Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
F > SEC Filings for F > Form 10-Q on 2-Nov-2012All Recent SEC Filings

Show all filings for FORD MOTOR CO

Form 10-Q for FORD MOTOR CO


2-Nov-2012

Quarterly Report


ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

RESULTS OF OPERATIONS

TOTAL COMPANY

As shown in the table below, third quarter 2012 net income was essentially
unchanged from a year ago, reflecting higher operating results offset by a
higher provision for income taxes related to the release of the tax valuation
allowance in the fourth quarter of 2011. The decrease in net income for the
first nine months of 2012 compared with a year ago primarily reflected lower
operating results and higher tax expense related to the tax valuation allowance
release.
                                                Third Quarter                    First Nine Months
                                                       Better/(Worse)                      Better/(Worse)
                                           2012             2011              2012              2011
                                         (Mils.)           (Mils.)           (Mils.)          (Mils.)
Income/(Loss)
Pre-tax results (excl. special items)  $    2,163     $         219       $     6,285     $       (1,374 )
Special items                                  83               181              (406 )               25
Pre-tax results (incl. special items)       2,246               400             5,879             (1,349 )
(Provision for)/Benefit from income
taxes                                        (613 )            (419 )          (1,810 )           (1,190 )
Net income/(loss)                           1,633               (19 )           4,069             (2,539 )
Less: Income/(Loss) attributable to
noncontrolling interests                        2                (1 )               2                 (8 )
Net income/(loss) attributable to Ford $    1,631     $         (18 )     $     4,067     $       (2,531 )

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.

As detailed in Note 19 of the Notes to the Financial Statements, we allocate special items to a separate reconciling item, as opposed to allocating them among the operating segments and Other Automotive, reflecting the fact that management excludes these items from its review of operating segment results for purposes of measuring segment profitability and allocating resources among the segments.

The following table details Automotive sector special items in each category:

                                                    Third Quarter               First Nine Months
                                                 2012           2011           2012            2011
                                               (Mils.)        (Mils.)         (Mils.)        (Mils.)
Personnel and Dealer-Related Items
Personnel-reduction actions                  $      (23 )   $      (81 )   $     (313 )    $     (213 )
Mercury discontinuation/Other dealer actions        (18 )          (42 )          (47 )          (104 )
Job Security Benefits/Other                           5             29             23              33
Total Personnel and Dealer-Related Items            (36 )          (94 )         (337 )          (284 )
Other Items
AAI consolidation (a)                               136              -            136               -
Loss on sale of two component businesses             (1 )            -           (174 )             -
Belgium pension settlement                            -              -              -            (104 )
Trust Preferred redemption                            -              -              -             (60 )
Other                                               (16 )           (4 )          (31 )            17
Total Other Items                                   119             (4 )          (69 )          (147 )
Total Special Items                          $       83     $      (98 )   $     (406 )    $     (431 )


__________


(a) The special item of $136 million is comprised of the $155 million gain from the consolidation of AAI (see Note 17 of the Notes to the Financial Statements), less a related $19 million adjustment for sales in September 2012 of Ford-brand vehicles produced by AAI.


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Discussion of Automotive sector, Financial Services sector, and total Company results of operations below is on a pre-tax basis and excludes special items unless otherwise specifically noted.

The chart below details third quarter 2012 pre-tax results by sector:

[[Image Removed]]
The increase in total Company pre-tax profit for third quarter 2012 compared with a year ago reflected higher Automotive sector profit, offset partially by lower Financial Services sector profit, as discussed below.


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

AUTOMOTIVE SECTOR

In general, we measure year-over-year change in Automotive pre-tax operating profit for our total Automotive sector and reportable segments using the causal factors listed below, with revenue and cost variances calculated at present-year volume and mix and exchange:

Market Factors:

? Volume and Mix - Primarily measures profit variance from changes in wholesale volumes (at prior-year average margin per unit) driven by changes in industry volume, market share, and dealer stocks, as well as the profit variance resulting from changes in product mix, including mix among vehicle lines and mix of trim levels and options within a vehicle line

? Net Pricing - Primarily measures profit variance driven by changes in wholesale prices to dealers and marketing incentive programs such as rebate programs, low-rate financing offers, and special lease offers

Contribution Costs - Primarily measures profit variance driven by per-unit changes in cost categories that typically vary with volume, such as material costs (including commodity and component costs), warranty expense, and freight and duty costs

Other Costs - Primarily measures profit variance driven by absolute change in cost categories that typically do not have a directly proportionate relationship to production volume. These include mainly structural costs, described below, as well as all other costs, which include items such as litigation costs and costs related to our after-market parts, accessories, and service business. Structural costs include the following cost categories:

? Manufacturing and Engineering - consists primarily of costs for hourly and salaried manufacturing- and engineering-related personnel, plant overhead (such as utilities and taxes), new product launch expense, prototype materials, and outside engineering services

? Spending-Related - consists primarily of depreciation and amortization of our manufacturing and engineering assets, but also includes asset retirements and operating leases

? Advertising and Sales Promotions - includes costs for advertising, marketing programs, brand promotions, customer mailings and promotional events, and auto shows

? Administrative and Selling - includes primarily costs for salaried personnel and purchased services related to our staff activities and selling functions, as well as associated information technology costs

? Pension and OPEB - consists primarily of past service pension cost and other post-retirement employee benefit costs

Exchange - Primarily measures profit variance driven by one or more of the following: (i) impact of gains or losses arising from transactions denominated in currencies other than the functional currency of the locations, (ii) effect of remeasuring income, assets, and liabilities of foreign subsidiaries using U.S. dollars as the functional currency, or (iii) results of our foreign currency hedging activities

Net Interest and Other - Primarily measures profit variance driven by changes in our Automotive sector's centrally-managed net interest (primarily interest expense, interest income, and other adjustments) and related fair value market adjustments in our investment portfolio and marketable securities as well as other items not included in the causal factors defined above


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Total Automotive. The charts below detail key metrics, and the change in pre-tax results for the third quarter of 2012 compared with the third quarter of 2011 by causal factor. Automotive operating margin is defined as Automotive pre-tax results, excluding special items and Other Automotive, divided by Automotive revenue.

[[Image Removed]]
[[Image Removed]]
As shown above, third quarter 2012 wholesales and revenue for the total Automotive sector decreased slightly from a year ago, more than explained by Europe, while pre-tax results and operating margin increased. As shown in the memo above, all four key metrics -- wholesales, revenue, pre-tax results, and operating margin -- were lower for the first nine months of 2012 compared with a year ago.

The increase in third quarter 2012 total Automotive pre-tax profit compared with a year ago primarily reflected higher net pricing and lower contribution cost, offset partially by higher structural costs and unfavorable exchange. During the quarter, we incurred a favorable absolute commodity hedge adjustment of about $100 million, compared with an unfavorable absolute hedge adjustment of about $350 million a year ago. The difference in the adjustments between these two periods was the primary factor driving improved contribution cost in the present quarter compared with a year ago.

The increase in pre-tax profit for the third quarter of 2012 compared with the second quarter of 2012 (shown in the memo above) reflected higher net pricing and lower costs, offset partially by lower volume.


Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)

Total costs and expenses for our Automotive sector for third quarter 2012 and
2011 was $28.6 billion and $29.8 billion, respectively, a difference of $1.2
billion; for first nine months 2012 and 2011 these were $87.6 billion and $90.3
billion, respectively, a difference of $2.7 billion. An explanation of the
changes, as reconciled to our statement of operations, is shown below (in
billions):
                                                2012 Better/(Worse) 2011
                                          Third Quarter       First Nine Months
Explanation of change:
Volume and mix, exchange, and other      $       1.3         $             4.0
Contribution costs (a)
Commodity costs (incl. hedging)                  0.4                         -
Material costs excluding commodity costs        (0.2 )                    (0.4 )
Warranty/Freight                                 0.3                       0.4
Other costs (a)
Structural costs                                (0.6 )                    (1.1 )
Other                                              -                      (0.2 )
Special items                                      -                         -
Total                                    $       1.2         $             2.7


_________


(a) Our key cost change elements are measured primarily at present-year exchange; in addition, costs that vary directly with volume, such as material, freight and warranty costs, are measured at present-year volume and mix. Excludes special items.

Results by Automotive Segment. Details by segment of Income/(Loss) before income taxes are shown below for the third quarter of 2012.

[[Image Removed]] Third quarter 2012 total Automotive pre-tax profit was more than explained by Ford North America results. Ford South America and Ford Asia Pacific Africa were also profitable, while Ford Europe incurred a loss. The loss in Other Automotive mainly reflects net interest expense.

We expect full-year 2012 net interest expense to be about $500 million, consistent with the low end of our prior guidance.


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Ford North America Segment. The charts below detail key metrics, and the change in pre-tax results for the third quarter of 2012 compared with the third quarter of 2011 by causal factor.

[[Image Removed]]
[[Image Removed]]
As shown above, all four key metrics increased for the third quarter and first nine months of 2012 compared with a year ago. The increase in pre-tax profit for third quarter 2012 compared with a year ago was more than explained by favorable volume and mix, higher net pricing, and lower contribution cost (mainly reflecting favorable commodity hedging effect); higher structural costs and unfavorable exchange were partial offsets.

The increase in pre-tax profit for the third quarter of 2012 compared with the second quarter of 2012 (shown in the memo above) reflected higher net pricing and lower contribution cost, offset partially by lower volume.

Our total U.S. market share in the third quarter (shown in the memo above) was down 1.5 percentage points from the same period a year ago. The decrease primarily reflected the impact of discontinued products such as Ranger and Crown Victoria, as well as adverse industry segmentation changes for the full-size pickup segment; F-Series share of the full-size pickup segment was higher compared with last year.

Our full-year 2012 outlook for Ford North America is unchanged. We expect significantly higher full-year pre-tax profit and operating margin compared with 2011, as consumers continue to respond to our strong product line-up while we maintain our competitive cost structure as we grow our business.


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Ford South America Segment. The charts below detail key metrics and the change in pre-tax results for the third quarter of 2012 compared with the third quarter of 2011 by causal factor.

[[Image Removed]]
[[Image Removed]]
As shown above, all four key metrics declined for the third quarter and first nine months of 2012 compared with a year ago. The decrease in wholesales was due in part to the launch ramp-up of new products, and production reductions in Venezuela related to currency restrictions, while unfavorable exchange contributed to the decline in revenue. The decrease in pre-tax profit for the third quarter of 2012 compared with a year ago primarily reflected unfavorable exchange (mainly a weaker Brazilian real), unfavorable volume and mix, and higher costs. Although net pricing was higher in the third quarter of 2012 than a year ago, it was constrained compared with prior years by a more intense competitive environment.

As shown in the memo above, third quarter 2012 pre-tax profit was about unchanged compared with second quarter 2012.

We continue to expect Ford South America to be profitable for full-year 2012, but at a substantially lower level than 2011.


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Ford Europe Segment. The charts below detail key metrics and the change in pre-tax results for the third quarter of 2012 compared with the third quarter of 2011 by causal factor.

[[Image Removed]]
[[Image Removed]]
As shown above, all four key metrics declined for the third quarter and first nine months of 2012 compared with a year ago. The decline in wholesales and revenue primarily reflected lower industry sales and market share, along with corresponding dealer stock adjustments. Revenue also was negatively affected by unfavorable exchange.

The decline in third quarter 2012 pre-tax results compared with a year ago was more than explained by lower volume, including the impact of lower industry, lower share, and unfavorable dealer stock changes; lower costs and favorable exchange were partial offsets.

The decline in pre-tax profits for the third quarter of 2012 compared with the second quarter of 2012 (shown in the memo above) was more than explained by lower volume.

As a result of the deteriorating environment in Europe, as well as elements of our transformation plan for Ford Europe, we now expect our full-year 2012 loss for Ford Europe to exceed $1.5 billion. This includes more than $400 million related to dealer stock reductions, and about $100 million of accelerated depreciation associated with planned manufacturing footprint actions. Compared with prior guidance, the higher loss is explained primarily by the strategic dealer stock reduction actions being taken in the fourth quarter. See "Outlook" below for additional discussion.


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Ford Asia Pacific Africa Segment. The charts below detail key metrics and the change in pre-tax results for the third quarter of 2012 compared with the third quarter of 2011 by causal factor.

[[Image Removed]]
[[Image Removed]]
As shown above, all four key metrics improved for the third quarter of 2012 compared with a year ago. For the first nine months of 2012 (as shown in the memo), pre-tax earnings declined compared with a year ago, while wholesales and revenue were higher than a year ago.

The improvement in third quarter 2012 pre-tax results compared with a year ago primarily reflected favorable volume and mix, higher net pricing, and favorable exchange, offset partially by higher costs associated with new products and investments to support higher volumes and future growth.

As shown in the memo above, the improvement in pre-tax results for the third quarter of 2012 compared with the second quarter of 2012 primarily reflected favorable market factors.

For full-year 2012, we expect Ford Asia Pacific Africa's results to be a loss roughly in line with 2011.


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

FINANCIAL SERVICES SECTOR

As shown in the total Company discussion above, we present our Financial Services sector results in two segments, Ford Credit and Other Financial Services. Ford Credit, in turn, has two segments, North America and International.

Ford Credit. The chart below details the decrease in pre-tax operating profit by causal factor:

[[Image Removed]]

The decline in pre-tax profits is more than explained by fewer lease terminations, which resulted in fewer vehicles sold at a gain, lower financing margin as higher-yielding assets originated in prior years run off, and the non-recurrence of credit loss reserve reductions.

Ford Credit now expects full-year 2012 pre-tax profits of about $1.6 billion and to pay distributions for the full year of about $600 million. Ford Credit will continue to assess future distributions based on available liquidity and managed leverage objectives. Ford Credit projects managed receivables to be in the range of $85 billion to $90 billion at year-end 2012.


Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)

Ford Credit's receivables, including finance receivables and operating leases at
September 30, 2012 and December 31, 2011 are shown in the table below (in
billions). Receivables at September 30, 2012 increased from year-end 2011,
primarily due to higher net investment in operating leases in North America.
                                                             September 30, 2012     December 31, 2011
Receivables
Finance receivables - North America Segment
Consumer
Retail installment and direct financing leases              $           39.3       $           38.4
Non-Consumer
Wholesale                                                               15.6                   15.5
Dealer loan and other                                                    2.2                    2.1
Total North America Segment - finance receivables (a)                   57.1                   56.0
Finance receivables - International Segment
Consumer
Retail installment and direct financing leases                           8.9                    9.1
Non-Consumer
Wholesale                                                                7.0                    8.5
Dealer loan and other                                                    0.4                    0.4
Total International Segment - finance receivables (a)                   16.3                   18.0
Unearned interest supplements                                           (1.5 )                 (1.6 )
Allowance for credit losses                                             (0.4 )                 (0.5 )
Finance receivables, net                                                71.5                   71.9
Net investment in operating leases (a)                                  14.0                   11.1
Total receivables (b)                                       $           85.5       $           83.0
Memo:
Total managed receivables (c)                               $           87.0       $           84.6

(a) At September 30, 2012 and December 31, 2011, includes consumer receivables before allowance for credit losses of $29.6 billion and $36 billion, respectively, and non-consumer receivables before allowance for credit losses of $18.5 billion and $19.8 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. In addition, at September 30, 2012 and December 31, 2011, includes net investment in operating leases before allowance for credit losses of $5.1 billion and $6.4 billion, respectively, that have been included in securitization transactions but continue to be reported in our financial statements. The receivables are available only for payment of the debt and other obligations issued or arising in the securitization transactions; they are not available to pay Ford Credit's other obligations or the claims of its other creditors. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt and other obligations issued or arising in each of these securitization transactions.

(b) Includes allowance for credit losses of $416 million and $534 million at September 30, 2012 and December 31, 2011, respectively.

(c) Excludes unearned interest supplements related to finance receivables.


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Credit Losses. The charts below detail quarterly trends of charge-offs (credit losses, net of recoveries), loss-to-receivables ratios (charge-offs on an annualized basis divided by the average amount of receivables outstanding for the period, excluding the reserves and unearned interest supplements related to finance receivables), credit loss reserve, and Ford Credit's credit loss reserve as a percentage of end-of-period ("EOP") receivables:

[[Image Removed]]

Ford Credit's third quarter 2012 credit losses continued at or near historically low levels.

Year-over-year charge-offs were down $10 million, reflecting lower repossessions in the United States. Quarter-over-quarter charge-offs were up $18 million, reflecting lower recoveries and higher repossessions and severities, consistent with historical seasonality. Although credit loss performance (i.e., LTRs) continued to be in line with historical lows, Ford Credit started to see a reduction in its year-over-year improvements.

The credit loss reserve was $416 million, down $182 million from a year ago, reflecting lower repossessions, and up $10 million from the second quarter of 2012, primarily reflecting growth of the portfolio.

In purchasing retail finance and lease contracts, Ford Credit uses a proprietary scoring system that classifies contracts using several factors, such as credit bureau information, credit bureau scores (e.g., FICO score), customer characteristics, and contract characteristics. In addition to Ford Credit's proprietary scoring system, it considers other factors, such as employment history, financial stability, and capacity to pay. At September 30, 2012 and December 31, 2011, Ford Credit classified between 5% - 6% of the outstanding U.S. retail finance and lease contracts in its portfolio as high risk at contract inception.


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Residual Risk. Ford Credit is exposed to residual risk on operating leases and similar balloon payment products where the customer may return the financed vehicle to Ford Credit. Residual risk is the possibility that the amount Ford Credit obtains from returned vehicles will be less than its estimate of the expected residual value for the vehicle. Ford Credit estimates the expected residual value by evaluating recent auction values, return volumes for its leased vehicles, industry-wide used vehicle prices, marketing incentive plans, and vehicle quality data.

The following chart shows return volumes and auction values at constant third quarter 2012 vehicle mix for vehicles returned in the respective periods. Ford Credit's U.S. Ford and Lincoln operating lease portfolio accounted for about 90% of its total investment in operating leases at September 30, 2012.

[[Image Removed]]
Lease return volumes in the third quarter of 2012 were 2,000 units lower than the same period a year ago, primarily reflecting lower lease placements in 2009. The third quarter 2012 lease return rate was 61%, up 13 percentage points compared with the same period last year, reflecting a higher mix of 24-month contracts, which typically have higher return rates than longer term contracts. . . .
  Add F to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for F - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.