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| F > SEC Filings for F > Form 10-Q on 6-Nov-2009 | All Recent SEC Filings |
6-Nov-2009
Quarterly Report
THIRD QUARTER RESULTS OF OPERATIONS
Our worldwide net income attributable to Ford Motor Company was $997 million or
$0.29 per share of Common and Class B Stock in the third quarter of 2009, an
improvement of $1.2 billion from a net loss attributable to Ford Motor Company
of $161 million or $0.07 per share of Common and Class B Stock in the third
quarter of 2008.
Results by sector are shown below (in millions):
Third Quarter
2009 Over/
2009 2008 (a) (Under) 2008
Income/(Loss) before income taxes
Automotive sector $ 545 $ (732 ) $ 1,277
Financial Services sector 670 159 511
Total Company 1,215 (573 ) 1,788
Provision for/(Benefit from) income taxes 139 (463 ) 602
Income/(Loss) from continuing operations 1,076 (110 ) 1,186
Income/(Loss) from discontinued operations - - -
Net income/(loss) 1,076 (110 ) 1,186
Less: Income/(Loss) attributable to noncontrolling
interests (b) 79 51 28
Net income/(loss) attributable to Ford Motor
Company (c) $ 997 $ (161 ) $ 1,158
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(b) Formerly labeled "Minority interests in net income/(loss)," reflects new presentation under standard on accounting for noncontrolling interests, which was effective January 1, 2009. Primarily related to Ford Europe's consolidated 41% owned affiliate, Ford Otosan. The pre-tax results for Ford Otosan were $89 million and $106 million in the third quarter of 2009 and 2008, respectively.
(c) Formerly labeled "Net income/(loss)," reflects new presentation under the standard on accounting for noncontrolling interests, effective January 1, 2009.
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 special items in each category by segment or business unit (in millions):
Third Quarter - Income/(Loss)
Personnel and Dealer-Related Items: 2009 2008
Automotive Sector
Ford North America
Retiree health care and related charges $ (120 ) $ 2,569
Personnel-reduction actions/Other (23 ) (197 )
U.S. dealer actions (13 ) (38 )
Job Security Benefits 22 320
Total Ford North America (134 ) 2,654
Ford South America
Personnel-reduction actions (6 ) -
Ford Europe
Personnel-reduction actions/Other (16 ) (40 )
Ford Asia Pacific Africa
Personnel-reduction actions (6 ) (28 )
Volvo
Personnel-reduction actions (3 ) (15 )
U.S. dealer actions - (11 )
Total Volvo (3 ) (26 )
Other Automotive
Returns on assets held in the TAA 93 (250 )
Total Personnel and Dealer-Related Items - Automotive sector (72 ) 2,310
Other Items:
Automotive Sector
Ford North America
Accelerated depreciation related to AAI acquisition of
leased facility - (82 )
Gain/(Loss) on sale of ACH plants - (19 )
Total Ford North America - (101 )
Volvo
Held-for-sale cessation of depreciation and related charges 163 -
Other Automotive
Gain on debt securities exchanged for equity - 35
Net gains on debt reduction actions 8 -
Total Other Automotive 8 35
Jaguar Land Rover
Sale-related/Other - (37 )
Total Other Items - Automotive sector 171 (103 )
Financial Services Sector
DFO Partnership - gain on sale 9 -
Total $ 108 $ 2,207
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Included in Provision for/(Benefit from) income taxes are tax benefits of $16 million and $641 million for the third 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 $630 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)
Discussion of Automotive and Financial Services sector results of operations below is on a pre-tax basis. Discussion of overall Automotive cost changes, including structural cost changes (e.g., manufacturing and engineering, pension/OPEB, overhead, etc.), is at constant exchange and excludes special items and discontinued operations. In addition, costs that vary directly with production volume, such as material, freight, and warranty costs, are measured at constant volume and mix.
AUTOMOTIVE SECTOR
Results of Operations
Details by segment or business unit of Income/(Loss) before income taxes are
shown below for the third quarter of 2009 and 2008 (in millions), with Mazda and
Jaguar Land Rover separated out from "ongoing" subtotals:
Third Quarter
2009 2008 2009 Over/(Under) 2008
Ford North America * $ 223 $ (36 ) $ 259
Ford South America 241 480 (239 )
Ford Europe 177 29 148
Ford Asia Pacific Africa 21 (24 ) 45
Volvo 25 (484 ) 509
Total ongoing Automotive operations 687 (35 ) 722
Other Automotive (142 ) (659 ) 517
Total ongoing Automotive 545 (694 ) 1,239
Mazda - (1 ) 1
Jaguar Land Rover - (37 ) 37
Total Automotive sector $ 545 $ (732 ) $ 1,277
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Details by segment of Automotive revenues ("sales") and wholesale unit volumes for the third quarter of 2009 and 2008 are shown below:
Third 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) $ 13.7 $ 10.8 $ 2.9 28 % 516 462 54 12 %
Ford South
America 2.1 2.7 (0.6 ) (23 ) 108 126 (18 ) (14 )
Ford Europe 7.6 9.7 (2.1 ) (21 ) 393 410 (17 ) (4 )
Ford Asia
Pacific Africa
(d) 1.5 1.7 (0.2 ) (13 ) 139 111 28 25
Volvo 3.0 2.9 0.1 3 76 66 10 15
Total Automotive
sector $ 27.9 $ 27.8 $ 0.1 - 1,232 1,175 57 5
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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 73,000 and 41,000 units in the third 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 third
quarter of 2009 and 2008, along with the level of dealer stocks as of September
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) 14.6 % 12.4 % 2.2 pts. 313 478 (165 )
South America (b)
(c) 9.9 9.6 0.3 27 43 (16 )
Europe (b) (d) 9.2 8.6 0.6 190 272 (82 )
Asia Pacific Africa
(b) (e) (f) 2.0 2.0 - 43 56 (13 )
Volvo - United
States/Europe (d) 0.6/1.2 0.4/1.2 0.2/- 10/28 16/36 (6)/(8)
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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 is more than explained by favorable net pricing ($1.9 billion), favorable cost changes ($1.7 billion), and returns on assets held in the TAA (about $400 million), offset partially by the non-recurrence of a retiree health care curtailment gain and higher retiree health care and related charges ($2.7 billion). The favorable cost changes are more than explained by lower structural costs and lower net product costs.
The increase in revenues is more than explained by favorable net pricing and favorable volume, offset partially by unfavorable changes in currency exchange.
The table below details our Automotive sector third 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
Primarily hourly and salaried personnel
Manufacturing and reductions and efficiencies in our plants and
engineering processes $ 0.5
Advertising & sales
promotions Reduced costs 0.2
Primarily the effect of the UAW Retiree Health
Pension and OPEB Care Settlement Agreement 0.2
Overhead Primarily salaried personnel reductions 0.1
Total $ 1.0
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Ford North America Segment. The improvement in results primarily reflects favorable net pricing, favorable cost changes, and favorable volume and mix, offset partially by the non-recurrence of a retiree health care curtailment gain and higher retiree health care and related charges, and unfavorable changes in currency exchange. The favorable cost changes are more than explained by lower net product costs and lower structural costs (including lower manufacturing and engineering, pension and OPEB, and overhead costs).
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Ford South America Segment. The decrease in earnings is more than explained by unfavorable changes in currency exchange rates, unfavorable volume and mix, and unfavorable cost changes, offset partially by favorable net pricing. The unfavorable cost changes are more than explained by higher net product costs.
Ford Europe Segment. The increase in earnings primarily reflects favorable cost changes and favorable net pricing, offset partially by unfavorable volume and mix and unfavorable changes in currency exchange rates. The favorable cost changes are more than explained by lower structural costs (including lower manufacturing and engineering and advertising and sales promotions costs) and lower net product costs.
Ford Asia Pacific Africa Segment. The improvement in results primarily reflects favorable net pricing, favorable China joint venture profits, lower costs associated with personnel-reduction actions, and favorable cost changes, offset partially by unfavorable changes in currency exchange. The favorable cost changes are more than explained by lower structural costs (including lower advertising and sales promotions and manufacturing and engineering costs) and lower freight costs, offset partially by higher net product costs.
Volvo Segment. The improvement in results primarily reflects favorable cost changes, held-for-sale cessation of depreciation, favorable changes in currency exchange rates, and favorable volume and mix. The favorable cost changes primarily reflect lower structural costs (including lower manufacturing and engineering, advertising and sales promotions, and overhead costs) and lower net product costs.
Other Automotive. The improvement in earnings is more than explained by higher returns on the assets held in the TAA, higher returns on our cash portfolio, and lower interest expense, offset partially by lower interest income and unfavorable fair market value adjustments on our investment in Mazda.
FINANCIAL SERVICES SECTOR
Results of Operations
Details by segment or business unit of Revenues and Income/(Loss) before income
taxes for the third quarter of 2009 and 2008 are shown below:
Third 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 $ 2.9 $ 3.9 $ (1.0 ) $ 677 $ 161 $ 516
Other Financial Services 0.1 0.1 - (7 ) (2 ) (5 )
Total $ 3.0 $ 4.0 $ (1.0 ) $ 670 $ 159 $ 511
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Ford Credit
The increase in pre-tax earnings primarily reflects lower depreciation expense for leased vehicles consistent with lower residual losses on returned vehicles due to higher auction values (about $400 million); a lower provision for credit losses, primarily related to lower severity offset partially by higher repossessions (about $250 million); lower operating costs (about $100 million); and net gains related to unhedged currency exposure, primarily from cross-border intercompany lending (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).
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
third quarter of 2009 and 2008 are shown below:
Third Quarter
2009
Over/(Under)
2009 2008 2008
Income/(Loss) before income taxes
North America operations $ 650 $ 114 $ 536
International operations (7 ) 71 (78 )
Unallocated risk management* 34 (24 ) 58
Income/(Loss) before income taxes 677 161 516
Provision for/(Benefit from) income taxes and Gain
on disposal of discontinued operations 250 66 184
Net income/(loss) $ 427 $ 95 $ 332
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The increase in pre-tax earnings for Ford Credit's North America operations primarily reflects lower depreciation expense for leased vehicles, a lower provision for credit losses, net gains related to unhedged currency exposure from cross-border intercompany lending, and lower operating costs. These factors were offset partially by lower volume. The decline in pre-tax results for Ford Credit's International operations primarily reflects lower volume, a valuation allowance for finance receivables classified as held-for-sale at September 30, 2009 (related to the sale of Ford Credit's Australia retail portfolio on October 1, 2009), and a higher provision for credit losses. These factors were offset partially by lower operating costs and lower residual losses. The change in unallocated risk management reflects the non-recurrence of net losses 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
Over/(Under)
September 30, 2009 December 31, 2008 2008
Receivables - On-Balance Sheet
Finance receivables
Retail installment $ 58.4 $ 65.5 $ (7.1 )
Wholesale 18.6 27.7 (9.1 )
Other 2.5 2.8 (0.3 )
Unearned interest supplements (1.8 ) (1.3 ) (0.5 )
Allowance for credit losses (1.5 ) (1.4 ) (0.1 )
Finance receivables, net 76.2 93.3 (17.1 )
Net investment in operating leases 16.3 22.5 (6.2 )
Total receivables - on-balance sheet (a)(b) $ 92.5 $ 115.8 $ (23.3 )
Memo:
Total receivables - managed (c) $ 94.4 $ 117.7 $ (23.3 )
Total receivables - serviced (d) 94.5 118.0 (23.5 )
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(b) Includes allowance for credit losses of $1.7 billion at September 30, 2009 and December 31, 2008.
(c) Includes on-balance sheet receivables, excluding unearned interest supplements related to finance receivables of $1.8 billion and $1.3 billion at September 30, 2009 and December 31, 2008, respectively; and includes off-balance sheet retail receivables of about $100 million and about $600 million at September 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 it continues to service of about $100 million and about $300 million at September 30, 2009 and December 31, 2008, respectively.
The decrease in receivables from year-end 2008 primarily reflects lower industry volumes, lower dealer stocks, and the transition of Jaguar, Land Rover, and Mazda financing to other finance providers.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
The following table shows worldwide charge-offs (credit losses, net of
recoveries) for the various categories of financing during the periods
indicated. The loss-to-receivables ratios, which equal charge-offs on an
annualized basis divided by the average amount of receivables outstanding for
the period, excluding the allowance for credit losses and unearned interest
supplements related to finance receivables, are shown below.
Third Quarter
2009 2008 2009 Over/(Under) 2008
On-Balance Sheet
Charge-offs (in millions) $ 240 $ 296 $ (56 )
Loss-to-receivables ratio 0.97 % 0.89 % 0.08 pts.
Memo:
. . .
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