, 1999, respectively.
E) Includes $1,855.8 million, $2,693.2 million, and $3,312.5 million with
affiliated companies at September 30, 2000, December 31, 1999, and
September 30, 1999, respectively.
-5-
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes To Financial Statements - Continued
Note 3. Comprehensive Income (in millions)
Third Quarter Nine Months
------------------------------ --------------------------------
2000 1999 2000 1999
------------ ------------ ------------ -------------
(Unaudited) (Unaudited)
Net income $ 385.5 $ 316.9 $ 1,126.3 $ 952.0
Other comprehensive income (126.2) 44.2 (270.6) (113.6)
--------- --------- --------- ---------
Total comprehensive income $ 259.3 $ 361.1 $ 855.7 $ 838.4
========= ========= ========= =========
Other comprehensive income includes foreign currency translation adjustments,
net unrealized gains and losses on investments in securities and retained
interests in securitized assets.
-6-
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes to Financial Statements - Continued
Note 4. Segment Information (in millions)
Ford Credit manages its operations through two segments, Ford Credit North
America and Ford Credit International. In the Third Quarter of 2000, the
Company merged the Personal Financial Services segment into these segments.
Ford Credit Ford Credit
North Ford Credit Eliminations/ Financial
America International Reclassifications Statements
---------------- --------------- ----------------- ---------------
Third Quarter
- ---------------------------------------------
2000
Revenue $ 5,456.9 $ 946.8 $ (413.0) $ 5,990.7
Income
...Income before income taxes 539.5 100.5 (5.7) 634.3
...Provision for income taxes 203.5 35.5 (3.7) 235.3
...Net income 336.0 65.0 (15.5) 385.5
Other disclosures
...Depreciation on operating leases 1,761.2 212.1 9.2 1,982.5
...Interest expense 2,235.1 404.3 (339.0) 2,300.4
1999
Revenue $ 4,366.6 $ 880.5 $ (115.1) $ 5,132.0
Income
...Income before income taxes 360.7 149.5 5.9 516.1
...Provision for income taxes 94.5 96.6 2.6 193.7
...Net income 266.2 52.9 (2.2) 316.9
Other disclosures
...Depreciation on operating leases 1,698.9 165.0 .9 1,864.8
...Interest expense 1,680.3 362.0 (205.4) 1,836.9
Nine Months
- ------------------------------------------
2000
Revenue $ 15,559.9 $ 2,777.5 $ (997.9) $ 17,339.5
Income
...Income before income taxes 1,514.4 333.9 (4.8) 1,843.5
.Provision for income taxes 566.3 115.6 2.0 683.9
...Net income 948.1 218.3 (40.1) 1,126.3
Other disclosures
...Depreciation on operating leases 5,241.4 612.7 4.9 5,859.0
...Interest expense 6,286.0 1,178.2 (898.9) 6,565.3
...Finance receivables (including net
investment operating leases) 153,449.2 27,523.0 (23,600.7) 157,371.5
...Total assets 159,516.8 31,878.9 (21,501.4) 169,894.3
1999
Revenue $ 13,090.7 $ 2,656.2 $ (676.2) $ 15,070.7
Income
...Income before income taxes 1,111.6 447.2 12.8 1,571.6
...Provision for income taxes 363.5 218.5 5.3 587.3
...Net income 748.1 228.7 (24.8) 952.0
Other disclosures
...Depreciation on operating leases 5,211.9 470.0 (21.7) 5,660.2
...Interest expense 4,877.9 1,139.1 (711.9) 5,305.1
...Finance receivables (including net
investment operating leases) 127,856.1 27,129.1 (21,005.8) 133,979.4
...Total assets 135,485.9 28,541.7 (16,150.4) 147,877.2
-7-
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Unless otherwise indicated, Ford Credit's 2000 third quarter and year-to-date
results and financial condition reflect the impact of consolidation of Volvo
financing operations for North America, Belgium, Britain, Finland, the
Netherlands, Norway, Spain, and Switzerland into Ford Credit's earnings.
Additional Volvo financing operations will be consolidated into Ford Credit's
financial results in 2001.
In addition, Ford Credit is restructuring its North American operations. This
involves the centralizing of collections and administrative functions,
historically performed in Ford Credit's 136 branches, into eight regional
service centers in North America. Currently, five of the service centers are
fully operational. The remaining three service centers are expected to be fully
operational by April 2001.
THIRD QUARTER 2000 COMPARED WITH THIRD QUARTER 1999
Ford Credit's consolidated net income in the third quarter of 2000 was $386
million, up $69 million or 22% from the third quarter of 1999. Compared with
1999, the increase in earnings reflects primarily improved net financing margins
and a higher level of receivables, offset partially by higher credit losses and
operating costs, both of which are associated with the restructuring of North
American operations.
Total net finance receivables and net investment in operating leases at
September 30, 2000 were $157 billion, up $23 billion or 17% from a year earlier.
The increase results primarily from a higher volume of installment sales
receivables, due in part to Ford Motor Company-sponsored special financing
programs that are available exclusively through Ford Credit, a higher volume of
wholesale receivables, and the inclusion of Volvo financing receivables.
Improved net financing margins reflect primarily lower depreciation expense
resulting from fewer off-lease vehicles returned to Ford Credit.
Credit losses as a percent of average net finance receivables including net
investment in operating leases increased to 0.87% in third quarter 2000 compared
with 0.71% in 1999. The increase is due primarily to the transition of
collection activities to the regional service centers discussed above.
Higher operating costs reflect primarily the servicing of a higher level of
receivables, operating expenses of recently acquired subsidiaries, and costs
associated with the restructuring of North American operations.
During the first nine months of 2000, Ford Credit financed 56% of all new
cars and trucks sold by Ford, Lincoln, and Mercury dealers in the U.S. compared
with 53% in the same period of 1999. In Europe, Ford Credit financed 31% of all
new vehicles sold by Ford dealers, compared with 33% a year ago. Ford Credit's
retail financing for new and used vehicles totaled about 952,000 in the United
States and about 206,000 in Europe during the third quarter of 2000. Ford Credit
provided wholesale financing for 81% of Ford, Lincoln, and Mercury factory sales
in the United States and 96% of Ford factory sales in Europe compared with 84%
for the United States and 97% for Europe in the third quarter of 1999.
FIRST NINE MONTHS OF 2000 COMPARED WITH 1999
For the first nine months of 2000, Ford Credit's consolidated net income was
$1,126 million, up $174 million or 18% from the same period in 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 and higher credit losses, both of
which are associated with the restructuring of North American operations.
During the first nine months of 2000, Ford Credit provided retail financing
for 52% of all new cars and trucks sold by Ford, Lincoln, and Mercury dealers in
the U.S. compared with 47% in 1999. In Europe, Ford Credit financed 32% of all
new vehicles sold by Ford dealers in the first nine months of 2000, unchanged
from a year ago. In the first nine months of 2000, Ford Credit provided retail
financing for about 2,779,000 and about 618,000 new and used vehicles in the
U.S. and Europe, respectively. Ford Credit also provided wholesale financing for
83% of Ford, Lincoln, and Mercury U.S. factory sales and 96% of Ford Europe
factory sales compared with 83% for the U.S. and 96% for Europe in the first
nine months of 1999.
-8-
Ford Credit Liquidity and Capital Resources
Ford Credit's outstanding debt at September 30, 2000 and at the end of each of
the last four years was as follows (in millions):
September 30, December 31
-------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------------- -------------- -------------- -------------- --------------
Commercial paper & STBAs(A) $ 35,681 $ 43,078 $ 48,636 $ 42,311 $ 38,774
Other short-term debt (B) 5,961 6,770 4,997 3,897 4,243
Long term debt
(including current portion) (C) 100,254 83,226 61,334 54,517 55,007
------------ ------------- -------------- ------------- ------------
Total debt $ 141,896 $ 133,074 $ 114,967 $ 100,725 $ 98,024
============= ============= ============== ============= =============
United States $ 113,179 $ 104,186 $ 85,394 $ 78,443 $ 76,635
Europe 13,335 14,510 16,653 12,491 14,028
Other international 15,382 14,378 12,920 9,791 7,361
------------- -------------- -------------- ------------ ------------
Total debt $ 141,896 $ 133,074 $ 114,967 $ 100,725 $ 98,024
============== ============== ============== ============= =============
- - - - -
A) Short-term borrowing agreements with bank trust departments
B) Includes $565 million, $718 million, $989 million, $831 million, and
$2,478 million with affiliated companies at September 30, 2000
December 31, 1999, December 31, 1998, December 31, 1997, and
December 31, 1996, respectively.
C) Includes $3,138 million, $3,457 million, $2,878 million, $3,547 million,
and $4,237 million with affiliated companies at September 30, 2000,
December 31, 1999, December 31, 1998, December 31, 1997, and December 31,
1996, respectively.
Support facilities represent additional sources of funds, if required. At
September 30, 2000, Ford Credit had approximately $19.2 billion of contractually
committed facilities. In addition, approximately $7.5 billion of Ford lines of
credit may be used by Ford Credit at Ford's option. These credit lines have
various maturity dates through June 30, 2005 and may be used, at Ford Credit's
option, by any of its direct or indirect majority-owned subsidiaries. Any such
borrowings will be guaranteed by Ford Credit. Banks also provide $1.5 billion of
contractually committed liquidity facilities to support Ford Credit's asset
backed commercial paper program.
Additionally, at September 30, 2000, there were approximately $4.5 billion of
contractually committed facilities available for FCE Bank plc's ("FCE Bank")
use. In addition, $598 million of Ford credit lines may be used by FCE Bank at
Ford's option. The lines have various maturity dates through June 30, 2005 and
may be used, at FCE Bank's option, by any of its direct or indirect
majority-owned subsidiaries. Any such borrowings will be guaranteed by FCE Bank.
-9-
New Accounting Standards
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. We will adopt SFAS 133 (as amended by SFAS 138) beginning January 1,
2001. We are in the process of completing our review to determine the impact of
the new standard on income and equity. There are certain issues that still
need to be resolved by the Derivative Implementation Group that may impact us.
Also, since the impact is dependent on future market rates and future derivative
actions prior to year-end, it is not fully determinable at this time.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". We have examined our revenue recognition practices in light of
interpretive guidence and do not expect a material impact when SAB 101 is
adopted in the fourth quarter of 2000.
Statement of Financial Accounting Standards No. 140 ("SFAS 140"),
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities, was issued by the Financial Accounting Standards Board in
September 2000, as a replacement to SFAS No. 125. SFAS 140 revises the
standards for accounting for transfers of financial assets and collateral and
requires certain disclosures. Ford Credit will adopt SFAS 140 as of
April 1, 2001 for all transfers and servicing of financial assets and
extinguishments of liabilities. Additionally, as of December 31, 2000
Ford Credit will adopt certain provisions of SFAS 140 that are effective
at that time. The adoption of this Standard is not expected to materially
impact Ford Credit's financial statements.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of purported class actions and other proceedings
affecting Ford Credit, see Item 5, "Other Information - Information
Concerning Ford - Class Actions - Ford Credit Debt Collection Class
Actions."
Item 2. Changes in Securities
Not required
Item 3. Defaults Under Senior Securities
Not required
Item 4. Submission of Matters to a Vote of Security Holders
Not required.
-10-
Item 5. Other Information
INFORMATION CONCERNING FORD
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
For the Periods Ended September 30, 2000 and 1999
(in millions)
Third Quarter Nine Months
-------------------------- ---------------------------
2000 1999 2000 1999
---------- ----------- ------------ ----------
(unaudited) (unaudited)
AUTOMOTIVE
Sales $32,582 $30,645 $106,123 $97,788
Costs and expenses (Note 5)
Cost of sales 29,679 27,879 94,772 86,412
Selling, administrative and other expenses 2,338 2,029 7,061 6,102
------- ------- -------- -------
Total costs and expenses 32,017 29,908 101,833 92,514
Operating income 565 737 4,290 5,274
Interest income 382 354 1,139 1,039
Interest expense 367 371 1,012 993
------- ------- ------- -------
Net interest income (expense) 15 (17) 127 46
Equity in net income (loss) of affiliated companies (61) 11 (64) 33
Net revenue (expense) from transactions with
Financial Services 9 (17) 19 (62)
------- ------- ------- -------
Income before income taxes - Automotive 528 714 4,372 5,291
FINANCIAL SERVICES
Revenues 7,482 6,635 21,354 18,948
Costs and expenses
Interest expense 2,451 1,988 6,975 5,701
Depreciation 2,427 2,333 7,033 6,881
Operating and other expenses 1,257 1,206 3,717 3,304
Provision for credit and insurance losses 482 383 1,347 1,146
------- ------- ------- -------
Total costs and expenses 6,617 5,910 19,072 17,032
Net revenue (expense) from transactions with
Automotive (9) 17 (19) 62
------- ------- ------- -------
Income before income taxes - Financial Services 856 742 2,263 1,978
------- ------- ------- -------
TOTAL COMPANY
Income before income taxes 1,384 1,456 6,635 7,269
Provision for income taxes 449 473 2,199 2,400
------- ------- -------- -------
Income before minority interests 935 983 4,436 4,869
Minority interests in net income of subsidiaries 47 24 103 78
------- ------- -------- -------
Income from continuing operations 888 959 4,333 4,791
Income from discontinued operation (Note 2) - 155 309 640
Loss on spin-off of discontinued operation (Note 2) - - (2,252) -
------- ------- -------- -------
Net income (loss) $ 888 $ 1,114 $ 2,390 $ 5,431
======= ======= ======== =======
Income attributable to Common and Class B Stock
after preferred stock dividends $ 884 $ 1,110 $ 2,379 $ 5,420
Average number of shares of Common and Class B
Stock outstanding 1,649 1,209 1,354 1,210
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
Basic Income (Note 9)
Income from continuing operations $ 0.54 $ 0.79 $ 3.21 $ 3.96
Net income $ 0.54 $ 0.92 $ 1.77 $ 4.49
Diluted Income (Note 9)
Income from continuing operations $ 0.53 $ 0.78 $ 3.14 $ 3.87
Net income $ 0.53 $ 0.90 $ 1.73 $ 4.39
Cash dividends $ 0.50 $ 0.46 $ 1.50 $ 1.38
-11-
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
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. Ford's financial statements for and at
the end of 1999 and the first and second quarters of 2000 have been
restated to reflect Visteon as a "discontinued operation".
4. Value Enhancement Plan - On August 7, 2000, Ford announced the final
results of Ford's recapitalization, known as Ford's Value Enhancement Plan
("VEP"). Under the VEP, Ford shareholders exchanged each of their old Ford
common or Class B shares for one new Ford common or Class B share,
as the case may be, plus, at their election, either $20 in cash, 0.748
additional new Ford common shares, or a combination of $5.17 in cash and
0.555 additional new Ford common shares.
In accordance with generally accepted accounting principles, prior period
shares and earnings per share amounts were not adjusted. Third quarter 2000
average diluted shares of 1.678 billion were calculated based on an average
of 1.222 billion shares for the period prior to the VEP and an average of
1.929 billion shares for the period subsequent to the VEP.
5. Selected Automotive Costs and Expenses are summarized as follows (in
millions):
Third Quarter Nine Months
---------------------- ------------------------
2000 1999 2000 1999
--------- --------- ---------- ----------
Depreciation $734 $715 $2,146 $1,999
Tooling Amortization 574 641 1,776 1,773
Pension benefits 75 111 89 317
Acquisition of Land Rover - Under U.S. accounting rules, Ford was
required to write-up inventory acquired to fair value, resulting in
a one-time increase to third quarter 2000 cost of sales of $162 million
($106 million after tax).
European Charges - Following an extensive business review of the Ford brand
operations in Europe, Ford 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.
As of September 30, 2000, Ford has spent or utilized approximately $150
million related to the restructuring charge; the remaining $318 million is
expected to be incurred in the time period specified in the original plan.
Acquisition of AB Volvo's worldwide passenger car business ("Volvo Car") -
Under U.S. accounting rules, Ford was required to write-up inventory
acquired to fair value, resulting in a one-time increase to second quarter
1999 cost of sales of $224 million ($146 million after tax).
Dissolution of AutoEuropa Joint Venture - Effective January 1, 1999,
Ford's 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.
-12-
9. Income 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 third quarter
shares outstanding reflect the issuance of new shares as a result of the
VEP (Note 4).
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 per share of Common and Class B Stock was as follows (in millions,
except per share amounts):
Third Quarter 2000 Third Quarter 1999
--------------------- ----------------------
Income Shares Income Shares
---------- --------- ---------- ----------
Income from continuing operations $ 888 1,649 $ 959 1,209
Preferred stock dividend requirements (4) - (4) -
Issuable and uncommitted ESOP shares - (6) - (3)
------ ----- ------ ----
Basic income and shares from continuing operations $ 884 1,643 $ 955 1,206
Basic income per share from continuing operations $ 0.54 $ 0.79
Basic income per share from discontinued operation - 0.13
------ ------
Basic income per share $ 0.54 $ 0.92
Basic income and shares from continuing operations $ 884 1,643 $ 955 1,206
Net dilutive effect of options - 35 - 25
------ ----- ------ -----
Diluted income and shares from continuing operations $ 884 1,678 $ 955 1,231
Diluted income per share from continuing operations $ 0.53 $ 0.78
Diluted income per share from discontinued operation - 0.12
------ ------
Diluted income per share $ 0.53 $ 0.90
Nine Months 2000 Nine Months 1999
--------------------- ----------------------
Income Shares Income Shares
---------- --------- ---------- ----------
Income from continuing operations $4,333 1,354 $4,791 1,210
Preferred stock dividend requirements (11) - (11) -
Issuable and uncommitted ESOP shares - (7) - (4)
------ ----- ------ -----
Basic income and shares from continuing operations $4,322 1,347 $4,780 1,206
Basic income per share from continuing operations $ 3.21 $ 3.96
Basic income per share from discontinued operation 0.23 0.53
Basic loss per share on spin-off of discontinued operation (1.67) -
------ ------
Basic income per share $ 1.77 $ 4.49
Basic income and shares from continuing operations $4,322 1,347 $4,780 1,206
Net dilutive effect of options - 28 - 29
------ ----- ------ -----
Diluted income and shares from continuing operations $4,322 1,375 $4,780 1,235
Diluted income per share from continuing operations $ 3.14 $ 3.87
Diluted income per share from discontinued operation 0.23 0.52
Diluted loss per share on spin-off of discontinued operation (1.64) -
------ ------
Diluted income per share $ 1.73 $ 4.39
-13-
Management's Discussion and Analysis of Financial Condition and Results
of Operations-Ford
- ------------------
In addition to specific explanations discussed below, comparisons between
Ford's 2000 and 1999 third quarter and nine months results are influenced
by the following important events:
o On August 7, 2000, Ford announced the final results of
their recapitalization, known as Ford's Value Enhancement Plan
("VEP"), which became effective on August 2, 2000. Under the VEP,
Ford shareholders exchanged each of their old Ford common or
Class B shares for one new Ford common or Class B share, as the
case may be, plus, at their election, either $20 in cash, 0.748
additional new Ford common shares, or a combination of $5.17 in cash
and 0.555 additional new Ford common shares. As a result of the
elections made by shareholders under the VEP, the total cash
elected was $5.7 billion and the total number of new Ford common and
Class B shares issued and becoming outstanding was 1.893 billion. See
note 4 of the Notes to Financial Statements for a description of the
effect of the VEP on earnings per share.
o On June 30, 2000, Ford purchased the Land Rover business from the
BMW Group. Land Rover's results and financial condition are
included in Ford's financial statements on a consolidated basis
beginning in the third quarter of 2000.
o On June 28, 2000, Ford distributed 130 million shares of
Visteon Corporation, which represented Ford's 100% ownership
interest, by means of a tax-free spin-off in the form of a dividend
on Ford Common and Class B Stock. Visteon has been reflected as a
discontinued operation through June 30, 2000. Ford's third quarter
2000 results and financial condition exclude completely
Visteon's results and financial condition.
o On March 31, 1999, Ford purchased AB Volvo's worldwide passenger
car business ("Volvo Car"). Volvo Car's results and financial
condition have been included in Ford's financial statements on a
consolidated basis since the second quarter of 1999.
THIRD QUARTER RESULTS OF OPERATIONS
Ford's worldwide net income was $888 million in the third quarter of 2000,
or $0.53 per diluted share of Common and Class B Stock. In the third quarter
of 1999, earnings from continuing operations were $959 million, or $0.78
per diluted share. Worldwide sales and revenues were $40.1 billion in the
third quarter of 2000, up $2.8 billion from a year ago, reflecting primarily
higher unit volume and the addition of Land Rover. Unit sales of cars and
trucks were 1,654,000, up 55,000 units, reflecting primarily the addition of
Land Rover unit sales.
Results by business sector for the third quarter of 2000 and 1999 are shown
below (in millions).
Third Quarter
Net Income
--------------------------------------
2000
O/(U)
2000 1999 1999
------------ ----------- -----------
Automotive sector $ 391 $ 535 $(144)
Financial Services sector 497 424 73
------ ------ -----
Income from continuing operations 888 959 (71)
Income from discontinued operation - 155 (155)
------ ------ -----
Total Ford net income $ 888 $1,114 $(226)
====== ====== =====
-14-
Automotive Sector
- -----------------
Worldwide earnings for Ford's Automotive sector were $391 million in the
third quarter of 2000, on sales of $32.6 billion. These earnings include a
one-time profit reduction of $106 million related to the acquisition of Land
Rover, reflecting the write-up of inventory to fair value. Excluding this profit
reduction, third quarter 2000 earnings would have been $497 million. Earnings in
the third quarter of 1999 were $535 million, on sales of $30.6 billion. These
earnings include one-time profit reductions of $79 million and $125 million
related to salaried separations and post-retirement benefits, respectively.
Excluding these unusual items, third quarter 1999 earnings would have been $739
million.
Details of third quarter Automotive sector earnings from continuing
operations are shown below (in millions).
Third Quarter
Net Income/(Loss)
-----------------------------------
2000
O/(U)
2000 1999 1999
----------- ---------- ----------
North American Automotive $ 769 $ 867 $ (98)
Automotive outside North America
- Europe (297) (156) (141)
- South America (64) (86) 22
- Rest of World (17) 35 (52)
------ ----- ------
Total Automotive outside
North America (378) (207) (171)
Post-retirement benefit adjustment - (125) 125
------ ----- -----
Total Automotive sector $ 391 $ 535 $(144)
====== ===== ======
Automotive sector earnings in North America were $769 million in the third
quarter of 2000, on sales of $23.4 billion. In the third quarter of 1999,
earnings were $867 million, on sales of $22.4 billion. The after-tax return on
sales for Ford's North American Automotive sector was 3.3% in the third quarter
of 2000, down 6/10 of a percentage point from a year ago. The decrease in
earnings and returns is more than explained by the impact of the Firestone tire
recall, discussed in Part II "Other Information", Item 1 "Legal Proceedings -
Ford - Other Matters". The profit impact amounted to approximately $300 million
($500 million pre-tax), about one-half of which includes lost profits from a
three-week production shut-down at selected plants and the other half includes
primarily costs incurred in facilitating and accelerating Firestone's recall
effort. Although Ford expects to make up in the fourth quarter the production
lost in the third quarter, costs relating to Firestone's recall may continue in
the fourth quarter and beyond.
In the third quarter of 2000, approximately 4.6 million new cars and trucks
were sold in the United States, up 67,000 units from a year ago. Ford's share of
those unit sales was 22.8%, down 3/10 of a percentage point from a year ago.
Ford's Automotive sector loss in Europe was $297 million in the third
quarter of 2000, compared with a loss of $156 million a year ago. The
deterioration reflects primarily the European share of the Land Rover one-time
profit reduction ($76 million), lower pricing and increased warranty coverage in
the United Kingdom, loss of production from fuel cost-related labor disruptions,
and launch costs for the new Mondeo model.
In the third quarter of 2000, approximately 4.1 million new cars and trucks
were sold in Ford's nineteen primary European markets, down 349,000 units from a
year ago. Ford's share of those unit sales were 10.7%, unchanged from a year
ago.
-15-
Ford's Automotive sector loss in South America was $64 million in the third
quarter of 2000, compared with a loss of $86 million a year ago. The improvement
reflected primarily improved revenue and cost reductions.
In the third quarter of 2000, approximately 386,000 new cars and trucks
were sold in Brazil, compared with 359,000 a year ago. Ford's share of those
unit sales were 9.2%, up 5/10 of a percentage point from a year ago, in part
reflecting new products.
Automotive sector results outside North America, Europe, and South America
("Rest of World") were a loss of $17 million in the third quarter of 2000,
compared with earnings of $35 million in the third quarter of 1999. The decline
reflected primarily the effects of unfavorable exchange rates at Mazda.
Financial Services Sector
- -------------------------
Earnings of Ford's Financial Services sector consist primarily of two
segments, Ford Credit and Hertz. Details of third quarter Financial Services
sector earnings are shown below (in millions).
Third Quarter
Net Income/(Loss)
--------------------------------------
2000
O/(U)
2000 1999 1999
----------- ---------- -----------
Ford Credit $386 $317 $69
Hertz 143 139 4
Minority interests, eliminations,
and other (32) (32) -
---- ---- ---
Total Financial Services sector $497 $424 $73
==== ==== ===
Memo: Ford's share of earnings in Hertz $116 $113 $ 3
For a discussion of Ford Credit's results of operations in the third
quarter of 2000, see Item 2. "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Third Quarter 2000 Compared with Third
Quarter 1999."
Earnings at Hertz in the third quarter of 2000 were $143 million (of which
$116 million was Ford's share), compared with earnings of $139 million (of which
$113 million was Ford's share) a year ago. The increase in earnings reflected
primarily strong volume-related performance, offset partially by downward
pricing pressure and higher interest costs.
FIRST NINE MONTHS RESULTS OF OPERATIONS - FORD
Ford's worldwide earnings from continuing operations in the first nine
months of 2000 were $4,333 million. Earnings from continuing operations in the
first nine months of 1999 were $4,791 million. Worldwide sales and revenues in
the first nine months of 2000 were $127.5 billion, up $10.7 billion from a year
ago. Unit sales of cars and trucks were 5,563,000, up 261,000 units.
-16-
Results of Ford's operations by business sector for the first nine months
of 2000 and 1999 are shown below (in millions).
Nine Months
Net Income/(Loss)
-----------------------------------
2000
O/(U)
2000 1999 1999
----------- ----------- -----------
Automotive sector $ 2,995 $3,632 $ (637)
Financial Services sector 1,338 1,159 179
------- ------ -------
Income from continuing operations 4,333 4,791 (458)
Income from discontinued operation 309 640 (331)
Loss on spin-off of discontinued operation (2,252) - (2,252)
------- ------ -------
Total Company net income $ 2,390 $5,431 $(3,041)
======= ====== =======
Automotive Sector
- -----------------
Automotive sector earnings from continuing operations in the first nine
months of 2000 and 1999 are shown below (in millions).
Nine Months
Net Income/(Loss)
------------------------------------
2000
O/(U)
2000 1999 1999
----------- ----------- ------------
North American Automotive $ 4,279 $3,944 $ 335
Automotive outside North America
- Europe (1,163) 80 (1,243)
- South America (209) (344) 135
- Rest of World 88 77 11
------- ------ ------
Total Automotive outside
North America (1,284) (187) (1,097)
Post-retirement benefit adjustment - (125) 125
------- ------ -------
Total Automotive sector $ 2,995 $3,632 $ (637)
======= ====== =======
Worldwide earnings for Ford's Automotive sector were $2,995 million in the
first nine months of 2000, on sales of $106.1 billion. Earnings in the first
nine months of 1999 were $3,632 million, on sales of $97.8 billion. Unusual
items included in Automotive net income during these periods are shown below (in
millions):
Nine Months
Gain/(Charge)
-------------------------
2000 1999
---------- ------------
- Asset impairment and restructuring costs for
Ford brand operations in Europe (second quarter) $(1,019)
- Inventory-related profit reduction for Land Rover
acquisition (third quarter) (106)
- Gain on sale of interest in AutoEuropa (first quarter) $ 165
- Inventory-related profit reduction for Volvo acquisition
(second quarter) (146)
- Employee separation costs in North America (third quarter) (79)
- Post-retirement benefit adjustment (third quarter) (125)
------- -----
Total unusual items $(1,125) $(185)
======= =====
-17-
Excluding these unusual items, Automotive net income from continuing
operations in the first nine months of 2000 would have been $4,120 million,
compared with $3,817 million in the same period a year ago. This improvement
reflected higher net revenue and increased volume.
In the first nine months of 2000, Ford's total Automotive costs were down
$200 million compared with a year ago, adjusted for constant volume and mix.
Ford had set a target to reduce total Automotive costs by $1 billion in 2000 (at
constant volume and mix); however, Ford now expects cost reductions in 2000 to
be in the range of $700 million to $800 million. Ford will not be able to
overcome higher warranty costs associated with Ford's 3.8-liter engine in the
first quarter and the costs associated with the Firestone tire recall in the
third quarter to achieve the original target.
Automotive sector earnings in North America were $4,279 million in the
first nine months of 2000, up $335 million from the first nine months of 1999.
The increase reflects primarily higher revenue resulting from improved mix. The
North American Automotive after-tax return on sales was 5.5% in the first nine
months of 2000, unchanged from a year ago.
In the first nine months of 2000, approximately 13.9 million new cars and
trucks were sold in the United States, up 700,000 units from a year ago. Ford's
share of those unit sales were 24%, unchanged from a year ago.
Ford's Automotive sector loss in Europe in the first nine months of 2000
was $1,163 million, compared with earnings of $80 million in the first nine
months a year ago. The decline primarily reflected the second quarter 2000
charge of $1,019 million related to asset impairment and restructuring costs for
Ford brand operations.
In the first nine months of 2000, approximately 14 million new cars and
trucks were sold in Ford's nineteen primary European markets, down 179,000 units
from a year ago. Ford's share of those unit sales were 10.1%, down 2/10 of a
percentage point from a year ago, reflecting a decrease in demand for
Ford-branded vehicles.
Ford's Automotive sector loss in South America was $209 million in the
first nine months of 2000, compared with a loss of $344 million in the first
nine months a year ago. The improvement reflected primarily improved revenue and
cost reductions. In the first nine months of 2000, approximately 1,046,000 new
cars and trucks were sold in Brazil, compared with 964,000 a year ago. Ford's
share of those unit sales were 9.3%, down 1/10 of a percentage point.
Financial Services Sector
- -------------------------
Higher earnings at Ford Credit and Hertz in the first nine months of 2000,
compared with the first nine months of 1999, reflected primarily the same
factors as those described in the discussion of third quarter results of
operations. Details of Financial Services sector earnings in the first nine
months of 2000 and 1999 are shown below (in millions).
Nine Months
Net Income/(Loss)
-----------------------------------
2000
O/(U)
2000 1999 1999
---------- ---------- -----------
Ford Credit $1,126 $ 952 $ 174
Hertz 303 276 27
Minority interests, eliminations,
and other (91) (69) (22)
------ ------ ------
Total Financial Services sector $1,338 $1,159 $ 179
====== ====== ======
Memo: Ford's share of earnings in Hertz $ 246 $ 224 $ 22
-18-
LIQUIDITY AND CAPITAL RESOURCES
Automotive Sector
- -----------------
At September 30, 2000, Ford's Automotive sector had $18.6 billion of cash
and marketable securities, down $3.1 billion from December 31, 1999, more than
explained by the Value Enhancement Plan and the acquisition of Land Rover.
Automotive capital expenditures totaled $4.9 billion in the first nine
months of 2000, up $400 million from the first nine months of 1999.
At September 30, 2000, Ford's Automotive sector had total debt of $12.0
billion, compared with $11.7 billion at December 31, 1999. Automotive debt at
September 30, 2000 was 40% of total capital (the sum of Ford's stockholders'
equity and Automotive debt), up 10 percentage points from December 31, 1999. The
increase reflected primarily a decrease in stockholders' equity of $9.3 billion,
reflecting the VEP, the Visteon spin-off, and a reduction in other comprehensive
income reflecting foreign currency translation adjustments related primarily to
the strengthening of the U.S. dollar relative to European currencies.
Financial Services Sector
- -------------------------
At September 30, 2000, Ford's Financial Services sector had cash and cash
equivalents totaling $2.3 billion, up $722 million from December 31, 1999.
Finance receivables and net investments in operating leases were $168.4 billion
at September 30, 2000, up from $155.8 billion at December 31, 1999.
Total debt was $149.8 billion at September 30, 2000, up $9.9 billion from
December 31, 1999.
Outstanding commercial paper at September 30, 2000 totaled $35 billion at
Ford Credit and $2.1 billion at Hertz, with an average remaining maturity of 25
days and 16 days, respectively.
HERTZ PURCHASE
On September 21, 2000, Ford announced that it proposes to acquire, through
a merger transaction, the 18.5% of outstanding stock of Hertz that Ford does not
already own. The proposal is subject to approval of the Hertz board of
directors, the board's favorable recommendation to Hertz shareholders and the
negotiation, execution and performance of a definitive merger agreement. In the
proposed merger, public shareholders of Hertz would receive $30 for each of the
approximately 20 million shares of Hertz Class A Common stock they own.
NEW ACCOUNTING STANDARDS-FORD
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. Ford will adopt SFAS 133 (as amended by SFAS 138) beginning January 1,
2001. Ford is in the process of completing it's review to determine the impact
of the new standard on income and equity. There are certain issues that still
need to be resolved by the Derivative Implementation Group that may impact Ford.
Also, since the impact is dependent on future market rates and future derivative
actions prior to year-end, it is not fully determinable at this time.
-19-
Management's Discussion and Analysis of Financial Condition and Results
of Operations-Ford(Continued)
- ------------------
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". PriceWaterhouseCoopers has examined Ford's revenue recognition
practices in light of interpretive guidance and do not expect a material impact
when SAB 101 is adopted in the fourth quarter of 2000.
-20-
Legal Proceedings - Ford
- --------------------------
Environmental Matters
- ---------------------
Rawsonville Plant. (Previously discussed on page 23 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, this enforcement matter.
On Board Diagnostics Investigation. (Previously discussed on page 23 of the
10-K Report.) Ford is in the process of concluding an agreement with the
California Air Resources Board ("CARB") to conduct a voluntary recall of
California vehicles. No civil penalties will be imposed. The recall also will
include states that have adopted California standards. The issue remains pending
with the United States Environmental Protection Agency ("EPA").
Class Actions
- -------------
Hertz Minority Shareholder Fiduciary Duty Class Actions. Thirteen class
actions have been filed in Delaware state court on behalf of minority
shareholders of The Hertz Corporation ("Hertz") against Ford, Hertz, and the
directors of Hertz, alleging that the defendants breached their fiduciary duties
to the minority shareholders of Hertz by Ford proposing, on September 20, 2000,
a merger transaction under which the minority shareholders would receive $30 per
share for the shares of Hertz stock they own. The plaintiffs allege that the
consideration offered is unfair and inadequate, was not negotiated at arms
length and was designed to benefit Ford by "capping" the value of the stock, and
would deny them the full value of their stock. They seek to enjoin or rescind
the transaction, recover damages and profits, and an award of attorneys' fees.
Ford expects all of these actions to be consolidated into a single court
proceeding.
Ford Credit Debt Collection Class Actions. Three class actions have been
filed against Ford Credit and Primus alleging unfair debt collection practices.
In Pertuso, plaintiffs allege that Ford Credit's policies and practices for
obtaining reaffirmation agreements violate Federal law and constitute an unfair
collection practice. This case has been dismissed at the trial court level and
is now on appeal. All appellate briefing and oral argument is complete and Ford
Credit awaits a decision on the appeal from the Sixth Circuit. Molloy and Dubois
are two nationwide class action lawsuits brought by the same group of plaintiff
attorneys. Both cases allege that Ford Credit attempts to collect on discharged,
non-reaffirmed debts in violation of the Bankruptcy Code and the Fair Debt
Collection Practices Act. In Molloy, Primus' motion to dismiss was denied
and they are proceeding with discovery. The Dubois case was recently filed and
Ford Credit has filed a motion to dismiss.
TFI Module Class Action. (Previously discussed on page 24 of the 10-K
Report.) On October 11, the California court in the Howard case found that Ford
violated California law by concealing a safety defect. The court ruled that
California consumers who paid to replace distributor mounted TFI modules were
entitled to restitution, that Ford would be required to recall the vehicles in
the class, and that plaintiffs were entitled to attorneys' fees and expenses.
The amount and method of restitution and the nature and scope of the recall will
be determined in further hearings to be scheduled before a special master.
Ignition Switch Class Action. (Previously discussed on page 24 of the 10-K
Report and on page 20 of Ford Credit's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000 (the "Second Quarter 10-Q Report").) The renewed
motion for class certification in Snodgrass has been denied. Ford currently has
no class actions pending on this issue.
-21-
Legal Proceedings - Ford
- -------------------------
(continued)
Retail Lessee Insurance Coverage Class Action. (Previously discussed on
page 25 of the 10-K Report). A hearing on Ford's motion for summary judgment,
and on Plaintiffs' motion for class certification, has been scheduled for
October 27, 2000.
Head Gasket Class Action. (Previously discussed on page 26 of the 10-K
Report and on page 20 of the Second Quarter 10-Q Report.) Plaintiffs in the
Illinois suit have acknowledged that the extended Owner Notification Program
("ONP") provides the relief sought in their complaint, and they now seek only
attorney fees (alleging that they were responsible for the decision to extend
the ONP). On October 13, 2000, Ford's motion to dismiss the Ohio case was
granted.
3.8 Liter Engine Transmission Class Actions. (Previously discussed on page
26 of the 10-K Report and on page 19 of Ford Credit's Quarterly Report on Form
10-Q for the quarter ended March 31, 2000 (the "First Quarter 10-Q Report.")
Ford's motion to dismiss the Pennsylvania case was granted, and plaintiffs have
indicated that they will appeal. The remaining cases address only the 1995
Windstar.
Other Matters
- -------------
Rouge Powerhouse Insurance Litigation. (Previously discussed on page 19 of
the First Quarter 10-Q Report and on page 21 of the Second 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
Ford. Both of these actions have now been ordered to arbitration. Additionally,
carriers of suppliers to Rouge Steel have filed three other subrogation actions
with claims totaling approximately $20 million.
Firestone Tire Recall and Litigation. On August 9, 2000,
Bridgestone/Firestone, Inc. ("Firestone") announced a recall of all Firestone
ATX and ATX II tires (P235/75R15) produced in North America since 1991 and
Wilderness AT tires of that same size manufactured at Firestone's Decatur,
Illinois plant. Firestone estimated that about 6.5 million of the affected tires
were still in service on the date the recall was announced. The recall was
announced following an analysis by Ford and Firestone that identified a
statistically significant incidence of tread separation occurring in the
affected tires. Most of the affected tires were installed as original equipment
on Ford Explorer sport utility vehicles. Ford estimates that sufficient tires
will be available to provide for the completion of the recall by the end of
November.
Neither Ford nor Firestone has determined the root cause of the tread
separation incidents. The National Highway Traffic Safety Administration
("NHTSA") is investigating this matter both to make an independent root cause
assessment and to determine whether Firestone's recall should be expanded to
include other Firestone tires. NHTSA has issued a "Consumer's Advisory" on an
additional 1.4 million Firestone tires, which Firestone has agreed to replace as
part of a customer satisfaction program.
Four Congressional hearings were held in September before various
subcommittees of the U.S. House and Senate. Ford provided the Congressional
staffs with voluminous documentation and testified at the hearings, along with
representatives of Firestone, NHTSA and consumer groups. Following the hearings,
Congress passed legislation (discussed below under "Government Standards") that
will significantly expand NHTSA's information-gathering, regulatory oversight
and enforcement authority, including criminal provisions.
-22-
Legal Proceedings - Ford
- --------------------------
(continued)
In the U.S., the recall and tread separation related accidents have led to
a significant number of personal injury, class action and other lawsuits against
Ford and Firestone. Most of the lawsuits were filed after the recall
announcement. Most of the class actions have been filed on behalf of persons who
have never been in an accident. The class actions seek to expand the scope of
the recall to include other tires and to award to consumers the cost of
replacing those tires or the alleged diminution in the value of the vehicle
caused by the allegedly defective tires. Several of the individual personal
injury lawsuits and class actions also seek punitive damages.
Some of the class actions were filed against Ford in federal court, but
most were filed in state courts. Ford removed every class action filed in state
court to federal court and Ford asked the panel on Multi-District Litigation
("MDL") to consolidate as many cases as possible in one federal court for
discovery and other pre-trial purposes. The MDL panel issued an order
consolidating the cases for discovery and pre-trial purposes in the United
States District Court for the Southern District of Indiana. These class actions
and lawsuits could result in Ford having to pay compensatory and/or punitive
damages in very large amounts and could result in recall campaigns, sanctions,
or other relief that would require very large expenditures.
In addition, a consortium of about 40 state attorneys general is reviewing
the circumstances leading up to the Firestone recall. Ford is scheduling
meetings with various individual state attorneys general to brief them on the
background of this matter. The consortium has appointed an Executive Committee
to lead the information-gathering effort. The Executive Committee consists of
the state attorneys general from Connecticut, Florida, Georgia, Illinois,
Maryland, Tennessee, Texas and Wisconsin.
Ford also has been served with shareholder derivative and securities fraud
lawsuits. The shareholder derivative actions filed against the Board of
Directors and Ford allege that Ford's board members breached their fiduciary
duties to Ford and its shareholders by failing to inform themselves adequately
regarding Firestone tires, failing to take certain actions regarding the design
of the Explorer, failing to report problems with Firestone tires and to stop
using Firestone tires as original equipment, failing to recall all affected
tires in a timely manner, and mismanaging the recall once it was announced. The
plaintiffs seek injunctive relief and damages, a return of all director
compensation during the period of the alleged breaches and attorneys' fees.
The securities fraud class actions allege that from early 1999 through the
announcement of the Firestone tire recall, Ford made misrepresentations about
the safety of Ford products and the Explorer in particular, and allegedly failed
to disclose material facts about problems with Firestone tires and the safety of
Explorers equipped with Firestone tires. The plaintiffs claim that, as a result
of these misrepresentations or omissions, they purchased Ford stock at inflated
prices and were damaged when the price of the stock fell upon announcement of
the recall and subsequent revelations.
Several governmental authorities in Venezuela are conducting investigations
of accidents in Venezuela involving Explorers equipped with Firestone tires most
of which were locally made. Ford of Venezuela implemented a customer
satisfaction program in May 2000 to replace, at no cost to the customer, all
Firestone Wilderness tires on Explorers and light trucks in Venezuela, Columbia
and Ecuador. On September 5, 2000, Firestone announced its own recall of the
same type of tires covered by Ford of Venezuela's customer satisfaction program,
specifically the 16 inch Wilderness Tires, some of which were mislabeled as
having 5 plies when they in fact had 4. Ford of Venezuela will complete the tire
replacement customer satisfaction program in Venezuela in October and in
Colombia and Ecuador by the end of November. An investigation is being conducted
by the prosecutor's office in Caracas to determine whether criminal charges
should be brought against any Firestone and Ford of Venezuela directors,
officers and managers following a report submitted by the consumer protection
agency of the Venezuelan government, INDECU, to the Venezuelan Attorney General.
The report alleged that several
-23-
Legal Proceedings - Ford
- --------------------------
(continued)
unsubstantiated defects in the Explorer had contributed to the rollover
accidents as well as recommending an additional investigation because the
parties had not taken action sooner. INDECU also has indicated it may open an
administrative proceeding to determine if fines up to $11,000 per complaint it
has received from consumers should be levied against Firestone and/or Ford of
Venezuela. On October 4, 2000, Ford of Venezuela management appeared before a
conciliation hearing held by INDECU with some of the injured parties. Ford of
Venezuela indicated it was unable to accept conciliation because it would have
constituted an admission of responsibility for the failure of the tires but
offered to submit the claims of the injured parties to binding arbitration in
Venezuela. No response has been received to this offer, however, INDECU has
indicated it will convoke the injured parties again to determine if they are
willing to accept arbitration. If not, INDECU's head has indicated he will open
an administrative proceeding against Ford. On October 11, 2000, Ford of
Venezuela management testified at a congressional hearing held in Venezuela. The
Venezuelan congress has designated a sub commission to investigate the cause and
handling of the Firestone tire tread separation cases and has designated a
technical commission composed primarily of Venezuelan university professors to
study the causes and provide a report on their findings.
-24-
Other Information - Ford
- --------------------------
Government Standards
- --------------------
Mobile Source Emissions Control. (Previously discussed on page 15 of the
10-K Report). The EPA finalized its post-2004 emissions standards for
"heavy-duty" trucks (8,500-14,000 lbs. Gross vehicle weight) in July, 2000. The
standards were finalized largely as proposed.
As mentioned previously, California adopted new vehicle emission
regulations in late 1998 that establish stringent new standards for passenger
cars, light-duty and medium-duty trucks, and medium-duty passenger vehicles for
the 2004 through 2010 model years. Recently, Massachusetts has formally adopted
these new California standards. Several other states, including New York,
Vermont, and Maine, appear to be in the process of adopting these California
standards as well. The adoption of these standards by other states could pose
compliance problems if such states attempt to impose California's fleet-wide
average emission limits on their own unique mix of vehicles.
Motor Vehicle Safety. (Previously discussed on page 17 of the 10-K Report).
As previously reported, the National Highway Traffic Safety Administration (the
"Safety Administration") published a supplemental notice of a proposed advanced
air bag rule in November 1999. The Safety Administration issued a final advanced
air bag rule on May 12, 2000. In the first stage of the new rule phase-in, an
unbelted barrier crash test of 25 mph replaces the existing sled test. Phase-in
starts in September 2003 requiring compliance by 35% of all vehicles produced by
a manufacturer, followed by 65% in 2004 and 100% in 2005. As expected, other
requirements include: numerous out-of-position tests, a new family of test
dummies, a 25 mph offset barrier crash test, and stringent new injury criteria.
The second stage of phase-in requires a 35 mph belted barrier crash test with a
mid-sized male dummy, same as the current New Car Assessment Program test.
Second stage phase-in starts at 35% in 2007, followed by 65% in 2008 and 100% in
2009.
The Safety Administration issued a request for comments on its proposed
vehicle rollover propensity consumer information program in the June 1, 2000
Federal Register with comments due by July 31, 2000. The proposal indicates that
the Safety Administration tentatively has decided that a "static stability
factor" should be used to indicate rollover risk in single vehicle crashes as
part of a New Car Assessment Program. It is anticipated that the Safety
Administration will assign "star ratings" to vehicles based on static stability
factor results. The Safety Administration plans to evaluate static stability
factors for 2001 model year vehicles as a pilot program, and may restrict the
public availability of star ratings.
Proposed legislation has been introduced in the U.S. Senate (S. 2070) and
the U.S. House (H.R. 4145) that would require the Safety Administration to
improve vehicle crash test standards for child restraints by simulating an array
of crash conditions such as side impact, rear impact and rollover. The bills
also would require vehicle manufacturers to design child restraints to minimize
head injuries during side impact and rollover and require child restraints to
have side impact protection. In response to the proposed legislation, the Safety
Administration is developing a comprehensive child passenger safety improvement
plan that is likely to be published in the Federal Register this fall for
comment.
In response to the Firestone tire recall, Congress has passed legislation
that will significantly expand NHTSA's information-gathering, regulatory
oversight and enforcement authority, including criminal provisions. The Act,
which has been sent to the President for signature into law, is called the
Transportation Recall Enhancement, Accountability, and Documentation (TREAD)
Act. The TREAD Act establishes new reporting requirements for motor vehicles,
motor vehicle equipment and tires, including reporting to NHTSA information on
foreign recalls and information received by the manufacturer that may assist the
agency in the identification of safety defects. The obligation of vehicle
manufacturers to provide, on a cost-free basis, a remedy for vehicles with an
identified safety defect or non-compliance issue is extended from eight years to
ten years by the new legislation. Potential civil penalties are increased from
$1,000 to $5,000 per day for certain statutory violations, with a maximum
penalty of $15,000,000 for a related series of violations, unless the violation
was willful and intentional, in which case no cap applies. Similar penalties are
included for violation of the reporting requirements. Criminal penalties are
introduced for persons who make false statements to the government or withhold
information with the intent to
-25-
Other Information - Ford
- --------------------------
(continued)
mislead the government about safety defects that have caused death or grievous
bodily harm. The penalty may be a fine of $100,000, imprisonment for not more
than 15 years, or both. The TREAD Act also addresses the availability of parts
during a recall, reimbursement for parts replaced immediately prior to a recall,
and the resale of replaced equipment. NHTSA is charged to update the motor
vehicle safety standards applicable to tires and to improve tire labeling
standards. NHTSA also is required to promulgate a dynamic vehicle rollover test
to be used for consumer information and a rule requiring an in-vehicle warning
system designed to signal when a tire is significantly under-inflated. Finally,
the TREAD Act authorizes appropriations for the authorized activities and
addresses a number of public information and standard setting rulemakings. This
legislation and the ensuing regulations will have a significant effect on the
automotive industry, particularly on the way information is shared with NHTSA
and the way recalls are administered.
End of Life Vehicle Proposal. (Previously discussed on page 20 of the 10-K
Report). The European Commission has published a revised draft proposal to
introduce an obligation for motor vehicle manufacturers to take back end-of-life
vehicles registered after July 1, 2002 with no cost to the last owner. Vehicles
registered after this date, must be taken back, cost-free to the last owner, as
of January 1, 2007. The proposed directive also imposes requirements on the
proportion of the vehicle that may be disposed of in landfills and the
proportion that must be reused or recycled beginning in 2006, and bans the use
of certain substances in vehicles beginning with vehicles registered after July
1, 2003. Member States may apply these provisions prior to the dates mentioned
above.
-26-
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Please refer to Exhibit Index
(b) Reports on Form 8-K during the quarter ended September 30, 2000:
FINANCIAL
DATE OF REPORT ITEM STATEMENTS FILED
- -------------- -------------- -----------------
July 14, 2000 Item 5 - Other Events None
July 19, 2000 Item 5 - Other Events News release dated
July 19, 2000 of Ford
Motor Credit Company
and subsidiaries
for the quarter
ended June 30, 2000 and
news releases dated
July 19, 2000 of Ford
Motor Company and
subsidiaries
for the quarter
ended June 30, 2000 with
attachments.
July 31, 2000 Item 5 - Other Events None
September 11, 2000 Item 5 - Other Events None
September 14, 2000 Item 5 - Other Events None
September 21, 2000 Item 5 - Other Events None
-27-
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 CREDIT COMPANY
(Registrant)
October 30, 2000 /s/ B. Boerio
---------------------
B. Boerio
Executive Vice President,
Chief Financial Officer
and Treasurer
-28-
Report of Independent Accountants
To the Board of Directors and Stockholder
Of Ford Motor Credit Company:
We have reviewed the accompanying condensed consolidated balance sheet of Ford
Motor Credit Company and Subsidiaries as of September 30, 2000 and 1999, and the
related condensed consolidated statements of income and of earnings retained for
use in the business for each of the three-month and nine-month periods ended
September 30, 2000 and 1999 and the condensed consolidated statement of cash
flows for the nine-month periods ended September 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 condensed consolidated interim financial statements
for them to be in conformity with accounting principles generally accepted in
the United States of America.
We previously audited in accordance with auditing standards generally accepted
in the United States of America, the consolidated balance sheet as of December
31, 1999, and the related consolidated statements of income, stockholder's
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 condensed 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
October 17, 2000
-29-
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
EXHIBIT INDEX
Sequential
Designation Description Method of Filing
- ----------- ------------ -----------------
12-A Calculation of ratio of Filed with this
earnings to fixed charges Report.
of Ford Credit
12-B Calculation of ratio of Filed with this
earnings to fixed charges Report.
of Ford.
15 Letter from Filed with this
PricewaterhouseCoopers LLP Report.
dated October 17, 2000,
regarding unaudited
interim financial infor-
mation.
27 Financial Data Schedule Filed with this
Report.
-30-