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 2, 1998
----------------
(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, 1997 together with the
Report on Examination thereof by Coopers & Lybrand L.L.P., independent
certified public accountants, filed as Exhibit 20 to this Current Report on
Form 8-K, are incorporated by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
- ---------------------------------------------------------------------------
EXHIBITS
--------
Designation Description Method of Filing
- ----------- ----------- ----------------
Exhibit 20 Consolidated Financial Statements Filed with this Report
of Ford and Subsidiaries for the
year ended and at December 31, 1997
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 -
Automotive Segment Filed with this Report
Exhibit 27.2 Financial Data Schedule -
Financial Services Segment Filed with this Report
Exhibit 27.3 Financial Data Schedule -
Conglomerate Total Filed with this Report
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 2, 1998 By/s/Peter Sherry, Jr.
------------------
Peter Sherry, Jr.
Assistant Secretary
<PAGE>
-3-
EXHIBIT INDEX
-------------
DESIGNATION DESCRIPTION PAGE
- ----------- ----------- ----
Exhibit 20 Consolidated Financial Statements
of Ford and Subsidiaries for the
year ended and at December 31, 1997
together with the Report on
Examination thereof by Coopers &
Lybrand L.L.P., independent
certified public accountants
Exhibit 23 Consent of Experts
Exhibit 27.1 Financial Data Schedule -
Automotive Segment
Exhibit 27.2 Financial Data Schedule -
Financial Services Segment
Exhibit 27.3 Financial Data Schedule -
Conglomerate Total
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
HIGHLIGHTS
----------
Fourth Quarter Full Year
---------------------------- -----------------------------
1997 1996 1997 1996
--------- ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C>
Worldwide vehicle unit sales of
cars and trucks (in thousands)
- - United States 987 1,006 4,016 3,897
- - Outside United States 804 747 2,927 2,756
----- ----- ----- -----
Total 1,791 1,753 6,943 6,653
===== ===== ===== =====
Sales and revenues (in millions)
- - Automotive $31,897 $31,505 $122,935 $118,023
- - Financial Services 8,055 7,328 30,692 28,968
------- ------- -------- --------
Total $39,952 $38,833 $153,627 $146,991
======= ======= ======== ========
Net income (in millions)
- - Automotive $ 1,341 $ 390 $ 4,714 $ 1,655
- - Financial Services 455 814 2,206 2,791
------- ------- -------- --------
Total $ 1,796 $ 1,204 $ 6,920 $ 4,446
======= ======= ======== ========
Capital expenditures (in millions)
- - Automotive $ 2,389 $ 2,413 $ 8,142 $ 8,209
- - Financial Services 162 93 575 442
------- ------- -------- --------
Total $ 2,551 $ 2,506 $ 8,717 $ 8,651
======= ======= ======== ========
Automotive capital expenditures as a
percentage of sales 7.5% 7.7% 6.6% 7.0%
Stockholders' equity at December 31
- - Total (in millions) $30,734 $26,762 $ 30,734 $ 26,762
- - After-tax return on Common and
Class B stockholders' equity 24.1% 18.4% 24.4% 17.6%
Automotive net cash at December 31
(in millions)
- - Cash and marketable securities $20,835 $15,414 $ 20,835 $ 15,414
- - Debt 8,176 8,156 8,176 8,156
------- ------- -------- --------
Automotive net cash $12,659 $ 7,258 $ 12,659 $ 7,258
======= ======= ======== ========
After-tax return on sales
- - U.S. Automotive 5.8% 3.2% 4.6% 2.7%
- - Total Automotive 4.2% 1.3% 3.9% 1.4%
Shares of Common and Class B Stock
(in millions)
- - Average number outstanding 1,201 1,187 1,195 1,179
- - Number outstanding at December 31 1,202 1,188 1,202 1,188
Common Stock price (per share)
- - High $50-1/4 $33-7/8 $ 50-1/4 $ 37-1/4
- - Low 41-1/2 30-3/8 30 27-1/4
AMOUNTS PER SHARE OF COMMON AND
CLASS B STOCK AFTER PREFERRED
STOCK DIVIDENDS
Income assuming dilution
- - Automotive $ 1.08 $ 0.32 $ 3.82 $ 1.33
- - Financial Services 0.37 0.67 1.80 2.31
------- ------- -------- --------
Total $ 1.45 $ 0.99 $ 5.62 $ 3.64
======= ======= ======== ========
Cash dividends $ 0.420 $ 0.385 $ 1.645 $ 1.47
</TABLE>
FS-1
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
VEHICLE UNIT SALES
------------------
For the Periods Ended December 31, 1997 and 1996
(in thousands)
Fourth Quarter Full Year
------------------------- -------------------------
1997 1996 1997 1996
-------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C>
North America
United States
Cars 409 428 1,614 1,656
Trucks 578 578 2,402 2,241
----- ----- ----- -----
Total United States 987 1,006 4,016 3,897
Canada 91 84 319 258
Mexico 40 28 97 67
----- ----- ----- -----
Total North America 1,118 1,118 4,432 4,222
Europe
Britain 124 140 466 516
Germany 137 106 460 436
Italy 70 51 248 180
Spain 43 41 155 155
France 41 47 153 194
Other countries 91 103 318 339
----- ----- ----- -----
Total Europe 506 488 1,800 1,820
Other international
Brazil 49 48 214 190
Argentina 35 21 143 64
Australia 31 31 132 138
Taiwan 17 14 79 86
Japan 10 11 40 52
Other countries 25 22 103 81
----- ----- ----- -----
Total other international 167 147 711 611
----- ----- ----- -----
Total worldwide vehicle unit sales 1,791 1,753 6,943 6,653
===== ===== ===== =====
</TABLE>
Vehicle unit sales generally 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 Periods Ended December 31, 1997, 1996 and 1995
(in millions, except amounts per share)
1997 1996 1995
------------ ----------- -------------
<S> <C> <C> <C>
AUTOMOTIVE
Sales (Note 1) $122,935 $118,023 $110,496
Costs and expenses (Notes 1 and 15):
Costs of sales 108,907 108,882 101,171
Selling, administrative and other expenses 7,082 6,625 6,044
-------- -------- --------
Total costs and expenses 115,989 115,507 107,215
Operating income 6,946 2,516 3,281
Interest income 1,116 841 800
Interest expense 788 695 622
-------- -------- --------
Net interest income 328 146 178
Equity in net loss of affiliated companies (Note 1) (88) (6) (154)
Net expense from transactions with
Financial Services (Note 1) (104) (85) (139)
-------- -------- --------
Income before income taxes - Automotive 7,082 2,571 3,166
FINANCIAL SERVICES
Revenues (Note 1) 30,692 28,968 26,641
Costs and expenses (Note 1):
Interest expense 9,712 9,704 9,424
Depreciation 7,645 6,875 6,500
Operating and other expenses 6,621 6,217 5,499
Provision for credit and insurance losses 3,230 2,564 1,818
Asset write-downs and dispositions (Note 15) - 121 -
-------- -------- --------
Total costs and expenses 27,208 25,481 23,241
Net revenue from transactions with Automotive (Note 1) 104 85 139
Gain on sale of Common Stock of a subsidiary (Note 15) 269 650 -
-------- -------- --------
Income before income taxes - Financial Services 3,857 4,222 3,539
-------- -------- --------
TOTAL COMPANY
Income before income taxes 10,939 6,793 6,705
Provision for income taxes (Note 6) 3,741 2,166 2,379
-------- -------- --------
Income before minority interests 7,198 4,627 4,326
Minority interests in net income of subsidiaries 278 181 187
-------- -------- --------
Net income $ 6,920 $ 4,446 $ 4,139
======== ======== ========
Income attributable to Common and Class B Stock
after preferred stock dividends (Note 1) $ 6,866 $ 4,381 $ 3,839
Average number of shares of Common and Class B
Stock outstanding (Note 1) 1,195 1,179 1,071
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK (Note 1)
Basic income $ 5.75 $ 3.73 $ 3.58
Diluted income $ 5.62 $ 3.64 $ 3.33
Cash dividends $ 1.645 $ 1.47 $ 1.23
</TABLE>
The accompanying notes are part of the financial statements.
FS-3
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
--------------------------
(in millions)
December 31, December 31,
1997 1996
-------------- -------------
<S> <C> <C>
ASSETS
Automotive
Cash and cash equivalents $ 6,316 $ 3,578
Marketable securities (Note 2) 14,519 11,836
-------- --------
Total cash and marketable securities 20,835 15,414
Receivables 3,097 3,133
Inventories (Note 4) 5,468 6,656
Deferred income taxes 3,249 3,296
Other current assets (Note 1) 3,782 3,193
Net current receivable from Financial Services (Note 1) 416 0
-------- --------
Total current assets 36,847 31,692
Equity in net assets of affiliated companies (Note 1) 1,951 2,483
Net property (Note 5) 34,594 33,527
Deferred income taxes 3,712 4,429
Other assets (Notes 1 and 8) 7,975 7,527
-------- --------
Total Automotive assets 85,079 79,658
Financial Services
Cash and cash equivalents 1,618 3,689
Investments in securities (Note 2) 2,207 2,307
Net receivables and lease investments (Note 3) 176,416 163,030
Other assets (Note 1) 13,777 13,710
Net receivable from Automotive (Note 1) 0 473
-------- --------
Total Financial Services assets 194,018 183,209
-------- --------
Total assets $279,097 $262,867
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive
Trade payables $ 11,997 $ 11,735
Other payables 2,557 2,206
Accrued liabilities (Note 7) 16,250 16,587
Income taxes payable 1,358 508
Debt payable within one year (Note 9) 1,129 1,661
Net current payable to Financial Services (Note 1) 0 473
-------- --------
Total current liabilities 33,291 33,170
Long-term debt (Note 9) 7,047 6,495
Other liabilities (Note 7) 28,899 26,793
Deferred income taxes 1,210 1,225
-------- --------
Total Automotive liabilities 70,447 67,683
Financial Services
Payables 4,539 4,695
Debt (Note 9) 160,071 150,205
Deferred income taxes 4,347 4,338
Other liabilities and deferred income 7,865 8,504
Net payable to Automotive (Note 1) 416 0
-------- --------
Total Financial Services liabilities 177,238 167,742
Company-obligated mandatorily redeemable preferred securities of a subsidiary
trust holding solely junior subordinated debentures of the Company (Note 1) 678 680
Stockholders' equity
Capital stock (Note 10 and 11)
Preferred Stock, par value $1.00 per share (aggregate liquidation preference
of $637 million and $694 million) * *
Common Stock, par value $1.00 per share (1,132 and 1,118 million shares issued) 1,132 1,118
Class B Stock, par value $1.00 per share (71 million shares issued) 71 71
Capital in excess of par value of stock 5,564 5,268
Foreign currency translation adjustments and other (Note 1) (1,267) (29)
Earnings retained for use in business 25,234 20,334
-------- --------
Total stockholders' equity 30,734 26,762
-------- --------
Total liabilities and stockholders' equity $279,097 $262,867
======== ========
</TABLE>
- - - - -
*Less than $500,000
The accompanying notes are part of the financial statements.
FS-4
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
For the Periods Ended December 31, 1997, 1996 and 1995
(in millions)
1997 1996 1995
---------------------------- ---------------------------- ---------------------------
Financial Financial Financial
Automotive Services Automotive Services Automotive Services
-------------- ------------ -------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents at
January 1 $ 3,578 $ 3,689 $ 5,750 $ 2,690 $ 4,481 $ 1,739
Cash flows from operating activities
(Note 16) 13,984 13,650 6,576 12,681 8,849 12,322
Cash flows from investing activities
Capital expenditures (8,142) (576) (8,209) (442) (8,676) (321)
Purchase of leased assets (332) - (195) - 0 -
Acquisitions of other companies 0 (40) 0 (166) 0 0
Acquisitions of receivables and
lease investments - (117,895) - (109,087) - (99,967)
Collections of receivables and
lease investments - 86,842 - 82,398 - 71,149
Net acquisitions of daily rental vehicles - (958) - (1,759) - (1,459)
Net proceeds from USL Capital
asset sales (Note 15) - - - 1,157 - -
Purchases of securities (Note 16) (43) (3,067) (6) (8,020) (51) (6,274)
Sales and maturities of securities
(Note 16) 13 3,520 7 9,863 325 5,052
Proceeds from sales of receivables
and lease investment - 5,197 - 2,867 - 4,360
Net investing activity with
Financial Services 258 - 416 - (19) -
Other (285) (568) (586) (45) 558 (184)
------- -------- ------- -------- -------- -------
Net cash used in investing activities (8,531) (27,545) (8,573) (23,234) (7,863) (27,644)
Cash flows from financing activities
Cash dividends (2,020) - (1,800) - (1,559) -
Issuance of Common Stock 310 - 192 - 601 -
Issuance of Common Stock of a
subsidiary (Note 15) - 453 - 1,897 - -
Changes in short-term debt (430) 6,210 151 3,474 413 5,884
Proceeds from issuance of other debt 1,100 22,923 1,688 22,342 300 23,854
Principal payments on other debt (668) (18,215) (1,031) (14,428) (177) (11,489)
Net financing activity with Automotive - (258) - (416) - 19
Receipts from annuity contracts - - - - - 283
Net redemption of subsidiary company
preferred stock (Note 1) - - - - - (1,875)
Other 1 (206) 37 (528) 121 102
------- -------- ------- -------- ------- -------
Net cash (used in)/provided by
financing activities (1,707) 10,907 (763) 12,341 (301) 16,778
Effect of exchange rate changes on cash (119) 28 (85) (116) 107 (28)
Net transactions with Automotive/
Financial Services (889) 889 673 (673) 477 (477)
------- ---------- ------- ------- ------- -------
Net (decrease)/increase in cash and
cash equivalents 2,738 (2,071) (2,172) 999 1,269 951
------- -------- ------- -------- -------- -------
Cash and cash equivalents at December 31 $ 6,316 $ 1,618 $ 3,578 $ 3,689 $ 5,750 $ 2,690
======= ======== ======= ======= ======= =======
</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, 1997, 1996 and 1995
(in millions)
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
CAPITAL STOCK (Note 10)
Common Stock:
Balance at beginning of year $ 1,118 $ 1,089 $ 952
Issued for Series A Preferred Stock conversion,
employee benefit plans and other 14 29 137
------- ------- -------
Balance at end of year 1,132 1,118 1,089
Class B Stock:
Balance at beginning of year 71 71 71
Changes during year - - -
------- ------- -------
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 year 5,268 5,105 5,273
Exchange of Series B Preferred Stock (Notes 1 and 10) - - (632)
Issued for Series A Preferred Stock conversion,
employee benefit plans and other 296 163 464
-------- ------- -------
Balance at end of year 5,564 5,268 5,105
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
AND OTHER (Note 1)
Balance at beginning of year (29) 594 189
Translation adjustments during year (1,038) (408) 250
Minimum pension liability adjustment (70) (159) (108)
Other (130) (56) 263
------- ------- -------
Balance at end of year (1,267) (29) 594
EARNINGS RETAINED FOR USE IN THE BUSINESS
Balance at beginning of year 20,334 17,688 15,174
Net income 6,920 4,446 4,139
Cash dividends (2,020) (1,800) (1,559)
Fair value adjustment from exchange of
Series B Preferred Stock (Note 1) - - (66)
------- ------ ------
Balance at end of year 25,234 20,334 17,688
------- ------ ------
Total stockholders' equity $30,734 $26,762 $24,547
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Series A Series B
Common Class B Preferred Preferred
Stock Stock Stock Stock
----- ----- ----- -----
<S> <C> <C> <C> <C>
SHARES OF CAPITAL STOCK
Issued at December 31, 1994 952 71 0.046 0.023
Additions
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 - - -
1997 - Conversion of Series A Preferred Stock 4 - (0.001) -
- Employee benefit plans and other 10 - - -
----- -- ------ ------
Net additions 180 - (0.043) (0.013)
----- -- ------ ------
Issued at December 31, 1997 1,132 71 0.003 0.010
===== == ====== ======
Authorized at December 31, 1997 3,000 265 -- In total: 30 --
- - - - - -
*The balances at the beginning and end of each period were less than $500,000.
</TABLE>
The accompanying notes are part of the financial statements.
FS-6
<PAGE>
Ford Motor Company and Subsidiaries
Notes to Financial Statements
NOTE 1. Accounting Policies
- ----------------------------
Principles of Consolidation
- ---------------------------
The consolidated financial statements include all significant majority-owned
subsidiaries and reflect the operating results, assets, liabilities and cash
flows for two business segments: Automotive and Financial Services. The assets
and liabilities of the Automotive segment are classified as current or
noncurrent, and those of the Financial Services segment are unclassified.
Affiliates that are 20% to 50% owned, principally Mazda Motor Corporation and
AutoAlliance International Inc., and subsidiaries where control is expected to
be temporary, principally investments in certain dealerships, are accounted for
on an equity basis. 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. 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 are reclassified, if required, to conform with
present period presentations.
Automotive revenues and costs for 1997 and 1996 include new entities in Brazil
and Argentina resulting from the dissolution of Autolatina; amounts for 1995
exclude these entities (Note 15).
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 $2,170 million at December 31,
1997, and $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 in the same manner as sales incentives described above.
Other Costs
- -----------
Advertising and sales promotion costs are expensed as incurred. Advertising
costs were $2,315 million in 1997, $2,155 million in 1996 and $2,024 million in
1995.
Estimated costs related to product warranty are accrued at the time of sale.
Research and development costs are expensed as incurred and were $6,327 million
in 1997, $6,821 million in 1996 and $6,624 million in 1995.
Income Per Share of Common and Class B Stock
- --------------------------------------------
The company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share", for financial statements for the year ended December 31,
1997. Adoption of this standard did not have a material effect on reported
income per share.
Basic 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, adjusted
for issuable shares and uncommitted ESOP shares.
The company had Series A Preferred Stock convertible to Common Stock. Other
obligations, such as stock options, are considered to be potentially dilutive
common stock. The calculation of diluted income per share of Common and Class B
Stock takes into account the effect of these convertible securities and
potentially dilutive common stock.
FS-8
<PAGE>
NOTE 1. Accounting Policies (continued)
- ----------------------------
Income per share of Common and Class B Stock were as follows (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- ---------------
Income Shares Income Shares Income Shares
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Net income $6,920 1,195 $4,446 1,179 $4,139 1,071
Preferred stock dividend requirements (54) - (65) - (234) -
Exchange adjustment of Series B Pref. Stock* - - - - (66) -
Issuable and uncommitted ESOP shares - (1) - (4) - 0
------ ----- ------ ------ ------ -----
Basic income and shares $6,866 1,194 $4,381 1,175 $3,839 1,071
Basic Income Per Share $ 5.75 $ 3.73 $ 3.58
- ----------------------
Basic income and shares $6,866 1,194 $4,381 1,175 $3,839 1,071
Net dilutive effect of options - 20 - 16 - 15
Convertible preferred stock and other 8 10 24 19 141 110
------ ----- ------- ----- ------ -----
Diluted income and shares $6,874 1,224 $4,405 1,210 $3,980 1,196
Diluted Income Per Share $ 5.62 $ 3.64 $ 3.33
- ------------------------
</TABLE>
- - - - - -
* 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
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.
FS-9
<PAGE>
NOTE 1. Accounting Policies (continued)
- ----------------------------
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
consistent with underlying debt issues as identified in Note 9. 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.
Foreign Currency Translation
- ----------------------------
Assets and liabilities of foreign subsidiaries generally are translated to U.S.
dollars at end-of-period exchange rates. The effects of this translation for
most foreign subsidiaries are reported in a separate component of stockholders'
equity. Remeasurement of assets and liabilities of foreign subsidiaries that use
the U.S. dollar as their functional currency are included in income as
transaction gains and losses. Income statement elements of all foreign
subsidiaries are translated to U.S. dollars at average-period exchange rates and
are recognized as part of revenues, costs and expenses. Also included in income
are gains and losses arising from transactions denominated in a currency other
than the functional currency of the subsidiary involved.
Net transaction gains and losses, as described above, decreased net income by
$164 million in 1997 and by $156 million in 1996, and increased net income by
$13 million in 1995.
Impairment of Long-Lived Assets and Certain Identifiable Intangibles
- --------------------------------------------------------------------
The company evaluates the carrying value of goodwill for potential impairment on
an ongoing basis. Such evaluations compare operating income before amortization
of goodwill to the amortization recorded for the operations to which the
goodwill relates. The company also evaluates the carrying value of long-lived
assets and long-lived assets to be disposed of for potential impairment
periodically. The company considers projected future operating results, cash
flows, 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 other assets
was $2.1 billion at December 31, 1997, and $2.3 billion at December 31, 1996.
Total goodwill included in Financial Services other assets was $2.7 billion at
December 31, 1997, and $2.9 billion at December 31, 1996.
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.
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.
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>
1997
- ----
Trading securities $14,114 $29 $ - $14,143 $14,143
Available-for-sale securities - Corporate securities 395 - 19 376 376
------- --- --- ------- -------
Total investment in securities $14,509 $29 $19 $14,519 $14,519
======= === === ======= =======
1996
- ----
Trading securities $11,812 $25 $ 1 $11,836 $11,836
</TABLE>
FS-11
<PAGE>
NOTE 2. Marketable and Other Securities (continued)
- ----------------------------------------
During 1997, $365 million of bonds issued by affiliates were reclassified from
equity in net assets of affiliated companies to available-for-sale marketable
securities. In 1997, proceeds from sales of available-for-sale securities were
$8 million; no gross gains or losses were realized on those sales. Stockholders'
equity included, net of tax, net unrealized gains of $28 million in 1997 and $96
million in 1996 on securities owned by certain unconsolidated affiliates. The
available-for-sale securities at December 31 by contractual maturity were due
between one and five years.
Financial Services
- ------------------
Investments in securities at December 31, 1997 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 $ 267 $ 4 $1 $ 270 $ 270
Available-for-sale securities
- -----------------------------
Debt securities issued by the U.S.
government and agencies 385 4 1 388 388
Municipal securities 13 - - 13 13
Debt securities issued by foreign governments 36 - - 36 36
Corporate securities 489 7 1 495 495
Mortgage-backed securities 837 8 1 844 844
Other debt securities 14 - - 14 14
Equity securities 53 65 2 116 116
------ --- -- ------ ------
Total available-for-sale securities 1,827 84 5 1,906 1,906
Held-to-maturity securities
- ---------------------------
Debt securities issued by the U.S.
government and agencies 7 - - 7 7
Corporate securities 15 - - 15 15
Other debt securities 3 - - 3 3
------ --- -- ------ ------
Total held-to-maturity securities 25 - - 25 25
Total investments in securities with
readily determinable fair value 2,119 $88 $6 $2,201 2,201
=== == ======
Equity securities not practicable to fair value 6 6
------ ------
Total investments in securities $2,125 $2,207
====== ======
</TABLE>
Investments in securities at December 31, 1996 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 $ 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)
- ------------------
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
1997 Cost Fair Value Cost Fair Value
---- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Due in one year or less $ 100 $ 101 $14 $14
Due after one year through five years 443 446 10 10
Due after five years through ten years 273 276 - -
Due after ten years 121 124 1 1
Mortgage-backed securities 837 843 - -
Equity securities 53 116 - -
------ ------ --- ---
Total $1,827 $1,906 $25 $25
====== ====== === ===
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
====== ====== === ===
</TABLE>
Proceeds from sales of available-for-sale securities were $2.9 billion in 1997,
$8.4 billion in 1996 and $2.4 billion in 1995. In 1997, gross gains of $98
million and gross losses of $8 million were realized on those sales; gross gains
of $43 million and gross losses of $21 million were realized in 1996, and gross
gains of $39 million and gross losses of $18 million were realized in 1995.
Stockholders' equity included, net of tax, net unrealized gains of $50 million
and $54 million at December 31, 1997 and 1996, respectively.
NOTE 3. Receivables - Financial Services
- -----------------------------------------
Included in net receivables and lease investments at December 31 were net
finance receivables, investments in direct financing leases and investments in
operating leases. The investments in direct financing and operating leases
relate to the leasing of vehicles, various types of transportation and other
equipment, and facilities.
Net finance receivables at December 31 were as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
-------- ------
<S> <C> <C>
Retail $ 65,661 $ 61,197
Wholesale 24,520 25,066
Real estate, mainly residential 21,065 18,940
Other finance receivables 19,482 17,097
-------- --------
Total finance receivables 130,728 122,300
Allowance for credit losses (3,021) (2,364)
-------- --------
Total net finance receivables 127,707 119,936
Retained interest in sold receivables 999 1,124
Other 85 76
-------- --------
Net finance and other receivables and
retained interest in sold receivables $128,791 $121,136
Net finance receivables subject to
fair value* $128,594 $120,832
Fair value $131,976 $122,104
</TABLE>
- - - - -
*Excludes certain diversified and other receivables of $197
million and $304 million at December 31, 1997 and 1996,
respectively
FS-13
<PAGE>
NOTE 3. Receivables - Financial Services (continued)
- -----------------------------------------
Included in finance receivables at December 31, 1997 and 1996 were a total of $1
billion and $1.2 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, 1997 and 1996 were $3.7 billion and $4 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): 1998 - $62,057; 1999 - $22,318; 2000 - $13,625; thereafter - $32,728.
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.
Investments in direct financing leases at December 31 were as follows (in
millions):
<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Minimum lease rentals, net
of unearned income $ 7,874 $6,816
Estimated residual values 2,923 2,938
Allowance for credit losses (143) (114)
------- ------
Net investments in direct financing leases $10,654 $9,640
======= ======
</TABLE>
Minimum direct financing lease rentals are contractually due as follows
(in millions): 1998 - $2,843; 1999 - $2,152; 2000 - $1,551; 2001 - $843;
2002 - $347; thereafter - $138.
Investments in operating leases at December 31 were as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Vehicles and other equipment, at cost $44,705 $38,722
Lease origination costs 65 57
Accumulated depreciation (7,487) (6,204)
Allowance for credit losses (312) (321)
------- -------
Net investments in operating leases $36,971 $32,254
======= =======
</TABLE>
Minimum rentals on operating leases are contractually due as follows
(in millions): 1998 - $12,773; 1999 - $9,183; 2000 - $1,462; 2001 - $156;
2002 - $73; thereafter - $349.
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): 1997 -
$6,505; 1996 - $5,867; 1995 - $5,508.
Allowances for credit losses are estimated and established as required based on
historical experience and other factors that affect collectibility. 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.
FS-14
<PAGE>
NOTE 3. Receivables - Financial Services (continued)
- -----------------------------------------
Changes in the allowances for credit losses were as follows (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Beginning balance $ 2,799 $ 2,391 $ 2,217
Additions 2,759 2,092 1,327
Net losses (2,246) (1,720) (1,120)
Other changes 164 36 (33)
------- ------- -------
Ending balance $ 3,476 $ 2,799 $ 2,391
======= ======= =======
</TABLE>
Statement of Financial Accounting Standards No. 125 ("SFAS 125") for sales of
receivables was adopted January 1, 1997, and the effect was not material.
NOTE 4. Inventories - Automotive
- ---------------------------------
Inventories at December 31 were as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
------ -----
<S> <C> <C>
Raw materials, work in process and supplies $2,875 $3,374
Finished products 2,593 3,282
------ ------
Total inventories $5,468 $6,656
====== ======
U.S. inventories $1,993 $2,280
</TABLE>
Inventories are stated at the lower of cost or market. The cost of most U.S.
inventories is determined by the last-in, first-out ("LIFO") method. The cost of
the remaining inventories is determined primarily by the first-in, first-out
("FIFO") method.
If the FIFO method had been used instead of the LIFO method, inventories would
have been higher by $1,397 million and $1,445 million at December 31, 1997 and
1996, respectively.
NOTE 5. Net Property, Depreciation and Amortization - Automotive
- -----------------------------------------------------------------
Net property at December 31 was as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Land $ 393 $ 415
Buildings and land improvements 8,803 8,679
Machinery, equipment and other 41,510 40,702
Construction in progress 2,377 1,902
-------- --------
Total land, plant and equipment 53,083 51,698
Accumulated depreciation (26,004) (26,176)
-------- --------
Net land, plant and equipment 27,079 25,522
Special tools, net of amortization 7,515 8,005
-------- --------
Net property $ 34,594 $ 33,527
======== ========
</TABLE>
Property, equipment and special tools are stated at cost, less accumulated
depreciation and amortization. Property and equipment placed in service before
January 1, 1993 are depreciated using an accelerated method that results in
accumulated depreciation of approximately two-thirds of asset cost during the
first half of the estimated useful life of the asset. Property and equipment
placed in service after December 31, 1992 are depreciated using the
straight-line method of depreciation over the estimated useful life of the
asset. On average, buildings and land improvements are depreciated based on a
30-year life; machinery and equipment are depreciated based on a 14-year life.
Special tools are amortized using an accelerated method over periods of time
representing the estimated productive life of those tools.
FS-15
<PAGE>
NOTE 5. Net Property, Depreciation and Amortization - Automotive (continued)
- -----------------------------------------------------------------
Depreciation and amortization expenses were as follows (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -----
<S> <C> <C> <C>
Depreciation $2,759 $2,644 $2,454
Amortization 3,179 3,272 2,765
------ ------ ------
Total $5,938 $5,916 $5,219
====== ====== ======
</TABLE>
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 $2,294 million in 1997, $2,325 million in 1996 and $2,206
million in 1995. Expenditures that increase the value or productive capacity of
assets are capitalized. Preproduction costs related to new facilities are
expensed as incurred.
NOTE 6. Income Taxes
- ---------------------
Income 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>
1997 1996 1995
------- ------ -----
<S> <C> <C> <C>
U.S. $ 8,622 $6,283 $5,521
Foreign 2,404 516 1,338
------- ------ ------
Total income before income taxes $11,026 $6,799 $6,859
======= ====== ======
</TABLE>
The provision for income taxes was estimated as follows (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -----
<S> <C> <C> <C>
Currently payable
U.S. federal $2,130 $ 655 $ 971
Foreign 830 756 578
State and local (25) 151 17
------ ------ ------
Total currently payable 2,935 1,562 1,566
Deferred tax liability/(benefit)
U.S. federal 536 642 731
Foreign 78 (117) (10)
State and local 192 79 92
------ ------ ------
Total deferred 806 604 813
------ ------ ------
Total provision $3,741 $2,166 $2,379
====== ====== ======
</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 $2.1 billion of retained earnings at December 31, 1997
that have been retained for use 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>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Tax provision at U.S. statutory rate of 35% $3,859 $2,380 $2,400
Effect of:
Tax on foreign income (30) 162 187
State and local income taxes 109 150 71
The Associates IPO - (228) -
Hertz IPO (94) - -
Other income not subject to tax or
subject to tax at reduced rates (10) (33) (47)
Other (93) (265) (232)
------ ------ ------
Provision for income taxes $3,741 $2,166 $2,379
====== ====== ======
Effective tax rate 33.9% 31.9% 34.7%
</TABLE>
FS-16
<PAGE>
NOTE 6. Income Taxes (continued)
- ---------------------
Deferred income taxes reflect the estimated tax effect of accumulated 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>
1997 1996
------- -------
<S> <C> <C>
Deferred tax assets
Employee benefit plans $ 6,378 $ 6,989
Dealer and customer allowances and claims 4,320 4,073
Net operating loss carryforwards 802 887
Allowance for credit losses 1,270 1,162
All other 1,697 1,308
Valuation allowances (251) (396)
------- -------
Total deferred tax assets 14,216 14,023
Deferred tax liabilities
Leasing transactions 5,588 5,488
Depreciation and amortization
(excluding leasing transactions) 4,011 3,259
Employee benefit plans 997 1,275
All other 2,490 2,118
------- -------
Total deferred tax liabilities 13,086 12,140
------- -------
Net deferred tax assets $ 1,130 $ 1,883
======= =======
</TABLE>
Foreign net operating loss carryforwards for tax purposes were $2.3 billion at
December 31, 1997. A substantial portion of these losses has an indefinite
carryforward period; the remaining losses have expiration dates beginning in
2000. 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 projected
future operating results, the eligible carryforward period and other
circumstances.
FS-17
<PAGE>
NOTE 7. Liabilities - Automotive
- ---------------------------------
Current Liabilities
- -------------------
Included in accrued liabilities at December 31 were the following (in millions):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Dealer and customer allowances and claims $ 8,059 $ 8,738
Employee benefit plans 2,154 2,185
Deferred revenue 2,566 2,078
Salaries, wages and employer taxes 759 983
Postretirement benefits other than pensions 640 761
Other 2,072 1,842
------- -------
Total accrued liabilities $16,250 $16,587
======= =======
</TABLE>
Noncurrent Liabilities
- ----------------------
Included in other liabilities at December 31 were the following (in millions):
<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Postretirement benefits other than pensions $15,407 $15,189
Dealer and customer allowances and claims 7,049 5,919
Employee benefit plans 3,137 2,982
Unfunded pension obligation 1,009 1,126
Minority interests in net assets of subsidiaries 94 93
Other 2,203 1,484
------- -------
Total other liabilities $28,899 $26,793
======= =======
</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. 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>
1997 1996 1995
------------------------ ------------------------ ------------------------
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 $ 551 $ 331 $ 532 $ 261 $ 435 $ 208
Interest on projected
benefit obligation 1,993 857 1,838 819 1,776 785
Return on assets:
Actual (gain)/loss (5,933) (1,533) (4,112) (958) (5,696) (1,201)
Deferred gain/(loss) 3,428 602 1,802 168 3,565 435
------- ------- ------- ----- ------- -------
Recognized (gain) (2,505) (931) (2,310) (790) (2,131) (766)
Net amortization and other 523 209 608 237 408 234
------- ------- ------- ----- ------- -------
Net pension expense $ 562 $ 466 $ 668 $ 527 $ 488 $ 461
======= ======= ======= ===== ======= =======
Discount rate for expense 7.25% 7.1% 7.0% 7.6% 8.25% 8.3%
Assumed long-term rate
of return on assets 9.0% 9.2% 9.0% 9.2% 9.0% 9.0%
</TABLE>
FS-18
<PAGE>
NOTE 8. Employee Retirement Benefits (continued)
- -------------------------------------
Pension expense in 1997 decreased for U.S. and non-U.S. plans as a result of
increased return on plan assets and the year-to-year change in the cost of
employee separation programs, offset by higher costs for pension benefit
improvements and, for non-U.S. plans, lower discount rates. Pension expense in
1996 increased for U.S. and non-U.S. plans as a result of employee separation
programs and lower discount rates.
The status of these plans at December 31 was as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
------------------------------ ------------------------------
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 $35,607 $ 76 $35,683 $30,931 $ 2 $30,933
Actuarial present value of:
Vested benefits $25,049 $ 683 $25,732 $22,363 $ 568 $22,931
Accumulated benefits 28,363 688 29,051 25,908 569 26,477
Projected benefits 30,128 795 30,923 27,557 688 28,245
Plan assets in excess of/(less than)
projected benefits $ 5,479 $ (719) $ 4,760 $ 3,374 $ (686) $ 2,688
Unamortized (net asset)/net
transition obligation a/ (98) 11 (87) (122) 12 (110)
Unamortized prior service cost b/ 2,339 54 2,393 2,789 82 2,871
Unamortized net (gains)/losses c/ (5,011) 210 (4,801) (3,082) 160 (2,922)
------- ------- ------- ------- ------- -------
Prepaid pension asset/(liability) 2,709 (444) 2,265 2,959 (432) 2,527
Adjustment required to recognize
minimum liability d/ - (170) (170) - (136) (136)
------- ------- ------- ------- ------- -------
Prepaid pension asset/(liability)
recognized in the balance sheet $ 2,709 $ (614) $ 2,095 $ 2,959 $ (568) $ 2,391
======= ======= ======= ======= ======= =======
Plan assets in excess of/(less than)
accumulated benefits $ 7,244 $ (612) $ 6,632 $ 5,023 $ (567) $ 4,456
Assumptions:
Discount rate at year-end 6.75% 7.25%
Average rate of increase in compensation 5.5% 5.5%
Non-U.S. Plans
Plan assets at fair value $ 9,056 $ 2,631 $11,687 $ 8,052 $ 2,846 $10,898
Actuarial present value of:
Vested benefits $ 6,735 $ 4,747 $11,482 $ 5,682 $ 5,263 $10,945
Accumulated benefits 6,855 5,024 11,879 5,966 5,556 11,522
Projected benefits 7,953 5,358 13,311 6,951 5,914 12,865
Plan assets in excess of/(less than)
projected benefits $ 1,103 $(2,727) $(1,624) $ 1,101 $(3,068) $(1,967)
Unamortized (net asset)/net
transition obligation a/ (114) 326 212 (149) 421 272
Unamortized prior service cost b/ 442 128 570 391 151 542
Unamortized net (gains)/losses c/ (790) 727 (63) (670) 774 104
------- ------- ------- ------- ------- -------
Prepaid pension asset/(liability) 641 (1,546) (905) 673 (1,722) (1,049)
Adjustment required to recognize
minimum liability d/ - (849) (849) - (990) (990)
------- ------- ------- ------- ------- -------
Prepaid pension asset/(liability)
recognized in the balance sheet $ 641 $(2,395) $(1,754) $ 673 $(2,712) $(2,039)
======= ======= ======= ======= ======= =======
Plan assets in excess of/(less than)
accumulated benefits $ 2,201 $(2,393) $ (192) $ 2,086 $(2,710) $ (624)
Assumptions:
Discount rate at year-end 6.5% 7.1%
Average rate of increase in compensation 5.1% 5.2%
</TABLE>
- - - - - -
a/ The balance of the initial difference between assets and obligation deferred
for recognition over a 15-year period.
b/ The prior service effect of plan amendments deferred for recognition over
remaining service.
c/ The deferred gain or loss resulting from investments, other experience and
changes in assumptions.
d/ An adjustment to reflect the unfunded accumulated benefit obligation in the
balance sheet for plans whose benefits exceed the assets. At December 31,
1997, the unfunded liability in excess of $500 million resulted in an
increase in the charge to stockholders' equity of $70 million net of
deferred taxes; at December 31, 1996, the charge to stockholders' equity
was $159 million.
FS-19
<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.
In June 1997, the company prepaid certain 1998 and 1999 hourly health benefits
by contributing $1,590 million to a Voluntary Employees' Beneficiary Association
(VEBA) trust; $736 million of this amount applies to retirees.
Net postretirement benefit expense, including Financial Services, was as follows
(in millions):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- ------
<S> <C> <C> <C>
Benefits attributed to employee service $ 242 $ 268 $ 223
Interest on accumulated benefit obligation 1,161 1,195 1,160
Net amortization and other (31) (69) (68)
------- ------- ------
Net postretirement benefit expense $ 1,372 $ 1,394 $1,315
======= ======= ======
Retiree benefit payments $ 793 $ 730 $ 698
</TABLE>
The status of these plans at December 31 was as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $10,098 $ 8,614
Active employees eligible to retire 3,027 3,047
Other active employees 4,397 4,842
------- -------
Total accumulated obligation 17,522 16,503
Unamortized prior service cost* 162 256
Unamortized net losses** (757) (438)
Less VEBA assets at fair value (736) -
------- -------
Accrued liability $16,191 $16,321
======= =======
Assumptions:
Discount rate 7.0% 7.5%
Present health care cost trend rate 6.6% 6.6%
Ultimate trend rate in ten years 5.0% 5.0%
Weighted-average trend rate 5.5% 5.7%
- - - - -
* 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 1997 by about $190 million and the
accumulated postretirement benefit obligation at December 31, 1997 by about $2
billion.
FS-20
<PAGE>
NOTE 9. Debt
- -------------
The fair value of debt was estimated based on quoted market prices or current
rates for similar debt with the same remaining maturities.
Automotive
- ----------
<TABLE>
<CAPTION>
Debt at December 31 was as follows (in millions):
Weighted Average
Interest Rate* Book Value
------------------ -----------------
Maturity 1997 1996 1997 1996
-------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Debt payable within one year
Short-term debt 7.9% 6.2% $ 592 $1,021
Long-term debt payable within one year 537 640
------ ------
Total debt payable within one year 1,129 1,661
Long-term debt 1999-2097 8.5% 8.6% 7,047 6,495
------ ------
Total debt $8,176 $8,156
====== ======
Fair value $8,988 $8,680
- - - - -
*Excludes the effect of interest rate swap agreements
</TABLE>
Long-term debt at December 31, 1997 included maturities as follows (in
millions): 1998 - $537 (included in current liabilities); 1999 - $144; 2000 -
$984; 2001 - $1,138; 2002 - $436; thereafter - $4,345.
Included in long-term debt at December 31, 1997 and 1996 were obligations of
$6,864 million and $5,961 million, respectively, with fixed interest rates and
$183 million and $534 million, respectively, with variable interest rates
(generally based on LIBOR or other short-term rates). Obligations payable in
foreign currencies at December 31, 1997 and 1996 were $372 million and $756
million, respectively.
Agreements to manage exposures to fluctuations in interest rates, which include
primarily interest rate swap agreements and futures contracts, did not change
the overall weighted-average interest rate on long-term debt and the obligations
subject to variable interest rates of $183 million at December 31, 1997. At
December 31, 1996, these agreements decreased the weighted-average interest rate
on long-term debt and effectively decreased the obligations subject to variable
rates to $363 million.
Financial Services
- ------------------
Debt at December 31 was as follows (in millions):
<TABLE>
<CAPTION>
Weighted Average
Interest Rate* Book Value
------------------ -------------------
Maturity 1997 1996 1997 1996
-------- ------ ------ -------- --------
<S> <C> <C> <C> <C> <C>
Debt payable within one year
Unsecured short-term debt $ 3,684 $ 2,489
Commercial paper 63,834 57,726
Other short-term debt 3,985 4,757
-------- --------
Total short-term debt 6.0% 5.6% 71,503 64,972
Long-term debt payable within one year 15,370 14,592
-------- --------
Total debt payable within one year 86,873 79,564
Long-term debt
Secured indebtedness 1999-2005 9.3% 8.5% 64 70
Unsecured senior indebtedness
Notes and bank debt 1999-2048 6.6% 6.7% 67,477 66,893
Debentures 2006-2037 5.6% 5.6% 2,313 1,787
Unamortized (discount) (6) (19)
-------- --------
Total unsecured senior indebtedness 69,784 68,661
Unsecured subordinated indebtedness
Notes 2002-2021 8.5% 8.8% 2,946 1,500
Debentures 2009 7.3% 7.3% 425 425
Unamortized (discount) (21) (15)
-------- --------
Total unsecured subordinated indebtedness 3,350 1,910
-------- --------
Total long-term debt 73,198 70,641
-------- --------
Total debt $160,071 $150,205
======== ========
Fair value $161,872 $150,939
- - - - -
*Excludes the effect of interest rate swap agreements
</TABLE>
FS-21
<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>
1997 1996 1995
-------- -------- ------
<S> <C> <C> <C>
Average amount of short-term borrowings $65,592 $62,529 $60,203
Weighted-average short-term interest rates per annum
(average year) 5.3% 5.7% 6.0%
Average remaining term of commercial paper
at December 31 30 days 33 days 34 days
</TABLE>
Long-term debt at December 31, 1997 included maturities as follows (in
millions): 1998 - $15,370; 1999 - $16,343; 2000 - $13,474; 2001 - $12,258; 2002
- - 13,475; thereafter - $17,648.
Included in long-term debt at December 31, 1997 and 1996 were obligations of
$56.7 billion and $55.8 billion, respectively, with fixed interest rates and
$16.5 billion and $14.8 billion, respectively, with variable interest rates
(generally based on LIBOR or other short-term rates). Obligations payable in
foreign currencies at December 31, 1997 and 1996 were $27 billion and $28
billion, respectively. These obligations were issued primarily to fund foreign
business operations.
Outstanding commercial paper at December 31, 1997 totaled $40.9 billion at Ford
Credit, $19.5 billion at The Associates, and $1.4 billion at Hertz, with an
average remaining maturity of 24 days, 28 days, and 18 days, respectively.
Agreements to manage exposures to fluctuations in interest rates include
primarily interest rate swap agreements. At December 31, 1997, these agreements
decreased the weighted-average interest rate on long-term debt to 6.5%, compared
with 6.6% excluding these agreements, and effectively decreased the obligations
subject to variable interest rates to $11.8 billion; the weighted-average
interest rate on short-term debt excluding these agreements did not change
materially. 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 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.
Support Facilities
- ------------------
At December 31, 1997 Ford had long-term contractually committed global credit
agreements under which $8.3 billion is available from various banks at least
through June 30, 2002. The entire $8.3 billion may be used, at Ford's option, by
any affiliate of Ford; however, any borrowing by an affiliate will be guaranteed
by Ford. Ford also has the ability to transfer on a nonguaranteed basis $8
billion of such credit lines 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. In addition, at December 31, 1997,
$471 million of contractually committed credit facilities were available to
various Automotive affiliates outside the U.S. Approximately $66 million of
these facilities were in use at December 31, 1997.
FS-22
<PAGE>
NOTE 9. Debt (continued)
- -------------
At December 31, 1997, Financial Services had a total of $42.9 billion of
contractually committed support facilities (excluding the $8 billion available
under Ford's global credit agreements). Of these facilities, $23.8 billion are
contractually committed global credit agreements under which $19.2 billion and
$4.6 billion are available to Ford Credit and Ford Credit Europe, respectively,
from various banks; 61% and 77%, respectively, of such facilities are available
through June 30, 2002. The entire $19.2 billion may be used, at Ford Credit's
option, by any subsidiary of Ford Credit, and the entire $4.6 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, 1997, $154 million of the
Ford Credit global facilities were in use; $597 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, 1997 consisted of $17 billion of contractually committed support facilities
available to various affiliates in the U.S. and $2.1 billion of contractually
committed support facilities available to various affiliates outside the U.S.;
at December 31, 1997, approximately $1 billion of these facilities were in use.
Furthermore, banks provide $1.6 billion of liquidity facilities to support the
asset-backed commercial paper program of a Ford Credit sponsored special purpose
entity.
FS-23
<PAGE>
NOTE 10. Capital Stock
- -----------------------
At December 31, 1997, 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.
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 $129 million and 2,580 shares $508 million and 10,163 shares
at December 31, 1997 outstanding (2,579,962 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 or 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>
On January 9, 1998, all outstanding shares of Series A Preferred Stock were
redeemed at an amount equivalent to $51.68 per Depositary Share plus unpaid
dividends.
On January 22, 1998, the company announced an offer to purchase all Depositary
Shares representing its Series B Cumulative Preferred Stock at a price of $31.40
per Depositary Share. The offer to purchase is in effect until February 26, 1998
(unless extended by the company).
The Series B Preferred Stock ranks (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. Options granted in 1997 and
subsequent years under the 1990 Plan become exercisable 33% after one year from
the date of grant, 67% after two years and in full after three years. In
general, options granted under the 1985 Plan and options granted prior to 1997
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 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 936,300 shares in
1997, 865,100 shares in 1996 and 884,500 shares in 1995 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.
Under the 1990 Plan, 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. Any
unused portion of the 1% limit for any calendar year may be carried forward and
made available for Plan awards in succeeding calendar years. At December 31,
1997, the number of unused shares carried forward aggregated to 1,130,322
shares.
Information concerning stock options is as follows (shares in millions):
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ------------------ ------------------
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 50.3 $26.93 48.5 $25.22 43.3 $23.24
New grants (based on fair value of
Common Stock at dates of grant) 8.6 32.05 8.0 32.69 9.7 32.00
Exercised* (8.3) 23.19 (5.2) 20.32 (3.4) 19.62
Surrendered upon exercise of stock
appreciation rights (0.4) 22.44 (0.7) 23.03 (0.9) 23.19
Terminated and expired (0.2) 30.86 (0.3) 31.14 (0.2) 28.05
----- ----- -----
Outstanding at end of period 50.0 ** 28.44 50.3 26.93 48.5 25.22
Outstanding but not exercisable (21.6) (21.5) (22.6)
----- ----- -----
Exercisable at end of period 28.4 25.84 28.8 23.61 25.9 21.77
===== ===== =====
</TABLE>
- - - - -
* Exercised at option prices ranging from $15.00 to $32.69 during 1997,
$13.42 to $29.06 during 1996, and $9.09 to $29.06 during 1995
** Included 2.0 and 48.0 million shares under the 1985 and 1990 Plans,
respectively, at option prices ranging from $15.00 to $45.84 per share.
At December 31, 1997, 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 1997, 1996
and 1995, using the Black-Scholes option-pricing model, was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -----
<S> <C> <C> <C>
Estimated fair value per share of
options granted during the year $5.76 $6.93 $7.16
Assumptions:
Annualized dividend yield 4.8% 4.3% 3.9%
Common Stock price volatility 22.1% 25.2% 26.2%
Risk-free rate of return 6.7% 6.2% 5.8%
Expected option term (in years) 5 5 5
</TABLE>
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 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 1997, 1996 and 1995, the pro forma effects on the company's
net income and earnings per share would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
------------------- -------------------- -------------------
As Pro As Pro As Pro
Reported Forma* Reported Forma* Reported Forma*
-------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Net income (in millions) $6,920 $6,892 $4,446 $4,428 $4,139 $4,138
Income per share
Basic $ 5.75 $ 5.73 $ 3.73 $ 3.71 $ 3.58 $ 3.58
Diluted $ 5.62 $ 5.60 $ 3.64 $ 3.63 $ 3.33 $ 3.33
</TABLE>
- - - - - -
* The pro forma disclosures may not be representative of the effects on reported
net income and earnings per share for future periods because only stock
options that were granted beginning in 1995 are included in the above table.
The estimated fair value, before tax, of options granted in 1997, 1996 and
1995 was $48 million, $54 million and $68 million respectively.
FS-26
<PAGE>
NOTE 12. Litigation and Claims
- -------------------------------
Various legal actions, governmental investigations and proceedings and claims
are pending or may be instituted or asserted in the future against the company
and its subsidiaries, including those arising out of alleged defects in the
company's products; governmental regulations relating to safety, emissions and
fuel economy; financial services; 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, 1997. 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, 1997, the company had the following minimum rental commitments
under non-cancelable operating leases (in millions): 1998 - $524; 1999 - $400;
2000 - $301; 2001 - $182; 2002 - $132; thereafter - $254. These amounts include
rental commitments related to the sale and leaseback of certain Automotive
machinery and equipment.
Ford in the U.S. and Ford of Canada have entered into agreements with 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, 1997 and 1996 was $1.8 billion and $1.6
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. The U.S. program was
discontinued December 31, 1997; rebates earned prior to program discontinuance
will be valid for up to five years following the calendar year in which earned
subject to certain restrictions.
Certain Financial Services subsidiaries make credit lines available to holders
of their credit cards. At December 31, 1997 and 1996, the unused portion of
available credit was approximately $29.3 billion and $18.8 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.
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.
FS-27
<PAGE>
NOTE 14. Financial Instruments (continued)
- -------------------------------
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>
1997 1996
----------------------- ------------------------
Book Fair Book Fair Fair Value
Value Value Value Value Reference
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Automotive
Marketable securities $ 14,519 $ 14,519 $ 11,836 $ 11,836 Note 2
Debt 8,176 8,988 8,156 8,680 Note 9
Financial Services
Marketable securities $ 2,201 $ 2,201 $ 2,302 $ 2,302 Note 2
Receivables 128,594 131,976 120,832 122,104 Note 3
Debt 160,071 161,872 150,205 150,939 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>
1997 1996
------------------- --------------------
Fair Deferred Fair Deferred
Value (Loss)* Value (Loss)*
------ --------- ------- --------
<S> <C> <C> <C> <C>
Foreign currency instruments $(63) $(132)
- Assets $ 289 $ 259
- Liabilities 1,207 1,168
Interest rate instruments - -
- Assets 548 436
- Liabilities 182 319
</TABLE>
- - - - -
* Deferred losses are offset by unrecognized gains on the underlying
transactions or commitments
The notional amount represents the contract amount, not the amount at risk. The
notional amount for foreign currency instruments was $30,977 million at December
31 1997, and $29,700 million at December 31, 1996. The notional amount for
interest rate instruments was $90,428 million at December 31, 1997, and $76,200
million at December 31, 1996.
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, 1997, the notional amount of commodity hedging contracts
outstanding totaled $496 million; the notional amount at December 31, 1996 was
$505 million. The company also had guaranteed $860 million of debt of
unconsolidated subsidiaries, affiliates and others. The risk of loss under these
financial agreements is not material.
FS-28
<PAGE>
NOTE 15. Acquisitions, Dispositions and Restructuring
- ------------------------------------------------------
Asset Write-Downs and Dispositions - Financial Services
- -------------------------------------------------------
During third quarter 1996, Ford Leasing Corporation, then known as 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.
During 1997, Team Rental Group, Inc. ("Team Rental") acquired all of the
outstanding common stock of BRAC; Ford became the owner of approximately 22% of
Team Rental as a result of the partial repayment in Team Rental stock of Ford's
loans to BRAC. In fourth quarter 1997, Ford sold its shares of Budget Group
(formerly "Team Rental") stock. The gain on sale was not material.
The effect of the USL Capital disposition and BRAC write-down on the company's
results from operations are summarized below (in millions):
<TABLE>
<CAPTION>
1996
-----------------------------
Income/(loss) Net
Before Taxes Income/(loss)
------------- -------------
<S> <C> <C>
Sale of USL Capital's assets $ 263 $ 95
Write-down for Budget Rent a Car Corporation (384) (233)
----- -----
Total $(121) $(138)
===== =====
</TABLE>
Sale of Common Stock of a Subsidiary
- ------------------------------------
During April 1997, The Hertz Corporation ("Hertz"), a subsidiary of Ford,
completed an initial public offering ("IPO") of its common stock representing a
19.1% economic interest in Hertz. Ford recorded in second quarter 1997 a
non-operating gain of $269 million resulting from the IPO; the gain was not
subject to income taxes.
During May 1996, Associates First Capital Corporation ("The Associates"), a
subsidiary of Ford, completed an IPO of its common stock representing a 19.3%
economic interest in The Associates. Ford recorded in second quarter 1996 a
non-operating gain of $650 million resulting from the IPO; the gain was not
subject to income taxes.
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.
FS-29
<PAGE>
NOTE 15. Acquisitions, Dispositions and Restructuring (continued)
- ------------------------------------------------------
Dissolution of Autolatina Joint Venture
- ---------------------------------------
During fourth quarter 1995, the company's joint venture with Volkswagen AG in
Brazil and Argentina (Autolatina) 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 exclude these
entities; the company's income statement for 1995 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.
Restructurings
- --------------
The company recorded a pre-tax charge in second quarter 1997 totaling $272
million ($169 million after taxes) reflecting actions that will be completed
during 1997 and 1998. These include primarily the discontinuation of passenger
car production at the Lorain Assembly Plant resulting in a write-down of surplus
assets. The charge also included employee termination costs related to the
elimination of a shift at the Halewood (England) Plant, and a loss on the sale
of the Heavy Truck business.
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-30
<PAGE>
NOTE 16. Cash Flows
- --------------------
The reconciliation of net income to cash flows from operating activities is as
follows (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- --------------------- ---------------------
Financial Financial Financial
Automotive Services Automotive Services Automotive Services
---------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 4,714 $ 2,206 $ 1,655 $ 2,791 $ 2,056 $ 2,083
Adjustments to reconcile net income
to cash flows from operating activities:
Depreciation and amortization 5,938 7,645 5,916 6,875 5,219 6,500
Losses/(earnings) of affiliated
companies in excess of dividends
remitted 127 (1) 44 (16) 191 7
Provision for credit and
insurance losses - 3,230 - 2,564 - 1,818
Foreign currency adjustments (27) - 156 - (64) -
Net (purchases)/sales of trading
securities (2,307) 67 (5,180) 62 672 239
Provision for deferred income taxes 908 (102) 74 530 88 725
Gain on sale of common stock of a
subsidiary (Note 15) - (269) - (650) - -
Changes in assets and liabilities:
(Increase)/decrease in accounts
receivable and other current assets (179) 256 (2,183) (1,328) 129 (843)
Decrease/(increase) in inventory 1,234 - 553 - (46) -
Increase/(decrease) in accounts payable
and accrued and other liabilities 3,854 (121) 5,447 1,303 730 1,461
Other (278) 739 94 550 (126) 332
------- ------- ------- ------- ------- -------
Cash flows from operating activities $13,984 $13,650 $ 6,576 $12,681 $ 8,849 $12,322
======= ======= ======= ======= ======= =======
</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, 1997 and 1996 were $5.8 billion and $2.8 billion, respectively;
Financial Services cash equivalents at December 31, 1997 and 1996 were $0.8
billion and $2.8 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):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Interest $10,430 $10,250 $9,586
Income taxes 1,301 1,285 1,425
</TABLE>
FS-31
<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
- ---------- 1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Sales to unaffiliated customers
United States $ 81,313 $ 76,048 $ 73,870
Europe 24,424 27,006 26,132
All other 17,198 14,969 10,494
-------- -------- --------
Total $122,935 $118,023 $110,496
======== ======== ========
Intercompany sales among geographic areas*
United States $ 14,893 $ 11,232 $ 10,438
Europe 3,602 2,900 2,765
All other 15,500 14,812 12,060
-------- -------- --------
Total $ 33,995 $ 28,944 $ 25,263
======== ======== ========
Total sales
United States $ 96,206 $ 87,280 $ 84,308
Europe 28,026 29,906 28,897
All other 32,698 29,781 22,554
Elimination of intercompany sales (33,995) (28,944) (25,263)
-------- -------- --------
Total $122,935 $118,023 $110,496
======== ======== ========
Operating income/(loss)
United States $ 5,433 $ 2,800 $ 2,409
Europe 343 (497) 20
All other 1,170 213 852
-------- ------- --------
Total $ 6,946 $ 2,516 $ 3,281
======== ======== ========
Net income/(loss)
United States $ 3,706 $ 2,007 $ 1,843
Europe 273 (291) 116
All other 735 (61) 97
-------- -------- --------
Total $ 4,714 $ 1,655 $ 2,056
======== ======== ========
Assets at December 31
United States $ 52,301 $ 48,064 $ 43,421
Europe 16,306 15,121 15,137
All other 16,472 16,473 14,214
-------- -------- --------
Total $ 85,079 $ 79,658 $ 72,772
======== ======== ========
Capital expenditures (facilities, machinery
and equipment and tooling)
United States $ 4,494 $ 4,493 $ 5,296
Europe 2,411 1,905 1,892
All other 1,237 1,811 1,488
-------- -------- --------
Total $ 8,142 $ 8,209 $ 8,676
======== ======== ========
</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
- ------------------ 1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues
United States $ 24,268 $ 22,839 $ 21,383
Europe 3,194 3,472 3,144
All other 3,230 2,657 2,114
-------- -------- --------
Total $ 30,692 $ 28,968 $ 26,641
======== ======== ========
Income before income taxes**
United States $ 2,837 $ 3,363 $ 2,822
Europe 506 454 493
All other 514 405 224
-------- -------- --------
Total $ 3,857 $ 4,222 $ 3,539
======== ======== ========
</TABLE>
- - - - - -
** Financial Services activities do not report operating income; income before
income taxes is representative of operating income
FS-32
<PAGE>
NOTE 17. Segment Information (continued)
- -----------------------------
Financial Services (continued)
- ------------------
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net income
United States $ 1,656 $ 2,216 $ 1,718
Europe 331 268 321
All other 219 307 44
-------- -------- --------
Total $ 2,206 $ 2,791 $ 2,083
======== ======== ========
Assets at December 31
United States $154,263 $144,494 $137,154
Europe 20,850 22,788 20,237
All other 18,905 15,927 13,120
-------- -------- --------
Total $194,018 $183,209 $170,511
======== ======== ========
</TABLE>
NOTE 18. Summary Quarterly Financial Data (Unaudited)
- ------------------------------------------------------
(in millions, except amounts per share)
<TABLE>
<CAPTION>
1997 1996
---------------------------------------- ----------------------------------------
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 $30,037* $32,805 $28,196 $31,897 $28,297* $31,762* $26,459 $31,505
Operating income/(loss) 1,704 2,444 846 1,952 315 1,624 19 558
Financial Services
Revenues 7,277 7,460 7,900 8,055 6,928 7,211 7,501 7,328
Income before income taxes 830 1,199 912 916 832 947 1,268 1,175
Total Company
Net income $ 1,469 $ 2,530 $ 1,125 $ 1,796 $ 653 $ 1,903 $ 686 $ 1,204
Less:
Preferred stock dividend
requirements 14 14 13 13 19 16 16 14
------- ------- ------- ------- ------- ------- ------- -------
Income attributable
to Common and Class B Stock $ 1,455 $ 2,516 $ 1,112 $ 1,783 $ 634 $ 1,887 $ 670 $ 1,190
======= ======= ======= ======= ======= ======= ======= =======
AMOUNTS PER SHARE OF COMMON
AND CLASS B STOCK AFTER
PREFERRED STOCK DIVIDENDS**
Basic income $ 1.23 $ 2.11 $ 0.93 $ 1.48 $ 0.54 $ 1.61 $ 0.57 $ 1.01
Diluted income 1.20 2.06 0.91 1.45 0.53 1.56 0.56 0.99
Cash dividends 0.385 0.42 0.42 0.42 0.35 0.35 0.385 0.385
</TABLE>
- - - - - -
* Restated to reflect accounting adjustments to revenues (and costs) with no
effect on operating or net income
** Amounts for prior periods have been restated, where applicable, to reflect
adoption of Statement of Financial Accounting Standards No. 128, "Earnings
per Share".
FS-33
<PAGE>
Coopers & Lybrand L.L.P.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Ford Motor Company
We have audited the consolidated balance sheet of Ford Motor Company and
Subsidiaries at December 31, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1997. 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, 1997 and 1996, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/Coopers & Lybrand L.L.P.
400 Renaissance Center
Detroit, Michigan 48243
313-446-7100
January 26, 1998
<PAGE>
Ford Motor Company
The American Road
Dearborn, Michigan
CONSENT OF COOPERS & LYBRAND L.L.P.
Re: Ford Motor Company Registration Statements 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, 333-20725, 333-27993
and 333-28181 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 26, 1998 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 2, 1998.
/s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
400 Renaissance Center
Detroit, Michigan 48243
February 2, 1998
<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 2, 1998 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-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 6,316
<SECURITIES> 14,519
<RECEIVABLES> 3,210
<ALLOWANCES> 113
<INVENTORY> 5,468
<CURRENT-ASSETS> 36,847
<PP&E> 75,823
<DEPRECIATION> 41,229
<TOTAL-ASSETS> 85,079
<CURRENT-LIABILITIES> 33,291
<BONDS> 7,047
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 122,935
<TOTAL-REVENUES> 122,935
<CGS> 108,907
<TOTAL-COSTS> 115,989
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 788
<INCOME-PRETAX> 7,082
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Services Segment - This schedule contains summary financial
information extracted from Ford's Current Report on Form 8-K dated February 2,
1998 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-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,618
<SECURITIES> 2,207
<RECEIVABLES> 176,416
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 194,018
<CURRENT-LIABILITIES> 0
<BONDS> 160,071
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 30,692
<TOTAL-REVENUES> 30,692
<CGS> 0
<TOTAL-COSTS> 27,208
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,230
<INTEREST-EXPENSE> 9,712
<INCOME-PRETAX> 3,857
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> CT
<LEGEND>
Conglomerate Totals - This schedule contains summary financial information
extracted from Ford's Current Report on Form 8-K dated February 2, 1998 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-31-1997
<PERIOD-END> DEC-31-1997
<TOTAL-ASSETS> 279,097
<COMMON> 1,203
0
0
<OTHER-SE> 29,531
<TOTAL-LIABILITY-AND-EQUITY> 279,097
<TOTAL-REVENUES> 153,627
<INCOME-TAX> 3,741
<INCOME-CONTINUING> 6,920
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,920
<EPS-PRIMARY> 5.75
<EPS-DILUTED> 5.62
</TABLE>
