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| F > SEC Filings for F > Form 10-Q on 5-Aug-2009 | All Recent SEC Filings |
5-Aug-2009
Quarterly Report
SECOND QUARTER RESULTS OF OPERATIONS
Our worldwide net income attributable to Ford Motor Company was $2.3 billion or $0.69 per share of Common and Class B Stock in the second quarter of 2009, an improvement of $11 billion from a net loss attributable to Ford Motor Company of $8.7 billion or $3.89 per share of Common and Class B Stock in the second quarter of 2008.
Results by sector for the second quarter of 2009 and 2008 are shown below (in millions):
Second Quarter
2009 Over/
2009 2008 (a) (Under) 2008
Income/(Loss) before income taxes
Automotive sector $ 1,776 $ (6,639 ) $ 8,415
Financial Services sector 595 (2,420 ) 3,015
Total Company 2,371 (9,059 ) 11,430
Provision for/(Benefit from) income taxes 25 (443 ) 468
Income/(Loss) from continuing operations 2,346 (8,616 ) 10,962
Income/(Loss) from discontinued operations 5 8 (3 )
Net income/(loss) 2,351 (8,608 ) 10,959
Less: Income/(Loss) attributable to noncontrolling
interests (b) 90 89 1
Net income/(loss) attributable to Ford Motor
Company (c) $ 2,261 $ (8,697 ) $ 10,958
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(b) Formerly labeled "Minority interests in net income/(loss)," reflects new presentation under SFAS No. 160. Primarily related to Ford Europe's consolidated 41% owned affiliate, Ford Otosan. The pre-tax results for Ford Otosan were $75 million and $156 million in the second quarter of 2009 and 2008, respectively.
(c) Formerly labeled "Net income/(loss)," reflects new presentation under SFAS No. 160.
Provision for income taxes includes the favorable impact of approximately $190 million for the Canadian transfer pricing agreement, including the effects of interest.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Income/(Loss) before income taxes includes certain items ("special items") that we have grouped into "Personnel and Dealer-Related Items" and "Other Items" to provide useful information to investors about the nature of the special items. The first category includes items related to our efforts to match production capacity and cost structure to market demand and changing model mix and therefore helps investors track amounts related to those activities. The second category includes items that we do not generally consider to be indicative of our ongoing operating activities, and therefore allows investors analyzing our pre-tax results to identify certain infrequent significant items that they may wish to exclude when considering the trend of ongoing operating results.
The following table details second quarter 2009 and 2008 special items in each category by segment or business unit (in millions):
Second Quarter - Income/(Loss)
Personnel and Dealer-Related Items: 2009 2008
Automotive Sector
Ford North America
Retiree health care and related charges $ (110 ) $ 100
Personnel-reduction actions (98 ) (125 )
U.S. dealer actions (11 ) (39 )
Job Security Benefits 22 (149 )
Total Ford North America (197 ) (213 )
Ford South America
Personnel-reduction actions (13 ) -
Ford Europe
Personnel-reduction actions (139 ) (3 )
Volvo
Personnel-reduction actions (7 ) (23 )
U.S. dealer actions (1 ) (9 )
Total Volvo (8 ) (32 )
Ford Asia Pacific Africa
Personnel-reduction actions (1 ) (7 )
Mazda
Impairment of dealer network goodwill - (214 )
Total Personnel and Dealer-Related Items - Automotive sector (358 ) (469 )
Other Items:
Automotive Sector
Ford North America
Gain/(Loss) on sale of ACH plants - (303 )
Fixed asset impairment charges - (5,300 )
Total Ford North America - (5,603 )
Ford Europe
Investment impairment and related charges (100 ) -
Volvo
Held-for-sale cessation of depreciation and related charges 141 -
Other Automotive
Liquidation of foreign subsidiary - foreign currency
translation impact (281 ) -
Gain on debt securities exchanged for equity - 57
Returns on assets held in the TAA 3 -
Net gains on debt reduction actions 3,385 -
Total Other Automotive 3,107 57
Jaguar Land Rover
Sale-related/Other 5 75
Total Other Items - Automotive sector 3,153 (5,471 )
Financial Services Sector
Ford Credit net operating lease impairment charge - (2,086 )
Total $ 2,795 $ (8,026 )
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Included in Provision for/(Benefit from) income taxes are tax benefits of $99 million and $727 million for the second quarter of 2009 and 2008, respectively, that we consider to be special items. For 2008, this amount primarily consists of the tax effects of the pre-tax special items listed above, and a $645 million benefit reflecting the change in our deferred tax asset valuation allowance allocated to Income/(Loss) from continuing operations after taking into consideration income from Accumulated other comprehensive income/(loss) when determining whether sufficient future taxable income exists to realize deferred tax assets.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
The discussion below of Automotive and Financial Services sector results of operations is on a pre-tax basis. Cost changes described below are measured at constant volume, mix and exchange, excluding special items and discontinued operations.
AUTOMOTIVE SECTOR
Results of Operations
Details by segment or business unit of Income/(Loss) before income taxes are
shown below for the second quarter of 2009 and 2008 (in millions), with Mazda
and Jaguar Land Rover separated out from "ongoing" subtotals:
Second Quarter
2009 2008 2009 Over/(Under) 2008
Ford North America * $ (1,048 ) $ (7,153 ) $ 6,105
Ford South America 73 388 (315 )
Ford Europe (101 ) 579 (680 )
Volvo (98 ) (152 ) 54
Ford Asia Pacific Africa (26 ) 43 (69 )
Total ongoing Automotive operations (1,200 ) (6,295 ) 5,095
Other Automotive 2,971 (308 ) 3,279
Total ongoing Automotive 1,771 (6,603 ) 8,374
Mazda - (111 ) 111
Jaguar Land Rover 5 75 (70 )
Total Automotive sector $ 1,776 $ (6,639 ) $ 8,415
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Details by segment of Automotive revenues ("sales") and wholesale unit volumes for the second quarter of 2009 and 2008 are shown below:
Second Quarter
Sales (a) Wholesales (b)
(in billions) (in thousands)
2009 2008 2009 Over/(Under) 2008 2009 2008 2009 Over/(Under) 2008
Ford North
America (c) $ 10.8 $ 14.2 $ (3.4 ) (24 )% 458 679 (221 ) (33 )%
Ford South
America 1.9 2.4 (0.5 ) (22 ) 111 119 (8 ) (7 )
Ford Europe 7.2 11.5 (4.3 ) (37 ) 400 532 (132 ) (25 )
Volvo 2.9 4.3 (1.4 ) (33 ) 79 107 (28 ) (26 )
Ford Asia
Pacific Africa
(d) 1.2 1.7 (0.5 ) (32 ) 124 125 (1 ) (1 )
Total ongoing
Automotive 24.0 34.1 (10.1 ) (30 ) 1,172 1,562 (390 ) (25 )
Jaguar Land
Rover - 2.9 (2.9 ) (100 ) - 51 (51 ) (100 )
Total Automotive
sector $ 24.0 $ 37.0 $ (13.0 ) (35 ) 1,172 1,613 (441 ) (27 )
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(b) Wholesale unit volumes generally are reported on a where-sold basis, and include all Ford-badged units and units manufactured by Ford that are sold to other manufacturers, as well as units distributed for other manufacturers. Vehicles sold to daily rental car companies that are subject to a guaranteed repurchase option, as well as other sales of finished vehicles for which the recognition of revenue is deferred (e.g., consignments), are included in wholesale unit volumes.
(c) Includes sales of Mazda6 by our consolidated subsidiary, AAI.
(d) Included in wholesale unit volumes of Ford Asia Pacific Africa are Ford-badged vehicles sold in China by unconsolidated affiliates totaling about 68,000 and 49,000 units in the second quarters of 2009 and 2008, respectively. "Sales" above does not include revenue from these units.
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 second
quarter of 2009 and 2008, along with the level of dealer stocks as of June 30,
2009 and 2008, are shown below:
Dealer-Owned Stocks (a)
Market Share (in thousands)
2009
Over/(Under)
Market 2009 2008 2009 Over/(Under) 2008 2009 2008 2008
United States (b) 16.4 % 14.4 % 2.0 pts. 344 559 (215 )
South America (b)
(c) 10.4 9.4 1.0 33 35 (2 )
Europe (b) (d) 9.0 8.5 0.5 236 361 (125 )
Volvo - United
States/Europe (d) 0.6/1.2 0.5/1.3 0.1/ (0.1) 13/31 20/41 (7)/(10)
Asia Pacific Africa
(b) (e) (f) 2.0 1.9 0.1 42 62 (20 )
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(b) Includes only Ford and, in certain markets (primarily United States), Lincoln and Mercury brands.
(c) South America market share is based, in part, on estimated vehicle registrations for our six major markets (Argentina, Brazil, Chile, Colombia, Ecuador and Venezuela).
(d) Europe market share is based, in part, on estimated vehicle registrations for the 19 European markets we track (described in "Item 1. Business" of our 2008 Form 10-K Report).
(e) Asia Pacific Africa market share is based, in part, on estimated vehicle sales for our 12 major markets (Australia, China, Japan, India, Indonesia, Malaysia, New Zealand, Philippines, South Africa, Taiwan, Thailand and Vietnam).
(f) Dealer-owned stocks for Asia Pacific Africa include primarily Ford-brand vehicles as well as a small number of units distributed for other manufacturers.
Overall Automotive Sector
The improvement in results primarily reflects the non-recurrence of fixed asset impairment charges in Ford North America ($5.3 billion), net gains on debt reduction actions ($3.4 billion), favorable cost changes ($1.3 billion), and favorable net pricing ($1.2 billion), offset partially by unfavorable volume and mix ($2.2 billion), unfavorable changes in currency exchange (about $400 million), and lower parts and subsidiary profits and the impact of our lower ownership share in Mazda (about $300 million). The favorable cost changes primarily reflect lower structural costs, offset partially by higher net product costs.
The decrease in revenues primarily reflects unfavorable volume, the non-recurrence of Jaguar Land Rover revenues, and unfavorable changes in currency exchange, offset partially by favorable net pricing.
The table below details our Automotive sector second quarter 2009 structural cost changes at constant exchange, excluding special items and discontinued operations (in billions):
2009 Better/(Worse)
Explanation of Structural Cost Changes Than 2008
Manufacturing and Primarily hourly and salaried personnel
engineering reductions and efficiencies in our plants and
processes $ 1.1
Pension and OPEB Primarily the effect of the UAW Retiree Health
Care VEBA agreement 0.3
Spending-related Primarily lower depreciation and amortization
related to the North America asset impairment
at the end of second quarter 2008 0.2
Advertising & sales
promotions Primarily reduced costs 0.1
Overhead Primarily salaried personnel reductions 0.1
Total $ 1.8
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Ford North America Segment. The improvement in earnings primarily reflects the non-recurrence of fixed asset impairment charges, favorable cost changes, and favorable net pricing, offset partially by unfavorable volume and mix and unfavorable changes in currency exchange. The favorable cost changes primarily reflect lower structural costs (including lower manufacturing and engineering, pension and OPEB, spending-related, and overhead costs), offset partially by higher net product costs.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Ford South America Segment. The decrease in earnings primarily reflects unfavorable changes in currency exchange rates, unfavorable cost changes, unfavorable volume and mix, and the costs associated with personnel reduction actions, offset partially by favorable net pricing. The unfavorable cost changes are more than explained by higher net product costs.
Ford Europe Segment. The decline in results primarily reflects unfavorable volume and mix, the costs associated with personnel reduction actions, an investment impairment, and unfavorable changes in currency exchange rates, offset partially by favorable cost changes and favorable net pricing. The favorable cost changes are more than explained by lower structural costs (including lower manufacturing and engineering and advertising and sales promotions costs), offset partially by higher net product costs.
Volvo Segment. The improvement in earnings is more than explained by favorable cost changes, held-for-sale cessation of depreciation, and favorable changes in currency exchange rates, offset partially by unfavorable volume and mix and unfavorable net pricing. The favorable cost changes primarily reflect lower structural costs (including lower overhead and advertising and sales promotions costs) and net product costs.
Ford Asia Pacific Africa Segment. The decline in results primarily reflects unfavorable volume and mix, offset partially by favorable cost changes. The favorable cost changes primarily reflect lower structural costs (including lower manufacturing and engineering, advertising and sales promotion, and overhead costs), offset partially by higher net product costs.
Other Automotive. The improvement in results is more than explained by net gains on debt reduction actions (discussed in more detail in "Liquidity and Capital Resources" and Note 7 of the Notes to the Financial Statements).
Mazda Segment. In the fourth quarter of 2008, we sold a significant portion of our investment in Mazda. Our remaining ownership interest is treated as marketable securities, with mark-to-market adjustments reported in Other Automotive.
Jaguar Land Rover Segment. During the second quarter of 2008, we sold our Jaguar Land Rover operations.
FINANCIAL SERVICES SECTOR
Results of Operations
Details by segment or business unit of Revenues and Income/(Loss) before income
taxes for the second quarter of 2009 and 2008 are shown below:
Second Quarter
Revenues Income/(Loss) Before Income Taxes
(in billions) (in millions)
2009 2009
Over/(Under) Over/(Under)
2009 2008 2008 2009 2008 2008
Ford Credit $ 3.1 $ 4.0 $ (0.9 ) $ 646 $ (2,380 ) $ 3,026
Other Financial Services 0.1 0.1 - (51 ) (40 ) (11 )
Total $ 3.2 $ 4.1 $ (0.9 ) $ 595 $ (2,420 ) $ 3,015
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Ford Credit
The improvement in pre-tax results primarily reflects the non-recurrence of the 2008 impairment charge to Ford Credit's North America operating lease portfolio for contracts terminating beginning third quarter of 2008 ($2.1 billion), lower depreciation expense for leased vehicles and lower residual losses on returned vehicles due to higher auction values (about $800 million), and net gains related to unhedged currency exposure primarily from cross-border intercompany lending (about $250 million). The improved results also reflect a lower provision for credit losses more than explained by lower reserve increases (about $150 million), and lower operating costs (about $60 million). These factors were offset partially by lower volume primarily reflecting lower industry volumes, lower dealer stocks, the impact of divestitures and alternative business arrangements, and changes in currency exchange rates (about $300 million), and the non-recurrence of a gain related to the sale of approximately half of Ford Credit's ownership interest in its Nordic operations (about $100 million).
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Results of Ford Credit's operations and unallocated risk management for the
second quarter of 2009 and 2008 are shown below:
Second Quarter
2009 2008 2009 Over/(Under) 2008
Income/(Loss) before income taxes
North America operations $ 640 $ (2,606 ) $ 3,246
International operations (27 ) 214 (241 )
Unallocated risk management* 33 12 21
Income/(Loss) before income taxes 646 (2,380 ) 3,026
Provision for/(Benefit from) income taxes and Gain
on disposal of discontinued operations 233 (953 ) 1,186
Net income/(loss) $ 413 $ (1,427 ) $ 1,840
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The improvement in Ford Credit's North America operations pre-tax results primarily reflects non-recurrence of the impairment charge for operating leases, lower depreciation expense for leased vehicles, net gains related to unhedged currency exposure from cross-border intercompany lending, and a lower provision for credit losses. These factors were offset partially by lower volume. The decline in Ford Credit's International operations pre-tax results primarily reflects non-recurrence of a gain related to the sale of approximately half of Ford Credit's ownership interest in its Nordic operations, lower volume, a higher provision for credit losses more than explained by losses in Spain, and lower financing margin primarily in Mexico. The change in unallocated risk management reflected higher net gains related to market valuation adjustments to derivatives primarily related to movements in interest rates.
Ford Credit's net finance receivables and net investment in operating leases are shown below (in billions):
2009
June 30, December 31, Over/(Under)
2009 2008 2008
Receivables - On-Balance Sheet
Finance receivables
Retail installment $ 61.2 $ 65.5 $ (4.3 )
Wholesale 19.7 27.7 (8.0 )
Other 2.7 2.8 (0.1 )
Unearned interest supplements (1.7 ) (1.3 ) (0.4 )
Allowance for credit losses (1.6 ) (1.4 ) (0.2 )
Finance receivables, net 80.3 93.3 (13.0 )
Net investment in operating leases 18.2 22.5 (4.3 )
Total receivables - on-balance sheet (a)(b) $ 98.5 $ 115.8 $ (17.3 )
Memo:
Total receivables - managed (c) $ 100.3 $ 117.7 $ (17.4 )
Total receivables - serviced (d) 100.4 118.0 (17.6 )
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(b) Includes allowance for credit losses of $1.8 billion and $1.7 billion at June 30, 2009 and December 31, 2008, respectively.
(c) Includes on-balance sheet receivables, excluding unearned interest supplements related to finance receivables of $1.7 billion and $1.3 billion at June 30, 2009 and December 31, 2008, respectively; and includes off-balance sheet retail receivables of about $100 million and about $600 million at June 30, 2009 and December 31, 2008, respectively.
(d) Includes managed receivables and receivables sold in whole-loan sale transactions where Ford Credit retains no interest, but which Ford Credit continues to service of about $100 million and about $300 million at June 30, 2009 and December 31, 2008, respectively.
Receivables decreased from year-end 2008, primarily in North America and Europe, . . .
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