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 3, 1997
----------------
(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>
- 2 -
Item 5. Other Events.
- ---------------------
The Consolidated Financial Statements of Ford Motor Company and
Subsidiaries for the year ended and at December 31, 1996 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.
Filed as Exhibit 99 is the First Supplemental Indenture, dated as of
December 5, 1996, between Ford Motor Company and The Bank of New York, as
Trustee. The First Supplemental Indenture amends the Indenture, dated as of
February 15, 1992, between such parties to change the signatures required on
debt securities issued under the Indenture.
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,
1996, together with the Report on
Examination thereof by Coopers &
Lybrand L.L.P., independent 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
Exhibit 99 First Supplemental Indenture dated Filed with this Report
as of December 5, 1996, between
Ford Motor Company and The Bank
of New York, as Trustee.
<PAGE>
-3-
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 3, 1997 By:/s/Peter Sherry, Jr.
--------------------------
Peter Sherry, Jr.
Assistant Secretary
<PAGE>
-4-
EXHIBIT INDEX
-------------
DESIGNATION DESCRIPTION PAGE
- ----------- ----------- ----
Exhibit 20 Consolidated Financial Statements
of Ford and Subsidiaries for the
year ended and at December 31, 1996,
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
Exhibit 99 First Supplemental Indenture dated
as of December 5, 1996, between
Ford Motor Company and The Bank
of New York, as Trustee.
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
HIGHLIGHTS
----------
Fourth Quarter Full Year
------------------------ --------------------------
1996 1995 1996 1995
------ ------ ------ ------
(Unaudited)
<S> <C> <C> <C> <C>
Worldwide vehicle unit sales of
cars and trucks (in thousands)
(Unaudited)
- - United States 1,006 955 3,897 3,993
- - Outside United States 747 635 2,756 2,613
----- ----- ----- -----
Total 1,753 1,590 6,653 6,606
===== ===== ===== =====
Sales and revenues (in millions)
- - Automotive $31,505 $27,597 $118,023 $110,496
- - Financial Services 7,328 6,950 28,968 26,641
------- ------- -------- --------
Total $38,833 $34,547 $146,991 $137,137
======= ======= ======== ========
Net income (in millions)*
- - Automotive $ 390 $ 16 $ 1,655 $ 2,056
- - Financial Services 814 644 2,791 2,083
------- ------- -------- --------
Total $ 1,204 $ 660 $ 4,446 $ 4,139
======= ======= ======== ========
Capital expenditures (in millions)
- - Automotive $ 2,413 $ 2,472 $ 8,209 $ 8,676
- - Financial Services 93 98 442 321
------- ------- -------- --------
Total $ 2,506 $ 2,570 $ 8,651 $ 8,997
======= ======= ======== ========
Automotive capital expenditures
as a percentage of sales 7.7% 9.0% 7.0% 7.9%
Stockholders' equity at December 31
- - Total (in millions) $26,762 $24,547 $ 26,762 $ 24,547
- - After-tax return on Common and
Class B stockholders' equity 18.4% 10.9% 17.6% 18.2%
Automotive cash and marketable securities
at December 31 (in millions) $15,414 $12,406 $ 15,414 $ 12,406
Automotive debt at December 31
(in millions) $ 8,156 $ 7,307 $ 8,156 $ 7,307
After-tax return on sales
- - U.S. Automotive 3.2% 0.9% 2.7% 2.5%
- - Total Automotive 1.3 0.1 1.4 1.9
Shares of Common and Class B Stock
(in millions)
- - Average number outstanding 1,187 1,136 1,179 1,071
- - Number outstanding at December 31 1,188 1,159 1,188 1,159
AMOUNTS PER SHARE OF COMMON AND
CLASS B STOCK AFTER PREFERRED
STOCK DIVIDENDS
Income/(loss) assuming full dilution
- - Automotive $ 0.32 $ (0.06) $ 1.33 $ 1.59
- - Financial Services 0.67 0.54 2.31 1.74
------- ------- -------- --------
Total $ 0.99 $ 0.48 $ 3.64 $ 3.33
======= ======= ======== ========
Cash dividends $ 0.385 $ 0.35 $ 1.47 $ 1.23
- - - - - -
*One-time factors included in net income
(in millions):
Automotive
- Employee separation programs $ (336) $ (129) $ (436) $ (146)
- Autolatina dissolution - 230 - 230
Financial Services
- Sale of The Associates' common stock - - 650 -
- Sale of USL Capital's assets - - 95 -
- Net write-down for Budget Rent a Car
Corporation 204 - (233) -
------- ------- -------- --------
Total $ (132) $ 101 $ 76 $ 84
======= ======= ======== ========
</TABLE>
FS-1
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
VEHICLE UNIT SALES
------------------
For the Periods Ended December 31, 1996 and 1995
(in thousands)
Fourth Quarter Full Year
------------------------ --------------------------
1996 1995 1996 1995
------ ------ ------ ------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NORTH AMERICA
United States
Cars 428 434 1,656 1,767
Trucks 578 521 2,241 2,226
----- ----- ----- -----
Total United States 1,006 955 3,897 3,993
Canada 84 76 258 254
Mexico 28 11 67 32
----- ----- ----- -----
Total North America 1,118 1,042 4,222 4,279
EUROPE
Britain 140 125 516 496
Germany 106 84 436 409
France 47 41 194 165
Italy 51 54 180 193
Spain 41 31 155 160
Other countries 103 74 339 286
----- ----- ----- -----
Total Europe 488 409 1,820 1,709
OTHER INTERNATIONAL
Brazil 48 48 190 201
Australia 31 32 138 139
Taiwan 14 16 86 106
Argentina 21 14 64 48
Japan 11 13 52 57
Other countries 22 16 81 67
----- ----- ----- -----
Total other international 147 139 611 618
----- ----- ----- -----
Total worldwide vehicle unit sales 1,753 1,590 6,653 6,606
===== ===== ===== =====
</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.
FS-2
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
For the Years Ended December 31, 1996, 1995 and 1994
(in millions, except amounts per share)
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
AUTOMOTIVE
Sales (Note 1) $118,023 $110,496 $107,137
Costs and expenses (Notes 1 and 15):
Costs of sales 108,882 101,171 95,887
Selling, administrative and other expenses 6,625 6,044 5,424
-------- -------- --------
Total costs and expenses 115,507 107,215 101,311
Operating income 2,516 3,281 5,826
Interest income 841 800 665
Interest expense 695 622 721
-------- -------- --------
Net interest income/(expense) 146 178 (56)
Equity in net (loss)/income of affiliated companies (Note 1) (6) (154) 271
Net expense from transactions with Financial Services (Note 1) (85) (139) (44)
-------- -------- --------
Income before income taxes - Automotive 2,571 3,166 5,997
FINANCIAL SERVICES
Revenues (Note 1) 28,968 26,641 21,302
Costs and expenses (Note 1):
Interest expense 9,704 9,424 7,023
Depreciation 6,875 6,500 4,910
Operating and other expenses 6,217 5,499 4,607
Provision for credit and insurance losses 2,564 1,818 1,539
Asset write-downs and dispositions (Note 15) 121 - 475
-------- -------- --------
Total costs and expenses 25,481 23,241 18,554
Net revenue from transactions with Automotive (Note 1) 85 139 44
Ga in on sale of The Associates' common stock (Note 15) 650 - -
-------- -------- --------
Income before income taxes - Financial Services 4,222 3,539 2,792
-------- -------- --------
TOTAL COMPANY
Income before income taxes 6,793 6,705 8,789
Provision for income taxes (Note 6) 2,166 2,379 3,329
-------- -------- --------
Income before minority interests 4,627 4,326 5,460
Minority interests in net income of subsidiaries 181 187 152
-------- -------- --------
Net income $ 4,446 $ 4,139 $ 5,308
======== ======== ========
Income attributable to Common and Class B Stock
after preferred stock dividends (Note 1) $ 4,381 $ 3,839 $ 5,021
Average number of shares of Common and Class B Stock outstanding 1,179 1,071 1,010
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK (Note 1)
Income $ 3.72 $ 3.58 $ 4.97
Income assuming full dilution $ 3.64 $ 3.33 $ 4.44
Cash dividends $ 1.47 $ 1.23 $ 0.91
The accompanying notes are part of the financial statements.
</TABLE>
FS-3
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
--------------------------
(in millions)
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Automotive:
Cash and cash equivalents $ 3,578 $ 5,750
Marketable securities (Note 2) 11,836 6,656
-------- --------
Total cash and marketable securities 15,414 12,406
Receivables 3,635 3,321
Inventories (Note 4) 6,656 7,162
Deferred income taxes 3,296 2,709
Other current assets (Note 1) 3,193 1,483
Net current receivable from Financial Services (Note 1) 0 200
-------- --------
Total current assets 32,194 27,281
Equity in net assets of affiliated companies (Note 1) 2,483 2,248
Net property (Note 5) 33,527 31,273
Deferred income taxes 4,429 4,802
Other assets (Notes 1 and 8) 7,025 7,168
-------- --------
Total Automotive assets 79,658 72,772
Financial Services:
Cash and cash equivalents 3,689 2,690
Investments in securities (Note 2) 2,307 4,553
Net receivables and lease investments (Note 3) 161,906 149,694
Other assets (Note 1) 14,834 13,574
Net receivable from Automotive (Note 1) 473 0
-------- --------
Total Financial Services assets 183,209 170,511
-------- --------
Total assets $262,867 $243,283
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive:
Trade payables $ 11,735 $ 11,260
Other payables 2,206 1,976
Accrued liabilities (Note 7) 16,587 13,392
Income taxes payable 508 316
Debt payable within one year (Note 9) 1,661 1,832
Net current payable to Financial Services (Note 1) 473 0
-------- --------
Total current liabilities 33,170 28,776
Long-term debt (Note 9) 6,495 5,475
Other liabilities (Note 7) 26,793 25,677
Deferred income taxes 1,225 1,186
-------- --------
Total Automotive liabilities 67,683 61,114
Financial Services:
Payables 4,695 5,476
Debt (Note 9) 150,205 141,317
Deferred income taxes 4,338 3,831
Other liabilities and deferred income 8,504 6,116
Net payable to Automotive (Note 1) 0 200
-------- --------
Total Financial Services liabilities 167,742 156,940
Company-obligated mandatorily redeemable preferred securities of
a subsidiary trust holding solely junior subordinated debentures
of the Company (Note 1) 680 682
Stockholders' equity:
Capital stock (Notes 10 and 11)
Preferred Stock, par value $1.00 per share (aggregate
liquidation preference of $694 million and $1,042 million) * *
Common Stock, par value $1.00 per share
(1,118 million and 1,089 million shares issued) 1,118 1,089
Class B Stock, par value $1.00 per share (71 million shares issued) 71 71
Capital in excess of par value of stock 5,268 5,105
Foreign currency translation adjustments and other (Note 1) (29) 594
Earnings retained for use in business 20,334 17,688
-------- --------
Total stockholders' equity 26,762 24,547
-------- --------
Total liabilities and stockholders' equity $262,867 $243,283
======== ========
- - - - - -
*Less than $500,000
The accompanying notes are part of the financial statements.
</TABLE>
FS-4
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
For the Years Ended December 31, 1996, 1995 and 1994
(in millions)
1996 1995 1994
----------------------- ---------------------- ----------------------
Financial Financial Financial
Automotive Services Automotive Services Automotive Services
---------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents at January 1 $ 5,750 $ 2,690 $ 4,481 $ 1,739 $ 5,667 $ 2,555
Cash flows from operating activities
(Note 16) 6,576 12,681 8,849 12,322 7,542 9,087
Cash flows from investing activities
Capital expenditures (8,209) (442) (8,676) (321) (8,310) (236)
Purchase of leased assets (195) - 0 - 0 -
Acquisitions of other companies 0 (166) 0 0 0 (485)
Acquisitions of receivables and lease
investments - (109,087) - (99,967) - (90,824)
Collections of receivables and
lease investments - 82,398 - 71,149 - 61,111
Net acquisitions of daily rental vehicles - (1,759) - (1,459) - (924)
Net proceeds from USL Capital asset
sales (Note 15) - 1,157 - - - -
Purchases of securities (Note 16) (6) (8,020) (51) (6,274) (412) (10,688)
Sales and maturities of securities (Note 16) 7 9,863 325 5,052 511 9,649
Proceeds from sales of receivables and
lease investments - 2,867 - 4,360 - 3,622
Net investing activity with Financial
Services 416 - (19) - 355 -
Other (586) (45) 558 (184) (331) 196
------- --------- ------- -------- ------- --------
Net cash used in investing activities (8,573) (23,234) (7,863) (27,644) (8,187) (28,579)
Cash flows from financing activities
Cash dividends (1,800) - (1,559) - (1,205) -
Issuance of Common Stock 192 - 601 - 715 -
Issuance of Common Stock of a
subsidiary (Note 15) - 1,897 - - - -
Changes in short-term debt 151 3,474 413 5,884 (795) 10,314
Proceeds from other debt 1,688 22,342 300 23,854 158 21,885
Principal payments on other debt (1,031) (14,428) (177) (11,489) (75) (14,088)
Net financing activity with Automotive - (416) - 19 - (355)
Receipts from annuity contracts - - - 283 - 1,124
Net (redemption)/issuance of subsidiary
company preferred stock (Note 1) - - - (1,875) - 417
Other 37 (528) 121 102 31 (554)
------- --------- ------- -------- ------- --------
Net cash (used in)/provided by financing
activities (763) 12,341 (301) 16,778 (1,171) 18,743
Effect of exchange rate changes on cash (85) (116) 107 (28) 397 166
Net transactions with Automotive/
Financial Services 673 (673) 477 (477) 233 (233)
------- --------- ------- -------- ------- --------
Net (decrease)/increase in cash and
cash equivalents (2,172) 999 1,269 951 (1,186) (816)
------- --------- ------- -------- ------- --------
Cash and cash equivalents at December 31 $ 3,578 $ 3,689 $ 5,750 $ 2,690 $ 4,481 $ 1,739
======= ========= ======= ======== ======= ========
</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, 1996, 1995 and 1994
(in millions)
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
CAPITAL STOCK (Note 10)
Common Stock:
Balance at beginning of year $ 1,089 $ 952 $ 464
Issued for Series A Preferred Stock conversion,
employee benefit plans and other 29 137 19
Stock split in form of a 100% stock dividend - - 469
------- ------- -------
Balance at end of year 1,118 1,089 952
Class B Stock:
Balance at beginning of year 71 71 35
Stock split in form of a 100% stock dividend - - 36
------- ------- -------
Balance at end of year 71 71 71
Series A Preferred Stock * * *
Series B Preferred Stock (Note 1) * * *
CAPITAL IN EXCESS OF PAR VALUE OF STOCK
Balance at beginning of year 5,105 5,273 5,082
Exchange of Series B Preferred Stock (Notes 1 and 10) - (632) -
Issued for Series A Preferred Stock conversion,
employee benefit plans and other 163 464 696
Stock split in form of a 100% stock dividend - - (505)
------- ------- -------
Balance at end of year 5,268 5,105 5,273
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
AND OTHER (Note 1)
Balance at beginning of year 594 189 (1,078)
Translation adjustments during year (408) 250 800
Minimum pension liability adjustment (159) (108) 400
Other (56) 263 67
------- ------- -------
Balance at end of year (29) 594 189
EARNINGS RETAINED FOR USE IN THE BUSINESS
Balance at beginning of year 17,688 15,174 11,071
Net income 4,446 4,139 5,308
Cash dividends (1,800) (1,559) (1,205)
Fair value adjustment from exchange
of Series B Preferred Stock (Note 1) - (66) -
------- ------- -------
Balance at end of year 20,334 17,688 15,174
------- ------- -------
Total stockholders' equity $26,762 $24,547 $21,659
======= ======= =======
</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, 1993 464 35 0.046 0.023
Additions
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)
1996 - Conversion of Series A Preferred Stock 23 - (0.007) -
- Employee benefit plans and other 6 - - -
----- --- ----- -----
Net additions 654 36 (0.042) (0.013)
----- --- ----- -----
Issued at December 31, 1996 1,118 71 0.004 0.010
===== === ===== =====
Authorized at December 31, 1996 3,000 265 -- In total: 30 --
- - - - - -
*The balances at the beginning and end of each period were less than $500,000
The accompanying notes are part of the financial statements.
</TABLE>
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 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. Certain amounts for prior
periods have been reclassified to conform with 1996 presentations. Automotive
revenues and costs for 1996 include new entities in Brazil and Argentina
resulting from the dissolution of Autolatina; amounts for 1995 and 1994
exclude these entities (Note 15).
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.
Nature of Operations
- --------------------
The company operates in two principal business segments. 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, vehicle and equipment leasing and rental operations,
and insurance 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 Ford 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 in accordance with the Emerging Issues
Task Force consensus on Issue 95-1, "Revenue Recognition on Sales with a
Guaranteed Minimum Residual Value." Ford elected to recognize this change in
accounting principle on a prospective basis; the effect on the company's
consolidated results of operations was not material. Previously, the company
recognized revenue for these vehicles when shipped. The carrying value of these
vehicles, included in other current assets, was $1,803 million at December 31,
1996.
FS-7
<PAGE>
NOTE 1. Accounting Policies (continued)
- ----------------------------
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 $2,155 million in 1996, $2,024 million in 1995 and $1,823 million in
1994.
Estimated costs related to product warranty are accrued at the time of sale.
Research and development costs are expensed as incurred and were $6,821 million
in 1996, $6,624 million in 1995 and $5,811 million in 1994.
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 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):
1996 1995 1994
------ ------ ------
Net income $4,446 $4,139 $5,308
Less:
Preferred stock dividend
requirements 65 234 287
Fair value adjustment from
exchange of Series B
Preferred Stock* - 66 -
------ ------ ------
Income attributable to
Common and Class B Stock $4,381 $3,839 $5,021
====== ====== ======
- - - - -
* Represents a one-time reduction of $0.06 per share of Common and
Class B Stock to reflect the excess of the fair value of company-
obligated mandatorily redeemable preferred securities of a subsidiary
trust at date of issuance over the carrying amount of exchanged
Series B Preferred Stock
FS-8
<PAGE>
NOTE 1. Accounting Policies (continued)
- ----------------------------
Derivative Financial Instruments
- --------------------------------
Ford has operations in over 30 countries and sells vehicles in over 200 markets,
and is exposed to a variety of market risks, including the effects of changes in
foreign currency exchange rates, interest rates and commodity prices. These
financial exposures are monitored and managed by the company as an integral part
of the company's overall risk management program, which recognizes the
unpredictability of financial markets and seeks to reduce the potentially
adverse effect on the company's results. The company uses derivative financial
instruments to manage the exposures to fluctuations in exchange rates, interest
rates and commodity prices. All derivative financial instruments are classified
as "held for purposes other than trading"; company policy specifically prohibits
the use of leveraged derivatives or use of any derivatives for speculative
purposes.
Ford's primary foreign currency exposures, in terms of net corporate exposure,
are in the German Mark, Japanese Yen, British Pound Sterling, Brazilian Real and
Spanish Peseta. Agreements to manage foreign currency exposures include forward
contracts, swaps and options. The company uses these derivative instruments to
hedge assets and liabilities denominated in foreign currencies, firm commitments
and certain investments in foreign subsidiaries. Gains and losses on hedges of
firm commitments are deferred and recognized with the related transactions. In
the case of hedges of net investments in foreign subsidiaries, gains and losses
are recognized as an adjustment to the foreign currency translation component of
stockholders' equity. All other gains and losses are recognized in cost of sales
for Automotive and interest expense for Financial Services. These instruments
usually mature in two years or less for Automotive exposures and longer for
Financial Services exposures, consistent with the underlying transactions. The
effect of changes in exchange rates may not be fully offset by gains or losses
on currency derivatives, depending on the extent to which the exposures are
hedged.
Interest rate swap agreements are used to manage the effects of interest rate
fluctuations by changing the interest rate characteristics of debt to match the
interest rate characteristics of corresponding assets. These instruments mature
primarily through 2001, consistent with the underlying debt. The differential
paid or received on interest rate swaps is recognized on an accrual basis as an
adjustment to interest expense. Gains and losses on terminated interest rate
swaps are amortized and reflected in interest expense over the remaining term of
the underlying debt.
Ford has a commodity hedging program that uses primarily forward contracts and
options to manage the effects of changes in commodity prices on Automotive
results. The financial instruments used in this program mature in two years or
less, consistent with the related purchase commitments. Gains and losses are
recognized in cost of sales during the settlement period of the related
transactions.
FS-9
<PAGE>
NOTE 1. Accounting Policies (continued)
- ----------------------------
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 exchange
rates on revenues and costs was generally unfavorable in 1996, 1995 and 1994.
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 exchange rates on assets and liabilities, as described
above, decreased net income by $156 million in 1996, and increased net income by
$13 million in 1995 and $376 million in 1994. These amounts included a pre-tax
net transaction and translation loss of $300 million in 1996, and gains of $37
million in 1995 and $574 million in 1994.
Impairment of Long-Lived Assets and Certain Identifiable Intangibles
- --------------------------------------------------------------------
The company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," as of January 1, 1996. The effect of adopting this standard was
not material.
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 evaluates the carrying value of long-lived
assets and long-lived assets to be disposed of for potential impairment on an
ongoing basis. The company considers projected future operating results, trends
and other circumstances in making such estimates and evaluations.
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, 1996 was $2.3 billion and $2.9 billion,
respectively.
FS-10
<PAGE>
NOTE 1. Accounting Policies (continued)
- ----------------------------
Company-Obligated Mandatorily Redeemable Preferred Securities of a Subsidiary
Trust
- -----------------------------------------------------------------------------
During 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"). Concurrent with
the exchange 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 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.
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 is determined by quoted market prices. The
estimated fair value of securities for which there are no quoted market prices
is 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.
FS-11
<PAGE>
NOTE 2. Marketable and Other Securities (continued)
- ----------------------------------------
Automotive
- ----------
Investments in securities at December 31 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>
1996
----
Trading securities $11,812 $25 $1 $11,836 $11,836
1995
----
Trading securities $ 6,646 $12 $2 $ 6,656 $ 6,656
</TABLE>
Included in stockholders' equity at December 31, 1996 and 1995 was $96 million
and $146 million, respectively, which represented the company's equity interest
in the unrealized gains on securities owned by certain unconsolidated
affiliates.
Financial Services
- ------------------
<TABLE>
<CAPTION>
Investments in securities at December 31, 1996 were as follows (in millions):
Gross Gross Memo:
Amortized Unrealized Unrealized Fair Book
Cost Gains Losses Value Value
--------- ---------- ---------- ------ ------
<S> <C> <C> <C> <C> <C>
Trading securities $ 410 $ 3 $ 1 $ 412 $ 412
Available-for-sale securities
Debt securities issued by the U.S.
government and agencies 429 6 2 433 433
Municipal securities 14 - - 14 14
Debt securities issued by foreign governments 42 1 - 43 43
Corporate securities 505 3 5 503 503
Mortgage-backed securities 682 3 5 680 680
Other debt securities 2 - - 2 2
Equity securities 107 89 3 193 193
------ ---- --- ------ ------
Total available-for-sale securities 1,781 102 15 1,868 1,868
Held-to-maturity securities
Debt securities issued by the U.S.
government and agencies 9 - - 9 9
Corporate securities 13 - - 13 13
------ ---- --- ------ ------
Total held-to-maturity securities 22 - - 22 22
Total investments in securities with
readily determinable fair value 2,213 $105 $16 $2,302 2,302
==== === ======
Equity securities not practicable to fair value 5 5
------ -------
Total investments in securities $2,218 $2,307
====== ======
</TABLE>
FS-12
<PAGE>
NOTE 2. Marketable and Other Securities (continued)
- ----------------------------------------
Financial Services (continued)
- ------------------
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>
The amortized cost and fair value of investments in available-for-sale
securities and held-to-maturity securities at December 31 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>
1996
----
Due in one year or less $ 70 $ 70 $ 5 $ 5
Due after one year through five years 503 508 14 14
Due after five years through ten years 355 353 1 1
Due after ten years 64 64 2 2
Mortgage-backed securities 682 680 - -
Equity securities 107 193 - -
------ ------ --- ---
Total $1,781 $1,868 $22 $22
====== ====== === ===
1995
----
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 433 438 1,317 1,381
Due after ten years 178 186 77 79
Mortgage-backed securities 336 339 - -
Equity securities 300 358 - -
------ ------ ------ ------
Total $1,942 $2,028 $1,725 $1,792
====== ====== ====== ======
</TABLE>
Proceeds from sales of available-for-sale securities were $8.4 billion in 1996,
$2.4 billion in 1995 and $9.1 billion in 1994. In 1996, gross gains of
$43 million and gross losses of $21 million were realized on those sales; gross
gains of $39 million and gross losses of $18 million were realized in 1995, and
gross gains of $24 million and gross losses of $56 million were realized in
1994. Stockholders' equity included, net of tax, net unrealized gains of
$54 million and $56 million at December 31, 1996 and 1995, respectively.
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):
1996 1995
-------- --------
Retail $ 61,197 $ 55,742
Wholesale 25,066 23,911
Diversified 473 2,617
Real estate, mainly residential 18,940 16,900
Other finance receivables 16,624 13,470
-------- --------
Total finance receivables 122,300 112,640
Allowance for credit losses (2,364) (1,947)
Other 76 52
-------- --------
Net finance and other receivables $120,012 $110,745
======== ========
Net finance receivables subject to
fair value* $119,708 $108,595
Fair value $120,980 $110,648
- - - - -
*Excludes certain diversified and other receivables of $304 million and $2,150
million at December 31, 1996 and 1995, respectively
Included in finance receivables at December 31, 1996 and 1995 were a total of
$1.2 billion and $1.3 billion, respectively, 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, 1996 and 1995 were $4 billion and
$3.5 billion, respectively, of accounts receivable purchased by certain
Financial Services operations from Automotive operations.
Contractual maturities of total finance receivables are as follows (in
millions): 1997 - $55,123; 1998 - $20,648; 1999 - $14,294; thereafter - $32,235.
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 $56 million in 1996,
$69 million in 1995 and $15 million in 1994.
Investments in direct financing leases at December 31 were as follows
(in millions):
1996 1995
------ -------
Minimum lease rentals, net of unearned income $6,816 $ 7,287
Estimated residual values 2,938 3,700
Allowance for credit losses (114) (155)
------ -------
Net investments in direct financing leases $9,640 $10,832
====== =======
Minimum direct financing lease rentals (including executory costs of $26
million) are contractually due as follows (in millions): 1997 - $4,145;
1998 - $2,761; 1999 - $1,671; 2000 - $806; 2001 - $287; thereafter - $110.
FS-14
<PAGE>
NOTE 3. Receivables - Financial Services (continued)
- -----------------------------------------
Investments in operating leases at December 31 were as follows (in millions):
1996 1995
------- -------
Vehicles and other equipment, at cost $38,722 $34,855
Lease origination costs 57 50
Accumulated depreciation (6,204) (6,499)
Allowance for credit losses (321) (289)
------- -------
Net investments in operating leases $32,254 $28,117
======= =======
Minimum rentals on operating leases are contractually due as follows (in
millions): 1997 - $11,365; 1998 - $10,535; 1999 - $1,185; 2000 - $247; 2001 -
$50; thereafter - $300.
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): 1996 -
$5,867; 1995 - $5,508; 1994 - $4,231.
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):
1996 1995 1994
------- ------- ------
Beginning balance $ 2,391 $ 2,217 $2,352
Additions 2,092 1,327 988
Net losses (1,720) (1,120) (826)
Other changes 36 (33) (297)
------- ------- ------
Ending balance $ 2,799 $ 2,391 $2,217
======= ======= ======
Statement of Financial Accounting Standards No. 125 ("SFAS 125"), "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," was issued in June 1996, effective for transfers and servicing of
financial assets and extinguishments of liabilities after December 31, 1996. The
company will adopt this standard on January 1, 1997. The effect of adopting SFAS
125 is not expected to be material.
The company adopted Statement of Financial Accounting Standards No. 114 ("SFAS
114"), "Accounting by Creditors for Impairment of a Loan," and Statement of
Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosures," as of January 1, 1995. The
effect of adopting these standards, which require that impaired loans be
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate, was not material.
FS-15
<PAGE>
NOTE 4. Inventories - Automotive
- ---------------------------------
Inventories at December 31 were as follows (in millions):
1996 1995
------ ------
Raw materials, work in process and supplies $3,374 $3,717
Finished products 3,282 3,445
------ ------
Total inventories $6,656 $7,162
====== ======
U.S. inventories $2,280 $2,662
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 $1,445 million and $1,406 million at December 31, 1996 and
1995, respectively.
NOTE 5. Net Property, Depreciation and Amortization - Automotive
- -----------------------------------------------------------------
Net property at December 31 was as follows (in millions):
1996 1995
-------- --------
Land $ 415 $ 381
Buildings and land improvements 8,679 7,539
Machinery, equipment and other 40,702 38,954
Construction in progress 1,902 1,609
-------- --------
Total land, plant and equipment 51,698 48,483
Accumulated depreciation (26,176) (25,313)
-------- --------
Net land, plant and equipment 25,522 23,170
Unamortized special tools 8,005 8,103
-------- --------
Net property $ 33,527 $ 31,273
======== ========
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):
1996 1995 1994
------ ------ ------
Depreciation $2,644 $2,454 $2,297
Amortization 3,272 2,765 2,129
------ ------ ------
Total $5,916 $5,219 $4,426
====== ====== ======
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 $2,325 million in 1996, $2,206 million in 1995 and $2,065
million in 1994. Expenditures that increase the value or productive capacity of
assets are capitalized. Preproduction costs related to new facilities are
expensed as incurred.
FS-16
<PAGE>
NOTE 6. Income Taxes
- ---------------------
Income 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>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
U.S. $6,283 $5,521 $6,944
Foreign 516 1,338 1,574
------ ------ ------
Total income before income taxes $6,799 $6,859 $8,518
====== ====== ======
The provision for income taxes was estimated as follows (in millions):
1996 1995 1994
------ ------ ------
Currently payable
U.S. federal $ 655 $ 971 $1,640
Foreign 756 578 690
State and local 151 17 165
------ ------ ------
Total currently payable 1,562 1,566 2,495
Deferred tax liability/(benefit)
U.S. federal 642 731 827
Foreign (117) (10) (71)
State and local 79 92 78
------ ------ ------
Total deferred 604 813 834
------ ------ ------
Total provision $2,166 $2,379 $3,329
====== ====== ======
</TABLE>
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 $1.9 billion of retained earnings at December 31, 1996
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>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Tax provision at U.S. statutory rate of 35% $2,380 $2,400 $2,981
Effect of:
Tax on foreign income 162 187 126
State and local income taxes 150 71 158
The Associates IPO (228) - -
Other income not subject to tax or
subject to tax at reduced rates (33) (47) (62)
Other (265) (232) 126
------ ------ ------
Provision for income taxes $2,166 $2,379 $3,329
====== ====== ======
Effective tax rate 31.9% 34.7% 39.1%
</TABLE>
FS-17
<PAGE>
NOTE 6. Income Taxes (continued)
- ---------------------
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>
1996 1995
------- -------
<S> <C> <C>
Deferred tax assets
-------------------
Employee benefit plans $ 6,989 $ 6,672
Dealer and customer allowances and claims 4,073 3,750
Net operating loss carryforwards 1,493 844
Allowance for credit losses 1,162 921
Alternative minimum tax 153 440
All other 1,155 1,711
Valuation allowances (396) (158)
------- -------
Total deferred tax assets 14,629 14,180
Deferred tax liabilities
------------------------
Leasing transactions 5,488 4,933
Depreciation and amortization
(excluding leasing transactions) 3,865 3,626
Employee benefit plans 1,275 1,486
All other 2,118 1,920
------- -------
Total deferred tax liabilities 12,746 11,965
------- -------
Net deferred tax assets $ 1,883 $ 2,215
======= =======
</TABLE>
Foreign net operating loss carryforwards for tax purposes were $4.3 billion at
December 31, 1996. A substantial portion of these losses has an indefinite
carryforward period; the remaining losses have expiration dates beginning in
1997. 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-18
<PAGE>
NOTE 7. Liabilities - Automotive
- ---------------------------------
Current Liabilities
- -------------------
Included in accrued liabilities at December 31 were the following (in millions):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Dealer and customer allowances and claims $ 8,738 $ 7,824
Employee benefit plans 2,185 2,225
Deferred revenue 2,078 228
Salaries, wages and employer taxes 983 843
Postretirement benefits other than pensions 761 782
Other 1,842 1,490
------- -------
Total accrued liabilities $16,587 $13,392
======= =======
</TABLE>
Noncurrent Liabilities
- ----------------------
Included in other liabilities at December 31 were the following (in millions):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Postretirement benefits other than pensions $15,189 $14,533
Dealer and customer allowances and claims 5,919 5,514
Employee benefit plans 2,982 2,657
Unfunded pension obligation 1,126 631
Minority interests in net assets of subsidiaries 93 121
Other 1,484 2,221
------- -------
Total other liabilities $26,793 $25,677
======= =======
</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>
1996 1995 1994
------------------------ ------------------------ -------------------------
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
employee service $ 532 $ 261 $ 435 $ 208 $ 526 $ 236
Interest on projected
benefit obligation 1,838 819 1,776 785 1,639 677
Return on assets:
Actual (gain)/loss (4,112) (958) (5,696) (1,201) (74) 137
Deferred gain/(loss) 1,802 168 3,565 435 (1,928) (759)
------- ----- ------- ------- ------- -----
Recognized (gain) (2,310) (790) (2,131) (766) (2,002) (622)
Net amortization and other 608 237 408 234 452 151
------- ----- ------- ------- ------- -----
Net pension expense $ 668 $ 527 $ 488 $ 461 $ 615 $ 442
======= ===== ======= ======= ======= =====
Discount rate for expense 7.0% 7.6% 8.25% 8.3% 7.0% 7.2%
Assumed long-term rate
of return on assets 9.0% 9.2% 9.0% 9.0% 9.0% 9.0%
</TABLE>
FS-19
<PAGE>
NOTE 8. Employee Retirement Benefits (continued)
- -------------------------------------
Pension expense in 1996 increased for U.S. and non-U.S. plans as a result of
employee separation programs and lower discount rates. 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 rate changes. In addition, amendments made in September
1996 to the Ford-UAW Retirement Plan and the General Retirement Plan provide
pension benefit improvements for present and future retirees that will increase
the company's pension expense in future years compared with 1996.
The status of these plans at December 31 was as follows (in millions):
<TABLE>
<CAPTION>
1996 1995
-------------------------------- ------------------------------
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 $30,931 $ 2 $30,933 $27,921 $ 154 $28,075
Actuarial present value of:
Vested benefits $22,363 $ 568 $22,931 $20,641 $ 516 $21,157
Accumulated benefits 25,908 569 26,477 23,980 568 24,548
Projected benefits 27,557 688 28,245 25,607 670 26,277
Plan assets in excess of/(less than)
projected benefits $ 3,374 $ (686) $ 2,688 $ 2,314 $ (516) $ 1,798
Unamortized (net asset)/net
transition obligation a/ (122) 12 (110) (142) 10 (132)
Unamortized prior service cost b/ 2,789 82 2,871 1,808 60 1,868
Unamortized net (gains)/losses c/ (3,082) 160 (2,922) (758) 144 (614)
------- ------- ------- ------- ------- -------
Prepaid pension asset/(liability) 2,959 (432) 2,527 3,222 (302) 2,920
Adjustment required to recognize
minimum liability d/ - (136) (136) - (114) (114)
------- ------- ------- ------- ------- -------
Prepaid pension asset/(liability)
recognized in the balance sheet $ 2,959 $ (568) $ 2,391 $ 3,222 $ (416) $ 2,806
======= ======= ======= ======= ======= =======
Plan assets in excess of/(less than)
accumulated benefits $ 5,023 $ (567) $ 4,456 $ 3,941 $ (414) $ 3,527
Assumptions:
Discount rate at year-end 7.25% 7.0%
Average rate of increase in compensation 5.5% 5.5%
Non-U.S. Plans
- --------------
Plan assets at fair value $ 8,052 $ 2,846 $10,898 $ 8,447 $ 938 $ 9,385
Actuarial present value of:
Vested benefits $ 5,682 $ 5,263 $10,945 $ 6,468 $ 3,478 $ 9,946
Accumulated benefits 5,966 5,556 11,522 6,556 3,506 10,062
Projected benefits 6,951 5,914 12,865 7,751 3,654 11,405
Plan assets in excess of/(less than)
projected benefits $ 1,101 $(3,068) $(1,967) $ 696 $(2,716) $(2,020)
Unamortized (net asset)/net
transition obligation a/ (149) 421 272 63 230 293
Unamortized prior service cost b/ 391 151 542 330 170 500
Unamortized net (gains)/losses c/ (670) 774 104 (184) 255 71
------- ------- ------- ------- ------- -------
Prepaid pension asset/(liability) 673 (1,722) (1,049) 905 (2,061) (1,156)
Adjustment required to recognize
minimum liability d/ - (990) (990) - (517) (517)
------- ------- ------- ------- ------- -------
Prepaid pension asset/(liability)
recognized in the balance sheet $ 673 $(2,712) $(2,039) $ 905 $(2,578) $(1,673)
======= ======= ======= ======= ======= =======
Plan assets in excess of/(less than)
accumulated benefits $ 2,086 $(2,710) $ (624) $ 1,891 $(2,568) $ (677)
Assumptions:
Discount rate at year-end 7.1% 7.6%
Average rate of increase in compensation 5.2% 5.1%
</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 December 31,
1996, the unfunded liability in excess of $651 million resulted in an
increase in the charge to stockholders' equity of $159 million net of
deferred taxes; at December 31, 1995, the charge to stockholders' equity
was $108 million.
FS-20
<PAGE>
NOTE 8. Employee Retirement Benefits (continued)
- -------------------------------------
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 these 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>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Benefits attributed to employee service $ 268 $ 223 $ 263
Interest on accumulated benefit obligation 1,195 1,160 1,088
Net amortization and other (69) (68) (32)
------ ------ ------
Net postretirement benefit expense $1,394 $1,315 $1,319
====== ====== ======
Retiree benefit payments $ 730 $ 698 $ 639
</TABLE>
The status of these plans at December 31 was as follows (in millions):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 8,614 $ 8,413
Active employees eligible to retire 3,047 3,014
Other active employees 4,842 5,717
------- -------
Total accumulated obligation 16,503 17,144
Unamortized prior service cost* 256 270
Unamortized net losses** (438) (1,756)
------- -------
Accrued liability $16,321 $15,658
======= =======
Assumptions:
Discount rate 7.5% 7.25%
Present health care cost trend rate 6.6% 9.5 %
Ultimate trend rate in ten years 5.0% 5.5 %
Weighted-average trend rate 5.7% 6.6 %
- - - - -
* The prior service effect of plan amendments deferred for
recognition over remaining service to retirement eligibility
** The deferred gain or loss resulting from experience and changes in
assumptions deferred for recognition over remaining service to
retirement
</TABLE>
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 1996 by about $200 million and the
accumulated postretirement benefit obligation at December 31, 1996 by about
$2 billion.
FS-21
<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.
<TABLE>
<CAPTION>
Automotive
- ----------
Debt at December 31 was as follows (in millions):
Weighted Average
Interest Rate* Book Value
------------------- -------------------
Maturity 1996 1995 1996 1995
--------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Debt payable within one year
----------------------------
Short-term debt 6.2% 6.6% $1,021 $ 872
Long-term debt payable within one year 640 960
------ ------
Total debt payable within one year 1,661 1,832
Long-term debt 1998-2046 8.6% 9.2% 6,495 5,475
------ ------
Total debt $8,156 $7,307
====== ======
Fair value $8,680 $8,160
- - - - -
*Excludes the effect of interest rate swap agreements
</TABLE>
Long-term debt at December 31, 1996 included maturities as follows (in
millions): 1997 - $640 (included in current liabilities); 1998 - $401; 1999 -
$148; 2000 - $1,006; 2001 - $893; thereafter - $4,047.
Included in long-term debt at December 31, 1996 and 1995 were obligations of
$5,961 million and $5,031 million, respectively, with fixed interest rates and
$534 million and $444 million, respectively, with variable interest rates
(generally based on LIBOR or other short-term rates). Obligations payable in
foreign currencies at December 31, 1996 and 1995 were $756 million and
$968 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 interest rate on long-term debt
and effectively decreased the obligations subject to variable interest rates to
$363 million at December 31, 1996 and $287 million at December 31, 1995.
Financial Services
- ------------------
<TABLE>
<CAPTION>
Debt at December 31 was as follows (in millions):
Weighted Average
Interest Rate* Book Value
------------------- --------------------
Maturity 1996 1995 1996 1995
--------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Debt payable within one year
----------------------------
Unsecured short-term debt $ 2,489 $ 3,032
Commercial paper 57,726 56,002
Other short-term debt 4,757 1,927
-------- --------
Total short-term debt 5.6% 5.7% 64,972 60,961
Long-term debt payable within one year 14,592 12,097
-------- --------
Total debt payable within one year 79,564 73,058
Long-term debt
--------------
Secured indebtedness 1998-2021 8.5% 7.7% 70 89
Unsecured senior indebtedness
Notes and bank debt 1998-2048 6.7% 6.9% 66,893 64,810
Debentures 1998-2010 5.6% 7.4% 1,787 591
Unamortized (discount) (19) (5)
-------- --------
Total unsecured senior indebtedness 68,661 65,396
Unsecured subordinated indebtedness
Notes 1998-2021 8.8% 8.8% 1,500 2,665
Debentures 1998-2009 7.3% 8.1% 425 141
Unamortized (discount) (15) (32)
-------- --------
Total unsecured subordinated indebtedness 1,910 2,774
-------- --------
Total long-term debt 70,641 68,259
-------- --------
Total debt $150,205 $141,317
======== ========
Fair value $150,939 $144,730
- - - - -
*Excludes the effect of interest rate swap agreements
</TABLE>
FS-22
<PAGE>
NOTE 9. Debt (continued)
- -------------
Financial Services (continued)
- ------------------
Information concerning short-term borrowings (excluding long-term debt payable
within one year) is as follows (in millions):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Average amount of short-term borrowings $62,529 $60,203 $50,106
Weighted-average short-term interest rates per annum
(average year) 5.7% 6.0% 4.6%
Average remaining term of commercial paper
at December 31 33 days 34 days 27 days
</TABLE>
Long-term debt at December 31, 1996 included maturities as follows (in
millions): 1997 - $14,592; 1998 - $14,742; 1999 - $14,473; 2000 - $12,442; 2001
- - $11,211; thereafter - $17,773.
Included in long-term debt at December 31, 1996 and 1995 were obligations of
$55.8 billion and $53.2 billion, respectively, with fixed interest rates and
$14.8 billion and $15.1 billion, respectively, with variable interest rates
(generally based on LIBOR or other short-term rates). Obligations payable in
foreign currencies at December 31, 1996 and 1995 were $28 billion and $21
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, 1996, these agreements
decreased the weighted-average interest rate on long-term debt to 6.4%, compared
with 6.7% excluding these agreements, and effectively decreased the obligations
subject to variable interest rates to $13.6 billion; the weighted-average
interest rate on short-term debt increased to 5.7%, compared with 5.6% excluding
these agreements. At December 31, 1995, these agreements did not materially
change the overall weighted-average interest rate on long-term debt of 7% and
effectively decreased the obligations subject to variable rates to
$11.9 billion; the weighted-average interest rate on short-term debt increased
to 5.8%, compared with 5.7% excluding these agreements.
Support Facilities
- ------------------
At December 31, 1996, Ford had long-term contractually committed global credit
agreements under which $8.4 billion is available from various banks through June
30, 2001. 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 Motor Credit Company ("Ford
Credit"), a subsidiary of Ford, and to Ford Credit Europe plc ("Ford Credit
Europe"), a subsidiary of Ford Credit. These facilities were unused at December
31, 1996.
At December 31, 1996, Financial Services had a total of $49.8 billion of
contractually committed support facilities. Of these facilities, $24.5 billion
(excluding the $8.4 billion of Ford's credit facilities) are contractually
committed global credit agreements under which $19.6 billion and $4.9 billion
are available to Ford Credit and Ford Credit Europe, respectively, from various
banks; 62% and 76%, respectively, of such facilities are available through June
30, 2001. The entire $19.6 billion may be used, at Ford Credit's option, by any
subsidiary of Ford Credit, and the entire $4.9 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, 1996, $165 million of the Ford Credit global
facilities were in use; $709 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, 1996 consisted of
$22.6 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, 1996, approximately $1.4 billion of these facilities were in use.
FS-23
<PAGE>
NOTE 10. Capital Stock
- -----------------------
At December 31, 1996, 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 of Incorporation 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 $186 million and 3,721 shares $508 million and 10,163 shares
at December 31, 1996 outstanding (3,720,647 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 for cash at the option of Ford, in
equivalent 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-24
<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. 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 which 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 865,100 shares in 1996, 884,500 shares in 1995 and 709,800
shares in 1994 under the 1990 Long-Term Incentive Plan (not included in the
tables below). The number of shares ultimately awarded will depend on the extent
to which the Performance Target specified in each Right is achieved, individual
performance of the recipients and other factors, as determined by the
Compensation and Option Committee of the Board of Directors.
There were no shares authorized for future grants at December 31, 1996, 1995 and
1994. Up to 1% of Common Stock issued 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, 1996, this reduction aggregated to 279,420 shares.
Information concerning stock options is as follows (shares in millions):
<TABLE>
<CAPTION>
1996 1995 1994
------------------- ------------------ ------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares subject to option Shares Price Shares Price Shares Price
------------------------ ------ --------- ------ ---------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period 48.5 $25.22 43.3 $23.24 37.4 $21.42
New grants (based on fair value of
Common Stock at dates of grant) 8.0 32.69 9.7 32.00 9.5 29.06
Exercised* (5.2) 20.32 (3.4) 19.62 (2.6) 19.71
Surrendered upon exercise of stock
appreciation rights (0.7) 23.03 (0.9) 23.19 (0.9) 21.59
Terminated and expired (0.3) 31.14 (0.2) 28.05 (0.1) 22.71
----- ----- -----
Outstanding at end of period 50.3 ** 26.93 48.5 25.22 43.3 23.24
Outstanding but not exercisable (21.5) (22.6) (21.3)
----- ----- -----
Exercisable at end of period 28.8 23.61 25.9 21.77 22.0 21.04
===== ===== =====
</TABLE>
- - - - -
* Exercised at option prices ranging from $13.42 to $29.06 during 1996,
$9.09 to $29.06 during 1995, and $9.09 to $28.84 during 1994
** Included 4.8 and 45.5 million shares under the 1985 and 1990 Plans,
respectively, at option prices ranging from $13.42 to $32.75 per share.
At December 31, 1996, the weighted-average remaining exercise period
relating to the outstanding options was 6.9 years
The estimated fair value as of date of grant of options granted in 1996 and
1995, using the Black-Scholes option-pricing model, was as follows:
1996 1995
------ ------
Estimated fair value per share of
options granted during the year $6.93 $7.16
Assumptions:
Annualized dividend yield 4.3% 3.9%
Common Stock price volatility 25.2% 26.2%
Risk-free rate of return 6.2% 5.8%
Expected option term (in years) 5 5
FS-25
<PAGE>
NOTE 11. Stock Options (continued)
- -----------------------
The company adopted the disclosure requirements of Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," effective with the 1996 financial statements, but elected to
continue to measure compensation cost using the intrinsic value method, in
accordance with APB Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to
Employees." Accordingly, no compensation cost for stock options has been
recognized. If compensation cost had been determined based on the estimated fair
value of options granted in 1996 and 1995, consistent with the methodology in
SFAS 123, the pro forma effects on the company's net income and income per share
would not have been material.
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; employment-related matters; 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
be estimated at December 31, 1996. 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, 1996, the company had the following minimum rental commitments
under non-cancelable operating leases (in millions): 1997 - $776; 1998 - $416;
1999 - $395; 2000 - $269; 2001 - $206; thereafter - $915. These amounts include
rental commitments related to the sale and leaseback 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 vehicles. The maximum amount of
rebates available to qualified cardholders at December 31, 1996 and 1995 was
$4.1 billion and $3.1 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, 1996 and 1995, the unused portion of
available credit was approximately $18.8 billion and $17.3 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-26
<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 estimated fair values is
provided throughout the Notes to Financial Statements. Book value and estimated
fair value amounts at December 31 were as follows (in millions):
<TABLE>
<CAPTION>
1996 1995
----------------------- ------------------------
Book Fair Book Fair Fair Value
Value Value Value Value Reference
--------- -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Automotive
----------
Marketable securities $ 11,836 $ 11,836 $ 6,656 $ 6,656 Note 2
Debt 8,156 8,680 7,307 8,160 Note 9
Financial Services
------------------
Marketable securities $ 2,302 $ 2,302 $ 4,229 $ 4,296 Note 2
Receivables 119,708 120,980 108,595 110,648 Note 3
Debt 150,205 150,939 141,317 144,730 Note 9
</TABLE>
Foreign Currency and Interest Rate Instruments
- ----------------------------------------------
The fair value of foreign currency and interest rate instruments was estimated
using current market prices provided by outside quotation services. The
estimated fair value, notional amount and deferred loss at December 31 were as
follows (in millions):
<TABLE>
<CAPTION>
1996 1995
------------------------------ ------------------------------
Fair Notional Deferred Fair Notional Deferred
Value Amount* (Loss)** Value Amount* (Loss)**
------ -------- ---------- ------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Foreign currency instruments $29,700 $(132) $24,500 $(118)
- Assets $ 259 $373
- Liabilities 1,168 316
Interest rate instruments 76,200 - 64,600 -
- Assets 436 739
- Liabilities 319 430
- - - - -
* The notional amount represents the contract amount, not the amount
at risk
** Deferred losses are offset by unrecognized gains on the underlying
transactions or commitments
</TABLE>
Counterparty Credit Risk
- ------------------------
Ford manages its foreign currency and interest rate counterparty credit risks by
limiting exposure to and by monitoring the financial condition of each
counterparty. The amount of exposure Ford may have to a single counterparty on a
worldwide basis is limited by company policy. In the unlikely event that a
counterparty fails to meet the terms of a foreign currency or an interest rate
instrument, the company's risk is limited to the fair value of the instrument.
Other Financial Agreements
- --------------------------
At December 31, 1996, the notional amount of commodity hedging contracts
outstanding totaled $300 million; the notional amount at December 31, 1995 was
not material. The company also had guaranteed $1.1 billion of debt of
unconsolidated subsidiaries, affiliates and others. The risk of loss under these
financial agreements is not material.
FS-27
<PAGE>
NOTE 15. Acquisitions, Dispositions and Restructuring
- ------------------------------------------------------
Asset Write-Downs and Dispositions - Financial Services
- -------------------------------------------------------
During third quarter 1996, USL Capital Corporation ("USL Capital'), a subsidiary
of Ford Holdings, concluded a series of transactions for the sale of
substantially all of its assets, as well as certain assets owned by Ford Credit
and managed by USL Capital. Proceeds from the sale were used to pay down related
liabilities and debt.
The company recorded a pre-tax charge in 1996 totaling $384 million
($233 million after taxes) to recognize the estimated value of its outstanding
notes receivable from, and preferred stock investment in, Budget Rent a Car
Corporation ("BRAC"). The initial provision taken in second quarter 1996
totaling $700 million ($437 million after taxes) resulted from conclusions
reached in a study of Ford's rental car business strategy. In accordance with
SFAS 114, the notes receivable provision reflected primarily the unsecured
portion of financing provided to BRAC by Ford. The preferred stock write-down
reflected recognition of the fair value of Ford's investment at the time. In
fourth quarter 1996, the notes receivable provision was reduced by $316 million
($204 million after taxes), reflecting a strengthening of the rental car
business, recent sales of rental car franchises, and increased investor interest
that led to a reassessment of the value of notes receivable from BRAC to Ford.
In connection with a January 1997 agreement by Team Rental Group, Inc. ("Team
Rental") to acquire all of the outstanding common stock of BRAC, a portion of
Ford's loans to BRAC will be forgiven and the remainder will be repaid or
purchased in cash and Team Rental common stock. In addition, the BRAC preferred
stock held by Ford will be redeemed. Ford will own approximately 22% of Team
Rental when the transaction is completed.
During September 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 charge related to the disposition of the Bank, reflecting the
nonrecovery 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, 1996 and 1995 were included in the balance sheet under Financial
Services - Other Assets.
The effect of the USL Capital disposition, BRAC write-down and Bank disposition
on the company's results from operations are summarized below (in millions):
<TABLE>
<CAPTION>
1996 1994
------------------------------ ----------------------------
Income/(loss) Net Loss
Before Taxes Income/(loss) Before Taxes Net Loss
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Sale of USL Capital's assets $ 263 $ 95 $ - $ -
Write-down for Budget Rent a Car Corporation (384) (233) - -
First Nationwide Bank disposition - - (475) (440)
----- ----- ----- -----
Total $(121) $(138) $(475) $(440)
===== ===== ===== =====
</TABLE>
Sale of The Associates' Common Stock
- ------------------------------------
During May 1996, Associates First Capital Corporation ("The Associates"), a
subsidiary of Ford, completed an initial public offering of its common stock
representing a 19.3% economic interest in The Associates (the "IPO"). Ford
recorded in second quarter 1996 a non-operating gain of $650 million resulting
from the IPO, to recognize the excess of the net proceeds from the IPO over the
proportionate share of Ford's investment in The Associates. The gain was not
subject to income taxes.
FS-28
<PAGE>
NOTE 15. Acquisitions, Dispositions and Restructuring (continued)
- ------------------------------------------------------
Investment in Mazda Motor Corporation
- -------------------------------------
During May 1996, Ford increased its investment in Mazda Motor Corporation
("Mazda") from its existing 24.5% ownership interest to a 33.4% ownership
interest by purchasing from Mazda newly-issued shares of common stock for an
aggregate purchase price of $484 million. In connection with the purchase of
shares, Mazda agreed to coordinate more closely with Ford its strategies and
plans, particularly in the areas of product development, manufacturing and
distribution of vehicles, so as to improve the competitiveness and economies of
scale of both companies. Ford and Mazda remain separate public companies with
separate identities. Ford is not responsible for any of Mazda's liabilities,
debts or other obligations, and Mazda's operating results and financial position
are not consolidated with those of Ford; Mazda continues to be reflected in
Ford's consolidated financial statements on an equity basis.
Dissolution of Autolatina Joint Venture
- ---------------------------------------
During fourth quarter 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. Effective December 31, 1995, the assets and liabilities of
the new entities in Brazil and Argentina were consolidated in the company's
balance sheet; revenues and costs for 1996 were consolidated in the company's
income statement. Automotive revenues and costs for 1995 and 1994 exclude these
entities; the company's income statement for 1995 and 1994 included Ford's
equity share in the results of the Autolatina joint venture.
Sale of Annuity Business
- ------------------------
During 1995, the company agreed to sell its annuity business to SunAmerica, Inc.
for $173 million. The sale was 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 were included in the
balance sheet under Financial Services - Other Assets at December 31, 1995.
Acquisition of The Hertz Corporation
- ------------------------------------
During April 1994, The Hertz Corporation ("Hertz") became a wholly-owned
subsidiary of Ford. The operating results, assets, liabilities and cash flows of
Hertz are consolidated as part of the Financial Services segment.
Employee Separation Programs
- ----------------------------
Costs for special voluntary employee separation programs reduced the company's
Automotive net income for 1996 and 1995 by $436 million and $146 million,
respectively. These programs affected about 3,500 salaried employees in 1996,
primarily in the U.S.; there also were reductions in hourly employment outside
the U.S. Costs for voluntary separation programs are recognized in expense when
employees accept offers of early retirement or termination and the costs can be
reasonably estimated.
FS-29
<PAGE>
NOTE 16. Cash Flows
- --------------------
The reconciliation of net income to cash flows from operating activities is as
follows (in millions):
<TABLE>
<CAPTION>
1996 1995 1994
--------------------- --------------------- ----------------------
Financial Financial Financial
Automotive Services Automotive Services Automotive Services
---------- --------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 1,655 $ 2,791 $2,056 $ 2,083 $ 3,913 $1,395
Adjustments to reconcile net income
to cash flows from operating activities:
Depreciation and amortization 5,916 6,875 5,219 6,500 4,426 4,910
Losses/(earnings) of affiliated
companies in excess of dividends
remitted 44 (16) 191 7 (171) (2)
Provision for credit and
insurance losses - 2,564 - 1,818 - 1,539
Foreign currency adjustments 156 - (64) - (384) -
Net (purchases)/sales of trading
securities (5,180) 62 672 239 (3,616) (41)
Provision for deferred income taxes 74 530 88 725 424 410
Gain on sale of The Associates'
common stock (Note 15) - (650) - - - -
Changes in assets and liabilities:
(Increase)/decrease in accounts
receivable and other current assets (2,183) - 129 - (1,096) -
Decrease/(increase) in inventory 553 - (46) - (894) -
Increase in accounts payable and
accrued and other liabilities 5,447 1,303 730 1,461 4,949 1,077
Other 94 (778) (126) (511) (9) (201)
------- ------- ------ ------- ------- ------
Cash flows from operating activities $ 6,576 $12,681 $8,849 $12,322 $ 7,542 $9,087
======= ======= ====== ======= ======= ======
</TABLE>
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, 1996 and 1995 were $2.8 billion and $4.7 billion, respectively;
Financial Services cash equivalents at December 31, 1996 and 1995 were
$2.8 billion and $1.8 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. 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):
1996 1995 1994
------- ------ ------
Interest $10,250 $9,586 $7,718
Income taxes 1,285 1,425 2,042
FS-30
<PAGE>
NOTE 17. Segment Information
- -----------------------------
The company's major geographic areas are the United States and Europe. Other
geographic areas (primarily Canada, Mexico, South America and Asia Pacific)
individually are not material. Financial information segregated by major
geographic area is as follows (in millions):
<TABLE>
<CAPTION>
Automotive
- ---------- 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Sales to unaffiliated customers
United States $ 76,048 $ 73,870 $ 73,759
Europe 27,006 26,132 22,623
All other 14,969 10,494 10,755
-------- -------- --------
Total $118,023 $110,496 $107,137
======== ======== ========
Intercompany sales among geographic areas*
United States $ 11,232 $ 10,438 $ 11,206
Europe 2,900 2,765 2,303
All other 14,812 12,060 11,217
-------- -------- --------
Total $ 28,944 $ 25,263 $ 24,726
======== ======== ========
Total sales
United States $ 87,280 $ 84,308 $ 84,965
Europe 29,906 28,897 24,926
All other 29,781 22,554 21,972
Elimination of intercompany sales (28,944) (25,263) (24,726)
-------- -------- --------
Total $118,023 $110,496 $107,137
======== ======== ========
Operating income/(loss)
United States $ 2,800 $ 2,409 $ 4,131
Europe (497) 20 611
All other 213 852 1,084
-------- -------- --------
Total $ 2,516 $ 3,281 $ 5,826
======== ======== ========
Net income/(loss)
United States $ 2,007 $ 1,843 $ 3,002
Europe (291) 116 128
All other (61) 97 783
-------- -------- --------
Total $ 1,655 $ 2,056 $ 3,913
======== ======== ========
Assets at December 31
United States $ 51,681 $ 45,841 $ 45,889
Europe 18,440 17,010 16,880
All other 21,951 18,842 16,798
Net receivables from Financial Services 0 200 677
Elimination of intercompany receivables (12,414) (9,121) (11,605)
-------- -------- --------
Total $ 79,658 $ 72,772 $ 68,639
======== ======== ========
Capital expenditures (facilities, machinery
and equipment and tooling)
United States $ 4,493 $ 5,296 $ 5,429
Europe 1,905 1,892 1,393
All other 1,811 1,488 1,488
-------- -------- --------
Total $ 8,209 $ 8,676 $ 8,310
======== ======== ========
</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
- ------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues
United States $ 22,839 $ 21,383 $ 17,356
Europe 3,472 3,144 2,336
All other 2,657 2,114 1,610
-------- -------- --------
Total $ 28,968 $ 26,641 $ 21,302
======== ======== ========
Income before income taxes**
United States $ 3,363 $ 2,822 $ 2,185
Europe 454 493 419
All other 405 224 188
-------- -------- --------
Total $ 4,222 $ 3,539 $ 2,792
======== ======== ========
</TABLE>
- - - - - -
** Financial Services activities do not report operating income; income before
income taxes is representative of operating income
FS-31
<PAGE>
NOTE 17. Segment Information (continued)
- -----------------------------
Financial Services (continued)
- ------------------
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net income
United States $ 2,216 $ 1,718 $ 1,119
Europe 268 321 218
All other 307 44 58
-------- -------- --------
Total $ 2,791 $ 2,083 $ 1,395
======== ======== ========
Assets at December 31
United States $144,494 $137,154 $124,120
Europe 22,788 20,237 16,507
All other 15,927 13,120 10,356
-------- -------- --------
Total $183,209 $170,511 $150,983
======== ======== ========
</TABLE>
NOTE 18. Summary Quarterly Financial Data (Unaudited)
- ------------------------------------------------------
(in millions, except amounts per share)
<TABLE>
<CAPTION>
1996 1995
--------------------------------------- ----------------------------------------
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 $29,333 $30,726 $26,459 $31,505 $28,601 $29,861 $24,437 $27,597
Operating income/(loss) 315 1,624 19 558 1,782 1,774 (204) (71)
Financial Services
Revenues 6,928 7,211 7,501 7,328 6,182 6,528 6,981 6,950
Income before income taxes 832 947 1,268 1,175 759 885 978 917
Total Company
Net income* $ 653 $ 1,903 $ 686 $ 1,204 $ 1,550 $ 1,572 $ 357 $ 660
Less:
Preferred stock dividend
requirements 19 16 16 14 72 69 55 38
Fair value adjustment
from exchange of
Series B Preferred Stock - - - - - - - 66
------- ------- ------- ------- ------- ------- ------- -------
Income attributable
to Common and
Class B Stock $ 634 $ 1,887 $ 670 $ 1,190 $ 1,478 $ 1,503 $ 302 $ 556
======= ======= ======= ======= ======= ======= ======= =======
AMOUNTS PER SHARE OF COMMON
AND CLASS B STOCK AFTER
PREFERRED STOCK DIVIDENDS**
Income $ 0.54 $ 1.60 $ 0.57 $ 1.00 $ 1.44 $ 1.45 $ 0.28 $ 0.49
Income assuming full
dilution 0.53 1.56 0.56 0.99 1.28 1.30 0.27 0.48
Cash dividends 0.35 0.35 0.385 0.385 0.26 0.31 0.31 0.35
- - - - - -
* One-time factors included in net income:
- Employee separation
programs (28) (21) (51) (336) - (9) (8) (129)
- Autolatina dissolution - - - - - - - 230
- Sale of The Associates'
common stock - 650 - - - - - -
- Sale of USL Capital's
assets - 19 76 - - - - -
- Write-down for Budget
Rent a Car Corporation - (437) - 204 - - - -
** The sum of the income per share amounts in 1996 and 1995 is different from
the amount reported for the full year because of the effect that issuances of
the company's stock had on average shares outstanding for those periods
</TABLE>
FS-32
<PAGE>
[Coopers & Lybrand L.L.P. letterhead]
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, 1996 and 1995, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1996. 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, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
400 Renaissance Center
Detroit, Michigan 48243
313-446-7100
January 27, 1997
<PAGE>
Exhibit 23
[Coopers & Lybrand L.L.P. letterhead]
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, 33-56785, 33-58255, 33-58785, 33-58861, 33-61107,
33-62227, 33-64605, 33-64607, 333-02401, 333-02735 and 333-20725 on
Form S-8, and 2-42133, 33-32641, 33-40638, 33-43085, 33-55474, 33-55171,
33-64247 and 333-14297 on Form S-3
We consent to the incorporation by reference in the above Registration
Statements of our report dated January 27, 1997 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 3, 1997.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
400 Renaissance Center
Detroit, Michigan 48243
February 3, 1997
<PAGE>
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
extracted from Ford's Current Report on Form 8-K dated February 3, 1997 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-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,578
<SECURITIES> 11,836
<RECEIVABLES> 3,741
<ALLOWANCES> 106
<INVENTORY> 6,656
<CURRENT-ASSETS> 32,194
<PP&E> 73,129
<DEPRECIATION> 39,602
<TOTAL-ASSETS> 79,658
<CURRENT-LIABILITIES> 33,170
<BONDS> 6,495
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 118,023
<TOTAL-REVENUES> 118,023
<CGS> 108,882
<TOTAL-COSTS> 115,507
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 695
<INCOME-PRETAX> 2,571
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Services Segment - This schedule contains summary financial
information extracted from Ford's Current Report on Form 8-K dated February 3,
1997 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-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,689
<SECURITIES> 2,307
<RECEIVABLES> 161,906
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 183,209
<CURRENT-LIABILITIES> 0
<BONDS> 150,205
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 28,968
<TOTAL-REVENUES> 28,968
<CGS> 0
<TOTAL-COSTS> 25,481
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,564
<INTEREST-EXPENSE> 9,704
<INCOME-PRETAX> 4,222
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> CT
<LEGEND>
Congolmerate Totals - This schedule contains summary financial
information extracted from Ford's Current Report on Form 8-K dated February 3,
1997 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-31-1996
<PERIOD-END> DEC-31-1996
<TOTAL-ASSETS> 262,867
0
0
<COMMON> 1,189
<OTHER-SE> 25,573
<TOTAL-LIABILITY-AND-EQUITY> 262,867
<TOTAL-REVENUES> 146,991
<INCOME-TAX> 2,166
<INCOME-CONTINUING> 4,446
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,446
<EPS-PRIMARY> 3.72
<EPS-DILUTED> 3.64
</TABLE>
Exhibit 99
FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE (the "First Supplemental Indenture"), dated as
of December 5, 1996, between Ford Motor Company, a Delaware corporation, as
Issuer (the "Company"), and The Bank of New York, a New York corporation, as
Trustee (the "Trustee").
WITNESSETH:
WHEREAS, in accordance with Section 9.01 of the Indenture, dated as of
February 15, 1992, between the Company and the Trustee (the "Indenture")
relating to the unsecured and unsubordinated debt securities of the Company (the
"Securities"), the Company and the Trustee desire to amend the Indenture as
herein set forth;
WHEREAS, Section 9.01(9) of the Indenture permits the Indenture to be
amended to make provisions with respect to matters or questions arising under
the Indenture, provided that such action shall not adversely affect the
interests of the Holders of Securities of any series in any material respect;
WHEREAS, the amendments set forth herein will not materially and adversely
affect the rights of any Holder of any series of Securities issued under the
Indenture to date; and
WHEREAS, all other things necessary to make this First Supplemental
Indenture a valid supplement to the Indenture according to its terms have been
done.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Certain Terms Defined in the Indenture. All capitalized terms
used herein without definition herein shall have the meanings ascribed thereto
in the Indenture.
SECTION 2. Amendment of Section 2.02. The last paragraph of text prior to
the date and signature lines in Section 2.02 of the Indenture is hereby amended
and restated in its entirety as follows:
"IN WITNESS WHEREOF, the Company has caused this Security to be
signed by its Chairman of the Board, its President, one of its
Executive Vice Presidents, Group Vice Presidents or Vice Presidents,
its Treasurer or one of its Assistant Treasurers, and by its
Secretary or one of its Assistant Secretaries, manually or in
facsimile, and a facsimile of its corporate seal to be imprinted
hereon."
SECTION 3. Amendment of Section 3.03. The first sentence of the first
paragraph of Section 3.03 of the Indenture is hereby amended and restated in its
entirety as follows:
"The Securities shall be signed on behalf of the Company by its
Chairman of the Board, its President, one of its Executive Vice
Presidents, Group Vice Presidents or Vice Presidents, its Treasurer or
one of its Assistant Treasurers, and by its Secretary or one of its
Assistant Secretaries, under its corporate seal reproduced thereon."
<PAGE>
-2-
SECTION 4. Governing Law. This First Supplemental Indenture shall be deemed
to be a contract made under the laws of the State of New York, and for all
purposes shall be governed by and construed in accordance with the laws of said
State.
SECTION 5. Counterparts. This First Supplemental Indenture may be executed
in any number of counterparts, each of which shall be an original, but all of
which shall together constitute one and the same instrument.
SECTION 6. Ratification. Except as expressly amended hereby, each provision
of the Indenture shall remain in full force and effect and, as amended hereby,
the Indenture is in all respects agreed to, ratified and confirmed by each of
the Company and the Trustee.
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed as of the date first above written.
FORD MOTOR COMPANY
[Seal]
By: /s/J. M. Rintamaki
Name: J. M. Rintamaki
Title: Secretary
Attest: /s/T. J. DeZure
T. J. DeZure
Assistant Secretary
THE BANK OF NEW YORK
[Seal]
By: /s/Mary Jane Morrissey
Name: Mary Jane Morrissey
Title: Vice President
Attest: /s/Paul J. Schmalzel
Paul J. Schmalzel
Assistant Treasurer
<PAGE>
STATE OF MICHIGAN )
) ss.:
COUNTY OF WAYNE )
On this 5th day of December, 1996, before me personally came J. M.
Rintamaki, to me known, who, being by me duly sworn, did depose and say at
Dearborn, Michigan, that he is the Secretary of FORD MOTOR COMPANY, one of the
corporations described in and which executed the above instrument; that he knows
the corporate seal of said corporation; that the seal affixed to the said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that he signed his/her name thereto
by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/Deanna M. Rowe
Deanna M. Rowe
Notary Public, Wayne County, MI
My Commission Expires January 7, 1998
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 6th day of December, 1996, before me personally came Mary Jane
Morrissey, to me known, who, being by me duly sworn, did depose and say that
(s)he resides at 1320 Sunrise Ave, Pt. Pleasant, N.J., that she is a Vice
President of THE BANK OF NEW YORK, one of the corporations described in and
which executed the above instrument; that (s)he knows the corporate seal of said
corporation; that the seal affixed to the said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that (s)he signed his/her name thereto by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/Timothy J. Shea
Timothy J. Shea
Notary Public, State of New York
No. 01SH5027547
Qualified in New York County
Commission Expires May 8, 1998
