Exhibit 99
Items 2 and 4 of Part I and Items 1, 2 and 6 of Part II of Ford's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2004. ALL
REFERENCES TO WE, OUR, AND US IN THIS EXHIBIT 99 REFER TO FORD MOTOR COMPANY.
-44-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
SECOND QUARTER RESULTS OF OPERATIONS
Our worldwide net income was $1.2 billion in the second quarter of 2004, or
$0.57 per diluted share of Common and Class B Stock. In the second quarter of
2003, net income was $417 million, or $0.22 per share.
Results by business sector for the second quarter of 2004 and 2003 are
shown below (in millions):
Second Quarter
Net Income/(Loss)
--------------------------------------------
2004
Over/(Under)
2004 2003* 2003
----------- ------------ -------------------
Income/(loss) before income taxes
Automotive sector $ (57) $ 3 $(60)
Financial Services sector 1,559 715 844
------ ------ ----
Total Company 1,502 718 784
Provision for/(benefit from) income taxes 268 194 74
Minority interests in net income/(loss) of subsidiaries 72 98 (26)
------ ------ ----
Income/(loss) from continuing operations 1,162 426 736
Income/(loss) from discontinued/held-for-sale operations 3 (9) 12
------ ------ ----
Net income/(loss) $1,165 $ 417 $748
====== ====== ====
- ----------
* Certain amounts were reclassified to conform to current period presentation
consistent with the presentation in our 10-K Report. Reclassifications
include profits and losses related to discontinued/held-for-sale
operations.
Automotive Sector
- -----------------
Details of Automotive sector results for the second quarter of 2004 and
2003 are shown below (in millions):
Second Quarter
--------------------------------------------------------------------------------
Income/(Loss) Before Taxes
Income/(Loss) Before Taxes Excluding Special Items
--------------------------------------- ---------------------------------------
2004 2004
Over/ Over/
(Under) (Under)
2004 2003 2003 2004 2003 2003
----------- ------------- ------------- --------- ------------ ------------------
Americas
Ford North America $ 335 $ 445 $(110) $ 455 $ 445 $ 10
Ford South America 22 (69) 91 22 (69) 91
------ ----- ----- ----- ----- -----
Total Americas 357 376 (19) 477 376 101
Ford Europe and PAG
Ford Europe 191 (525) 716 211 (525) 736
PAG (362) 166 (528) (362) 166 (528)
------ ----- ----- ----- ----- -----
Total Ford Europe and PAG (171) (359) 188 (151) (359) 208
Ford Asia Pacific and Africa/Mazda
Ford Asia Pacific and Africa (5) (28) 23 (5) (28) 23
Mazda and Associated Operations 60 45 15 60 45 15
----- ------ ----- ------ ------ -----
Total Ford Asia Pacific
and Africa/Mazda 55 17 38 55 17 38
Other Automotive (298) (31) (267) (298) (31) (267)
----- ------ ------ ----- ------ -----
Total, excluding special items 83 3 80
Special items * (140) - (140)
----- ------ -----
Total Automotive $ (57) $ 3 $ (60) $ (57) $ 3 $ (60)
===== ====== ===== ===== ====== =====
- --------------
* Special items include $(120) million of charges for revaluation and
restructuring of our investment in Ballard Power Systems (see discussion
below) and $(20) million of charges related to the completion of the
previously announced Ford Europe restructuring plan.
-45-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Details of Automotive sector sales and vehicle unit sales for the second
quarter 2004 and 2003 are shown below:
Sales Vehicle Unit Sales *
(in billions) (in thousands)
-------------------------------------------- --------------------------------------------
2004 2004
Over/(Under) Over/(Under)
2004 2003 2003 2004 2003 2003
--------- ---------- ----------------------- --------------------------------------------
Americas
Ford North America $20.5 $20.7 $(0.2) (1)% 919 982 (63) (6)%
Ford South America 0.7 0.4 0.3 75 67 49 18 37
----- ----- ----- --- ----- ----- --- --
Total Americas 21.2 21.1 0.1 0 986 1,031 (45) (4)
Ford Europe and PAG
Ford Europe 6.7 5.2 1.5 29 453 407 46 11
PAG 6.9 6.4 0.5 8 201 197 4 2
----- ----- ----- --- ----- ----- --- --
Total Ford Europe and PAG 13.6 11.6 2.0 17 654 604 50 8
Ford Asia Pacific and Africa 1.9 1.4 0.5 36 108 83 25 30
----- ----- ----- --- ----- ----- --- ---
Total Automotive $36.7 $34.1 $ 2.6 8% 1,748 1,718 30 2%
===== ===== ===== === ===== ===== === ===
- -------------
* Included in vehicle unit sales of Ford Asia Pacific and Africa are
Ford-badged vehicles sold in China and Malaysia by our unconsolidated
subsidiaries totaling 22,000 and 9,000 units in 2004 and 2003,
respectively. The revenue from these units is not reflected in the dollar
sales reported above.
Details of Automotive sector market share for selected markets for the
second quarter 2004 and 2003 are shown below:
2004
Over/(Under)
2004 2003 2003 Market
----------- ------------- -------------------- ------------------
Americas
Ford North America 18.1% 19.3% (1.2)pts. U.S. b/
Ford South America 11.1 11.7 (0.6) Brazil b/
Ford Europe and PAG a/
Ford Europe 8.6 8.5 0.1 Europe b/
PAG 1.3/2.4 1.3/2.2 0/0.2 U.S./Europe
Ford Asia Pacific and Africa 13.7 13.6 0.1 Australia b/
- ----------
a/ 2004 European market share for Ford Europe and PAG are based, in part, on
estimated vehicle registrations.
b/ Excludes market share of our Premier Automotive Group brand vehicles
(i.e. Volvo, Jaguar, Land Rover and Aston Martin).
The following discussion, except where noted, is based on Income/(Loss)
Before Taxes Excluding Special Items. We believe this measure to be useful to
investors because it excludes elements that we do not consider to be indicative
of earnings from our on-going operating activities. As a result, it provides
investors with a more relevant measure of the results generated by our
operations.
Compared with the second quarter of 2003, the improvement of $80 million in
income before income taxes for the Automotive sector reflected improved unit
sales volume, primarily at Ford Europe, and product mix, primarily at Ford North
America (about $400 million); favorable net pricing, primarily at Ford North
America (about $200 million); unchanged cost performance (measured at constant
volume, mix and exchange); the effects of unfavorable changes in exchange rates
(about $200 million); and higher net interest (about $300 million), which is
discussed below under "Other Automotive."
The unchanged cost performance resulted from the following factors:
o quality related costs increased by about $300 million, primarily reflecting
the non-recurrence of favorable accrual adjustments for warranty and
additional service action costs in the year-ago period;
o manufacturing and engineering costs declined by about $200 million,
-46-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
o overhead costs, which includes administrative and staff support, declined
by about $200 million;
o net product costs declined by about $100 million; the reductions on
carryover models and the effect of the discontinuation of a supplier cost
reduction sharing program more than offset higher costs on new models;
o depreciation and amortization costs increased by about $200 million; and
o pension and retiree health care expenses were unchanged.
Americas
- --------
Ford North America. The improvement in profits for Ford North America
primarily reflected improved product mix and positive net pricing, offset
partially by lower volume and unfavorable cost performance. Positive net
pricing included the favorable impact of higher than expected proceeds from
sales of vehicles returned to us by daily rental car companies pursuant to
repurchase options.
Vehicle unit sales were down by 63,000 units, which primarily reflected
lower market share in the U.S., offset partially by higher U.S. industry
volume (up 1.8%). U.S. market share was down 1.2 percentage points,
primarily due to a reduction in retail market share.
We have been in an alliance with Ballard Power Systems Inc. ("Ballard") and
DaimlerChrysler AG ("DCX") since 1998 to develop fuel cell technology for
the automotive industry. We presently own 22 million shares of Ballard,
representing 18.7% of its outstanding shares. On July 8, 2004, we signed a
non-binding memorandum of understanding ("MOU") with Ballard and DCX to
acquire from Ballard a 50% interest in Ballard AG, Ballard's vehicular fuel
systems subsidiary, in exchange for 8.3 million shares of Ballard stock.
DCX presently owns 49% of Ballard AG and plans to acquire the remaining 1%
from Ballard. This acquisition will allow us jointly with DCX to focus on
the research, development and manufacturing of the vehicular fuel cell
system and Ballard to focus on fuel cell research, development and
manufacturing. Contemporaneous with the execution of the MOU, Ballard
issued to Ford and DCX a conditional call notice in satisfaction of a
pre-existing capital call obligation. Pursuant to this contingent call
notice, we and DCX would be required to invest C$25 million and C$30
million, respectively, to acquire additional shares of Ballard at a price
of C$12.33863 per share at the closing of the transactions contemplated by
the MOU. Assuming the transactions contemplated by the MOU occur, our
ownership interest in Ballard would decrease from 18.7% to 13.9% and DCX's
ownership interest would increase from 16.6% to 18.8%. (See also Note 6 of
the Notes to the Financial Statements for a discussion of our investment in
Ballard.)
Ford South America. The improvement in profits and sales for Ford South
America primarily reflected positive net pricing and higher unit sales
volumes, partially offset by unfavorable cost performance. The higher unit
sales volumes reflected higher industry sales volume. The unfavorable cost
performance reflected higher material costs, primarily for steel.
Ford Europe and PAG
- -------------------
Ford Europe. The improvement for Ford Europe primarily reflected higher
vehicle unit sales volume and favorable cost performance, including the
effects of our previously announced restructuring actions. The increase in
vehicle unit sales volume primarily reflected the higher sales in Turkey
and Russia, the strength of the Ford Focus C-Max model, and a slower rate
of dealer stock reductions. The improvement in revenue reflected the
increase in vehicle unit sales and stronger European currencies.
PAG. The deterioration in results for PAG primarily reflected unfavorable
changes in exchange rates, unfavorable product mix, higher costs including
the effects of product changeover at Land Rover, and lower net pricing.
Sales at Jaguar, particularly in the U.S., were less than expected and the
cost improvements progressed slower than expected at Jaguar and Land Rover.
Ford Asia Pacific and Africa/Mazda
- ----------------------------------
Ford Asia Pacific and Africa. The improvement for Ford Asia Pacific and
Africa primarily reflected favorable changes in exchange rates and
increased vehicle unit sales, offset partially by higher costs. The
increase in revenue primarily reflected higher sales and improved product
mix in Australia, South
-47-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Africa, and Taiwan, as well as favorable exchange rates. The increase in
vehicle unit sales reflected higher industry volumes in China, Australia,
and Taiwan, and improved market share in South Africa.
Mazda and Associated Operations. The change primarily reflected
improvements in our Mazda-related investments.
Other Automotive
- ----------------
The increase in loss before income taxes for Other Automotive primarily
reflected the reclassification of interest expense on our 6.50% Junior
Subordinated Debentures due 2032 held by a subsidiary trust, Ford Motor Company
Capital Trust II (prior to July 1, 2003, this interest expense was included in
Minority interests in net income/(loss) of subsidiaries) and lower earnings on
our gross cash.
Financial Services Sector
- -------------------------
Our Financial Services sector includes two primary segments, Ford Credit
and Hertz. Details of Financial Services sector income/(loss) before income
taxes for the second quarter of 2004 and 2003 are shown below (in millions):
Second Quarter
Income/(Loss) Before Income Taxes
--------------------------------------------
2004
Over/(Under)
2004 2003 2003
------------ ----------- -----------------
Ford Credit $1,422 $661 $761
Hertz* 144 57 87
Other Financial Services (7) (3) (4)
----- ---- ----
Total Financial Services sector $1,559 $715 $844
====== ==== ====
- -----------
* Includes amortization expense related to intangibles recognized upon
consolidation of Hertz.
Ford Credit
- -----------
The improvement in earnings resulted primarily from improvement in credit
loss performance (about $450 million), improved lease residual performance
(about $200 million) and improved financing margin (about $150 million), offset
partially by the impact of lower off-balance sheet securitizations and
whole-loan sale transactions (about $100 million). The improvement in lease
residual performance resulted from higher used vehicle prices and a reduction in
the percentage of vehicles returned by dealers to Ford Credit at the end of the
lease period.
Details of actual credit losses net of recoveries ("credit losses") and
loss-to-receivables ratios (annualized credit losses during a period as a
percentage of average net receivables for that period) for the second quarter of
2004 and 2003 are shown below:
Second Quarter
-------------------------
2004 2003
------------ -----------
Credit losses (in millions)
On-balance sheet $332 $452
Managed 446 623
Loss-to-receivables ratio
On-balance sheet 1.03% 1.44%
On-balance sheet (including credit losses
associated with reacquired receivables)* 1.07% 1.50%
- ----------
* Ford Credit believes that the use of the on-balance sheet
loss-to-receivables ratio that includes the credit losses on reacquired
receivables is useful to investors because it provides a more complete
presentation of Ford Credit's on-balance sheet credit loss performance.
The decrease of $120 million in credit losses for the on-balance sheet
portfolio primarily reflected improved loss performance in the U.S. retail
installment and operating lease portfolio resulting from lower
-48-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
repossessions and a lower average loss per repossession. The on-balance sheet
loss-to-receivables ratio including reacquired receivables in the second
quarter of 2004 was 1.07%, down from 1.50% in 2003.
Ford Credit's finance receivables, net of allowance for credit losses, and
net investment in operating leases for on-balance sheet, securitized
off-balance sheet, managed and serviced portfolios are shown below
(in billions):
June 30, December 31,
2004 2003
---------------- -----------------
On-balance sheet (including on-balance sheet securitizations) $129.2 $132.1
Securitized off-balance sheet 45.8 49.4
------ ------
Managed $175.0 $181.5
====== ======
Serviced $180.5 $188.8
The decrease in on-balance sheet finance receivables and net investment in
operating leases of $2.9 billion primarily reflected the impact of lower retail
and lease placement volumes. The decrease in securitized off-balance sheet
receivables of $3.6 billion primarily reflected the slower pace of off-balance
sheet securitizations.
Shown below is Ford Credit's allowance for credit losses related to finance
receivables and operating leases for the periods specified:
June 30, December 31,
2004 2003
---------------- ----------------
Allowance for credit losses (in billions) $2.7 $3.0
Allowance as a percentage of end-of-period net receivables 2.05% 2.28%
The decrease in the allowance for credit losses of about $300 million
primarily reflected improving portfolio performance, especially in the United
States, and the impact of lower receivables.
The following table summarizes the activity related to the off-balance
sheet sales of receivables reported as revenues for the periods indicated (in
millions):
Second Quarter
--------------------------------
2004 2003
-------------- --------------
Net gain on sales of receivables $ 69 $ 51
Interest income from retained securities 166 197
Servicing fees 111 179
Excess spread and other 235 245
--------- ---------
Investment and other income related to sales of receivables 581 672
Less: Whole-loan income (32) (48)
--------- ---------
Income related to off-balance sheet securitizations $ 549 $ 624
========= =========
Memo:
Finance receivables sold $ 2,400 $ 2,666
Servicing portfolio as of period-end 51,304 62,595
Pre-tax gain per dollar of retail receivables sold 2.9% 1.9%
Investment and other income related to sales of receivables decreased $91
million or 14% from $672 million in the second quarter 2003 to $581 million in
the second quarter of 2004. This decline resulted from lower levels of
outstanding sold receivables, down about $11 billion compared with the second
quarter of 2003, reflecting primarily lower funding requirements. Excluding the
effects of whole-loan sale transactions, which totaled $10.4 billion in the
2002-2004 period, off-balance sheet securitization income declined $75 million
from $624 million in the second quarter of 2003 to $549 million in the second
quarter of 2004.
The net impact of off-balance sheet securitizations on earnings in a given
period will vary depending on the amount and type of receivables sold and the
timing of the transactions in the current period and the preceding two-to-three
year period, as well as the interest rate environment at the time the finance
receivables were originated and securitized.
-49-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
The following table shows, on an analytical basis, the earnings impact of
off-balance sheet securitizations had Ford Credit reported them as on-balance
sheet and funded them through asset-backed financings for the periods indicated
(in millions):
Second Quarter
------------------------
2004 2003
----------- -----------
Financing revenue
Retail revenue $663 $ 951
Wholesale revenue 284 297
---- -----
Total financing revenue 947 1,248
Borrowing cost (244) (390)
---- -----
Net financing margin 703 858
Credit losses (101) (153)
---- -----
Income before income taxes $602 $ 705
==== =====
Memo:
Income related to off-balance sheet securitizations $549 $624
Recalendarization impact of off-balance sheet securitizations (53) (81)
In the second quarter of 2004, the impact to earnings of off-balance sheet
securitizations was $53 million lower than had these transactions been
structured as on-balance sheet securitizations. This difference results from
recalendarization effects caused by gain-on-sale accounting requirements. This
effect will fluctuate as the amount of receivables sold in off-balance sheet
securitizations increases or decreases over time.
Hertz
- -----
In the second quarter of 2004, income before income taxes was $144 million,
compared with $57 million in the second quarter of 2003. The improvement was
primarily due to higher rental volume in the Hertz worldwide car rental
business, offset partially by lower pricing. Earnings were also favorably
impacted by lower fleet costs, higher net proceeds received in excess of book
value on the disposal of used vehicles and equipment, and improved cost
performance.
FIRST HALF RESULTS OF OPERATIONS
Our worldwide net income was $3.1 billion in the first half of 2004, or
$1.51 per diluted share of Common and Class B Stock. In the first half of 2003,
net income was $1.3 billion, or $0.67 per share.
Results by business sector for the first half of 2004 and 2003 are shown
below (in millions):
First Half
Net Income/(Loss)
--------------------------------------------
2004
Over/(Under)
2004 2003* 2003
----------- ------------ -------------------
Income/(loss) before income taxes
Automotive sector $1,749 $ 665 $1,084
Financial Services sector 2,642 1,393 1,249
------ ------ ------
Total Company 4,391 2,058 2,333
Provision for/(benefit from) income taxes 1,097 531 566
Minority interests in net income/(loss) of subsidiaries 157 200 (43)
------ ------ ------
Income/(loss) from continuing operations 3,137 1,327 1,810
Income/(loss) from discontinued/held-for-sale operations (20) (14) (6)
------ ------ ------
Net income/(loss) $3,117 $1,313 $1,804
====== ====== ======
- ----------
* Certain amounts were reclassified to conform to current period presentation
consistent with the presentation in our 10-K Report. Reclassifications
include profits and losses related to discontinued/held-for-sale
operations.
-50-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Automotive Sector
- -----------------
Details of Automotive sector results for the first half of 2004 and 2003
are shown below (in millions):
First Half
--------------------------------------------------------------------------------
Income/(Loss) Before Taxes
Income/(Loss) Before Taxes Excluding Special Items
-------------------------------------- ---------------------------------------
2004 2004
Over/ Over/
(Under) (Under)
2004 2003 2003 2004 2003 2003
---------- ------------ -------------- ---------- ------------ ---------------
Americas
Ford North America $2,297 $1,681 $ 616 $2,417 $1,681 $ 736
Ford South America 37 (100) 137 37 (100) 137
------ ------ ------ ------ ------ ------
Total Americas 2,334 1,581 753 2,454 1,581 873
Ford Europe and PAG
Ford Europe 167 (772) 939 216 (772) 988
PAG (342) 78 (420) (342) 78 (420)
------ ------ ------ ------ ------ ------
Total Ford Europe and PAG (175) (694) 519 (126) (694) 568
Ford Asia Pacific/Africa and Mazda
Ford Asia Pacific and Africa 23 (53) 76 23 (53) 76
Mazda and Associated Operations 114 86 28 114 86 28
------ ------ ------ ------ ------ ------
Total Ford Asia Pacific/Africa
and Mazda 137 33 104 137 33 104
Other Automotive (547) (255) (292) (564) (255) (309)
------ ------ ------ ------ ------ ------
Total, excluding special items 1,901 665 1,236
Special items * (152) - (152)
------ ------ ------
Total Automotive $1,749 $ 665 $1,084 $1,749 $ 665 $1,084
====== ====== ====== ====== ====== ======
- ----------
* Special items include $(120) million of charges for revaluation and
restructuring of our investment in Ballard Power Systems (see discussion
above), $(49) million related to the completion of the previously announced
Ford Europe restructuring plan, and $17 million related to a prior
divestiture.
Details of Automotive sector sales and vehicle unit sales for the first
half 2004 and 2003 are shown below:
Sales Vehicle Unit Sales *
(in billions) (in thousands)
-------------------------------------------- --------------------------------------------
2004 2004
Over/(Under) Over/(Under)
2004 2003 2003 2004 2003 2003
--------- ----------- ---------------------- -------- ----------- -----------------------
Americas
Ford North America $43.8 $42.9 $0.9 2% 1,930 2,006 (76) (4)%
Ford South America 1.3 0.7 0.6 86 133 93 40 43
----- ----- ---- -- ----- ----- --- --
Total Americas 45.1 43.6 1.5 3 2,063 2,099 (36) (2)
Ford Europe and PAG
Ford Europe 13.2 10.2 3.0 29 876 791 85 11
PAG 13.7 11.8 1.9 16 390 369 21 6
----- ----- ---- -- ----- ----- --- --
Total Ford Europe and PAG 26.9 22.0 4.9 22 1,266 1,160 106 9
Ford Asia Pacific and Africa 3.5 2.7 0.8 30 204 165 39 24
----- ----- ---- -- ----- ----- --- --
Total Automotive $75.5 $68.3 $7.2 11% 3,533 3,424 109 3%
===== ===== ==== == ===== ===== === ==
- ----------
* Included in vehicle unit sales of Ford Asia Pacific and Africa are
Ford-badged vehicles sold in China and Malaysia by our unconsolidated
subsidiaries totaling 34,000 and 13,000 in 2004 and 2003, respectively. The
revenue from these units is not reflected in the dollar sales reported
above.
-51-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Details of Automotive sector market share for selected markets for the
first half of 2004 and 2003 are shown below:
2004
Over/(Under)
2004 2003 2003 Market
------------ -------------- ------------------- ---------------------
Americas
Ford North America 18.4% 19.6% (1.2)pts. U.S. b/
Ford South America 11.2 11.1 0.1 Brazil b/
Ford Europe and PAG a/
Ford Europe 8.9 8.9 0 Europe b/
PAG 1.3/2.4 1.3/2.2 0/0.2 U.S./Europe
Ford Asia Pacific 13.6 13.9 (0.3) Australia b/
- ----------
a/ 2004 European market share for Ford Europe and PAG are based, in part, on
estimated vehicle registrations.
b/ Excludes market share of our Premier Automotive Group brand vehicles
(i.e. Volvo, Jaguar, Land Rover and Aston Martin).
The following discussion is based on Income/(Loss) Before Taxes Excluding
Special Items. We believe this measure to be useful to investors because it
excludes elements that we do not consider to be indicative of earnings from our
on-going operating activities. As a result, it provides investors with a more
relevant measure of the results generated by our operations.
Americas
- --------
Ford North America. The improvement in profits for Ford North America
primarily reflected improved product mix, positive net pricing, and
favorable cost performance, offset partially by lower volume.
Ford South America. The improvement in profits for Ford South America
primarily reflected positive net pricing and higher vehicle unit sales
volume and improved product mix, offset partially by unfavorable cost
performance. The higher unit sales volume reflected stronger industry sales
volumes and higher market share, particularly for the Ford EcoSport,
Fiesta, and Cargo models.
Ford Europe and PAG
- -------------------
Ford Europe. The improvement in profits for Ford Europe primarily reflected
favorable cost performance, including the effects of our previously
announced restructuring actions, higher vehicle unit sales volume and
positive net pricing. The increase in vehicle unit sales volume primarily
reflected the strength of the Ford Focus C-Max model and higher sales in
Turkey and Russia. The improvement in revenue primarily reflected stronger
European currencies and the increase in vehicle unit sales.
PAG. The deterioration in results for PAG primarily reflected unfavorable
changes in exchange rates, unfavorable product mix, and negative net
pricing, offset partially by higher unit sales volume. The higher unit
sales volume reflected higher market share in Europe and higher industry
volumes in Europe and the U.S.
Ford Asia Pacific and Africa/Mazda
- ----------------------------------
Ford Asia Pacific and Africa. The improvement for Ford Asia Pacific and
Africa primarily reflected favorable changes in exchange rates and higher
unit sales volume.
Mazda and Associated Operations. The change primarily reflected
improvements in our Mazda-related investments.
Other Automotive
- ----------------
The increase in loss before income taxes for Other Automotive primarily
reflected the reclassification of interest expense on our 6.50% Junior
Subordinated Debentures due 2032 held by a subsidiary trust, Ford Motor Company
Capital Trust II (prior to July 1, 2003, this interest expense was included in
Minority interests in net income/(loss) of subsidiaries) and lower earnings on
our gross cash.
-52-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Financial Services Sector
- -------------------------
Details of Financial Services sector income/(loss) before income taxes for
the first half of 2004 and 2003 are shown below (in millions):
First Half
Income/(Loss) Before Income Taxes
--------------------------------------------
2004
Over/(Under)
2004 2003 2003
------------ ----------- -----------------
Ford Credit $2,509 $1,388 $1,121
Hertz* 137 (2) 139
Other Financial Services (4) 7 (11)
------ ------ ------
Total Financial Services sector $2,642 $1,393 $1,249
====== ====== ======
- ----------
* Includes amortization expense related to intangibles recognized upon
consolidation of Hertz.
Ford Credit
- -----------
The improvement in earnings resulted primarily from improvement in credit
loss performance, improved lease residual performance and improved financing
margin, offset partially by the impact of lower off-balance sheet
securitizations and whole-loan sale transactions. The improvement in lease
residual performance resulted from higher used vehicle prices and a reduction in
the percentage of vehicles returned by dealers to Ford Credit at the end of the
lease period.
Details of credit losses and loss-to-receivables ratios for the first half
of 2004 and 2003 are shown below:
First Half
-------------------------
2004 2003
------------ ------------
Credit losses (in millions)
On-balance sheet $667 $ 945
Managed 939 1,309
Loss-to-receivables ratio
On-balance sheet 1.03% 1.53%
On-balance sheet (including credit losses
associated with reacquired receivables)* 1.09% 1.56%
- ----------
* Ford Credit believes that the use of the on-balance sheet
loss-to-receivables ratio that includes the credit losses on reacquired
receivables is useful to investors because it provides a more complete
presentation of Ford Credit's on-balance sheet credit loss performance.
The decrease of $278 million in credit losses for the on-balance sheet
portfolio primarily reflected improved loss performance in the U.S. retail
installment and operating lease portfolio resulting from lower repossessions and
a lower average loss per repossession. The on-balance sheet loss-to-receivables
ratio including reacquired receivables in the first half of 2004 was 1.09%, down
from 1.56% in 2003.
Hertz
- -----
In the first half of 2004, income before income taxes was $137 million,
compared with a loss of $2 million in the first half of 2003. The improvement
was primarily due to higher rental volume in the Hertz worldwide car rental
business, offset partially by lower pricing. Earnings were also favorably
impacted by lower fleet costs, higher net proceeds received in excess of book
value on the disposal of used vehicles and equipment, and improved cost
performance.
LIQUIDITY AND CAPITAL RESOURCES
Automotive Sector
- -----------------
For the Automotive sector, liquidity and capital resources include cash
generated by operations, gross cash balances, funds raised in capital markets
and committed credit lines.
-53-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Gross Cash. Automotive gross cash includes cash and cash equivalents,
marketable and loaned securities and assets contained in a short-term Voluntary
Employee Beneficiary Association trust ("VEBA") as detailed below (in billions):
2004 2003
------------------------------ -----------------------------
June 30 January 1 June 30 January 1
--------------- ------------- -------------- ------------
Cash and cash equivalents $ 5.9 $ 5.4 $ 7.5 $ 5.2
Marketable securities 11.6 10.8 15.0 17.4
Loaned securities 5.3 5.7 4.6 -
----- ----- ----- ------
Total cash, marketable and
loaned securities 22.8 21.9 27.1 22.6
Short-term VEBA assets 4.0 4.0 1.6 2.7
----- ----- ----- ------
Gross cash $26.8 $25.9 $28.7 $ 25.3
===== ===== ===== ======
In managing our business, we classify changes in gross cash into four
categories: operating-related (both including and excluding pension/long-term
VEBA contributions and tax refunds), capital transactions with the Financial
Services sector, acquisitions and divestitures and other (primarily financing
related). Our key metric for operating-related cash flow is cash flow before
funded pension plan and long-term VEBA contributions and tax refunds. This
metric best represents the ability of our Automotive operations to generate
cash. We believe the cash flow analysis reflected in the table below, which
differs from a cash flow statement presented in accordance with GAAP, is useful
to investors because it includes cash flow elements that we consider to be
related to our operating activities (e.g., capital spending) that are not
included in Cash flows from operating activities before securities trading, the
most directly comparable GAAP financial measure.
Changes in Automotive gross cash for the second quarter and first half of
2004 and 2003 are summarized below (in billions):
Second Quarter First Half
----------------------- -----------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Gross cash at end of period $26.8 $28.7 $26.8 $28.7
Gross cash at beginning of period 26.5 26.6 25.9 25.3
----- ----- ----- -----
Total change in gross cash $ 0.3 $ 2.1 $ 0.9 $ 3.4
===== ===== ===== =====
Operating-related cash flows
Automotive income/(loss) before income
taxes, excluding special items $ 0.1 $ - $ 1.9 $ 0.7
Capital expenditures (1.4) (2.0) (2.6) (3.4)
Depreciation and special tools amortization 1.6 1.3 3.2 2.7
Changes in receivables, inventory and trade payables (1.4) (0.2) (1.0) (0.6)
Other 1.2 1.7 0.9 2.4
----- ----- ----- -----
Total operating-related cash flows before pension/
long-term VEBA contributions and tax refunds 0.1 0.8 2.4 1.8
Funded pension plans/long-term VEBA contributions (0.3) (0.1) (1.5) (1.3)
Tax refunds - - - 0.9
----- ----- ----- -----
Total operating-related cash flows (0.2) 0.7 0.9 1.4
Capital transactions with Financial Services sector * 1.0 0.9 1.9 1.7
Divestitures and acquisitions 0.1 0.2 0.3 0.4
Other
Dividends paid to shareholders (0.2) (0.2) (0.4) (0.4)
Changes in total Automotive sector debt (0.3) 0.4 (1.7) 0.2
Other (0.1) 0.1 (0.1) 0.1
----- ----- ----- -----
Total change in gross cash $ 0.3 $ 2.1 $ 0.9 $ 3.4
===== ===== ===== =====
- ----------
* Primarily dividends, capital contributions, loans and loan repayments.
-54-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Shown in the table below is a reconciliation between Cash flows from
operating activities before securities trading and operating-related cash flows,
calculated as shown in the table above, for the second quarter and first half of
2004 and 2003 (in billions):
Second Quarter First Half
------------------------- ------------------------
2004 2003 2004 2003
----------- ----------- ---------- ----------
Cash flows from operating activities
before securities trading $ 1.0 $ 2.8 $ 3.6 a/ $ 5.7 a/
Items included in operating-related cash flow
Capital expenditures (1.4) (2.0) (2.6) (3.4)
Net transactions between Automotive
And Financial Services sectors 0.6 - 0.5 b/ (0.3) b/
Other (0.4) (0.1) (0.6) (0.6)
----- ----- ----- -----
Operating-related cash flows $(0.2) $ 0.7 $ 0.9 $ 1.4
===== ===== ===== =====
- ----------
a/ As shown in our condensed sector statement of cash flows for the
Automotive sector.
b/ Primarily payables and receivables between the sectors in the normal
course of business, as shown in our condensed sector statement of cash
flows.
Automotive operating-related cash flow, excluding pension and long-term
VEBA contributions and tax refunds, was positive at about $100 million for the
second quarter 2004. This reflects Automotive pre-tax profit excluding special
items ($83 million), depreciation and amortization in excess of capital spending
(about $200 million), and other operating-related changes, primarily timing
differences between expense or revenue recognition and the corresponding cash
payments for items such as health care, pension, marketing and warranty
(positive cash flow of $1.2 billion), offset by changes in receivables,
inventory, and trade payables (negative cash flow of $1.4 billion).
Capital transactions with the Financial Services sector, primarily
dividends received from Ford Credit, totaled $1 billion in the second quarter of
2004.
Balance Sheet Improvement Actions. We are taking actions over time to
strengthen the Automotive balance sheet. By year-end 2004, we plan to have taken
actions that, in total, will have reduced our obligations by about $10 billion
over the past two years. These capital improvements include pre-funding our
healthcare and pension obligations and reducing Automotive debt.
In 2003, these actions included $2.8 billion in contributions to our U.S.
and non-U.S. funded pension plans and a $2 billion contribution to a long-term
VEBA, which we are using to pre-fund a portion of our healthcare obligation.
In the second quarter 2004, we contributed about $300 million to our
non-U.S. funded pension plans, for a total of $1.5 billion in contributions to
non-U.S. funded pension plans for the first half 2004.
In the first half 2004, we repurchased $1 billion of senior debt in the
open market. The majority of our purchases have been among four large issues,
which have maturities between 2028 and 2032. In addition, in January 2004, we
redeemed our 9% Trust Originated Preferred Securities, which had the effect of
reducing our subordinated debt by about $700 million.
In the second half of 2004, we plan $2 billion of additional balance sheet
improvement actions, including a $1.5 billion contribution on July 21, 2004 to
our long-term VEBA.
Shutdown Working Capital Financing. Each year during the summer and at year
end, vacation and holiday production shutdowns occur. During these periods,
wholesale revenues are not generated (because we are not shipping and selling
vehicles to dealers). Historically, we funded the seasonal cash outflows during
the shut-down period by reducing cash reserves.
In July 2004, we initiated an alternative source of cost-effective funding
for the 2004 United States summer vacation shutdown through an uncommitted
auction facility with our bank group. We received $3.6 billion in bids in our
first auction and elected to raise $2.3 billion, which matures on September 7,
2004. We expect to use this funding process for future shutdowns.
-55-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
With this shutdown working capital financing, a portion of our cash
reserves otherwise held for shutdown periods can be deployed more efficiently to
address other longer-term liabilities (including pension and healthcare
obligations and debt retirement), as described above.
Debt. At June 30, 2004, our Automotive sector had total senior debt of
$13.7 billion, compared with $15.0 billion at December 31, 2003. The debt
decrease primarily reflected the repurchases described above.
Ford Motor Company Capital Trust II (the "Trust II") had outstanding
$5.0 billion of trust preferred securities at June 30, 2004. The dividend
and liquidation preferences on these securities are paid from interest and
principal payments on our junior subordinated debentures held by the
Trust II in a principal amount of $5.2 billion.
Credit Facilities. Excluding credit facilities of our Variable Interest
Entities, at July 1, 2004, the Automotive sector had $7.0 billion of
contractually committed credit agreements with various banks, of which
$6.9 billion were available for use. Seventy-six percent of the total
facilities are committed through June 30, 2009. Of the $7.0 billion,
$6.7 billion constitute global credit facilities and may be used, at Ford's
option, by any of its direct or indirect majority-owned subsidiaries on a
guaranteed basis. Ford also has the ability to transfer, on a non-guaranteed
basis, $2.5 billion of such global credit facilities to Ford Credit and
$518 million to FCE Bank plc. ("FCE"), Ford Credit's European operation.
All of the global credit facilities are free of material adverse change
clauses and restrictive financial covenants (for example, debt-to-equity
limitations, minimum net worth requirements and credit rating triggers) that
could limit our ability to borrow.
Financial Services Sector
- -------------------------
Ford Credit
- -----------
Debt and Cash. Ford Credit's total debt was $138.3 billion at
June 30, 2004, down $11.4 billion compared with December 31, 2003. This
decrease primarily reflected repayment of debt maturing in the second quarter of
2004 and lower asset levels, which reduced Ford Credit's funding needs.
Ford Credit's unsecured commercial paper outstanding at June 30, 2004 totaled
$8.0 billion, up $1.9 billion compared with December 31, 2003.
Funding. During the second quarter of 2004, Ford Credit issued $2.2 billion
of long-term debt with maturities of one to 10 years, including about
$600 million of unsecured institutional funding and about $1.6 billion of
unsecured retail bonds. In addition, Ford Credit realized proceeds of about
$2.1 billion from sales of receivables in off-balance sheet securitizations.
Ford Credit expects its full-year 2004 public term funding requirements to
be between $13 billion and $19 billion. In the first half of 2004, it completed
about $8 billion of public term funding transactions. Because of significant
available liquidity and a relatively smaller balance sheet size, Ford Credit
plans, depending on market conditions, to repurchase a portion of its
outstanding debt securities during the remainder of 2004.
Leverage. Ford Credit uses leverage, or the debt-to-equity ratio, to make
various business decisions, including establishing pricing for retail, wholesale
and lease financing, and assessing its capital structure. Ford Credit calculates
leverage on a financial statement basis and on a managed basis.
Ford Credit's financial statement leverage (debt-to-equity ratio) is
calculated in the following table:
June 30, December 31,
2004 2003
---------------- ----------------
Total debt (in billions) $138.3 $149.7
Total stockholder's equity (in billions) 12.1 12.5
Debt-to-equity ratio (to 1) 11.4 12.0
At June 30, 2004, Ford Credit's financial statement leverage was 11.4 to 1,
compared with 12.0 to 1 at December 31, 2003. This decrease in leverage resulted
primarily from lower funding requirements.
-56-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Ford Credit's managed leverage is calculated in the following table (in
billions, except ratios):
June 30, December 31,
2004 2003
---------------- ----------------
Total debt $138.3 $149.7
Securitized off-balance sheet
receivables outstanding 45.8 49.4
Retained interest in securitized
off-balance sheet receivables (16.4) (13.0)
Adjustments for cash and
cash equivalents (8.8) (15.7)
Adjustments for SFAS No. 133 (3.2) (4.7)
------ ------
Adjusted debt $155.7 $165.7
====== ======
Total stockholder's equity
(including minority interest) $ 12.1 $ 12.5
Adjustment for SFAS No. 133 0.1 0.2
------ ------
Adjusted equity $ 12.2 $ 12.7
====== ======
Managed debt-to-equity ratio (to 1) 12.7 13.0
At June 30, 2004, Ford Credit's managed leverage was 12.7 to 1, down from
13.0 to 1 at year-end 2003. Ford Credit's dividend policy is based in part on
its strategy to maintain managed leverage at the lower end of the 13 - 14 to 1
range. Based on Ford Credit's profitability and managed receivable levels, it
paid dividends of $1.9 billion in the first half of 2004.
Credit Facilities. For additional funding and to maintain liquidity, Ford
Credit and its majority-owned subsidiaries (including FCE) have contractually
committed credit facilities with financial institutions that totaled
approximately $7.7 billion at July 1, 2004. This includes $4.8 billion of Ford
Credit facilities ($3.9 billion global and $0.9 billion non-global) and
$2.9 billion of FCE facilities ($2.7 billion global and $0.2 billion
non-global). Approximately $1.1 billion of the total facilities were in use at
July 1, 2004. Of the $7.7 billion, about 42% of these facilities are committed
through June 30, 2009. The global credit facilities may be used, at Ford
Credit's or FCE's option, by any of their direct or indirect majority-owned
subsidiaries. Ford Credit or FCE, as the case may be, will guarantee any such
borrowings. All of the global credit facilities are free of material adverse
change clauses and restrictive financial covenants (for example,
debt-to-equity limitations, minimum net worth requirements and credit rating
triggers) that would limit our ability to borrow.
Additionally, at July 1, 2004, banks provided $18.6 billion of
contractually committed liquidity facilities supporting two asset-backed
commercial paper programs; $18.2 billion support Ford Credit's FCAR program and
$425 million support Ford Credit's Motown NotesSM Program. Facilities supporting
Ford Credit's FCAR program increased to $18.5 billion at July 12, 2004,
reflecting additional bank commitments of $250 million.
In addition, Ford Credit also has entered into agreements with several
bank-sponsored commercial paper issuers ("conduits") under which such conduits
are contractually committed to purchase from Ford Credit, at Ford Credit's
option, up to an aggregate of approximately $11.8 billion of receivables. The
agreements have varying maturity dates between September 16, 2004 and
June 23, 2005. As of June 30, 2004, approximately $3.7 billion of these
conduit commitments have been utilized.
Hertz
- -----
Debt and Cash. At June 30, 2004, Hertz had total debt of $9.2 billion, up
$1.6 billion from December 31, 2003. Commercial paper outstanding at
June 30, 2004 totaled $2.4 billion, compared with $2.2 billion at
December 31, 2003. At June 30, 2004, Hertz had cash and cash equivalents of
$860 million, up from $610 million at December 31, 2003.
Hertz has an asset backed securitization ("ABS") program for its domestic
car rental fleet to reduce its borrowing costs and enhance its financing
resources. On March 31, 2004, Hertz issued $600 million of medium term notes
under its ABS program. As of June 30, 2004, $1.1 billion was outstanding under
the ABS program consisting of $500 million of commercial paper and the
$600 million of medium term notes.
Total Company
- -------------
Stockholders' Equity. Our stockholders' equity was $13.6 billion at
June 30, 2004, up $1.9 billion from December 31, 2003. The increase
primarily reflected net income of $3.1 billion less dividends of $366 million
-57-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
and other comprehensive loss of $795 million. See Note 8 of the Notes to the
Financial Statements for further discussion of other comprehensive
income/(loss).
OFF-BALANCE SHEET ARRANGEMENTS
Special Purpose Entities. At June 30, 2004, the total outstanding principal
amount of receivables sold by Ford Credit held by off-balance sheet
securitization entities was $45.8 billion, down $3.6 billion from
December 31, 2003. Ford Credit's retained interests in such sold receivables at
June 30, 2004 were $16.4 billion, up $3.4 billion from December 31, 2003.
The decrease in receivables held by off-balance sheet securitization
entities primarily reflected Ford Credit's lower funding requirements. The
increase in retained interests primarily reflected the maturity of a wholesale
term securitization in June 2004.
OUTLOOK
Shown below are our 2004 planning assumptions, operational metrics
milestones and financial results milestones and our outlook for achieving these
milestones:
Full Year
Base Outlook
Planning Assumptions
--------------------
Industry volume (SAAR) - U.S. 17.0 million units 17.0
Europe 16.9 million units 17.2
Milestone
Operation Metrics
-----------------
Quality Improve in all regions On Track
Market share Flat or improve in all regions Mixed
Automotive cost performance a/ Improve by at least $500 million Better
Capital spending $7 billion Lower
Operating-related cash flow b/ $1.2 billion positive On Track
Financial Results Pre-tax income c/
----------------- --------------
(in billions)
Automotive
Americas
Ford North America $ 1.5 - $ 1.7 On Track/Better
Ford South America (0.1) - 0 On Track
Ford Europe/PAG
Ford Europe (0.2) - (0.1) On Track/Better
PAG 0.5 - 0.6 Worse
Ford Asia Pacific and Africa
/Mazda 0 - 0.1 On Track
----- -----
Total Automotive 0.9 - 1.1 On Track
Financial Services 2.6 - 2.7 Better
----- -----
Total Company $ 3.5 - $ 3.8 Better
===== =====
- ----------
a/ At constant volume, mix and exchange; excluding special items.
b/ Excluding pension/long-term VEBA contributions and tax refunds.
c/ Excluding special items.
Second quarter 2004 results included the effect of favorable experience
related to prior-year tax matters, which resulted in an effective tax rate of
20% for the quarter. We expect our effective tax rate for the remainder of the
year to average about 28%, for a full-year effective rate of about 26%.
We continue to believe that our Automotive sector is on track to achieve
$0.9 to $1.1 billion of pre-tax income in 2004, excluding special items. Our
present expectation is that Ford North America and Ford Europe will meet or
slightly exceed the full year milestones. Ford South America and Ford Asia
Pacific and Africa/Mazda appear to be on track to meet the full year milestones.
We do not expect that PAG will meet the full year milestone of $500 million to
$600 million in pre-tax profit and is unlikely to achieve breakeven for the
year. We are assessing business improvement actions for PAG, particularly at
Jaguar.
Second quarter 2004 results for the Financial Services sector again
exceeded our expectations and we continue to expect that the Financial Services
sector will exceed the full year earnings milestone of $2.6 - $2.7 billion in
pre-tax profit.
-58-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Overall, we expect to exceed our total company milestone for pre-tax
income, excluding special items. Based on present conditions, we expect special
items for the full year to be about $260 million pre-tax (or about $0.08 per
share) consisting primarily of charges related to the revaluation and
restructuring of our investment in fuel cell technologies and completion of the
Ford Europe restructuring actions.
The pricing and competitive environment in the automotive industry remains
intense and may intensify further in the balance of the year due to the high
level of dealer inventories across the industry and many new products scheduled
to be introduced in 2004 by various manufacturers.
Based on the foregoing and subject to the risks described under "Risk
Factors" below, we expect third quarter per share earnings to be in the range of
breakeven to $0.05, from continuing operations and excluding special items. For
full-year 2004, we have increased our per share earnings guidance by $0.15 from
a range of $1.65 to $1.75 to a range of $1.80 to $1.90, from continuing
operations and excluding special items. This increase reflects our expectation
that our Financial Services sector will exceed our previous guidance, as well as
the effect of the change to our full-year tax rate to about 26% as discussed
above.
RISK FACTORS
Statements included or incorporated by reference herein may constitute
"forward looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements involve a number of risks,
uncertainties, and other factors that could cause actual results to differ
materially from those stated, including, without limitation:
o greater price competition resulting from currency fluctuations, industry
overcapacity or other factors;
o a significant decline in industry sales, particularly in the U.S. or
Europe, resulting from slowing economic growth, geo-political events or
other factors;
o lower-than-anticipated market acceptance of new or existing products;
o work stoppages at key Ford or supplier facilities or other interruptions of
supplies;
o the discovery of defects in vehicles resulting in delays in new model
launches, recall campaigns or increased warranty costs;
o increased safety, emissions, fuel economy or other regulation resulting in
higher costs and/or sales restrictions;
o unusual or significant litigation or governmental investigations arising
out of alleged defects in our products or otherwise;
o worse-than-assumed economic and demographic experience for our post
retirement benefit plans (e.g., investment returns, interest rates, health
care cost trends, benefit improvements);
o currency or commodity price fluctuations;
o changes in interest rates;
o a market shift from truck sales in the U.S.;
o economic difficulties in any significant market;
o reduced availability of or higher prices for fuel;
o labor or other constraints on our ability to restructure our business;
o a change in our requirements under long-term supply arrangements under
which we are obligated to purchase minimum quantities or pay minimum
amounts;
o credit rating downgrades;
o inability to access debt or securitization markets around the world at
competitive rates or in sufficient amounts;
o higher-than-expected credit losses;
o lower-than-anticipated residual values for leased vehicles;
o increased price competition in the rental car industry and/or a general
decline in business or leisure travel due to terrorist attacks, acts of
war, epidemic disease or measures taken by governments in response thereto
that negatively affect the travel industry; and
o our inability to implement the Revitalization Plan.
OTHER FINANCIAL INFORMATION
The interim financial information included in this Quarterly Report on Form
10-Q for the quarter ended June 30, 2004 has not been audited by
PricewaterhouseCoopers LLP ("PwC"). In reviewing such information, PwC has
applied limited procedures in accordance with professional standards for reviews
of interim financial information. Accordingly, you should restrict your reliance
on their reports on such information. PwC is not subject
-59-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
to the liability provisions of Section 11 of the Securities Act of 1933 for
their reports on the interim financial information because such reports do not
constitute "reports" or "parts" of the registration statements prepared or
certified by PwC within the meaning of Sections 7 and 11 of the
Securities Act of 1933.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures. William Clay Ford, Jr.,
our Chief Executive Officer, and Donat R. Leclair, our Chief Financial Officer,
have performed an evaluation of the Company's disclosure controls and
procedures, as that term is defined in Rule 13a-14 (c) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as of June 30, 2004 and
each has concluded that such disclosure controls and procedures are effective to
ensure that information required to be disclosed in our periodic reports filed
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified by the Securities and Exchange Commission's rules and
regulations.
Change in internal controls. No changes in the Company's internal controls over
financial reporting occurred during the quarter ended June 30, 2004 that have
materially affected, or are reasonably likely to materially affect, the
Company's internal controls over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings
Product liability Matters
- -------------------------
Buell-Wilson v. Ford. During December 2002, an action was filed in Superior
Court in San Diego County, California, alleging that defects in stability, roof
strength and warnings in a 1997 Ford Explorer caused an accident in which the
plaintiff was seriously injured. In June of 2004, the jury rendered a verdict in
favor of the plaintiff and ordered us to pay $122.6 million in compensatory
damages and $246 million in punitive damages. We have filed motions for judgment
notwithstanding the verdict and for a new trial. If those motions are denied, we
will appeal to the California Court of Appeals.
F-150 Radiator Class Actions. (Previously discussed on page 29 of the 10-K
Report). The Texas Court of Appeals reversed the class certification orders and
remanded the case to the trial court for further proceedings. Additional
purported statewide class action suits with similar allegations and claims for
relief have been filed in state courts in Bibb County, Georgia and in Madison
County, Illinois.
-60-
Item 2. Changes in Securities and Use of Proceeds
During the second quarter of 2004, we issued a total of 23,099 shares of
our common stock under our Restricted Stock Plan for Non-Employee Directors to
certain directors as part of their total compensation. Such shares were not
registered pursuant to the Securities Act of 1933, as amended, in reliance on
Section 4(2) thereof.
During the second quarter of 2004, we purchased shares of our Common Stock
as follows:
Total Number of Maximum Number (or
Shares Purchased as Approximate Dollar Value) of
Total Number of Average Part of Publicly Shares that May Yet Be
Shares Purchased Price Paid Announced Plans or Purchased Under the Plans or
Period a/ per Share Programs Programs
- --------------------------- ------------------ ------------ ----------------------- -------------------------------
April 1, 2004
through No publicly announced
April 30, 2004 1,587,194 $14.27 0 repurchase program in place
May 1, 2004
through No publicly announced
May 31, 2004 1,535,414 $14.64 0 repurchase program in place
June 1, 2004
through No publicly announced
June 30, 2004 1,671,811 $15.49 0 repurchase program in place
--------- -
Total 4,794,419 $14.81 0
========= =
- ----------
a/ We currently do not have a publicly announced repurchase program in place.
Of the 4,794,419 shares purchased, 4,784,243 shares were purchased from the
Ford Motor Company Savings and Stock Investment Plan for Salaried Employees
("SSIP") and the Tax Efficient Savings Plan for Hourly Employees
("TESPHE"). Shares are generally purchased from the SSIP and TESPHE when
participants in those plans elect to sell units in the Ford Stock Fund upon
retirement, upon termination of employment with the Company, related to an
in-service distribution, or to fund a loan against an existing account
balance in the Ford Stock Fund. Shares are not purchased from these plans
when a participant transfers account balances out of the Ford Stock Fund
and into another investment option under the plans. The remaining shares
were acquired from our employees or former employees in accordance with our
various compensation plans as a result of share withholdings to pay income
taxes with respect to (i) the lapse of restrictions on restricted stock,
(ii) the issuance of stock as a result of the conversion of restricted
stock equivalents awarded to our executives or directors, or to pay the
exercise price and related income taxes with respect to the exercise of a
stock option.
-61-
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
Please refer to the Exhibit Index on Page 34.
(b) Reports on Form 8-K
-------------------
The Registrant filed the following Current Reports on Form 8-K during
the quarter ended June 30, 2004:
Current report on Form 8-K dated April 1, 2004 included information
relating to U.S. retail sales of Ford vehicles in March 2004.
Current report on Form 8-K dated April 21, 2004 included information
relating to Ford's first quarter 2004 financial results.
Current report on Form 8-K dated April 22, 2004 included information
relating to executive appointments.
Current report on Form 8-K dated May 3, 2004 included information
relating to U.S. retail sales of Ford vehicles in April 2004.
Current report on Form 8-K dated June 2, 2004 included information
relating to U.S. retail sales of Ford vehicles in May 2004.
Current report on Form 8-K dated June 16, 2004 included information
relating to second quarter earnings guidance.
-62-