SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report February 12, 1996
----------------
(Date of earliest event reported)
FORD MOTOR COMPANY
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-3950 38-0549190
(Commission File Number) (IRS Employer Identification No.)
The American Road, Dearborn, Michigan 48121
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 313-322-3000
<PAGE>
Item 5. Other Events.
- ---------------------
The Consolidated Financial Statements of Ford Motor Company and
Subsidiaries for the year ended and at December 31, 1995 together with the
Report on Examination thereof by Coopers & Lybrand L.L.P., independent
certified public accountants, filed as Exhibit 20 to this Current Report
on Form 8-K, are incorporated by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
- ---------------------------------------------------------------------------
EXHIBITS
Designation Description Method of Filing
- ---------- ----------- ----------------
Exhibit 20 Consolidated Financial Statements Filed with this Report
of Ford and Subsidiaries for the
year ended and at December 31, 1995,
together with the Report on
Examination thereof by Coopers &
Lybrand L.L.P., independenat certified
public accountants.
Exhibit 23 Consent of Experts Filed with this Report
Exhibit 27.1 Financial Data Schedule - Filed with this Report
Automotive Segment
Exhibit 27.2 Financial Data Schedule - Filed with this Report
Financial Services Segment
Exhibit 27.3 Financial Data Schedule - Filed with this Report
Conglomerate Total
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized on the date indicated.
FORD MOTOR COMPANY
(Registrant)
Date: February 12, 199 By:/s/Thomas J. DeZure
-----------------------
Thomas J. DeZure
Assistant Secretary
<PAGE>
EXHIBIT INDEX
DESIGNATION DESCRIPTION PAGE
Exhibit 20 Cosolidated Financial Statements
of Ford and Subsidiaries for the
year ended and at December 31, 1995,
together with the Report on Examination
thereof by Coopers & Lybrand L.L.P.,
independent certified public accountants
Exhibit 23 Consent of Experts
Exhibit 27.1 Financial Data Schedule -
Automotive Segment
Exhibit 27.2 Financial Data Schedule -
Financial Services Segment
Exhibit 27.3 Financial Data Schedule -
Conglomerate Total
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
HIGHLIGHTS
----------
Fourth Quarter Full Year
------------------------- --------------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Worldwide vehicle unit sales of
cars and trucks (in thousands)
- - United States 955 1,051 3,993 4,218
- - Outside United States 635 656 2,613 2,635
----- ----- ----- -----
Total 1,590 1,707 6,606 6,853
===== ===== ===== =====
Sales and revenues (in millions)
- - Automotive $27,597 $27,766 $110,496 $107,137
- - Financial Services 6,950 5,877 26,641 21,302
------- ------- -------- --------
Total $34,547 $33,643 $137,137 $128,439
======= ======= ======== ========
Net income (in millions)
- - Automotive $ 16 $ 1,119 $ 2,056 $ 3,913
- - Financial Services 644 450 2,083 1,395*
------- ------- -------- --------
Total $ 660 $ 1,569 $ 4,139 $ 5,308
======= ======= ======== ========
Capital expenditures (in millions)
- - Automotive $ 2,472 $ 2,404 $ 8,676 $ 8,310
- - Financial Services 98 65 321 236
------- ------- -------- --------
Total $ 2,570 $ 2,469 $ 8,997 $ 8,546
======= ======= ======== ========
Stockholders' equity at December 31
- - Total (in millions) $24,547 $21,659 $ 24,547 $ 21,659
- - After-tax return on Common and
Class B stockholders' equity 10.9% 34.5% 18.2% 33.6%
Automotive cash, cash equivalents,
and marketable securities at
December 31 (in millions) $12,406 $12,083 $ 12,406 $ 12,083
Automotive debt at December 31
(in millions) $ 7,307 $ 7,258 $ 7,307 $ 7,258
Automotive after-tax returns on sales 0.1% 4.1% 1.9% 3.7%
Shares of Common and Class B Stock
(in millions)
- - Average number outstanding 1,136 1,020 1,071 1,010
- - Number outstanding at December 31 1,159 1,023 1,159 1,023
AMOUNTS PER SHARE OF COMMON AND
CLASS B STOCK AFTER PREFERRED
STOCK DIVIDENDS
Income $ 0.49 $ 1.47 $ 3.58 $ 4.97
Income/(Loss) assuming full dilution
- - Automotive $ (0.06) $ 0.93 $ 1.59 $ 3.25
- - Financial Services 0.54 0.38 1.74 1.19
------- ------- -------- ---------
Total $ 0.48 $ 1.31 $ 3.33 $ 4.44
======= ======= ======== =========
Cash dividends $ 0.35 $ 0.26 $ 1.23 $ 0.91
</TABLE>
- - - - - -
*Includes a loss of $440 million related to the disposition of Granite
Savings Bank (formerly First Nationwide Bank)
Segment results for 1994 have been adjusted to reflect reclassification
of certain tax amounts to conform with the 1995 presentation.
FS-1<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
VEHICLE UNIT SALES
------------------
For the Periods Ended December 31, 1995 and 1994
(in thousands)
Fourth Quarter Full Year
--------------------------- -------------------------
1995 1994 1995 1994
----------- ---------- --------- --------
<S> <C> <C> <C> <C>
North America
United States
Cars 434 530 1,767 2,036
Trucks 521 521 2,226 2,182
----- ----- ----- -----
Total United States 955 1,051 3,993 4,218
Canada 76 75 254 281
Mexico 11 27 32 92
----- ----- ----- -----
Total North America 1,042 1,153 4,279 4,591
Europe
Britain 125 109 496 520
Germany 84 104 409 386
Italy 54 39 193 179
France 41 45 165 180
Spain 31 41 160 163
Other countries 74 71 286 281
----- ----- ----- -----
Total Europe 409 409 1,709 1,709
Other international
Brazil 48 43 201 164
Australia 32 38 139 125
Taiwan 16 21 106 97
Japan 13 13 57 50
Argentina 14 13 48 54
Other countries 16 17 67 63
----- ----- ----- -----
Total other international 139 145 618 553
----- ----- ----- -----
Total worldwide vehicle unit sales 1,590 1,707 6,606 6,853
===== ===== ===== =====
</TABLE>
Vehicle unit sales are reported worldwide on a "where sold" basis
and include sales of all Ford-badged units, as well as units manufactured
by Ford and sold to other manufacturers.
Fourth Quarter and Full Year 1994 unit sales have been restated to reflect
the country where sold and to include sales of all Ford-badged units.
Previously, factory unit sales were reported in North America on a
"where sold" basis and overseas on a "where produced" basis. Also,
Ford-badged unit sales of certain unconsolidated subsidiaries
(primarily Autolatina -- Brazil and Argentina) were not previously reported.
FS-2
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
For the Years Ended December 31, 1995, 1994 and 1993
(in millions, except amounts per share)
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
AUTOMOTIVE
Sales (Note 1) $110,496 $107,137 $91,568
Costs and expenses (Note 1)
Costs of sales 101,171 95,887 85,280
Selling, administrative, and other expenses 6,044 5,424 4,856
-------- -------- -------
Total costs and expenses 107,215 101,311 90,136
Operating income 3,281 5,826 1,432
Interest income 800 665 563
Interest expense 622 721 807
-------- -------- -------
Net interest income/(expense) 178 (56) (244)
Equity in net (loss)/income of affiliated companies (Note 1) (154) 271 127
Net expense from transactions with Financial Services (Note 1) (139) (44) (24)
-------- -------- -------
Income before income taxes - Automotive 3,166 5,997 1,291
FINANCIAL SERVICES
Revenues (Note 1) 26,641 21,302 16,953
Costs and expenses (Note 1)
Interest expense 9,424 7,023 6,482
Depreciation 6,500 4,910 3,064
Operating and other expenses 5,499 4,607 3,196
Provision for credit and insurance losses 1,818 1,539 1,523
Loss on disposition of Granite Savings Bank (formerly
First Nationwide Bank) (Note 15) - 475 -
-------- -------- -------
Total costs and expenses 23,241 18,554 14,265
Net revenue from transactions with Automotive (Note 1) 139 44 24
-------- -------- -------
Income before income taxes - Financial Services 3,539 2,792 2,712
-------- -------- -------
TOTAL COMPANY
Income before income taxes 6,705 8,789 4,003
Provision for income taxes (Note 6) 2,379 3,329 1,350
-------- -------- -------
Income before minority interests 4,326 5,460 2,653
Minority interests in net income of subsidiaries 187 152 124
-------- -------- -------
Net income $ 4,139 $ 5,308 $ 2,529
======== ======== =======
Income attributable to Common and Class B Stock
after preferred stock dividends (Note 1) $ 3,839 $ 5,021 $ 2,241
Average number of shares of Common and Class B Stock outstanding 1,071 1,010 986
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK (Note 1)
Income $ 3.58 $ 4.97 $ 2.27
Income assuming full dilution $ 3.33 $ 4.44 $ 2.10
Cash dividends $ 1.23 $ 0.91 $ 0.80
</TABLE>
The accompanying notes are part of the financial statements.
FS-3
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
--------------------------
(in millions)
December 31, December 31,
1995 1994
------------- -------------
<S> <C> <C>
ASSETS
Automotive
Cash and cash equivalents $ 5,750 $ 4,481
Marketable securities (Note 2) 6,656 7,602
-------- --------
Total cash, cash equivalents, and marketable securities 12,406 12,083
Receivables 3,321 2,548
Inventories (Note 4) 7,162 6,487
Deferred income taxes 2,709 3,062
Other current assets 1,483 2,006
Net current receivable from Financial Services (Note 1) 200 677
-------- --------
Total current assets 27,281 26,863
Equity in net assets of affiliated companies (Note 1) 2,248 3,554
Net property (Note 5) 31,273 27,048
Deferred income taxes 4,802 4,414
Other assets (Notes 1 and 8) 7,168 6,760
-------- --------
Total Automotive assets 72,772 68,639
Financial Services
Cash and cash equivalents 2,690 1,739
Investments in securities (Note 2) 4,553 6,105
Net receivables and lease investments (Note 3) 149,694 130,356
Other assets (Note 1) 13,574 12,783
-------- --------
Total Financial Services assets 170,511 150,983
-------- --------
Total assets $243,283 $219,622
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive
Trade payables $ 11,260 $ 10,777
Other payables 1,976 2,280
Accrued liabilities (Note 7) 13,392 11,943
Income taxes payable 316 316
Debt payable within one year (Note 9) 1,832 155
-------- --------
Total current liabilities 28,776 25,471
Long-term debt (Note 9) 5,475 7,103
Other liabilities (Note 7) 25,677 24,920
Deferred income taxes 1,186 1,216
-------- --------
Total Automotive liabilities 61,114 58,710
Financial Services
Payables 5,476 2,361
Debt (Note 9) 141,317 123,713
Deferred income taxes 3,831 2,958
Other liabilities and deferred income 6,116 7,669
Net payable to Automotive (Note 1) 200 677
-------- --------
Total Financial Services liabilities 156,940 137,378
Company-obligated mandatorily redeemable preferred securities of
a subsidiary trust (aggregate principal amount of $632 million) (Note 1) 682 -
Preferred stockholders' equity in a subsidiary company (Note 1) - 1,875
Stockholders' equity
Capital stock (Notes 10 and 11)
Preferred Stock, par value $1.00 per share (aggregate liquidation
preference of $1 billion and $3.4 billion) * *
Common Stock, par value $1.00 per share (1,089 and 952 million shares issued) 1,089 952
Class B Stock, par value $1.00 per share (71 million shares issued) 71 71
Capital in excess of par value of stock 5,105 5,273
Foreign currency translation adjustments and other (Note 1) 594 189
Earnings retained for use in business 17,688 15,174
-------- --------
Total stockholders' equity 24,547 21,659
-------- --------
Total liabilities and stockholders' equity $243,283 $219,622
======== ========
</TABLE>
- - - - - -
*Less than $1 million
The accompanying notes are part of the financial statements.
FS-4
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
For the Years Ended December 31, 1995, 1994 and 1993
(in millions)
1995 1994 1993
---------------------- --------------------- ----------------------
Financial Financial Financial
Automotive Services Automotive Services Automotive Services
---------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents at January 1 $ 4,481 $ 1,739 $ 5,667 $ 2,555 $ 3,504 $ 3,182
Cash flows from operating activities
(Note 16) 8,849 12,322 7,542 9,087 6,862 7,145
Cash flows from investing activities
Capital expenditures (8,676) (321) (8,310) (236) (6,714) (100)
Proceeds from sale and leaseback of
fixed assets 0 - 0 - 884 -
Acquisitions of other companies 0 0 0 (485) 0 (336)
Proceeds from sales of subsidiaries 0 0 0 715 173 0
Acquisitions of receivables and lease
investments - (99,967) - (90,824) - (76,566)
Collections of receivables and
lease investments - 71,149 - 61,111 - 55,552
Net acquisitions of daily rental vehicles - (1,459) - (924) - -
Purchases of securities (Note 16) (51) (6,274) (412) (10,688) (100,493) (13,741)
Sales and maturities of securities (Note 16) 325 5,052 511 9,649 101,927 12,426
Proceeds from sales of receivables - 4,360 - 3,622 - 4,794
Loans originated net of principal payments - (9) - (207) - (1,466)
Net investing activity with Financial
Services (19) - 355 - (117) -
Other 558 (175) (331) (312) (69) 389
------- -------- ------ -------- -------- --------
Net cash used in investing activities (7,863) (27,644) (8,187) (28,579) (4,409) (19,048)
Cash flows from financing activities
Cash dividends (1,559) - (1,205) - (1,086) -
Issuance of Common Stock 601 - 715 - 394 -
Changes in short-term debt 413 5,884 (795) 10,314 (66) 6,065
Proceeds from issuance of other debt 300 23,854 158 21,885 424 22,128
Principal payments on other debt (177) (11,489) (75) (14,088) (376) (13,791)
Net financing activity with Automotive - 19 - (355) - 117
Changes in customers' deposits, excluding
interest credited - - - (422) - (3,861)
Receipts from annuity contracts - 283 - 1,124 - 821
Net (redemption)/issuance of subsidiary
company preferred stock (Note 1) - (1,875) - 417 - 375
Other 121 102 31 (132) (124) (76)
------- -------- -------- -------- -------- -------
Net cash (used in)/provided by financing
activities (301) 16,778 (1,171) 18,743 (834) 11,778
Effect of exchange rate changes on cash 107 (28) 397 166 17 25
Net transactions with Automotive/
Financial Services 477 (477) 233 (233) 527 (527)
------- -------- -------- -------- -------- --------
Net increase/(decrease) in cash and
cash equivalents 1,269 951 (1,186) (816) 2,163 (627)
------- -------- -------- -------- -------- --------
Cash and cash equivalents at December 31 $ 5,750 $ 2,690 $ 4,481 $ 1,739 $ 5,667 $ 2,555
======= ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are part of the financial statements.
FS-5
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
----------------------------------------------
For the Years Ended December 31, 1995, 1994 and 1993
(in millions)
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
CAPITAL STOCK (Note 10)
Common Stock
- ------------
Balance at beginning of year $ 952 $ 464 $ 454
Issued for Series A Preferred Stock conversion,
employee benefit plans and other 137 19 10
Stock split in form of a 100% stock dividend - 469 -
------- ------- -------
Balance at end of year 1,089 952 464
Class B Stock
- -------------
Balance at beginning of year 71 35 35
Stock split in form of a 100% stock dividend - 36 -
------- ------- -------
Balance at end of year 71 71 35
Series A Preferred Stock * * *
Series B Preferred Stock (Note 1) * * *
CAPITAL IN EXCESS OF PAR VALUE OF STOCK
Balance at beginning of year 5,273 5,082 4,698
Exchange of Series B Preferred Stock (Notes 1 and 10) (632) - -
Issued for Series A Preferred Stock conversion,
employee benefit plans and other 464 696 384
Stock split in form of a 100% stock dividend - (505) -
------- ------- -------
Balance at end of year 5,105 5,273 5,082
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
AND OTHER (Note 1)
Balance at beginning of year 189 (1,078) (62)
Translation adjustments during year 250 800 (508)
Minimum pension liability adjustment (108) 400 (400)
Other 263 67 (108)
------- ------- -------
Balance at end of year 594 189 (1,078)
EARNINGS RETAINED FOR USE IN THE BUSINESS
Balance at beginning of year 15,174 11,071 9,628
Net income 4,139 5,308 2,529
Cash dividends (1,559) (1,205) (1,086)
Fair value adjustment from exchange
of Series B Preferred Stock (Note 1) (66) - -
------- ------- -------
Balance at end of year 17,688 15,174 11,071
------- ------- -------
Total stockholders' equity $24,547 $21,659 $15,574
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Series A Series B
Common Class B Preferred Preferred
SHARES OF CAPITAL STOCK Stock Stock Stock Stock
------ ------- --------- ---------
<S> <C> <C> <C> <C>
Issued at December 31, 1992 454 35 0.046 0.023
Additions
1993 10 0 0 0
1994 - Stock split in form of a 100% stock
dividend 469 36 - -
- Employee benefit plans and other 19 - - -
1995 - Conversion of Series A Preferred Stock 115 - (0.035) -
- Employee benefit plans and other 22 - - -
- Exchange of Series B Preferred Stock (Note 10) - - - (0.013)
----- --- ----- -----
Net additions 635 36 (0.035) (0.013)
----- --- ----- -----
Issued at December 31, 1995 1,089 71 0.011 0.010
===== === ===== =====
Authorized at December 31, 1995 3,000 265 -- In total: 30 --
</TABLE>
- - - - - -
*The balances at the beginning and end of each period were less
than $1 million.
The accompanying notes are part of the financial statements.
FS-6
<PAGE>
Ford Motor Company and Subsidiaries
Notes to Financial Statements
NOTE 1. Accounting Policies
- ----------------------------
Principles of Consolidation
- ---------------------------
The consolidated financial statements include all significant
majority owned subsidiaries and reflect the operating results,
assets, liabilities and cash flows for two business segments:
Automotive and Financial Services. The assets and liabilities of
the Automotive segment are classified as current or noncurrent,
and those of the Financial Services segment are unclassified.
Affiliates that are 20% to 50% owned, principally Mazda Motor
Corporation and AutoAlliance International Inc., and subsidiaries
where control is expected to be temporary, principally
investments in certain dealerships, are generally accounted for
on an equity basis. For purposes of Notes to Financial
Statements, "Ford" or "the company" means Ford Motor Company and
its majority owned consolidated subsidiaries unless the context
requires otherwise.
Use of estimates and assumptions as determined by management is
required in the preparation of consolidated financial statements
in conformity with generally accepted accounting principles.
Actual results could differ from those estimates and assumptions.
Certain amounts for prior periods have been reclassified to
conform with 1995 presentations.
Nature of Operations
- --------------------
The company operates in two principal business segments:
Automotive and Financial Services. The Automotive segment
consists of the design, manufacture, assembly and sale of cars,
trucks and related parts and accessories. The Financial Services
segment consists primarily of financing operations, insurance
operations, and vehicle and equipment leasing operations.
Intersegment transactions represent principally transactions
occurring in the ordinary course of business, borrowings and
related transactions between entities in the Financial Services
and Automotive segments, and interest and other support under
special vehicle financing programs. These arrangements are
reflected in the respective business segments.
Revenue Recognition - Automotive
- --------------------------------
Sales are recorded by the company when products are shipped to
dealers, except as described below. Estimated costs for
approved sales incentive programs normally are recognized as
sales reductions at the time of revenue recognition. Estimated
costs for sales incentive programs approved subsequent to the
time that related sales were recorded are recognized when the
programs are approved.
Beginning December 1, 1995, sales through dealers to certain
daily rental companies where the daily rental company has an
option to require the company to repurchase vehicles, subject to
certain conditions, are recognized over the period of daily
rental service in a manner similar to lease accounting. This
change in accounting principle was made as a result of the
consensus reached on November 15, 1995 by the Emerging Issues
Task Force of the Financial Accounting Standards Board on Issue
95-1 concerning the timing of revenue recognition when a
manufacturer conditionally guarantees the resale value of a
product or agrees to repurchase the product at a fixed price.
The company elected to recognize this change in accounting
principle on a prospective basis. The effect on the company's
1995 consolidated results of operations was not material, nor is
it expected to have a material effect in future years.
Implementation of this change will not affect the company's cash
flow. Previously, the company recognized revenue for these
vehicles when shipped.
FS-7
<PAGE>
NOTE 1. Accounting Policies (Cont'd)
- ----------------------------
Revenue Recognition - Financial Services
- ----------------------------------------
Revenue from finance receivables is recognized over the term of
the receivable using the interest method. Certain loan
origination costs are deferred and amortized over the term of the
related receivable as a reduction in financing revenue. Revenue
from operating leases is recognized as scheduled payments become
due. Agreements between Automotive operations and certain
Financial Services operations provide for interest supplements
and other support costs to be paid by Automotive operations on
certain financing and leasing transactions. Financial Services
operations recognize this revenue in income over the period that
the related receivables and leases are outstanding; the estimated
costs of interest supplements and other support costs are
recorded as sales incentives by Automotive operations.
Other Costs
- -----------
Advertising and sales promotion costs are expensed as incurred.
Advertising costs were $2,024 million in 1995, $1,823 million in
1994 and $1,610 million in 1993.
Estimated costs related to product warranty are accrued at the
time of sale.
Research and development costs are expensed as incurred and were
$6,509 million in 1995, $5,811 million in 1994, and $5,618
million in 1993.
Income Per Share of Common and Class B Stock
- --------------------------------------------
Income per share of Common and Class B Stock is calculated by
dividing the income attributable to Common and Class B Stock by
the average number of shares of Common Stock and Class B Stock
outstanding during the applicable period.
The company has outstanding securities, primarily Series A
Preferred Stock, that could be converted to Common Stock. Other
obligations, such as stock options, are considered to be common
stock equivalents. The calculation of income per share of Common
and Class B Stock assuming full dilution takes into account the
effect of these convertible securities and common stock
equivalents when the effect is material and dilutive.
Income attributable to Common and Class B Stock was as follows
(in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ -------
<S> <C> <C> <C>
Net income $4,139 $5,308 $2,529
Less:
Preferred stock dividend
requirements 234 287 288
Fair value adjustment from
exchange of Series B
Preferred Stock* 66 - -
------ ------ -----
Income attributable to
Common and Class B Stock $3,839 $5,021 $2,241
====== ====== ======
</TABLE>
- - - - -
* Represents a one-time reduction of $0.06 per share of Common and
Class B Stock related to the exchange of Series B Preferred Stock
for company-obligated mandatorily redeemable preferred securities
of a subsidiary trust; this adjustment equals the excess of the
fair value of company-obligated mandatorily redeemable preferred
securities at the date of issuance over the carrying amount of
exchanged Series B Preferred Stock
FS-8
<PAGE>
NOTE 1. Accounting Policies (Cont'd)
- ----------------------------
Derivative Financial Instruments
- --------------------------------
The company and many of its subsidiaries have entered into
agreements to manage certain exposures to fluctuations in foreign
exchange and interest rates. All derivative financial
instruments are classified as "held for purposes other than
trading;" company policy specifically prohibits the use of
derivatives for speculative purposes.
Ford has operations in many countries outside the U.S., and
purchases and sales of finished vehicles and production parts,
debt and other payables, subsidiary dividends, and investments in
subsidiaries are frequently denominated in foreign currencies.
Agreements to manage foreign exchange exposures include foreign
currency forward contracts, currency swaps and, to a lesser
extent, foreign currency options. Gains and losses on the
various agreements are recognized in income during the period of
the related transactions, included in the bases of the related
transactions, or, in the case of hedges of net investments in
foreign subsidiaries, recognized as an adjustment to the foreign
currency translation component of stockholders' equity.
Financial Services operations issue debt and other payables for
which the maturity and interest rate structure differs from the
invested assets to ensure continued access to capital markets and
to minimize overall borrowing costs. Agreements to manage
interest rate exposures include primarily interest rate swap
agreements. The differential paid or received on interest rate
swap agreements is recognized as an adjustment to interest
expense in the period.
Foreign Currency Translation
- -----------------------------
Revenues, costs and expenses of foreign subsidiaries are
translated to U.S. dollars at average-period exchange rates. The
effect of changes in foreign exchange rates on revenues and costs
was generally unfavorable in 1995, 1994 and 1993.
Assets and liabilities of foreign subsidiaries are translated to
U.S. dollars at end-of-period exchange rates. The effects of this
translation for most foreign subsidiaries and certain other
foreign currency transactions are reported in a separate
component of stockholders' equity. Translation gains and losses
for foreign subsidiaries that are located in highly inflationary
countries or conduct a major portion of their business with the
company's U.S. operations are included in income. Also included
in income are gains and losses arising from transactions
denominated in a currency other than the functional currency of
the subsidiary involved.
The effect of changes in foreign exchange rates on assets and
liabilities, as described above, increased net income by $13
million in 1995, $376 million in 1994, and $419 million in 1993.
These amounts included net transaction and translation gains
before taxes of $37 million in 1995, $574 million in 1994 and
$988 million in 1993. These gains were offset by higher costs of
sales that resulted from the use of historical exchange rates for
inventories sold during the period in countries with high
inflation rates.
Impairment of Long-Lived Assets and Certain Identifiable
Intangibles
- --------------------------------------------------------
The company evaluates the carrying value of goodwill for
potential impairment on an ongoing basis. Such evaluations
compare operating income before amortization of goodwill to the
amortization recorded for the operations to which the goodwill
relates. The company also considers projected future operating
results, trends and other circumstances in making such estimates
and evaluations.
Statement of Financial Accounting Standards No. 121 ("SFAS 121"),
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of," was issued in March 1995.
SFAS 121 requires that, effective January 1, 1996, long-lived
assets and certain identifiable intangibles to be held and used
by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying value of an
asset may not be recoverable. It also requires that long-lived
assets and certain identifiable intangibles to be disposed of be
reported at the lower of carrying amount or fair value less cost
to sell. The effect of adopting SFAS 121 is not expected to be
material.
FS-9
<PAGE>
NOTE 1. Accounting Policies (Cont'd)
- ----------------------------
Goodwill
- --------
Goodwill represents the excess of the purchase price over the
fair value of the net assets of acquired companies and is
amortized using the straight-line method principally over 40
years. Total goodwill included in Automotive and Financial
Services other assets at December 31, 1995 was $2.3 billion and
$3.2 billion, respectively.
Company-Obligated Mandatorily Redeemable Preferred Securities of
a Subsidiary Trust
- ----------------------------------------------------------------
On December 21, 1995, Ford Motor Company Capital Trust I (the
"Trust") issued $632 million of its 9% Trust Originated Preferred
Securities (the "Preferred Securities") in a one-for-one exchange
for 25,273,537 shares of the company's outstanding Series B
Depositary Shares ("Depositary Shares"), each representing
1/2,000 of a share of Series B Preferred Stock of Ford.
Concurrent with the issuance of the Preferred Securities in
exchange for Depositary Shares and the related purchase by Ford
of the Trust's common securities (the "Common Securities"), the
company issued to the Trust $651 million aggregate principal
amount of its 9% Junior Subordinated Debentures due December 2025
(the "Debentures"). The sole assets of the Trust are and will be
the Debentures. The interest and other payment dates on the
Debentures correspond to the distribution and other payment dates
on the Preferred Securities and Common Securities. The
Debentures are redeemable, in whole or in part, at the company's
option on or after December 1, 2002, at a redemption price of $25
per Debenture plus accrued and unpaid interest. If the company
redeems the Debentures, or upon maturity of the Debentures, the
Trust is required to redeem the Preferred Securities and Common
Securities at $25 per share plus accrued and unpaid
distributions.
Ford guarantees to pay in full to the holders of the Preferred
Securities all distributions and other payments on the Preferred
Securities to the extent not paid by the Trust only if and to the
extent that Ford has made a payment of interest or principal on
the Debentures. This guarantee, when taken together with Ford's
obligations under the Debentures and the Indenture relating
thereto and its obligations under the Declaration of Trust of the
Trust, including its obligation to pay certain costs and expenses
of the Trust, constitutes a full and unconditional guarantee by
Ford of the Trust's obligations under the Preferred Securities.
Preferred Stockholders' Equity in a Subsidiary Company
- ------------------------------------------------------
During Fourth Quarter 1995, Ford Holdings, Inc. ("Ford
Holdings"), a subsidiary of Ford, merged with Ford Holdings
Capital Corporation, a subsidiary of Ford Holdings, which
resulted in the cancellation of the voting preferred stock of
Ford Holdings in exchange for payment by Ford Holdings of the
liquidation preference of the stock plus accrued and unpaid
dividends. Ford Holdings funded the payment to the holders of
the preferred stock primarily with bank loans.
FS-10
<PAGE>
NOTE 2. Marketable and Other Securities
- ----------------------------------------
Trading securities are recorded at fair value with unrealized
gains and losses included in income. Available-for-sale
securities are recorded at fair value with unrealized gains and
losses excluded from income and reported, net of tax, in a
separate component of stockholders' equity. Held-to-maturity
securities are recorded at amortized cost. Equity securities
which do not have readily determinable fair values are recorded at
cost. The bases of cost used in determining realized gains and
losses are specific identification for Automotive operations and
first-in, first-out for Financial Services operations.
The fair value of most securities was estimated based on quoted
market prices. For those securities for which there were no
quoted market prices, the estimate of fair value was based on
similar types of securities that are traded in the market.
Expected maturities of debt securities may differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without penalty.
Automotive
- ----------
Investments in securities at December 31, 1995 were as follows (in
millions):
<TABLE>
<CAPTION>
Gross Gross Memo:
Amortized Unrealized Unrealized Fair Book
Cost Gains Losses Value Value
--------- ---------- ---------- ----- -----
<S> <C> <C> <C> <C> <C>
Trading securities $6,646 $12 $2 $6,656 $6,656
====== === == ====== ======
</TABLE>
Investments in securities at December 31, 1994 were as follows (in millions):
<TABLE>
<CAPTION>
Gross Gross Memo:
Amortized Unrealized Unrealized Fair Book
Cost Gains Losses Value Value
--------- ---------- ---------- ------ ------
<S> <C> <C> <C> <C> <C>
Trading securities $7,382 $3 $56 $7,329 $7,329
Available-for-sale securities
- -----------------------------
Debt securities issued by foreign governments 23 0 0 23 23
Corporate securities 231 0 1 230 230
------ -- --- ------- ------
Total available-for-sale securities 254 0 1 253 253
Held-to-maturity securities
- ---------------------------
Corporate securities 20 0 0 20 20
------ -- --- ------ ------
Total investments in securities $7,656 $3 $57 $7,602 $7,602
====== == === ====== ======
</TABLE>
All debt securities classified as available-for-sale or held-to-maturity
had contractual maturities of one year or less.
Included in stockholders' equity at December 31, 1995 and 1994 was $146
million and $188 million, respectively, which represented principally
the company's equity interest in the unrealized gains on securities
owned by certain unconsolidated subsidiaries.
FS-11
<PAGE>
NOTE 2. Marketable and Other Securities (Cont'd)
- ----------------------------------------
Financial Services
- ------------------
Investments in securities at December 31, 1995 were as follows (in millions):
<TABLE>
<CAPTION>
Gross Gross Memo:
Amortized Unrealized Unrealized Fair Book
Cost Gains Losses Value Value
--------- ----------- --------- ------ ------
<S> <C> <C> <C> <C> <C>
Trading securities $ 477 $ 1 $ 2 $ 476 $ 476
Available-for-sale securities
- -----------------------------
Debt securities issued by the U.S.
government and agencies 574 20 0 594 594
Municipal securities 102 3 2 103 103
Debt securities issued by foreign governments 38 1 0 39 39
Corporate securities 579 12 9 582 582
Mortgage-backed securities 336 4 1 339 339
Other debt securities 13 0 0 13 13
Equity securities 300 58 0 358 358
------ --- --- ------ ------
Total available-for-sale securities 1,942 98 12 2,028 2,028
Held-to-maturity securities
- ---------------------------
Debt securities issued by the U.S.
government and agencies 8 1 0 9 8
Municipal securities 1,132 60 7 1,185 1,132
Corporate securities 585 15 2 598 585
------ --- --- ------ ------
Total held-to-maturity securities 1,725 76 9 1,792 1,725
Total investments in securities with
readily determinable fair value 4,144 $175 $23 $4,296 4,229
==== ==== ======
Equity securities not practicable to
fair value 324 324
----- ------
Total investments in securities $4,468 $4,553
====== ======
</TABLE>
Investments in securities at December 31, 1994 were as follows (in millions):
<TABLE>
<CAPTION>
Gross Gross Memo:
Amortized Unrealized Unrealized Fair Book
Cost Gains Losses Value Value
-------- ---------- ---------- ----- -------
<S> <C> <C> <C> <C> <C>
Trading securities $ 715 $ 6 $ 10 $ 711 $ 711
Available-for-sale securities
- -----------------------------
Debt securities issued by the U.S.
government and agencies 692 1 38 655 655
Municipal securities 155 1 11 145 145
Debt securities issued by foreign governments 106 0 10 96 96
Corporate securities 1,929 3 152 1,780 1,780
Mortgage-backed securities 871 0 62 809 809
Other debt securities 22 0 0 22 22
Equity securities 172 34 6 200 200
------ --- ---- ------ ------
Total available-for-sale securities 3,947 39 279 3,707 3,707
Held-to-maturity securities
- ---------------------------
Debt securities issued by the U.S.
government and agencies 10 0 0 10 10
Municipal securities 783 0 12 771 783
Corporate securities 570 4 27 547 570
------ --- ---- ------ ------
Total held-to-maturity securities 1,363 4 39 1,328 1,363
Total investments in securities with
readily determinable fair value 6,025 $49 $328 $5,746 5,781
=== ==== ======
Equity securities not practicable to
fair value 324 324
------ ------
Total investments in securities $6,349 $6,105
====== ======
</TABLE>
FS-12
<PAGE>
NOTE 2. Marketable and Other Securities (Cont'd)
- ----------------------------------------
Financial Services (Cont'd)
- ------------------
The amortized cost and fair value of investments in available-for-sale
securities and held-to-maturity securities at December 31, 1995, by
contractual maturity, were as follows (in millions):
<TABLE>
<CAPTION>
Available-for-sale Held-to-maturity
--------------------- ----------------------
Amortized Amortized
Cost Fair Value Cost Fair Value
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Due in one year or less $ 173 $ 173 $ 50 $ 47
Due after one year through five years 522 534 281 285
Due after five years through ten years 449 454 1,317 1,381
Due after ten years 283 293 77 79
Mortgage-backed securities 215 216 - -
Equity securities 300 358 - -
------ ------ ------ ------
Total $1,942 $2,028 $1,725 $1,792
====== ====== ====== ======
</TABLE>
The amortized cost and fair value of investments in available-for-sale
securities and held-to-maturity securities at December 31, 1994, by
contractual maturity, were as follows (in millions):
<TABLE>
<CAPTION>
Available-for-sale Held-to-maturity
----------------------- ----------------------
Amortized Amortized
Cost Fair Value Cost Fair Value
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Due in one year or less $ 113 $ 112 $ 59 $ 58
Due after one year through five years 755 728 184 184
Due after five years through ten years 637 596 782 768
Due after ten years 1,399 1,262 338 318
Mortgage-backed securities 871 809 - -
Equity securities 172 200 - -
------ ------ ------ ------
Total $3,947 $3,707 $1,363 $1,328
====== ====== ====== ======
</TABLE>
Proceeds from sales of available-for-sale securities were $2.4 billion
in 1995 and $9.1 billion in 1994; gross gains of $39 million and gross
losses of $18 million were realized on those sales in 1995, and gross
gains of $24 million and gross losses of $56 million were realized on
those sales in 1994. Stockholders' equity included, net of tax, a net
unrealized gain of $56 million at December 31, 1995 and a net unrealized
loss of $155 million at December 31, 1994. Proceeds from sales of
investments in debt securities were $11.2 billion in 1993; gross gains
of $113 million and gross losses of $20 million were realized on those sales.
FS-13
<PAGE>
NOTE 3. Receivables - Financial Services
- -----------------------------------------
Included in net receivables and lease investments at December 31 were
net finance receivables, investments in direct financing leases and
investments in operating leases. The investments in direct financing
and operating leases relate to the leasing of vehicles, various types
of transportation and other equipment, and facilities.
Net finance receivables at December 31 were as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Automotive $ 98,162 $ 87,858
Real estate, mainly residential 17,577 15,560
Other 7,732 6,237
-------- --------
Total finance receivables 123,471 109,655
Loan origination costs 268 194
Unearned income (11,045) (9,656)
Allowance for credit losses (1,947) (1,762)
Unearned insurance premiums and
unpaid insurance claims related
to finance receivables (2) (90)
-------- --------
Net finance receivables $110,745 $ 98,341
======== ========
Fair value $112,798 $ 99,518
</TABLE>
Included in finance receivables at December 31, 1995 and 1994 were
a total of $1.3 billion owed by three customers with the
largest receivable balances. Other finance receivables consisted
primarily of commercial and consumer loans, collateralized loans,
credit card receivables, general corporate obligations and
accrued interest. Also included in other finance receivables at
December 31, 1995 and 1994 were $3.5 billion and $3.4 billion,
respectively, of accounts receivable purchased by certain
Financial Services operations from Automotive operations.
Contractual maturities of automotive and other finance
receivables are as follows (in millions): 1996 - $53,718;
1997 - $20,569; 1998 - $14,160; thereafter - $17,447.
Experience indicates that a substantial portion of the
portfolio generally is repaid before the contractual maturity
dates.
The fair value of most receivables was estimated by discounting
future cash flows using an estimated discount rate that reflected
the credit, interest rate and prepayment risks associated with
similar types of instruments. For receivables with short
maturities, the book value approximated fair value.
Sales of finance receivables increased net income by $69 million
in 1995, $15 million in 1994 and $60 million in 1993.
Investments in direct financing leases at December 31 were as
follows (in millions):
<TABLE>
<CAPTION>
1995 1994
------- --------
<S> <C> <C>
Minimum lease rentals $ 9,385 $ 8,321
Estimated residual values 3,960 3,715
Lease origination costs 81 70
Unearned income (2,439) (2,299)
Allowance for credit losses (155) (185)
------- -------
Net investments in direct financing leases $10,832 $ 9,622
======= =======
</TABLE>
Minimum direct financing lease rentals (including executory costs of
$31 million) are contractually due as follows (in millions):
1996 - $3,093; 1997 - $2,346; 1998 - $1,489; 1999 - $893; thereafter - $1,595.
FS-14
<PAGE>
NOTE 3. Receivables - Financial Services (Cont'd)
- -----------------------------------------
Investments in operating leases at December 31 were as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Vehicles and other equipment, at cost $34,855 $28,050
Lease origination costs 50 38
Accumulated depreciation (6,499) (5,425)
Allowance for credit losses (289) (270)
------- -------
Net investments in operating leases $28,117 $22,393
======= =======
</TABLE>
Minimum rentals on operating leases are contractually due as
follows (in millions): 1996 - $6,364; 1997 - $2,694; 1998 -
$431; 1999 - $131; thereafter - $222.
Depreciation expense for assets subject to operating leases is
provided primarily on the straight-line method over the term of
the lease in amounts necessary to reduce the carrying amount of
the asset to its estimated residual value. Gains and losses upon
disposal of the asset also are included in depreciation expense.
Depreciation expense was as follows (in millions): 1995 -
$5,508; 1994 - $4,231; 1993 - $2,984.
Allowances for credit losses are estimated and established as
required based on historical experience. Other factors that
affect collectibility also are evaluated, and additional amounts
may be provided. Finance receivables and lease investments are
charged to the allowances for credit losses when an account is
deemed to be uncollectible, taking into consideration the
financial condition of the borrower, the value of the collateral,
recourse to guarantors and other factors. Recoveries on finance
receivables and lease investments previously charged off as
uncollectible are credited to the allowances for credit losses.
Changes in the allowances for credit losses were as follows (in
millions):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------ ------
<S> <C> <C> <C>
Beginning balance $ 2,217 $2,352 $2,257
Additions 1,327 988 1,019
Net losses (1,120) (826) (903)
Other changes (33) (297) (21)
------- ------ ------
Ending balance $ 2,391 $2,217 $2,352
======= ====== ======
</TABLE>
Statement of Financial Accounting Standards No. 114, "Accounting
by Creditors for Impairment of a Loan," was issued in May 1993
and amended in October 1994 by Statement of Financial Accounting
Standards No. 118, "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures." The Standards
require that impaired loans be measured based on the present
value of expected future cash flows discounted at the loan's
effective interest rate. The company adopted these standards as
of January 1, 1995, and the effect was not material.
NOTE 4. Inventories - Automotive
- ---------------------------------
Inventories at December 31 were as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Raw materials, work in process and supplies $3,717 $3,192
Finished products 3,445 3,295
------ ------
Total inventories $7,162 $6,487
====== ======
U.S. inventories $2,662 $2,917
</TABLE>
Inventories are stated at the lower of cost or market. The cost
of most U.S. inventories is determined by the last-in, first-out
("LIFO") method. The cost of the remaining inventories is
determined primarily by the first-in, first-out ("FIFO") method.
If the FIFO method had been used instead of the LIFO method,
inventories would have been higher by $1,406 million and $1,383
million at December 31, 1995 and 1994, respectively.
FS-15
<PAGE>
NOTE 5. Net Property, Depreciation and Amortization - Automotive
- -----------------------------------------------------------------
Net property at December 31 was as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Land $ 381 $ 359
Buildings and land improvements 7,539 6,939
Machinery, equipment and other 38,954 33,551
Construction in progress 1,609 1,685
-------- --------
Total land, plant and equipment 48,483 42,534
Accumulated depreciation (25,313) (22,738)
-------- --------
Net land, plant and equipment 23,170 19,796
Unamortized special tools 8,103 7,252
-------- --------
Net property $ 31,273 $ 27,048
======== ========
</TABLE>
Property, equipment and special tools are stated at cost, less
accumulated depreciation and amortization. Property and equipment
placed in service before January 1, 1993 are depreciated using an
accelerated method that results in accumulated depreciation of
approximately two-thirds of asset cost during the first
half of the estimated useful life of the asset. Property and
equipment placed in service after December 31, 1992 are
depreciated using the straight-line method of depreciation over
the estimated useful life of the asset. On average, buildings and
land improvements are depreciated based on a 30-year life;
machinery and equipment are depreciated based on a 14-year life.
Special tools are amortized using an accelerated method over
periods of time representing the estimated productive life of
those tools.
Depreciation and amortization expenses were as follows (in
millions):
1995 1994 1993
------ ------ ------
Depreciation $2,454 $2,297 $2,392
Amortization 2,765 2,129 2,012
------ ------ ------
Total $5,219 $4,426 $4,404
====== ====== ======
When property and equipment are retired, the general policy is to
charge the cost of those assets, reduced by net salvage proceeds,
to accumulated depreciation. Maintenance, repairs, and
rearrangement costs are expensed as incurred and were $2,529
million in 1995, $2,377 million in 1994, and $1,934 million in
1993. Expenditures that increase the value or productive capacity
of assets are capitalized. Preproduction costs related to new
facilities are expensed as incurred.
NOTE 6. Income Taxes
- ---------------------
Income/(loss) before income taxes for U.S. and foreign operations,
excluding equity in net (loss)/income of affiliated companies, was
as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
U.S. $5,521 $6,944 $4,152
Foreign 1,338 1,574 (276)
------ ------ ------
Total income
before income taxes $6,859 $8,518 $3,876
====== ====== ======
</TABLE>
The provision for income taxes was estimated as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Currently payable
U.S. federal $ 971 $1,640 $1,259
Foreign 578 690 169
State and local 17 165 123
------ ------ ------
Total currently payable 1,566 2,495 1,551
Deferred tax liability/(benefit)
U.S. federal 731 827 (161)
Foreign (10) (71) (106)
State and local 92 78 66
------ ------ ------
Total deferred 813 834 (201)
------ ------ ------
Total provision $2,379 $3,329 $1,350
====== ====== ======
</TABLE>
FS-16
<PAGE>
NOTE 6. Income Taxes (Cont'd)
- ---------------------
The provision includes estimated taxes payable on that portion of
retained earnings of subsidiaries expected to be received by the
company. No provision was made with respect to $2.6 billion of
retained earnings at December 31, 1995 that have been invested by
foreign subsidiaries. It is not practicable to estimate the
amount of unrecognized deferred tax liability for the
undistributed foreign earnings.
A reconciliation of the provision for income taxes compared with
the amounts at the U.S. statutory tax rate is shown below (in
millions):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Tax provision at U.S. statutory rate of 35% $2,400 $2,981 $1,357
Effect of:
Foreign taxes over U.S. tax rate 100 68 219
State and local income taxes 71 158 118
Rate adjustments on U.S. and foreign
deferred taxes - - (199)
Income not subject to tax or subject to
tax at reduced rates (47) (62) (70)
Other (145) 184 (75)
------ ------ ------
Provision for income taxes $2,379 $3,329 $1,350
====== ====== ======
Effective tax rate 34.7% 39.1% 34.8%
</TABLE>
Deferred income taxes reflect the estimated tax effect of
temporary differences between assets and liabilities for financial
reporting purposes and those amounts as measured by tax laws and
regulations and net operating losses of subsidiaries. The
components of deferred income tax assets and liabilities at
December 31 were as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets
-------------------
Employee benefit plans $ 6,672 $ 5,951
Dealer and customer allowances and claims 3,750 3,375
Allowance for credit losses 921 821
Net operating loss carryforwards 844 1,152
Alternative minimum tax 440 318
Depreciation and amortization
(excludes leasing transactions) - 39
All other 1,711 1,466
Valuation allowances (158) (159)
------- -------
Total deferred tax assets 14,180 12,963
Deferred tax liabilities
------------------------
Leasing transactions 4,933 3,935
Depreciation and amortization
(excludes leasing transactions) 3,626 2,804
Employee benefit plans 1,486 1,443
All other 1,920 1,604
------- -------
Total deferred tax liabilities 11,965 9,786
------- -------
Net deferred tax assets $ 2,215 $ 3,177
======= =======
</TABLE>
Foreign net operating loss carryforwards for tax purposes were
$2.4 billion at December 31, 1995. A substantial portion of these
losses has an indefinite carryforward period; the remaining losses
have expiration dates beginning in 1996. For financial statement
purposes, the tax benefit of operating losses is recognized as a
deferred tax asset, subject to appropriate valuation allowances.
The company evaluates the tax benefits of operating loss
carryforwards on an ongoing basis. Such evaluations include a
review of historical and consideration of projected future
operating results, the eligible carryforward period and other
circumstances.
FS-17
<PAGE>
NOTE 7. Liabilities - Automotive
- ---------------------------------
Current Liabilities
- -------------------
Included in accrued liabilities at December 31 were the following
(in millions):
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Dealer and customer allowances and claims $ 7,824 $ 7,115
Employee benefit plans 2,225 2,130
Salaries, wages, and employer taxes 843 598
Postretirement benefits other than pensions 782 688
Other 1,718 1,412
------- ------
Total accrued liabilities $13,392 $11,943
======= =======
</TABLE>
Noncurrent Liabilities
- ----------------------
Included in other liabilities at December 31 were the following (in millions):
<TABLE>
<CAPTION>
1995 1994
------- --------
<S> <C> <C>
Postretirement benefits other than pensions $14,533 $14,025
Dealer and customer allowances and claims 5,514 6,044
Employee benefit plans 2,657 2,232
Unfunded pension obligation 627 362
Minority interests in net assets of subsidiaries 121 118
Other 2,225 2,139
------- -------
Total other liabilities $25,677 $24,920
======= =======
</TABLE>
NOTE 8. Employee Retirement Benefits
- -------------------------------------
Employee Retirement Plans
- -------------------------
The company has two principal retirement plans in the U.S. The
Ford-UAW Retirement Plan covers hourly employees represented by
the UAW, and the General Retirement Plan covers substantially all
other employees of the company and several finance subsidiaries in
the U.S. The hourly plan provides noncontributory benefits
related to employee service. The salaried plan provides similar
noncontributory benefits and contributory benefits related to pay
and service. Other U.S. and non-U.S. subsidiaries have separate
plans that generally provide similar types of benefits covering
their employees. The company and its subsidiaries also have
defined benefit plans applicable to certain executives which are
not funded.
The company's policy for funded plans is to contribute annually,
at a minimum, amounts required by applicable law, regulations and
union agreements. Plan assets consist principally of investments
in stocks, government and other fixed income securities and real
estate. The various plans generally are funded, except in
Germany, where this has not been the custom, and as noted above;
in those cases, an unfunded liability is recorded.
The company's pension expense, including Financial Services, was
as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
---------------------- ------------------------ ------------------------
Non- Non- Non-
U.S. Plans U.S. Plans U.S. Plans U.S. Plans U.S. Plans U.S. Plans
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Benefits attributed to
employees' service $ 435 $ 208 $ 526 $ 236 $ 419 $ 181
Interest on projected
benefit obligation 1,776 785 1,639 677 1,517 667
Return on assets:
Actual (gain)/loss (5,696) (1,201) (74) 137 (2,264) (1,370)
Deferred gain/(loss) 3,565 435 (1,928) (759) 389 677
------- ------- ------- ----- ------- -------
Recognized (gain) (2,131) (766) (2,002) (622) (1,875) (693)
Net amortization and other 408 234 452 151 259 169
------- ------- ------- ----- ------- -------
Net pension expense $ 488 $ 461 $ 615 $ 442 $ 320 $ 324
======= ======= ======= ===== ======= =======
Discount rate for expense 8.25% 8.3% 7.0% 7.2% 8.0% 8.6%
Assumed long-term rate
of return on assets 9.0 % 9.0% 9.0% 9.0% 9.5% 9.5%
</TABLE>
FS-18
<PAGE>
NOTE 8. Employee Retirement Benefits (Cont'd)
- -------------------------------------
Pension expense in 1995 decreased for U.S. plans primarily as a
result of higher discount rates, and increased for non-U.S.
plans primarily as a result of benefit improvements and
unfavorable exchange rates. Pension expense increased in 1994
as a result of lower discount rates for both U.S. and non-U.S.
plans. In addition, amendments made in September 1993 to the
Ford-UAW Retirement Plan and the General Retirement Plan
provided benefit improvements that increased U.S. expense in
1995 and 1994.
The status of these plans at December 31 was as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
------------------------------ -------------------------------
Assets in Accum. Assets in Accum.
Excess of Benefits Excess of Benefits
Accum. in Excess Total Accum. in Excess Total
Benefits of Assets Plans Benefits of Assets Plans
--------- --------- -------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
U.S. Plans
- ----------
Plan assets at fair value $27,921 $ 154 $28,075 $23,264 $ 132 $23,396
Actuarial present value of:
Vested benefits $20,641 $ 516 $21,157 $17,217 $ 404 $17,621
Accumulated benefits 23,980 568 24,548 20,256 453 20,709
Projected benefits 25,607 670 26,277 21,404 541 21,945
Plan assets in excess of/(less than)
projected benefits $ 2,314 $ (516) $ 1,798 $ 1,860 $ (409) $ 1,451
Unamortized (net asset)/net
transition obligation a/ (142) 10 (132) (164) 12 (152)
Unamortized prior service cost b/ 1,808 60 1,868 2,134 86 2,220
Unamortized net (gains)/losses c/ (758) 144 (614) (717) 56 (661)
------- ------- ------- ------- ------- -------
Prepaid pension asset/(liability) 3,222 (302) 2,920 3,113 (255) 2,858
Adjustment required to recognize
minimum liability d/ - (114) (114) - (77) (77)
------- ------- ------- ------- ------- -------
Prepaid pension asset/(liability)
recognized in the balance sheet $ 3,222 $ (416) $ 2,806 $ 3,113 $ (332) $ 2,781
======= ======= ======= ======= ======= =======
Plan assets in excess of/(less than)
accumulated benefits $ 3,941 $ (414) $ 3,527 $ 3,008 $ (321) $ 2,687
Assumptions:
Discount rate at year-end 7.0% 8.25%
Average rate of increase in compensation 5.5% 5.5 %
Non-U.S. Plans
- --------------
Plan assets at fair value $ 8,447 $ 938 $ 9,385 $ 7,018 $ 950 $ 7,968
Actuarial present value of:
Vested benefits $ 6,468 $ 3,478 $ 9,946 $ 5,318 $ 2,895 $ 8,213
Accumulated benefits 6,556 3,506 10,062 5,419 3,053 8,472
Projected benefits 7,751 3,654 11,405 6,321 3,240 9,561
Plan assets in excess of/(less than)
projected benefits $ 696 $(2,716) $(2,020) $ 697 $(2,290) $(1,593)
Unamortized net transition obligation a/ 63 230 293 32 241 273
Unamortized prior service cost b/ 330 170 500 227 248 475
Unamortized net (gains)/losses c/ (184) 255 71 (81) (25) (106)
------- ------- ------- ------- ------- -------
Prepaid pension asset/(liability) 905 (2,061) (1,156) 875 (1,826) (951)
Adjustment required to recognize
minimum liability d/ - (517) (517) - (284) (284)
------- ------- ------- ------- ------- -------
Prepaid pension asset/(liability)
recognized in the balance sheet $ 905 $(2,578) $(1,673) $ 875 $(2,110) $(1,235)
======= ======= ======= ======= ======= =======
Plan assets in excess of/(less than)
accumulated benefits $ 1,891 $(2,568) $ (677) $ 1,599 $(2,103) $ (504)
Assumptions:
Discount rate at year-end 7.6% 8.3%
Average rate of increase in compensation 5.1% 5.2%
- - - - - -
</TABLE>
a/ The balance of the initial difference between assets and
obligation deferred for recognition over a 15-year period.
b/ The prior service effect of plan amendments deferred for
recognition over remaining service.
c/ The deferred gain or loss resulting from investments, other
experience and changes in assumptions.
d/ An adjustment to reflect the unfunded accumulated benefit
obligation in the balance sheet for plans whose benefits
exceed the assets -- at year-end 1995, the unfunded liability
in excess of $448 million is recorded net of deferred taxes as
a $108 million reduction in stockholders' equity, and at year-end
1994, the unfunded liability was offset by an intangible asset.
FS-19
<PAGE>
NOTE 8. Employee Retirement Benefits (Cont'd)
- -------------------------------------
Postretirement Health Care and Life Insurance Benefits
- ------------------------------------------------------
The company and certain of its subsidiaries sponsor unfunded plans
to provide selected health care and life insurance benefits for
retired employees. The company's U.S. and Canadian employees may
become eligible for these benefits if they retire while working for
the company; however, benefits and eligibility rules may be
modified from time to time. The estimated cost for postretirement
health care benefits is accrued over periods of employee service on
an actuarially determined basis.
Net postretirement benefit expense, including Financial Services,
was as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Benefits attributed to employees' service $ 223 $ 263 $ 240
Interest on accumulated benefit obligation 1,160 1,088 1,207
Net amortization (68) (32) -
------ ------ ------
Net postretirement benefit expense $1,315 $1,319 $1,447
====== ====== ======
Retiree benefit payments $ 698 $ 639 $ 654
</TABLE>
The status of these plans at December 31 was as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 8,413 $ 6,720
Active employees eligible to retire 3,014 2,282
Other active employees 5,717 4,266
------- -------
Total accumulated obligation 17,144 13,268
Unamortized prior service cost a/ 270 321
Unamortized net (losses)/gains b/ (1,756) 1,440
------- -------
Accrued liability $15,658 $15,029
======= =======
Assumptions:
Discount rate 7.25% 8.75%
Present health care cost trend rate 9.5 % 5.9 %
Ultimate trend rate in ten years 5.5 % 5.5 %
Weighted-average trend rate 6.6 % 6.6 %
</TABLE>
- - - - - -
a/ The prior service effect of plan amendments deferred for
recognition over remaining service to retirement eligibility.
b/ The deferred gain or loss resulting from experience and
changes in assumptions deferred for recognition over
remaining service to retirement.
Changing the assumed health care cost trend rates by one percentage
point is estimated to change the aggregate service and interest
cost components of net postretirement benefit expense for 1995 by
about $245 million and the accumulated postretirement benefit
obligation at December 31, 1995 by about $2 billion. Health care
trend rates, together with other assumptions, are subject to review
annually in the first quarter. Based on estimates of recent
experience and the general health care cost trend outlook, it is
expected that these rates will be lowered.
FS-20
<PAGE>
NOTE 9. Debt
- -------------
The fair value of debt was estimated based on quoted market prices
or current rates for similar debt with the same remaining
maturities.
Automotive
- ----------
Debt at December 31 was as follows (in millions):
<TABLE>
<CAPTION>
Weighted Average
Interest Rate* Book Value
------------------- -------------------
Maturity 1995 1994 1995 1994
--------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Debt payable within one year
----------------------------
Short-term debt 6.6% 10.0% $ 872 $ 112
Long-term debt payable within one year 960 43
------ ------
Total debt payable within one year 1,832 155
Long-term debt 1997-2043 9.2% 9.0% 5,475 7,103
------ ------
Total debt $7,307 $7,258
====== ======
Fair value $8,160 $7,492
- - - - - -
</TABLE>
*Excludes the effect of interest rate swap agreements
Long-term debt at December 31, 1995 included maturities as
follows (in millions): 1996 - $960 (included in current
liabilities); 1997 - $580; 1998 - $351; 1999 - $53; 2000 -
$1,003; thereafter - $3,488.
Included in long-term debt at December 31, 1995 and 1994 were
obligations of $5,031 million and $6,567 million, respectively,
with fixed interest rates and $444 million and $536 million,
respectively, with variable interest rates (generally based on
LIBOR or other short-term rates). Obligations payable in foreign
currencies at December 31, 1995 and 1994 were $968 million and
$994 million, respectively.
Agreements to manage exposures to fluctuations in interest rates,
which include primarily interest rate swap agreements and futures
contracts, did not materially change the overall weighted-average
rate on long-term debt and effectively decreased the obligations
subject to variable interest rates to $287 million at
December 31, 1995 and $465 million at December 31, 1994.
Financial Services
- ------------------
<TABLE>
<CAPTION>
Debt at December 31 was as follows (in millions):
Weighted Average
Interest Rate* Book Value
------------------- -------------------
Maturity 1995 1994 1995 1994
--------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Debt payable within one year
----------------------------
Unsecured short-term debt $ 3,032 $ 2,990
Commercial paper 56,002 51,008
Other short-term debt 1,927 2,301
--------- --------
Total short-term debt 5.7% 5.9% 60,961 56,299
Long-term debt payable within one year 12,097 9,310
--------- --------
Total debt payable within one year 73,058 65,609
Long-term debt
--------------
Secured indebtedness 1997-2005 7.7% 6.7% 89 98
Unsecured senior indebtedness
Notes and bank debt 1997-2048 6.9% 7.1% 64,810 54,248
Debentures 1997-2010 7.4% 7.8% 591 560
Unamortized (discount) (5) (61)
-------- --------
Total unsecured senior indebtedness 65,396 54,747
Unsecured subordinated indebtedness
Notes 1997-2021 8.8% 9.2% 2,665 3,159
Debentures 1997-2009 8.1% 8.1% 141 141
Unamortized (discount) (32) (41)
-------- --------
Total unsecured subordinated
indebtedness 2,774 3,259
-------- --------
Total long-term debt 68,259 58,104
-------- --------
Total debt $141,317 $123,713
======== ========
Fair value $144,730 $122,252
- - - - - -
</TABLE>
*Excludes the effect of interest rate swap agreements
FS-21
<PAGE>
NOTE 9. Debt (Cont'd)
- -------------
Financial Services (Cont'd)
- ------------------
Information concerning short-term borrowings (excluding long-term debt
payable within one year) is as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
Average amount of short-term borrowings $60,203 $50,106 $38,353
Weighted-average short-term interest rates per annum
(average year) 6.0% 4.6% 3.8%
Average remaining term of commercial paper
at December 31 34 days 27 days 29 days
</TABLE>
Long-term debt at December 31, 1995 included maturities as follows
(in millions): 1996 - $12,097; 1997 - $14,326; 1998 - $13,696;
1999 - $11,485; 2000 - $12,306; thereafter - $16,446.
Included in long-term debt at December 31, 1995 and 1994 were
obligations of $53.2 billion and $45.9 billion, respectively, with
fixed interest rates and $15.1 billion and $12.2 billion,
respectively, with variable interest rates (generally based on
LIBOR or other short-term rates). Obligations payable in foreign currencies
at December 31, 1995 and 1994 were $21 billion and $12.2 billion,
respectively. These obligations were issued primarily to fund foreign
business operations.
Agreements to manage exposures to fluctuations in interest rates
include primarily interest rate swap agreements. At December 31,
1995, these agreements did not change the overall weighted-average
rate on long-term debt of 7% excluding these agreements, and
effectively decreased the obligations subject to variable interest
rates to $11.9 billion. At December 31, 1995, the weighted-
average interest rate on short-term debt increased to 5.8%,
compared with 5.7% excluding these agreements. At
December 31, 1994, these agreements decreased the overall
weighted-average rate on long-term debt to 7.1%, compared with
7.2% excluding these agreements, and effectively decreased the
obligations subject to variable rates to $7.2 billion. At
December 31, 1994, the weighted-average interest rate on short-
term debt decreased to 5.6%, compared with 5.9% excluding these
agreements.
Support Facilities
- ------------------
At December 31, 1995, Ford had long-term contractually committed
global credit agreements under which $8.4 billion is available
from various banks at least through June 30, 2000. The entire
$8.4 billion may be used, at Ford's option, by any affiliate of
Ford; however, any borrowing by an affiliate will be guaranteed by
Ford. In addition, Ford has the ability to transfer on a
nonguaranteed basis the entire $8.4 billion in varying portions to
Ford Credit and Ford Credit Europe. These facilities were unused
at December 31, 1995.
At December 31, 1995, Financial Services had a total of $48.5
billion of contractually committed support facilities. Of these
facilities, $23.8 billion (excluding the $8.4 billion of Ford
credit facilities) are contractually committed global credit
agreements under which $19.8 billion and $4 billion are available
to Ford Credit and Ford Credit Europe, respectively, from various
banks; 62% and 75%, respectively, of such facilities are available
through June 30, 2000. The entire $19.8 billion may be used, at
Ford Credit's option, by any subsidiary of Ford Credit, and the
entire $4 billion may be used, at Ford Credit Europe's option, by
any subsidiary of Ford Credit Europe. Any borrowings by such
subsidiaries will be guaranteed by Ford Credit or Ford Credit
Europe, as the case may be. At December 31, 1995, none of the Ford
Credit global facilities were in use; $742 million of the Ford Credit
Europe global facilities were in use. Other than the global credit
agreements, the remaining portion of the Financial Services support
facilities at December 31, 1995 consisted of $22 billion of
contractually committed support facilities available to various
affiliates in the U.S. and $2.7 billion of contractually committed
support facilities available to various affiliates outside the U.S.;
at December 31, 1995, about $1 billion of these facilities were in use.
FS-22
<PAGE>
NOTE 10. Capital Stock
- ------------------------
At December 31, 1995, all general voting power was vested in the
holders of Common Stock and the holders of Class B Stock, voting
together without regard to class. At that date, the holders of
Common Stock were entitled to one vote per share and, in the
aggregate, had 60% of the general voting power; the holders of
Class B Stock were entitled to such number of votes per share as
would give them, in the aggregate, the remaining 40% of the
general voting power, as provided in the company's Certificate of
Incorporation.
The Certificate provides that all shares of Common Stock and Class
B Stock share equally in dividends (other than dividends declared
with respect to any outstanding Preferred Stock), except that any
stock dividends are payable in shares of Common Stock to holders
of that class and in Class B Stock to holders of that class. Upon
liquidation, all shares of Common Stock and Class B Stock are
entitled to share equally in the assets of the company available
for distribution to the holders of such shares.
On April 14, 1994, the company's Board of Directors declared a 2-
for-1 stock split in the form of a 100% stock dividend on the
company's Common Stock and Class B Stock effective June 6, 1994.
Share data were restated to reflect the split, where appropriate.
Information concerning the Preferred Stock of the company is as
follows:
<TABLE>
<CAPTION>
Series A Series B
Cumulative Convertible Preferred Stock Cumulative Preferred Stock
-------------------------------------- ---------------------------------------
<S> <C> <C>
Liquidation preference $50 per Depositary Share $25 per Depositary Share
and shares outstanding $534 million and 10,681 shares $508 million and 10,163 shares
at December 31, 1995 outstanding (10,680,665 Depositary outstanding (20,326,463 Depositary
Shares) Shares)
Dividends $4.20 per year per Depositary Share $2.0625 per year per Depositary Share
Conversion Shares can be converted at any time None
into shares of Common Stock of the
company at a rate equivalent to
3.2654 shares of Common Stock for
each Depositary Share (equivalent to
a conversion price of $15.3121 per
share of Common Stock)
Redemption Not redeemable prior to Not redeemable prior to
December 7, 1997 December 1, 2002
On and after December 7, 1997, the On and after December 1, 2002, and
stock is redeemable for cash at the upon satisfaction of certain
company's option, in whole or in conditions, the stock is redeemable
part, initially at an amount equi- for cash at the option of Ford, in
valent to $51.68 per Depositary whole or in part, at a redemption
Share and thereafter at prices price equivalent to $25 per Depositary
declining to $50 per Depositary Share, plus an amount equal to the sum
Share on and after December 1, 2001, of all accrued and unpaid dividends
plus, in each case, an amount equal
to the sum of all accrued and unpaid 25,273,537 Depositary Shares were
dividends exchanged during 1995 (see Note 1,
"Company-Obligated Mandatorily
Redeemable Preferred Securities of a
Subsidiary Trust")
</TABLE>
The Series A and Series B Preferred Stock rank (and any other
outstanding Preferred Stock of the company would rank) senior to
the Common Stock and Class B Stock in respect of dividends and
liquidation rights.
FS-23
<PAGE>
NOTE 11. Stock Options
- -----------------------
The company has stock options outstanding under the 1985 Stock
Option Plan and the 1990 Long-Term Incentive Plan. These plans
were approved by the stockholders.
Information concerning stock options is as follows (shares in
millions):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ -------
<S> <C> <C> <C>
Option price of new grants a/ $32.00, $29.06 $28.84
$29.50, and
$28.06 $28.63
and
$28.56
Shares subject to option
------------------------
Outstanding at beginning of period 43.3 37.4 41.1
New grants 9.7 9.5 7.1
Exercised b/ (3.4) (2.6) (6.7)
Surrendered upon exercise of stock appreciation rights (0.9) (0.9) (3.9)
Terminated and expired (0.2) (0.1) (0.2)
----- ----- -----
Outstanding at end of period 48.5 c/ 43.3 37.4
Outstanding but not exercisable (22.6) (21.3) (19.3)
----- ----- -----
Exercisable at end of period 25.9 22.0 18.1
===== ===== =====
Shares authorized for future grants (as of
December 31) d/ 0 0 0
</TABLE>
- - - - - -
a/ Fair market value of Common Stock at dates of grant.
b/ At option prices ranging from $9.09 to $29.06 during 1995, $9.09
to $28.84 during 1994, and $9.09 to $25.84 during 1993.
c/ Including 7.6 million and 40.9 million shares under the 1985
and 1990 Plans, respectively, at option prices ranging from
$13.42 to $32.00 per share.
d/ In addition, up to 1% of the issued Common Stock as of
December 31 of any year may be made available for stock options and
other plan awards in the next succeeding calendar year. That limit
may be increased up to 2% in any year, with a corresponding
reduction in shares available for grants in future years. At
December 31, 1995, this reduction aggregated 2.4 million shares.
No further grants may be made under the 1985 Plan. Grants may be
made under the 1990 Plan through April 2000. In general, options
granted under the 1985 Plan and options granted to date under the
1990 Plan become exercisable 25% after one year from the date of
grant, 50% after two years, 75% after three years and in full
after four years. Options under both Plans expire after 10 years.
Certain options outstanding under the Plans were granted with an
equal number of accompanying stock appreciation rights that may be
exercised in lieu of the options. Under the Plans, a stock
appreciation right entitles the holder to receive, without
payment, the excess of the fair market value of the Common Stock
on the date of exercise over the option price, either in Common
Stock or cash or a combination. In addition, grants of Contingent
Stock Rights were made with respect to 884,500 shares in 1995,
709,800 shares in 1994, and 2,327,200 shares in 1993 under the
1990 Long-Term Incentive Plan (not included in the table above).
The number of shares ultimately awarded will depend on the extent
to which the Performance Target specified in each Right is
achieved, the individual performance of the recipients and other
factors, as determined by the Compensation and Option Committee of
the Board of Directors.
Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock-Based Compensation", was issued in October
1995. SFAS 123 permits entities to record expense for employee
stock compensation plans based on fair value at date of grant.
The company, however, plans to continue to measure compensation
cost using the intrinsic value method, in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees."
FS-24
<PAGE>
NOTE 12. Litigation and Claims
- -------------------------------
Various legal actions, governmental investigations and proceedings
and claims are pending or may be instituted or asserted in the
future against the company and its subsidiaries, including those
arising out of alleged defects in the company's products,
governmental regulations relating to safety, emissions and fuel
economy, financial services, intellectual property rights, product
warranties and environmental matters. Certain of the pending
legal actions are, or purport to be, class actions. Some of the
foregoing matters involve or may involve compensatory, punitive,
or antitrust or other treble damage claims in very large amounts,
or demands for recall campaigns, environmental remediation
programs, sanctions, or other relief which, if granted, would
require very large expenditures.
Litigation is subject to many uncertainties, and the outcome of
individual litigated matters is not predictable with assurance.
Reserves have been established by the company for certain of the
matters discussed in the foregoing paragraph where losses are deemed
probable. It is reasonably possible, however, that some of the
matters discussed in the foregoing paragraph for which reserves have
not been established could be decided unfavorably to the company or
the subsidiary involved and could require the company or such subsidiary
to pay damages or make other expenditures in amounts or a range of amounts
that cannot reasonably be at December 31, 1995. The company
does not reasonably expect, based on its analysis, that any adverse outcome
from such matters would have a material effect on future consolidated
financial statements for a particular year, although such an outcome is
possible.
NOTE 13. Commitments and Contingencies
- ---------------------------------------
At December 31, 1995, the company had the following minimum rental
commitments under non-cancelable operating leases (in millions):
1996 - $740; 1997 - $689; 1998 - $363; 1999 - $310; 2000 - $251;
thereafter - $456. These amounts include rental commitments
related to the sales and leasebacks of certain Automotive
machinery and equipment.
The company and certain of its subsidiaries have entered into
agreements with various banks to provide credit card programs that
offer rebates that can be applied against the purchase or lease of
Ford cars or trucks. The maximum amount of rebates available to
qualified cardholders at December 31, 1995 and 1994 was $3.1
billion and $2.3 billion, respectively. The company has provided
for the estimated net cost of these programs as a sales incentive
based on the estimated number of participants who ultimately will
purchase vehicles.
Certain Financial Services subsidiaries make credit lines
available to holders of their credit cards. At December 31, 1995
and 1994, the unused portion of available credit was approximately
$19.3 billion and $10.3 billion, respectively, and is revocable
under specified conditions. The fair value of unused credit lines
and the potential risk of loss were not considered to be material.
FS-25
<PAGE>
NOTE 14. Financial Instruments
- -------------------------------
Estimated fair value amounts have been determined using available
market information and various valuation methods depending on the
type of instrument. In evaluating the fair value information,
considerable judgment is required to interpret the market data
used to develop the estimates. The use of different market
assumptions and/or different valuation techniques may have a
material effect on the estimated fair value amounts. Accordingly,
the estimates of fair value presented herein may not be indicative
of the amounts that could be realized in a current market
exchange.
Balance Sheet Financial Instruments
- -----------------------------------
Information about specific valuation techniques and related
estimated fair value detail is provided throughout the footnotes.
The table below provides book value and estimated fair value
amounts (in millions) and a cross reference to the applicable
Note.
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
----------------------- ----------------------
Book Fair Book Fair Fair Value
Value Value Value Value Reference
--------- -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Automotive
----------
Marketable securities $ 6,656 $ 6,656 $ 7,602 $ 7,602 Note 2
Debt 7,307 8,160 7,258 7,492 Note 9
Financial Services
------------------
Marketable securities $ 4,229 $ 4,296 $ 5,781 $ 5,746 Note 2
Receivables 110,745 112,798 98,341 99,518 Note 3
Debt 141,317 144,730 123,713 122,252 Note 9
</TABLE>
Foreign Currency Instruments
- ----------------------------
The fair value of foreign currency instruments generally was
estimated using current market prices provided by outside
quotation services. At December 31, 1995 and 1994, the fair value
of net receivable contracts was $373 million and $298 million,
respectively, and the fair value of net payable contracts was $316
million and $108 million, respectively. At December 31, 1995 and
1994, foreign currency instruments had a net deferred loss of $111
million and a net deferred gain of $59 million, respectively. In
the unlikely event that a counterparty fails to meet the terms of
a foreign currency agreement, the company's market risk is limited
to the exchange rate differential. In the case of currency swaps,
the company's market risk also may include an interest rate differential.
At December 31, 1995 and 1994, the total amount of the company's
foreign currency forward contracts (contracts purchased and sold)
and currency swaps and options outstanding was $24.5 billion and
$12.6 billion, respectively, maturing primarily through 1996.
Interest Rate Instruments
- -------------------------
The fair value of interest rate instruments is the estimated
amount the company would receive or pay to terminate the
agreement. Fair value is calculated using information provided by
outside quotation services, taking into account current interest
rates and the current credit-worthiness of the swap parties. At
December 31, 1995 and 1994, the fair value of net receivable
contracts was $739 million and $452 million, respectively, and the
fair value of net payable contracts was $430 million and
$596 million, respectively. In the unlikely event that a
counterparty fails to meet the terms of an interest rate
agreement, the company's exposure is limited to the interest rate
differential. At December 31, 1995 and 1994, the underlying
principal amounts on which the company has interest rate swap
agreements outstanding aggregated $66.3 billion and $52.7 billion,
respectively, maturing primarily through 2001.
Other Financial Agreements
- --------------------------
At December 31, 1995, the company had guaranteed $1.2 billion of
debt of unconsolidated subsidiaries, affiliates and others. The
potential risk of loss under other financial agreements was not
material.
FS-26
<PAGE>
NOTE 15. Acquisitions and Dispositions
- ---------------------------------------
Dissolution of Autolatina Joint Venture
- ---------------------------------------
During 1995, the company's joint venture with Volkswagen AG in
Brazil and Argentina was dissolved. The dissolution resulted in a
gain of $230 million, primarily from a one-time cash compensation
payment to Ford. Prior to dissolution, the company held a 49%
interest in Autolatina and accounted for it on an equity basis.
The company's income statement for 1995 included Ford's equity
share in the net loss of the Autolatina joint venture through the
dissolution date together with the gain on dissolution. The
assets and liabilities of the new entities in Brazil and Argentina
were consolidated in the company's balance sheet at
December 31, 1995.
Historically, earnings in Brazil and Argentina have represented a
significant portion of Ford's Automotive earnings outside the U.S.
and Europe. The long-term effect, if any, of the dissolution of
Autolatina on the company's future results will depend on Ford's
ability to compete on its own in these markets.
Sale of Annuity Business
- ------------------------
During 1995, the company agreed to sell its annuity business to
SunAmerica, Inc. for $173 million. The sale is expected to be
completed in early 1996. The company recognized a one-time charge
related to the sale that was not material. The company's income
statement included the results of operations of the annuity
business through December 31, 1995. Net assets of the annuity
business at December 31, 1995 were included in the balance sheet
under Financial Services - Other Assets; at December 31, 1994, the
assets and liabilities were consolidated as part of the Financial
Services segment.
Sale of First Nationwide Bank
- -----------------------------
On September 30, 1994, substantially all of the assets of First
Nationwide Bank, since known as Granite Savings Bank (the "Bank"),
were sold to, and substantially all of the Bank's liabilities were
assumed by, First Madison Bank. The Bank is a wholly owned
subsidiary of Granite Management Corporation (formerly First
Nationwide Financial Corporation) ("Granite"), which in turn is a
wholly owned subsidiary of Ford.
The company recognized in First Quarter 1994 earnings a pre-tax
charge of $475 million ($440 million after taxes) related to the
disposition of the Bank, reflecting the non-recovery of goodwill
and reserves for estimated losses on assets not included in the
sale. The company's income statement included the results of
operations of Granite through March 31, 1994. The remaining net
assets of Granite at December 31, 1995 and 1994 were included in
the balance sheet under Financial Services - Other Assets.
Acquisition of The Hertz Corporation
- ------------------------------------
In April 1994, The Hertz Corporation ("Hertz") became a wholly
owned subsidiary of Ford. In 1993 and First Quarter 1994, Hertz
was accounted for on an equity basis as part of the Automotive
segment. In the balance of 1994 and in 1995, the operating
results, assets, liabilities and cash flows of Hertz were
consolidated as part of the Financial Services segment.
FS-27
<PAGE>
NOTE 16. Cash Flows
- --------------------
The reconciliation of net income to cash flows from operating
activities is as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
-------------------- --------------------- ---------------------
Financial Financial Financial
Automotive Services Automotive Services Automotive Services
--------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net income $2,056 $ 2,083 $3,913 $1,395 $1,008 $1,521
Adjustments to reconcile net income
to cash flows from operating activities:
Depreciation and amortization 5,219 6,500 4,426 4,910 4,404 3,064
Losses/(Earnings) of affiliated
companies in excess of dividends
remitted 191 7 (171) (2) (21) (9)
Provision for credit and
insurance losses - 1,818 - 1,539 - 1,523
Foreign currency adjustments (64) - (384) - (650) -
Net sales/(purchases) of trading
securities 672 239 (3,616) (41) - -
Provision/(Credit) for deferred income
taxes 88 725 424 410 (796) 595
Changes in assets and liabilities:
Decrease/(Increase) in accounts
receivable and other current assets 129 - (1,096) - 34 -
(Increase) in inventory (46) - (894) - (275) -
Increase in accounts payable and
accrued and other liabilities 730 1,461 4,949 1,077 3,735 594
Other (126) (511) (9) (201) (577) (143)
------ ------- ------ ------ ------ ------
Cash flows from operating activities $8,849 $12,322 $7,542 $9,087 $6,862 $7,145
====== ======= ====== ====== ====== ======
The company considers all highly liquid investments purchased with
a maturity of three months or less, including short-term time
deposits and government, agency and corporate obligations, to be
cash equivalents. Automotive cash equivalents at December 31,
1995 and 1994 were $4.7 billion and $3.4 billion, respectively;
Financial Services cash equivalents at December 31, 1995 and 1994
were $1.8 billion and $1.4 billion, respectively. Cash flows
resulting from futures contracts, forward contracts and options
that are accounted for as hedges of identifiable transactions are
classified in the same category as the item being hedged. With
the adoption of Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity
Securities," as of January 1, 1994, purchases, sales and
maturities of trading securities are included in cash flows from
operating activities. Purchases, sales and maturities of
available-for-sale and held-to-maturity securities are included in
cash flows from investing activities.
Cash paid for interest and income taxes was as follows (in
millions):
1995 1994 1993
------ ------ -------
Interest $9,586 $7,718 $6,969
Income taxes 1,425 2,042 1,522
FS-28
<PAGE>
NOTE 17. Segment Information
- -----------------------------
Financial information segregated by major geographic area is as
follows (in millions):
</TABLE>
<TABLE>
<CAPTION>
Automotive
- ----------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Sales to unaffiliated customers
United States $ 73,870 $ 73,759 $ 62,108
Europe 26,132 22,623 19,468
All other 10,494 10,755 9,992
-------- -------- --------
Total $110,496 $107,137 $ 91,568
======== ======== ========
Intercompany sales among geographic areas*
United States $ 10,438 $ 11,206 $ 9,320
Europe 2,765 2,303 2,269
All other 12,060 11,217 8,613
-------- -------- --------
Total $ 25,263 $ 24,726 $ 20,202
======== ======== ========
Total sales
United States $ 84,308 $ 84,965 $ 71,428
Europe 28,897 24,926 21,737
All other 22,554 21,972 18,605
Elimination of intercompany sales (25,263) (24,726) (20,202)
-------- -------- --------
Total $110,496 $107,137 $ 91,568
======== ======== ========
Operating income/(loss)
United States $ 2,409 $ 4,131 $ 1,677
Europe 20 611 (531)
All other 852 1,084 286
-------- ------- --------
Total $ 3,281 $ 5,826 $ 1,432
======== ======== ========
Net income/(loss)
United States $ 1,843 $ 3,002 $ 1,442
Europe 116 128 (873)
All other 97 783 439
-------- -------- --------
Total $ 2,056 $ 3,913 $ 1,008
======== ======== ========
Assets at December 31
United States $ 45,841 $ 45,889 $ 39,959
Europe 17,010 16,880 16,210
All other 18,842 16,798 15,197
Net receivable from Financial Services 200 677 910
Elimination of intercompany receivables (9,121) (11,605) (10,539)
-------- -------- --------
Total $ 72,772 $ 68,639 $ 61,737
======== ======== ========
Capital expenditures (facilities, machinery
and equipment and tooling)
United States $ 5,296 $ 5,429 $ 4,289
Europe 1,892 1,393 1,490
All other 1,488 1,488 935
-------- -------- --------
Total $ 8,676 $ 8,310 $ 6,714
======== ======== ========
</TABLE>
- - - - - -
* Intercompany sales among geographic areas consist primarily of
vehicles, parts and components manufactured by the company and
various subsidiaries and sold to different entities within the
consolidated group; transfer prices for these transactions are
established by agreement between the affected entities
<TABLE>
<CAPTION>
Financial Services
- ------------------
1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
Revenues
United States $ 21,383 $ 17,356 $ 14,102
Europe 3,144 2,336 1,673
All other 2,114 1,610 1,178
-------- -------- --------
Total $ 26,641 $ 21,302 $ 16,953
======== ======== ========
Income before income taxes**
United States $ 2,822 $ 2,185 $ 2,311
Europe 493 419 285
All other 224 188 116
-------- -------- --------
Total $ 3,539 $ 2,792 $ 2,712
======== ======== ========
</TABLE>
- - - - - -
** Financial Services activities do not report operating income;
income before income taxes is representative of operating income
FS-29
<PAGE>
NOTE 17. Segment Information (Cont'd)
- -----------------------------
Financial Services (Cont'd)
- ------------------
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
Net income
United States $ 1,718 $ 1,119 $ 1,340
Europe 321 218 140
All other 44 58 41
-------- -------- --------
Total $ 2,083 $ 1,395 $ 1,521
======== ======== ========
Assets at December 31
United States $137,154 $124,120 $117,290
Europe 20,237 16,507 12,132
All other 13,120 10,356 7,779
-------- -------- --------
Total $170,511 $150,983 $137,201
======== ======== ========
</TABLE>
NOTE 18. Summary Quarterly Financial Data (Unaudited)
- ------------------------------------------------------
(in millions, except amounts per share)
<TABLE>
<CAPTION>
1995 1994
------------------------------------ ------------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Automotive
Sales $28,601 $29,861 $24,437 $27,597 $26,070 $28,375 $24,926 $27,766
Operating income/(loss) 1,782 1,774 (204) (71) 1,559 1,966 989 1,312
Financial Services
Revenues 6,182 6,528 6,981 6,950 4,332 5,397 5,696 5,877
Income before income taxes 759 885 978 917 196 911 896 789
Total Company
Net income $ 1,550 $ 1,572 $ 357 $ 660 $ 904a/ $ 1,711 $ 1,124 $ 1,569
Less:
Preferred stock dividend
requirements 72 69 55 38 72 72 72 71
Fair value adjustment
from exchange of
Series B Preferred Stock - - - 66 - - - -
------ ------- ------- ------- ------- ------- ------- -------
Income attributable
to Common and
Class B Stock $ 1,478 $ 1,503 $ 302 $ 556 $ 832 $ 1,639 $ 1,052 $ 1,498
======= ======= ======= ======= ======= ======= ======= =======
AMOUNTS PER SHARE OF COMMON
AND CLASS B STOCK AFTER
PREFERRED STOCK DIVIDENDS b/
Income $ 1.44 $ 1.45 $ 0.28 $ 0.49 $ 0.83 $ 1.63 $ 1.04 $ 1.47
Income assuming full
dilution $ 1.28 $ 1.30 $ 0.27 $ 0.48 $ 0.75 $ 1.44 $ 0.93 $ 1.31
Cash dividends $ 0.26 $ 0.31 $ 0.31 $ 0.35 $ 0.20 $ 0.225 $ 0.225 $ 0.26
</TABLE>
- - - - - -
a/ Includes a loss of $440 million related to the disposition of
Granite Savings Bank (formerly First Nationwide Bank).
b/ The sum of the per share amounts in 1995 and 1994 is different
than the amounts reported for the full year because of the effect
that issuances of the company's stock had on average shares for
those periods.
FS-30
<PAGE>
Coopers & Lybrand L.L.P.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Ford Motor Company
We have audited the consolidated balance sheet of Ford Motor Company and
Subsidiaries at December 31, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Ford Motor
Company and Subsidiaries at December 31, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
/s/Coopers & Lybrand L.L.P.
400 Renaissance Center
Detroit, Michigan 48243
313-446-7100
January 26, 1996
Exhiibt 23
Coopers & Lybrand L.L.P.
Ford Motor Company
The American Road
Dearborn, Michigan
CONSENT OF COOPERS & LYBRAND L.L.P.
Re: Ford Motor Company Registration Statement Nos. 2-95018, 2-95020,
33-9722, 33-14951, 33-19036, 33-36043, 33-36061, 33-39402, 33-50087,
33-50194, 33-50238, 33-54304, 33-54344, 33-54348, 33-54275, 33-54283,
33-54735, 33-54737, 33-55847, 33-64607, on Form S-8, and 2-42133,
33-32641, 33-40638, 33-43085, 33-55474, 33-55171 and 33-64247 on
Form S-3
We consent to the incorporation by reference in the above Registration
Statements of our report dated January 26, 1996 to the Board of Directors
and Stockholders of Ford Motor Company accompanying the financial statements
of Ford Motor Company and Subsidiaries included in the Ford Motor Company
Current Report on Form 8-K dated February 12, 1996.
/s/Coopers & Lybrand
COOPERS & LYBRAND L.L.P.
400 Renaissance Center
Detroit, Michigan 48243
February 12, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Automotive Segment - This schedule contains summary financial information
of the Automotive Segment extracted from the consolidated financial
statements of Ford Motor Company and Subsidiaries for the year ended and at
December 31, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000037996
<NAME> FORD MOTOR COMPANY
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 5,750
<SECURITIES> 6,656
<RECEIVABLES> 3,401
<ALLOWANCES> 80
<INVENTORY> 7,162
<CURRENT-ASSETS> 27,281
<PP&E> 69,422
<DEPRECIATION> 38,149
<TOTAL-ASSETS> 72,772
<CURRENT-LIABILITIES> 28,776
<BONDS> 5,475
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 110,496
<TOTAL-REVENUES> 110,496
<CGS> 101,171
<TOTAL-COSTS> 107,215
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 622
<INCOME-PRETAX> 3,166
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Services Segment - This schedule contains summary financial
information of the Financial Services Segment extracted from the consolidated
financial statements of Ford Motor Company and Subsidiaries for the year ended
and at December 31, 1995 and is qualified in its entirety by reference to such
financial statements. The error message indicated on this FDS is a result
of the EDGAR system's inability to accept multiple Article 5 Financial Data
Schedules. Accordingly, the error message should be ignored.
</LEGEND
<CIK> 0000037996
<NAME> FORD MOTOR COMPANY
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,690
<SECURITIES> 4,553
<RECEIVABLES> 149,694
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 170,511
<CURRENT-LIABILITIES> 0
<BONDS> 141,317
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 26,641
<TOTAL-REVENUES> 26,641
<CGS> 0
<TOTAL-COSTS> 23,241
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,818
<INTEREST-EXPENSE> 9,424
<INCOME-PRETAX> 3,539
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> CT
<LEGEND>
Conglomerate Total - This schedule contains summary financial information
extracted from the consolidated financial statements of Ford Motor Company
and Subsidiaries for the year ended and at December 31, 1995 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000037996
<NAME> FORD MOTOR COMPANY
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<TOTAL-ASSETS> 243,283
<COMMON> 1,160
0
0
<OTHER-SE> 23,387
<TOTAL-LIABILITY-AND-EQUITY> 243,283
<TOTAL-REVENUES> 137,137
<INCOME-TAX> 2,379
<INCOME-CONTINUING> 4,139
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,139
<EPS-PRIMARY> 3.58
<EPS-DILUTED> 3.33
</TABLE>
