UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the Securities
- ---- Exchange Act of 1934 (No Fee Required)
For the fiscal year ended December 31, 1997
or
Transition report pursuant to Section 13 or 15(d) of the Securities
- ---- Exchange Act of 1934 (No Fee Required)
For the transition period from to
------- -------
Commission file number 1-3950
------
FORD MOTOR COMPANY
------------------
(Exact name of Registrant as specified in its charter)
Delaware 38-0549190
-------- ----------
(State of incorporation) (I.R.S. employer identification no.)
The American Road, Dearborn, Michigan 48121
------------------------------------- -----
(Address of principal executive offices) (Zip code)
313-322-3000
------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered (a)
------------------- ------------------------
Common Stock, par value $1.00 per share New York Stock Exchange
Pacific Coast Stock Exchange
Depositary Shares, each representing New York Stock Exchange
1/2,000 of a share of Series B Cumulative
Preferred Stock, as described below
- ---------------
(a) In addition, shares of Common Stock of the Registrant are listed on
certain stock exchanges in the United Kingdom and Continental Europe.
[Cover page 1 of 2 pages]
<PAGE>
Securities registered pursuant to Section 12(g) of the Act:
Series B Cumulative Preferred Stock, par value $1.00 per share, with an annual
dividend rate of $4,125 per share and a liquidation preference of $50,000 per
share.
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
-----
As of February 27, 1998, the Registrant had outstanding 1,141,127,738 shares of
Common Stock and 70,852,076 shares of Class B Stock. Based on the New York Stock
Exchange Composite Transaction closing price of the Common Stock on that date
($56 9/16 a share), the aggregate market value of such Common Stock was
$64,545,037,681. Although there is no quoted market for the Registrant's Class B
Stock, shares of Class B Stock may be converted at any time into an equal number
of shares of Common Stock for the purpose of effecting the sale or other
disposition of such shares of Common Stock. The shares of Common Stock and Class
B Stock outstanding at February 27, 1998 included shares owned by persons who
may be deemed to be "affiliates" of the Registrant. The Registrant does not
believe, however, that any such person should be considered to be an affiliate.
For information concerning ownership of outstanding Common Stock and Class B
Stock, see the Proxy Statement for the Registrant's Annual Meeting of
Stockholders to be held on May 14, 1998 (the "Proxy Statement"), which is
incorporated by reference under various Items of this Report.
Document Incorporated by Reference*
-----------------------------------
Document Where Incorporated
-------- ------------------
Proxy Statement Part III (Items 10,
11, 12 and 13)
- --------------------------
* As stated under various Items of this Report, only certain specified portions
of such document are incorporated by reference herein.
[Cover page 2 of 2 pages]
<PAGE>
PART I
Item 1. Business
- -----------------
Ford Motor Company (referred to herein as "Ford", the "Company" or the
"Registrant") was incorporated in Delaware in 1919 and acquired the business of
a Michigan company, also known as Ford Motor Company, incorporated in 1903 to
produce automobiles designed and engineered by Henry Ford. Ford is the world's
largest producer of trucks and the second largest producer of cars and trucks
combined. Ford and its subsidiaries also engage in automotive-related
businesses, such as, financing and renting vehicles and manufacturing automotive
components and systems.
General
The Company's two principal business segments are Automotive and Financial
Services. The activities of the Automotive segment consist of the design,
manufacture, assembly and sale of cars and trucks and related parts and
accessories. Substantially all of Ford's automotive products are marketed
through retail dealerships, most of which are privately owned and financed.
The primary activities of the Financial Services segment consist of
financing operations, vehicle and equipment leasing and rental operations, and
insurance operations. These activities are conducted primarily through the
Company's subsidiaries, Ford Motor Credit Company ("Ford Credit") and The Hertz
Corporation ("Hertz"). Ford also owns an 80.7% economic interest in Associates
First Capital Corporation ("The Associates"), which, as Ford has recently
announced, will be spun-off on April 7, 1998 to holders of Ford's Common and
Class B Stock.
See Note 17 (pages FS-32 and FS-33) of the Notes to Financial Statements
and Item 6. "Selected Financial Data" for information relating to revenue,
operating income/(loss) and assets attributable to Ford's industry segments.
Also see Item 7. "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for information with respect to revenue, net income
and other matters.
Automotive Operations
The worldwide automotive industry is affected significantly by a number of
factors over which the industry has little control, including general economic
conditions.
In the United States, the automotive industry is a highly-competitive,
cyclical business characterized by a wide variety of product offerings. The
level of industry demand (retail deliveries of cars and trucks) can vary
substantially from year to year. In any year, demand is dependent to a large
extent on general economic conditions, the cost of purchasing and operating cars
and trucks and the availability and cost of credit and of fuel. Industry demand
also reflects the fact that cars and trucks are durable items, the replacement
of which can be postponed.
The automotive industry outside of the United States consists of many
producers, with no single dominant producer. Certain manufacturers, however,
account for the major percentage of total sales within particular countries,
especially their respective countries of origin. Most of the factors that affect
the U.S. automotive industry and its sales volumes and profitability are equally
relevant outside the United States.
<PAGE>
Item 1. Business (Continued)
- ----------------------------
The worldwide automotive industry also is affected significantly by a
substantial amount of costly government regulation. In the United States and
Europe, for example, government regulation has arisen primarily out of concern
for the environment, for greater vehicle safety and for improved fuel economy.
Many governments also regulate local content and/or impose import requirements
as a means of creating jobs, protecting domestic producers or influencing their
balance of payments.
Unit sales of Ford vehicles vary with the level of total industry demand
and as a result of Ford's share of industry sales. Ford's share is influenced by
the quality, price, design, driveability, safety, reliability, economy and
utility of its products compared with those offered by other manufacturers, as
well as by the timing of new model introductions and capacity limitations.
Ford's ability to satisfy changing consumer preferences with respect to type or
size of vehicle and its design and performance characteristics can affect Ford's
sales and earnings significantly.
The profitability of vehicle sales is affected by many factors, including
unit sales volume, the mix of vehicles and options sold, the level of
"incentives" (price discounts) and other marketing costs, the costs for customer
warranty claims and other customer satisfaction actions, the costs for
government-mandated safety, emission and fuel economy technology and equipment,
the ability to control costs and the ability to recover cost increases through
higher prices. Further, because the automotive industry is capital intensive, it
operates with a relatively high percentage of fixed costs which can result in
large changes in earnings from relatively small changes in unit volume.
United States
- -------------
Sales Data. The following table shows U.S. industry demand for the years
indicated:
<TABLE>
<CAPTION>
U. S. Industry Retail Deliveries
(millions of units)
Years Ended December 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Cars........................................ 8.3 8.6 8.6 9.0 8.5
Trucks...................................... 7.2 6.9 6.5 6.4 5.7
---- ---- --- ---- ----
Total....................................... 15.5 15.5 15.1 15.4 14.2
==== ==== ==== ==== ====
</TABLE>
-2-
<PAGE>
Item 1. Business (Continued)
- ----------------------------
Ford classifies cars by small, middle, large and luxury segments and trucks
by compact pickup, compact bus/van/utility, full-size pickup, full-size
bus/van/utility and medium/heavy segments. The large and luxury car segments and
the compact bus/van/utility, full-size pickup and full-size bus/van/utility
truck segments include the industry's most profitable vehicle lines. The term
"bus" as used herein refers to vans designed to carry passengers. The following
tables show the proportion of retail car and truck sales by segment for the
industry (including Japanese and other foreign-based manufacturers) and Ford for
the years indicated:
<TABLE>
<CAPTION>
U. S. Industry Vehicle Sales by Segment
-----------------------------------------------------------------
Years Ended December 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
CARS
Small....................................... 18.1% 19.1% 19.6% 20.1% 19.8%
Middle...................................... 24.7 25.6 26.4 26.8 28.8
Large....................................... 3.9 3.9 4.3 4.8 5.0
Luxury...................................... 6.7 6.7 6.8 6.6 6.4
------ ------ ------ ------ ------
Total U.S. Industry Car Sales............... 53.4 55.3 57.1 58.3 60.0
------ ------ ------ ------ ------
TRUCKS
Compact Pickup.............................. 6.4 6.2 6.8 7.7 7.6
Compact Bus/Van/Utility..................... 20.0 19.0 18.0 16.9 16.5
Full-Size Pickup............................ 12.0 12.6 11.5 11.0 9.9
Full-Size Bus/Van/Utility................... 6.1 5.0 4.4 4.1 4.2
Medium/Heavy................................ 2.1 1.9 2.2 2.0 1.8
------ ------ ------ ------ ------
Total U.S. Industry Truck Sales............. 46.6 44.7 42.9 41.7 40.0
------ ------ ------ ------ ------
Total U.S. Industry Vehicle Sales 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Ford Vehicle Sales by Segment in U.S.
-----------------------------------------------------------------
Years Ended December 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
CARS
Small....................................... 12.7% 13.4% 15.1% 17.5% 15.1%
Middle...................................... 19.6 22.1 22.3 22.7 26.9
Large....................................... 5.6 5.3 4.9 5.2 5.1
Luxury...................................... 4.1 4.1 4.4 4.7 4.9
------ ------ ------ ------ ------
Total Ford U.S. Car Sales................... 42.0 44.9 46.7 50.1 52.0
------ ------ ------ ------ ------
TRUCKS
Compact Pickup.............................. 7.7 7.4 8.0 8.9 9.5
Compact Bus/Van/Utility..................... 18.9 20.0 20.1 16.7 15.6
Full-Size Pickup............................ 19.3 20.0 17.9 16.7 15.6
Full-Size Bus/Van/Utility................... 11.0 6.6 5.9 6.2 6.0
Medium/Heavy*............................... 1.1 1.1 1.4 1.4 1.3
------ ------ ------ ------ ------
Total Ford U.S. Truck Sales................. 58.0 55.1 53.3 49.9 48.0
------ ------ ------ ------ ------
Total Ford U.S. Vehicle Sales............... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
- ---------------------
*In May 1997, Ford and Freightliner Corporation ("Freightliner") entered into an
agreement for the sale to Freightliner of Ford's heavy truck business in North
America and Australia. Ford ceased production of heavy trucks in North America
in December 1997. The transfer of the North American heavy truck business is
expected to be completed by the end of the first quarter of 1998, and the
transfer of the Australian business is expect to be completed by year-end 1998.
As shown in the tables above, since 1993 there has been a steady shift from
cars to trucks for both industry sales and Ford sales. Most of the shift
reflects fewer sales of cars in the middle and large segments for the industry
and in the small and middle segments for Ford, as well as increased sales of
trucks in all segments with the exception of compact pickups and medium/heavy
trucks.
-3-
<PAGE>
Item 1. Business (Continued)
- ----------------------------
Market Share Data. The following tables show changes in car and truck
market shares of U.S. and foreign-based manufacturers for the years indicated:
<TABLE>
<CAPTION>
U.S. Car Market Shares*
-----------------------------------------------------------------
Years Ended December 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
U.S. Manufacturers (Including Imports)
Ford..................................... 19.7% 20.6% 20.9% 21.8% 22.3%
General Motors........................... 32.2 32.3 33.9 34.0 34.1
Chrysler................................. 8.9 9.8 9.1 9.0 9.8
----- ----- ----- ----- -----
Total U.S. Manufacturers.............. 60.8 62.7 63.9 64.8 66.2
Foreign-Based Manufacturers**
Japanese................................. 30.9 30.0 29.7 29.6 29.1
All Other................................ 8.3 7.3 6.4 5.6 4.7
----- ----- ----- ----- -----
Total Foreign-Based Manufacturers..... 39.2 37.3 36.1 35.2 33.8
----- ----- ----- ----- -----
Total U.S. Car Retail Deliveries...... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
U.S. Truck Market Shares*
-----------------------------------------------------------------
Years Ended December 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
U.S. Manufacturers (Including Imports)
Ford..................................... 31.2% 31.1% 31.9% 30.1% 30.5%
General Motors........................... 28.8 29.0 29.9 30.9 31.4
Chrysler................................. 21.7 23.4 21.3 21.7 21.4
Navistar International................... 1.3 1.3 1.4 1.3 1.3
All Other................................ 1.8 1.8 2.0 1.8 1.6
----- ----- ----- ----- -----
Total U.S. Manufacturers.............. 84.8 86.6 86.5 85.8 86.2
Foreign-Based Manufacturers**
Japanese................................. 14.2 12.7 12.7 13.5 13.2
All Other................................ 1.0 0.7 0.8 0.7 0.6
----- ----- ----- ----- -----
Total Foreign-Based Manufacturers..... 15.2 13.4 13.5 14.2 13.8
----- ----- ----- ----- -----
Total U.S. Truck Retail Deliveries.... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
U.S. Combined Car and Truck Market Shares*
-----------------------------------------------------------------
Years Ended December 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
U.S. Manufacturers (Including Imports)
Ford..................................... 25.0% 25.2% 25.6% 25.2% 25.5%
General Motors........................... 30.6 30.8 32.2 32.7 33.1
Chrysler................................. 14.8 15.9 14.3 14.3 14.7
Navistar International................... 0.6 0.6 0.6 0.5 0.5
All Other................................ 0.9 0.7 0.9 0.8 0.7
----- ----- ----- ----- -----
Total U.S. Manufacturers.............. 71.9 73.2 73.6 73.5 74.2
Foreign-Based Manufacturers**
Japanese................................. 23.2 22.4 22.6 22.9 22.8
All Other................................ 4.9 4.4 3.8 3.6 3.0
----- ----- ----- ----- -----
Total Foreign-Based Manufacturers..... 28.1 26.8 26.4 26.5 25.8
----- ----- ----- ----- -----
Total U.S. Car and Truck Retail
Deliveries ........................... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
- --------------------------
* All U.S. retail sales data are based on publicly available information
from the American Automobile Manufacturers Association, the media and trade
publications.
** Share data include cars and trucks assembled and sold in the U.S. by
Japanese-based manufacturers selling through their own dealers as well as
vehicles imported by them into the U.S. "All Other" includes primarily
companies based in various European countries and in Korea.
-4-
<PAGE>
Item 1. Business (Continued)
- ----------------------------
Japanese Competition. The market share of Ford and other domestic
manufacturers in the United States is affected by sales from Japanese
manufacturers. As shown in the table above, the share of the U.S. combined car
and truck industry held by the Japanese manufacturers decreased from 22.8% in
1993 to 22.4% in 1996. This trend reflected in part the effects of a
strengthening Japanese yen, which put an upward pressure on the prices of
vehicles produced by Japanese manufacturers, as well as the overall market shift
from cars to trucks and improvements in vehicles produced by U.S. manufacturers.
During 1997, however, the share of the U.S. combined car and truck market held
by Japanese manufacturers increased to 23.2% as the Japanese yen weakened
against the dollar. The recent disruption in Asian financial markets and
associated further weakening of the yen creates additional competitive pressures
in the United States by Japanese manufacturers.
In the 1980s and continuing in the 1990s, Japanese manufacturers added
assembly capacity in North America (frequently referred to as "transplants") in
response to a variety of factors, including export restraints, movements in the
exchange rate between the Japanese yen and the U.S. dollar, the significant
growth of Japanese car sales in the United States and international trade
considerations. Ford estimates that production in the United States by Japanese
transplants was approximately 2.3 million units in 1997.
Marketing Incentives and Fleet Sales. As a result of intense competition
from new product offerings (from both domestic and foreign manufacturers) and
the desire to maintain economic production levels, automotive manufacturers that
sell vehicles in the United States have provided marketing incentives (price
discounts) to retail and fleet customers (i.e., daily rental companies,
commercial fleets, leasing companies and governments). Marketing incentives are
particularly prevalent during periods of economic downturns, when excess
capacity in the industry tends to increase.
Ford's marketing costs in the United States as a percentage of gross sales
revenue for each of 1997, 1996, and 1995 were 8.7%, 8.0%, and 8.2%,
respectively. "Marketing costs" include (i) marketing incentives on vehicles
such as retail rebates and costs for special financing rates, (ii) reserves for
residual support on retail vehicle leases, (iii) reserves for costs and/or
losses associated with obligatory repurchases of certain vehicles sold to daily
rental companies and (iv) costs for advertising and sales promotions for
vehicles.
Sales by Ford to fleet customers were as follows for the years indicated:
<TABLE>
<CAPTION>
Ford Fleet Sales
-----------------------------------------------------------------
Years Ended December 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Units sold.................................. 923,000 936,000 971,000 924,000 881,000
Percent of Ford's total U.S. car
and truck sales............................ 24% 24% 25% 24% 25%
</TABLE>
Fleet sales generally are less profitable than retail sales, and sales to daily
rental companies generally are less profitable than sales to other fleet
purchasers. The mix between sales to daily rental companies and other fleet
sales has been about evenly split in recent years.
Warranty Coverage. Ford presently provides warranty coverage for defects in
factory-supplied materials and workmanship on all vehicles (other than
medium/heavy trucks) sold by it in the United States that extends for at least
36 months or 36,000 miles (whichever occurs first) and covers all components of
the vehicle, other than tires which are warranted by the tire manufacturers. In
general, different warranty coverage is provided on medium/heavy trucks and on
vehicles sold outside the United States. In addition, as discussed below under
"Governmental Standards - Mobile Source Emissions Control", the Federal Clean
Air Act requires a useful life of 10 years or 100,000 miles (whichever occurs
first) for emissions equipment on most light duty vehicles sold in the United
States. As a result of the coverage of these warranties and the increased
concern for customer satisfaction, costs for warranty repairs, emissions
equipment repairs and customer satisfaction actions ("warranty costs") can be
substantial. Estimated warranty costs for each vehicle sold by Ford are accrued
at the time of sale. Such accruals, however, are subject to adjustment from time
to time depending on actual experience.
-5-
<PAGE>
Item 1. Business (Continued)
- ----------------------------
Europe
- ------
Europe is the largest market for the sale of Ford cars and trucks outside
the United States. The automotive industry in Europe is intensely competitive;
for the past 12 years, the top six manufacturers have each achieved a car market
share in about the 10% to 17% range. (Manufacturers' shares, however, vary
considerably by country.) This competitive environment is expected to intensify
further as Japanese manufacturers, which together had a European car market
share of 11% for 1997, increase their production capacity in Europe and import
restrictions on Japanese built-up vehicles gradually are removed in total by
December 31, 1999. Ford estimates that in 1997 the European automotive industry
had excess capacity of approximately 5.5 million units (based on a comparison of
European domestic demand and capacity).
In 1997, European car industry sales were 13.2 million units, up 5% from
1996 levels. Truck sales were 1.8 million units, up 6% from 1996 levels. Ford's
European car share for 1997 was 11.2%, down 3/10 of a point from 1996, and its
European truck share for 1997 was 12.2%, down 9/10 of a point from 1996.
For Ford, Great Britain and Germany are the most important markets within
Europe, although the Southern European countries are becoming increasingly
significant. Any adverse change in the British or German market has a
significant effect on total automotive profits. For 1997 compared with 1996,
total industry sales were up 7% in Great Britain and up 7% in Germany.
A single currency called the euro will be introduced in Europe on January
1, 1999. The increased price transparency resulting from the use of a single
currency may affect the ability of Ford and other companies to price their
products differently in the various European markets. A possible result of this
price harmonization is lower average prices for products sold in these markets.
Other Foreign Markets
- ---------------------
Mexico and Canada. Mexico and Canada also are important markets for Ford.
In 1997, industry sales of cars and trucks in Canada were 1.4 million units, up
18% from 1996 levels. The increase reflected economic growth and low Canadian
interest rates. Mexico had been a growing market until late 1994. However,
substantial devaluation of the Mexican peso in late 1994 created a high level of
uncertainty regarding economic activity in Mexico. In 1996 and 1997, the Mexican
economy recovered. In 1997, industry volume was 496,000 units, up 50% from 1996
levels.
South America. Brazil and Argentina are the principal markets for Ford in
South America. The economic environment in those countries has been volatile in
recent years, leading to large variations in profitability. Results also have
been influenced by government actions to reduce inflation and public deficits,
and improve the balance of payments. Industry sales in 1997 were 1.9 million
units in Brazil, up 11% from 1996, and 426,000 units in Argentina, up 13% from
1996. Brazilian government austerity measures in late 1997 adversely impacted
industry vehicle sales in that country and are expected to continue to affect
industry sales in 1998.
Asia Pacific. In the Asia Pacific region, Australia, Taiwan and Japan are
the principal markets for Ford products. Industry volumes in 1997 in this region
were as follows: 722,000 units in Australia (up 11.1% from 1996), 482,000 units
in Taiwan (up 2.3% from 1996) and 6.7 million units in Japan (down 5% from
1996). In 1997, Ford was the market share leader in Australia with an 18%
combined car and truck market share. In Taiwan (where sales of built-up vehicles
manufactured in Japan are prohibited), Ford had a combined car and truck market
share in 1997 of 16.1%. Ford's combined car and truck market share in Japan has
never exceeded 1%. Ford's principal competition in the Asia Pacific region has
been the Japanese manufacturers. It is anticipated that the continuing
relaxation of import restrictions (including duty reductions) in Australia and
Taiwan will intensify competition in those markets.
-6-
<PAGE>
Item 1.Business (Continued)
- ---------------------------
The financial crisis that began in Thailand in mid-year 1997, and spread to
the neighboring Southeast Asian nations, particularly Indonesia, has resulted in
a significant reduction of vehicle sales for the region. These markets had been
expanding, but economic growth is now expected to remain subdued during a period
of restructuring. Ford is positioning itself to actively participate in these
markets in recognition of their long-term growth opportunities.
Africa. Ford operates in the South African market through South African
Motor Corporation (Pty.) Limited ("SAMCOR") in which Ford has a 45% equity
interest. SAMCOR is an assembler of Ford and other manufacturers' vehicles in
South Africa. In 1997, industry volume in South Africa was 367,000 units, down
7% from 1996 levels.
Financial Services Operations
Ford Motor Credit Company
- -------------------------
Ford Credit is an indirect wholly owned subsidiary of Ford. Ford Credit and
its subsidiaries provide wholesale financing and capital loans throughout the
world to Ford retail dealerships and associated non-Ford dealerships, most of
which are privately owned and financed, and purchase retail installment sale
contracts and retail leases from them. Ford Credit also makes loans to vehicle
leasing companies, the majority of which are affiliated with such dealerships.
In addition, subsidiaries of Ford Credit provide these financing services in the
United States, Europe, Canada and Australia to non-Ford dealerships. A
substantial majority of all new vehicles financed by Ford Credit and its
subsidiaries are manufactured by Ford and its affiliates. Ford Credit also
provides retail financing for used vehicles built by Ford and other
manufacturers. In addition to vehicle financing, Ford Credit makes loans to
affiliates of Ford and finances certain receivables of Ford and its
subsidiaries.
Outside the United States, Ford Credit Europe plc ("Ford Credit Europe") is
Ford Credit's largest operation. Ford Credit Europe is owned by Ford Credit
(70.4%), Ford Werke AG (19.6%) and Ford (10%). Ford Credit Europe's primary
business is to support the sale of Ford vehicles in Europe through the Ford
dealer network. A variety of retail, leasing and wholesale finance plans is
provided in most countries in which it operates.
Ford Credit also conducts insurance operations through The American Road
Insurance Company ("American Road") and its subsidiaries in the United States
and Canada. American Road's business consists of extended service plan contracts
for new and used vehicles manufactured by affiliated and nonaffiliated
companies, primarily originating from Ford dealers, physical damage insurance
covering vehicles and equipment financed at wholesale by Ford Credit, and the
reinsurance of credit life and credit disability insurance for retail purchasers
of vehicles and equipment.
Ford Credit financed the following percentages of new Ford cars and trucks
sold or leased at retail and sold at wholesale in the United States and Europe,
respectively, during the years indicated:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------
1997 1996 1995
-------------- --------------- -------------
<S> <C> <C> <C>
United States
Retail*............................ 37.5% 37.6% 36.9%
Wholesale.......................... 79.8 79.5 79.7
Europe
Retail*............................ 29.1 29.3 30.2
Wholesale.......................... 95.0 90.8 89.2
-------------------
* As a percentage of total sales and leases, including cash sales.
</TABLE>
-7-
<PAGE>
Item 1. Business (Continued)
- -----------------------------
Ford Credit's finance receivables and retained interest in sold receivables
and investments in operating leases were as follows at the dates indicated (in
millions):
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
Finance receivables and retained interest in
sold receivables
Retail $55,601 $53,141
Wholesale 21,605 22,706
Other 5,276 5,901
------- -------
Total finance receivables, net of unearned income 82,482 81,748
Less: allowance for credit losses (1,170) (900)
------- -------
Finance receivables, net 81,312 80,848
Retained interest in sold receivables 999 1,124
------- -------
Finance receivables, net and retained interest
in sold receivables $82,311 $81,972
======= =======
Investments in operating leases
Vehicles, at cost $41,926 $36,951
Lease origination costs 65 60
Less: Accumulated depreciation (6,943) (6,049)
Allowance for credit losses (302) (317)
------- -------
Net investment in operating leases $34,746 $30,645
======= =======
</TABLE>
The aggregated receivable balances related to accounts past due 60 days or
more were as follows at the dates indicated (in millions):
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
Retail $497 $807
Wholesale 35 53
Other 59 86
---- ----
Total $591 $946
==== ====
</TABLE>
The following table sets forth information concerning Ford Credit's credit
loss experience with respect to the various categories of financing during the
years indicated (in millions):
<TABLE>
<CAPTION>
Years Ended or at December 31,
-------------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C>
Net losses/(recoveries)
Retail* $1,004 $ 804 $ 467
Wholesale (1) 19 10
Other 4 7 9
------ ------ ------
Total $1,007 $ 830 $ 486
====== ====== ======
Net losses as a percentage of average net
receivables*
Retail 1.17% 1.03% 0.68%
Total finance receivables 0.89 0.78 0.51
Provision for credit losses $1,338 $ 993 $ 480
Allowance for credit losses 1,471 1,218 1,055
Allowance as a percentage of net receivables* 1.27% 1.09% 1.03%
</TABLE>
- ----------------
*Includes investments in operating leases.
-8-
<PAGE>
Item 1. Business (Continued)
- ----------------------------
An analysis of Ford Credit's allowance for credit losses on finance
receivables and operating leases is as follows for the years indicated (in
millions):
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Balance, beginning of year $1,218 $1,055 $1,084
Additions 1,338 993 480
Deductions
Losses 1,239 1,021 687
Recoveries (232) (191) (201)
------ ------ ------
Net losses 1,007 830 486
Other changes, principally
amounts relating to finance
receivables and operating
leases sold 78 - 23
------ ------ ------
Net deductions 1,085 830 509
------ ------ ------
Balance, end of year $1,471 $1,218 $1,055
====== ====== ======
</TABLE>
Ford Credit and Ford Credit Europe rely heavily on their ability to raise
substantial amounts of funds. These funds are obtained primarily by the sale of
commercial paper, the issuance of term debt and, in the case of Ford Credit
Europe, certificates of deposit. Funds also are provided by retained earnings
and sales of receivables. The level of funds can be affected by certain
transactions with Ford, such as capital contributions and dividend payments,
interest supplements and other support from Ford for vehicles financed and
leased by Ford Credit or Ford Credit Europe under Ford-sponsored special
financing or leasing programs. Funds also can be affected by the timing of
payments for the financing of dealers' wholesale inventories and for income
taxes.
The ability of Ford Credit and Ford Credit Europe to obtain funds is
affected by their credit ratings, which are closely related to the financial
condition of and the outlook for Ford, and the nature and availability of
support facilities, such as revolving credit agreements and receivables sales
facilities. The long-term senior debt of each of Ford, Ford Credit and Ford
Credit Europe is rated "A1" and "A" and the commercial paper of each of Ford
Credit and Ford Credit Europe is rated "Prime-1" and "A-1" by Moody's Investors
Service and Standard & Poor's Ratings Group, respectively.
Ford and Ford Credit are parties to a profit maintenance agreement which
provides for payments by Ford to the extent required to maintain Ford Credit's
earnings at specified minimum levels. In addition, Ford and Ford Credit Europe
are parties to a support agreement which requires Ford to retain a certain
direct or indirect ownership interest in Ford Credit Europe and to make (or
cause Ford Credit to make) payments to the extent required to maintain Ford
Credit Europe's net worth at specified minimum levels. No payments were required
under either of these agreements during the period 1988 through 1997.
The Hertz Corporation
- ---------------------
Hertz and its affiliates and independent licensees operate what Hertz
believes is the largest car rental business in the world based upon revenues and
volume of rental transactions and the largest industrial and construction
equipment rental business in the United States based upon revenues. Hertz,
together with its affiliates and independent licensees, rents and leases cars,
rents industrial and construction equipment and operates its other businesses
from approximately 5,500 locations throughout the United States and in
approximately 140 foreign countries and jurisdictions. In April 1997, Hertz
completed an initial public offering of common stock representing a 19.1%
economic interest in Hertz.
-9-
<PAGE>
Item 1. Business (Continued)
- ----------------------------
Associates First Capital Corporation
- ------------------------------------
The Associates is a leading, diversified consumer and commercial finance
organization which provides finance, leasing and related services to individual
consumers and businesses in the United States and internationally. On March 2,
1998, Ford's Board of Directors approved the spin-off of The Associates by
declaring a dividend pursuant to which all of Ford's 279.5 million shares of The
Associates will be distributed to Ford Common and Class B stockholders in
proportion to their ownership of Common and Class B Stock. The distribution will
be made on April 7, 1998 to holders of record on March 12, 1998.
In 1996 and 1997, The Associates contributed 16.8% and 12%, respectively,
to Ford's consolidated earnings. Generally, the earnings of The Associates have
been retained by The Associates to fund its growth.
Governmental Standards
A number of governmental standards and regulations relating to safety,
corporate average fuel economy ("CAFE"), emissions control, noise control,
damageability and theft prevention are applicable to new motor vehicles,
engines, and equipment manufactured for sale in the United States, Europe and
elsewhere. In addition, manufacturing and assembly facilities in the United
States, Europe and elsewhere are subject to stringent standards regulating air
emissions, water discharges and the handling and disposal of hazardous
substances. Such facilities in the United States also are subject to a
comprehensive federal-state permit program relating to air emissions.
Mobile Source Emissions Control -- U.S. Requirements. The Federal Clean Air
Act (the "Clean Air Act" or the "Act") imposes stringent limits on the amount of
regulated pollutants that lawfully may be emitted by new motor vehicles and
engines produced for sale in the United States. Concurrently, most light duty
vehicles sold in the United States must comply with these standards for 10 years
or 100,000 miles, whichever first occurs. More stringent emissions standards
will become effective as early as the 2004 model year, unless the U.S.
Environmental Protection Agency (the "EPA") decides otherwise.
Pursuant to the Act, California has received a waiver from the EPA to
establish unique emissions control standards. New vehicles and engines sold in
California must be certified by the California Air Resources Board (the "CARB").
The CARB's emissions requirements (the "California program") for model years
1994 through 2003 require manufacturers to meet a non-methane organic gasses
fleet average requirement and are significantly more stringent than those
prescribed by the Act for the corresponding periods of time. California
initially required that a specified percentage of each manufacturer's vehicles
produced for sale in California, beginning at 2% in 1998 and increasing to 10%
in 2003, must be zero-emission vehicles ("ZEVs"), which produce no emissions of
regulated pollutants. In 1996, however, the CARB eliminated the ZEV mandate
until the 2003 model year. Around the same time, vehicle manufacturers
voluntarily entered into an agreement with CARB to provide air quality benefits
for California equivalent to a 49 state program (i.e., equivalent to providing
vehicles certified to the California low emission vehicle standard nationwide
beginning with the 2001 model year), to continue research and development of ZEV
technology and to provide specific numbers of advanced technology battery
vehicles through demonstration programs in California.
Electric vehicles are the only presently known type of zero-emission
vehicles. However, despite intensive research activities, technologies have not
been identified that would allow manufacturers to produce an electric vehicle
that either meets most customers' expectations or is commercially viable.
Compliance with the ZEV mandate may require manufacturers to curtail the sale of
non-electric vehicles or to offer substantial discounts on electric vehicles,
selling them well below cost, while increasing the price on non-electric
vehicles. The California program and ZEV mandates present significant
-10-
<PAGE>
Item 1.Business (Continued)
- ---------------------------
technological challenges to manufacturers and compliance may require costly
actions that would have a substantial adverse effect on Ford's sales volume and
profits.
The Act also permits other states which do not meet national ambient air
quality standards to adopt the California program no later than two years before
the affected model year. Under the Act, twelve northeastern states and the
District of Columbia formed a group known as the Ozone Transport Commission (the
"OTC"). Based on an OTC recommendation, the EPA required each OTC jurisdiction
to adopt the California program. The OTC jurisdictions also may adopt
California's ZEV mandates, if any, but were not required to do so by the EPA. In
March 1997, the Circuit Court of Appeals for the District of Columbia vacated
the EPA's rule requiring the OTC jurisdictions to adopt the California program.
That decision did not affect California programs, including ZEV mandates,
already adopted by individual states. There are major problems with transferring
California standards to the Northeast -- many dealers sell vehicles in
neighboring states and the driving range of present ZEVs is greatly diminished
(by more than 50 percent) in cold weather. Also, the Northeast states have
refused to adopt the California reformulated gasoline requirement, which makes
the task of meeting standards even more difficult.
The California program was adopted in New York and Massachusetts and is
currently in effect for model years 1996 and beyond. In addition, these two
states adopted ZEV mandates beginning with model year 1998. New York's mandate
retains the now rescinded California ZEV requirements. The automotive industry
is seeking to have New York's pre-2003 model year ZEV mandate declared invalid,
and the case is now pending before the U.S. Court of Appeals for the Second
Circuit. Massachusetts has attempted to adopt as a standard the ZEV obligations
relating to California to which the auto manufacturers voluntarily agreed with
CARB. A federal district court has invalidated these regulations, but
Massachusetts has appealed the decision to the U.S. Court of Appeals for the
First Circuit. Connecticut adopted the California program beginning with model
year 1998. Rhode Island and Vermont have adopted the California program
beginning in model year 1999 (with a ZEV mandate to be required in Vermont after
certain determinations with respect to the advancement of ZEV technology have
been made). Maine has adopted the California program beginning with the 2001
model year. Maryland and New Jersey have laws requiring adoption of the
California program and ZEV mandates after certain conditions, relating to
actions which may be taken by other OTC jurisdictions, have been met.
In response to OTC actions, the automotive industry proposed a National Low
Emissions Vehicle (NLEV) program, which the EPA promulgated as a rule and which
has been agreed to by all manufacturers and all OTC jurisdictions except Maine,
Massachusetts, New York and Vermont. This NLEV program will require
manufacturers to sell low emission vehicles in the participating OTC
jurisdictions beginning with the 1999 model year, and throughout the remainder
of the country beginning with the 2001 model year. The OTC jurisdictions which
have agreed to the NLEV program will for its duration substitute the NLEV
program for any of their other emissions programs for passenger cars and light
duty gasoline trucks. California and the non-participating OTC jurisdictions
will retain their California-based programs. A petition seeking judicial review
of the EPA's rule establishing NLEV has been filed by a coalition of
environmental groups. The petition alleges that the rule violates the Clean Air
Act.
Under the Act, the EPA and CARB can require manufacturers to recall and
repair non-conforming vehicles. The EPA, through its testing of production
vehicles, can also halt the shipment of non-conforming vehicles. Ford may be
required to recall, or may voluntarily recall, vehicles for such purposes in the
future. The costs of related repairs or inspections associated with such recalls
can be substantial.
The Act generally prohibits the introduction of new fuel additives unless a
waiver is granted by the EPA. In 1995, the EPA was ordered by a federal court to
grant such a waiver to Ethyl Corporation for the additive MMT. Ford and other
manufacturers believe that the use of MMT will impair the performance of current
emissions systems and onboard diagnostics systems. Widespread use of MMT could
increase Ford's future warranty costs and necessitate changes in the Company's
warranties for emission control devices.
-11-
<PAGE>
Item 1. Business (Continued)
- ----------------------------
In January 1998, Ford announced that it would voluntarily re-engineer all
of its 1999 model year sports utility vehicles and its 1999 model year Windstar
minivan to emit 70% less pollutants than the level required by the Clean Air
Act. Ford is certifying those vehicles under the Act's Clean Fuel Fleet Program.
European Requirements. European Union directives and related legislation
limit the amount of regulated pollutants that may be emitted by new motor
vehicles and engines sold in the European Union. In June 1996, the European
Commission published a draft proposal for new more stringent European emissions
standards for 2000 (the "Stage III Directive"). That draft includes a new
framework for emission-related fiscal incentives for the early introduction of
vehicles capable of meeting Stage III standards before 2000 and vehicles capable
of meeting newly proposed and even more stringent standards before 2005. The
common position of the European Council of Environment Ministers (the
"Environment Council") published in November 1997 provides that the European
Commission should propose mandatory standards for 2005 by June 30, 1999 based on
a study that would address air quality needs, vehicle and engine technology
developments, the need for and availability of clean fuels, and other issues.
The European Parliament has proposed various amendments to the Environment
Council's common position that would make the proposed Stage III Directive even
more stringent. The Environment Council and the European Parliament are expected
to convene a conciliation committee to agree on the final form for the Stage III
Directive.
Certain European countries are conducting in-use emissions testing to
ascertain compliance of motor vehicles with applicable emissions standards.
These actions could lead to recalls of vehicles; the future costs of related
inspection or repairs could be substantial.
Motor Vehicle Safety -- The National Traffic and Motor Vehicle Safety Act
of 1966 (the "Safety Act") regulates motor vehicles and motor vehicle equipment
in two primary ways. First, the Safety Act prohibits the sale in the United
States of any new vehicle or equipment that does not conform to applicable motor
vehicle safety standards established by the National Highway Traffic Safety
Administration (the "Safety Administration"). Meeting or exceeding many safety
standards is costly because they tend to conflict with the need to reduce
vehicle weight in order to meet emissions and fuel economy standards. Second,
the Safety Act requires that defects related to motor vehicle safety be remedied
through safety recall campaigns. There currently are pending before the Safety
Administration a number of investigations relating to alleged safety defects in
Ford vehicles. A manufacturer is also obligated to recall vehicles if it
determines they contain a defect relating to motor vehicle safety or do not
comply with a safety standard. Should Ford or the Safety Administration
determine that either a safety defect or a noncompliance exists with respect to
certain of Ford's vehicles, the costs of such recall campaigns could be
substantial.
In 1997, the Safety Administration amended a standard to permit vehicle
manufacturers to reduce the inflation power in air bags in future models to
further reduce the risk of air bag deployment-related injuries. Ford will
incorporate lower output air bags in its 1998 and later model year vehicles. In
1997, the Safety Administration also adopted a rule permitting vehicle owners
meeting certain criteria to have their air bags deactivated or have "on-off"
switches installed in their vehicles. In June 1998, the Safety Administration is
expected to initiate rulemaking relating to advanced air bags.
The issue of truck-to-car compatibility in relation to collisions has
received significant media attention recently and has been the subject of a
Safety Administration report. Ford and its suppliers are continuing to work on
this complex issue, and Ford will participate with the Safety Administration in
a conference on this subject in early summer 1998. Government regulation to
address vehicle compatibility also is possible.
Canada, the European Union, individual member countries within the European
Union and other countries in Europe, South America and the Asia Pacific markets
also have safety standards applicable to motor vehicles and are likely to adopt
additional or more stringent standards in the future.
Motor Vehicle Fuel Economy -- U.S. Requirements. Under the Motor Vehicle
Information and Cost Savings Act (the "Cost Savings Act") vehicles must meet
minimum CAFE standards set by the Safety Administration. A manufacturer is
subject to potentially substantial civil penalties if it fails to meet the CAFE
standard in any model year, after taking into account all available credits for
the preceding three model years and expected credits for the three succeeding
model years.
-12-
<PAGE>
Item 1. Business (Continued)
- ----------------------------
The Cost Savings Act established a passenger car CAFE standard of 27.5 mpg
for the 1985 and later model years, which the Safety Administration believes it
has the authority to amend to a level it determines to be the maximum feasible
level. The Safety Administration has established a 20.7 mpg CAFE standard
applicable to light trucks.
Ford expects to be able to comply with the foregoing CAFE standards, in
some cases using credits from prior or succeeding years. However, a continued
increase in demand for larger vehicles coupled with a decline in demand for
small and middle-size vehicles could jeopardize its ability to comply.
It is anticipated that efforts may be made to raise the CAFE standard
because of concerns for carbon dioxide ("CO2") emissions, energy security or
other reasons. President Clinton's Climate Change Action Plan ("CCAP") sets a
goal to improve new vehicle fuel efficiency in an amount equivalent to at least
2% per year over a 10 to 15 year period. In addition, international concerns
over global warming due to the emission of "greenhouse gasses" have given rise
to strong pressures to increase fuel economy. During the December 1997 meeting
of the parties to the United Nations Climate Change Convention in Kyoto, Japan,
the United States agreed to reduce greenhouse gas emissions by 7% below their
1990 levels during the 2008-2012 period (the "Kyoto Protocol"). The Kyoto
Protocol is not yet binding on the United States, pending signature by the
President and ratification by the Senate. If the CCAP or Kyoto Protocol goals
are partially or fully implemented through increases in the CAFE standard, or if
significant increases in car or light truck CAFE standards for subsequent model
years otherwise are imposed, Ford would find it necessary to take various costly
actions that would have substantial adverse effects on its sales volume and
profits. For example, Ford might have to curtail or eliminate production of
larger family-size and luxury cars and full-size light trucks, restrict
offerings of engines and popular options, and continue or increase market
support programs for its most fuel-efficient cars and light trucks.
Foreign Requirements. The European Union is also a party to the Kyoto
Protocol and has agreed to reduce greenhouse gas emissions by 8% below their
1990 levels during the 2008-2012 period. In December 1997, the Environment
Council reaffirmed its goal to reduce average CO2 emissions from new cars to 120
grams per kilometer by 2010 (at the latest) and invited European motor vehicle
manufacturers to negotiate further with the European Commission on a
satisfactory voluntary environmental agreement to help achieve this goal. In
addition, the Environment Council directed the European Commission to propose
legislation with binding CO2 limit values if such an agreement is determined to
be unachievable. On March 10, 1998, representatives of the European automotive
manufacturers association met with the European Environment Commissioner to
present an industry proposal that would (among other things) reduce the average
CO2 emissions of new cars sold in the European Union to 140 grams per kilometer
by 2008, review in 2002-2003 the feasibility of further reductions for 2012, and
offer for sale by 2000 vehicles that produce no more than 120 grams of CO2 per
kilometer. This proposal assumes (among other things) that no negative measures
will be implemented against diesel-fueled cars and the full availability of
improved fuels with low sulphur content by 2005. The European Environment
Commissioner will review the proposal with the member countries at a forthcoming
Environment Council meeting. The European Parliament has considered even more
stringent proposals for reducing CO2 emissions from new cars. If adopted,
certain of the proposals being considered could have substantial adverse effects
on Ford's sales volumes and profits in Europe.
In 1995, members of the German Automobile Manufacturers Association
(including Ford Werke AG) made a voluntary pledge to reduce by 2005 the average
fuel consumption of new cars sold in Germany by 25% from 1990 levels, to review
before the year 2000 the need for and feasibility of further reductions in
average fuel consumption, to make regular reports on fuel consumption, and to
increase industry research and development efforts toward this end.
Other initiatives for reducing CO2 emissions from motor vehicles are being
considered by other European countries. Taken together such proposals could have
substantial adverse effects on Ford's sales volumes and profits in Europe.
-13-
<PAGE>
Item 1. Business (Continued)
- ----------------------------
Japan has adopted automobile fuel consumption goals that manufacturers must
attempt to achieve by the 2000 model year. The consumption levels apply only to
gasoline-powered vehicles, vary by vehicle weight, and range from 5.8 km/I to
19.2 km/l.
U.S. Stationary Source Air Pollution Control -- The Clean Air Act limits
various emissions into the atmosphere from stationary sources as well as mobile
sources, and allows states to adopt even more stringent standards. The Act
imposes comprehensive permit requirements for manufacturing facilities in
addition to those required by various states. Regulations continue to be
promulgated under the Act, and the costs to comply with the Act could be
substantial. In addition, the enormous complexity and time-consuming nature of
the comprehensive permit program provided for by the Act may reduce operational
flexibility and may interfere with future competitive upgrading of Ford's U.S.
production facilities.
U.S. Water Pollution Control -- Pursuant to the Federal Water Pollution
Control Act (the "Clean Water Act"), Ford is required to obtain permits for its
manufacturing facilities that regulate the facilities' discharge of wastewater
into public waters and municipal sewerage systems. The EPA also requires
management standards and, in some cases, permits for the discharge of storm
water. The standards under the Clean Water Act are established by the EPA and by
the state where a facility is located. Many states have requirements that go
beyond those established under the Clean Water Act.
The EPA also adopted regulations, pursuant to the Great Lakes Critical
Programs Act of 1990, that require more restrictive standards for discharges
into waters that impact the Great Lakes. These regulations may require the
addition of costly control equipment.
U.S. Hazardous Substance and Waste Control -- Pursuant to the Federal
Resource Conservation and Recovery Act ("RCRA"), the EPA has issued regulations
establishing certain procedures and standards for persons who generate,
transport, treat, store, or dispose of hazardous wastes and requiring corrective
action for prior releases. States may adopt even more extensive requirements.
The Federal Comprehensive Environmental Response, Compensation, and Liability
Act ("CERCLA") requires notification regarding certain releases into the
environment, and creates potential liability for remediation costs and for
damage to natural resources at sites where Ford waste was taken for treatment or
disposal. A number of states have enacted separate laws of this type. In
addition, under the Federal Toxic Substances Control Act ("TSCA"), the EPA
evaluates environmental and health effects of existing chemicals and new
substances. Pursuant to TSCA, the EPA regulates the use of polychlorinated
biphenyls in transformers, capacitors and other equipment that may be located at
Ford's U.S. facilities.
European Stationary Source Environmental Control -- The European Union and
individual member countries impose requirements on waste and hazardous wastes,
incineration, packaging, landfill, soil pollution, integrated pollution control,
air emissions standards, import/export and use of dangerous substances, air and
water quality standards, noise, environmental management systems, energy
efficiency, emissions reporting, and planning and permitting. Additional or more
stringent requirements (including tax measures and civil liability schemes for
cleaning polluted sites) are likely to be adopted in the future. The cost of
complying with these standards could be substantial.
The European Commission has published a draft proposal to introduce an
obligation for motor vehicle manufacturers to take back end-of-life vehicles on
a cost-free basis beginning in 2003, to impose requirements on the proportion of
the vehicle that may be disposed of in landfills and the proportion that must be
reused or recycled beginning in 2005, and to ban the use of certain substances
in vehicles beginning in 2003. Such proposals could, if adopted, impose a
substantial cost on manufacturers. The German Automobile Association (including
Ford Werke AG) and the German Automobile Importers Association made a voluntary
pledge to establish a nationwide infrastructure network to take back passenger
cars that are at least 12 years old (and meet certain other requirements) on a
cost-free basis to their owners.
Pollution Control Costs -- During the period 1998 through 2002, Ford
expects that approximately $550 million will be spent on its North American and
European facilities to comply with air and water pollution and hazardous waste
control standards which now are in effect or are scheduled to come into effect.
Of this total, Ford estimates that approximately $100 million will be spent in
1998 and $120 million will be spent in 1999.
-14-
<PAGE>
Item 1. Business (Continued)
- ----------------------------
Worldwide Regulatory Compatibility -- Ford's efforts to develop new markets
and increase imports are impeded by incompatible automotive safety,
environmental and other product regulatory standards. At present, differing
standards either restrict the vehicles Ford can export to serve new markets or
increase the cost and complexity to do so.
Employment Data
Average employment for Ford by geographic area was as follows for the years
indicated:
<TABLE>
<CAPTION>
1997 1996
----------------- -----------------
<S> <C> <C>
United States 189,787 189,718
Europe 104,014 106,156
Other 70,091 75,828
------- -------
Total 363,892 371,702
======= =======
</TABLE>
In 1997, average Ford employment decreased 2.1 percent reflecting reduced
Automotive employment offset partially by increased employment in the Company's
Financial Services operations.
For further information regarding employment statistics of Ford, see Item
6. "Selected Financial Data". For information concerning employee retirement
benefits, see Note 8 of Notes to Financial Statements.
Substantially all hourly employees of Ford in the United States are
included in collective bargaining units represented by unions. Approximately 99%
of these unionized hourly employees are represented by the United Automobile
Workers (the "UAW"). Approximately 3% of salaried employees are represented by
unions. Most hourly employees and many nonmanagement salaried employees of
subsidiaries outside the United States also are represented by unions.
Affiliates of Ford also are parties to collective bargaining agreements in
Britain, France, Germany and Spain. Collective bargaining agreements between
Ford and the UAW and between Ford of Canada and the Canadian Automobile Workers
were entered into in 1996 and are scheduled to expire in September 1999.
Ford has not experienced significant work stoppages at its facilities in
recent years, but work stoppages have occurred in supplier facilities. Any
protracted work stoppages in the future, whether in Ford's facilities or those
of certain suppliers, could substantially adversely affect Ford's results of
operations.
-15-
<PAGE>
Item 1. Business (Continued)
- ----------------------------
Research and Development
Ford and certain of its subsidiaries have staffs of professional employees
whose activities are directed primarily to the improvement of the performance
(including fuel efficiency), safety and comfort of the products of those
companies and to the development of new products, and also have staffs of
scientists engaged in basic research. Extensive engineering, research and design
facilities are maintained for these purposes. Principal among them are the
engineering, research and design centers of Ford at Dearborn, Michigan; of Ford
Motor Company, Limited at Dunton, England; and of Ford Werke AG at Merkenich,
Germany.
In 1997, 1996 and 1995, $6.3 billion, $6.8 billion and $6.6 billion,
respectively, were charged to income of Ford and its consolidated subsidiaries
for Ford-sponsored research and development activities relating to the
development of new products and services and the improvement of existing
products and services. In addition, $20 million, $42 million and $18 million
were charged to income in 1997, 1996 and 1995, respectively, for
customer-sponsored research and development activities.
Item 2. Properties
- -------------------
Ford's U.S. manufacturing and assembly facilities, substantially all of
which are owned by Ford and its subsidiaries, are situated in various sections
of the country and include assembly plants, engine plants, casting plants, metal
stamping plants, electronic components plants, transmission and axle plants,
glass plants and industrial equipment plants. A major portion of the
distribution centers, warehouses and sales offices is owned by Ford, with the
remainder being leased.
In addition, Ford's foreign subsidiaries maintain and operate manufacturing
plants, assembly facilities, parts distribution centers and engineering centers
outside the United States, substantially all of which are owned by such
subsidiaries.
The furniture, equipment and other physical property owned by Ford's
Financial Services operations are not material in relation to their total
assets.
-16-
<PAGE>
Item 3. Legal Proceedings
- --------------------------
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. See Item 1,
"Business--Governmental Standards". Included among the foregoing matters are the
following:
Product Liability Matters
- -------------------------
Occupant Restraint Systems. Ford is a defendant in various actions for
damages arising out of automobile accidents where plaintiffs claim that the
injuries resulted from (or were aggravated by) alleged defects in the occupant
restraint systems in vehicle lines of various model years. The damages specified
by the plaintiffs in these actions, including both actual and punitive damages,
aggregated approximately $1 billion at December 31, 1997.
Bronco II. Ford is a defendant in various actions involving the alleged
propensity of Bronco II utility vehicles to roll over. The damages specified in
these actions, including both actual and punitive damages, aggregated
approximately $979 million at December 31, 1997.
In most of the actions described in the foregoing paragraphs no dollar
amount of damages is specified or the specific amount referred to is only the
jurisdictional minimum. It has been Ford's experience that in cases that allege
a specific amount of damages in excess of the jurisdictional minimum, such
amounts, on average, bear little relation to the actual amounts of damages paid
by Ford in such cases, which generally are, on average, substantially less than
the amounts originally claimed. In addition to the pending actions, accidents
have occurred and claims have arisen which also may result in lawsuits in which
such a defect may be alleged.
Asbestos. Ford is a defendant in various actions for injuries claimed to
have resulted from alleged contact with certain Ford parts and other products
containing asbestos. Damages specified by plaintiffs in complaints in these
actions, including both actual and punitive damages, aggregated approximately
$1.4 billion at December 31, 1997. (In some of these actions no dollar amount of
damages is specified or the specific amount referred to is only the
jurisdictional minimum.) As distinguished from most lawsuits against Ford, in
most of these asbestos-related cases, Ford is but one of many defendants, and
many of these co-defendants have substantial resources.
Environmental Matters
- ---------------------
General. Ford has received notices from government environmental
enforcement agencies concerning four matters which potentially involve monetary
sanctions exceeding $100,000. The agencies believe that Ford facilities may have
violated regulations relating to the management of certain materials or relating
to certain emissions from facility operations. In Ford's prior reports, Ford
included another environmental matter that related to certain emissions from one
of its facilities. That matter was resolved in February 1998, with Ford paying a
civil penalty of $135,000.
-17-
<PAGE>
Item 3. Legal Proceedings (Continued)
- -------------------------------------
Ford has received notices under RCRA, CERCLA and applicable state laws that
it (along with others) may be a potentially responsible party for the costs
associated with remediating numerous hazardous substance storage, recycling or
disposal sites in many states and, in some instances, for natural resource
damages. Ford also may have been a generator of hazardous substances at a number
of other sites. The amount of any such costs or damages for which Ford may be
held responsible could be substantial. Contingent losses expected to be incurred
by Ford in connection with many of these sites have been accrued and are
reflected in Ford's financial statements in accordance with generally accepted
accounting principles. However, for many sites the remediation costs and other
damages for which Ford ultimately may be responsible are not reasonably
estimable because of uncertainties with respect to factors such as Ford's
connection to the site or to materials there, the involvement of other
potentially responsible parties, the application of laws and other standards or
regulations, site conditions, and the nature and scope of investigations,
studies and remediation to be undertaken (including the technologies to be
required and the extent, duration and success of remediation). As a result, Ford
is unable to determine or reasonably estimate the amount of costs or other
damages for which it is potentially responsible in connection with these sites,
although it could be substantial.
CCA Lawsuit. The Corporation for Clean Air, Inc., a California non-profit
group ("CCA"), filed a lawsuit in California against Ford and numerous other
engine and vehicle manufacturers and owners of vehicle fleets, under
California's Safe Drinking Water and Toxic Enforcement Act ("Proposition 65").
Under Proposition 65 any business that knowingly and intentionally exposes any
person to certain carcinogens and reproductive toxins must provide that person
with an advance clear and reasonable warning, unless the business can prove that
the exposures are insignificant. CCA's complaint alleges that manufacturers and
fleet owners of diesel powered vehicles are exposing California's citizens to
diesel exhaust in violation of Proposition 65. Maximum penalties under
Proposition 65 are $2,500 per vehicle per day of violation.
Bridgend Plant. In November 1997, the Cardiff Crown Court imposed a fine of
10,000 Pounds Sterling on Ford's British subsidiary, Ford Motor Company, Limited
("Ford Britain"), for the discharge of certain pollutants into the River Ewenny
by Ford Britain's Bridgend plant in September 1995. Ford Britain was also
required to pay the United Kingdom Environmental Agency's costs of approximately
11,000 Pounds Sterling and to pay for the restocking of fish in the river.
Class Actions
- -------------
Described below are various class action lawsuits in which Ford has been
named a defendant. Class action lawsuits can involve very large classes of
plaintiffs, such as statewide or nationwide classes, if plaintiffs persuade the
court to grant class certification. Ford believes it has valid defenses in each
of these cases; however, if plaintiffs were to prevail in any of these lawsuits,
Ford could be required to pay substantial damages.
Paint. Pending against the Company are five purported class actions
alleging defects in the paint processes used on more than nine million vehicles
manufactured by the Company in model years 1984 through 1993. One case (Landry)
is nationwide in scope and is pending in the U.S. District Court for the Eastern
District of Louisiana. In January 1998, plaintiffs in Landry filed a motion for
class certification, which Ford opposed. Of the five cases that were
consolidated with Landry for pretrial proceedings, two were dismissed, and the
plaintiffs in the other three did not file motions for class certification
within the court-ordered deadline. In the remaining case (Sheldon), a Texas
state court certified two subclasses of Texas residents for trial. The Texas
Court of Appeals affirmed the class certification order. In its opinion, the
Court of Appeals approved of a bifurcated trial process that would require class
members to prove causation and damages in separate trials following a classwide
trial on the existence of a defect and the Company's knowledge thereof. Ford
will appeal the class certification to the Texas Supreme Court. In each pending
lawsuit, the plaintiffs seek unspecified compensatory damages, as well as
punitive damages, attorneys' fees and costs.
Bronco II. Currently pending against Ford are two state and one federal
purported class actions filed by Bronco II owners seeking recovery for economic
injury attributable to the alleged rollover propensity of these vehicles. Each
lawsuit expressly excludes personal injury claimants, whose claims are discussed
-18-
<PAGE>
Item 3. Legal Proceedings (Continued)
- -------------------------------------
above. Some of the lawsuits also seek recovery of unspecified punitive damages
and an order requiring the Company to recall and retrofit these vehicles. Seven
federal Bronco II cases had originally been consolidated for pretrial purposes
in a Louisiana federal court. After the court denied plaintiffs' motion for
class certification in these cases, six of the cases were dismissed either by
the court or voluntarily by the plaintiffs. Plaintiffs in these cases have
appealed the court's dismissal orders and denial of class certification to the
U.S. Court of Appeals for the Fifth Circuit. Ford's motion for summary judgment
is pending in the remaining federal case. The two state court cases are pending
in Alabama and Texas. The Texas case is dormant. In October 1997, the Alabama
court denied Ford's motion to dismiss plaintiffs' fraud claims and certified a
class consisting of Alabama residents who owned a Bronco II vehicle any time
between August 26, 1993 and May 31, 1997. The Alabama Supreme Court agreed to
hear Ford's interlocutory appeal of the trial court's denial of Ford's motion to
dismiss, but it has not yet ruled on Ford's petition to appeal the trial court's
class certification order. The trial court proceedings are stayed pending the
Supreme Court's decision on Ford's interlocutory appeal.
A separate purported class action involving the Bronco II (Goff) is pending
against Ford in federal court in the Southern District of West Virginia. The
lawsuit purports to represent a class of former plaintiffs in Bronco II personal
injury cases that have been settled or tried. Plaintiffs allege that Ford and a
Ford expert on the design history of the Bronco II conspired to fraudulently
conceal documents that would establish (a) that Ford paid the expert to offer
false testimony in favor of Ford regarding the design of the Bronco II, and (b)
that Ford knew the design of the Bronco II rendered the vehicle unstable and
prone to rollover under normal driving conditions. Plaintiffs seek compensatory
and punitive damages, prejudgment interest, costs and attorneys' fees.
Plaintiffs also seek to prevent Ford from using as a defense in this case
releases obtained in settled Bronco II personal injury lawsuits and defense
verdicts in tried Bronco II personal injury lawsuits. Plaintiffs' motion for
class certification and Ford's motion to dismiss are pending.
Ignition Switch. In 1996, the Company was served with fourteen purported
class action lawsuits alleging that certain 1983 to 1993 model year vehicles
were equipped with defective ignition switches that could cause an electrical
short circuit, resulting in smoke and fire damage. Most of the suits were
brought on behalf of plaintiffs who have not experienced a problem, but who
claim that their vehicles have diminished value because of the allegedly
defective switches. Some of the lawsuits were purportedly brought on behalf of
plaintiffs who claim to have suffered fire or smoke damage to their vehicles.
Plaintiffs seek unspecified compensatory damages, punitive damages, attorneys'
fees and costs, as well as injunctive relief requiring, among other things, that
Ford replace the allegedly defective ignition switch in all affected vehicles.
All fourteen lawsuits were consolidated for pretrial proceedings in federal
court in New Jersey. In August 1997, the court denied plaintiffs' motion for
class certification. In September 1997, the court dismissed all of the claims
brought by the non-incident class members except the implied warranty claims
brought under Louisiana law and the breach of contract claims. In October 1997,
plaintiffs filed a motion with the court to remand all of the lawsuits to state
courts and to vacate the court's ruling denying nationwide class certification
and dismissing most of the underlying claims. The court deferred ruling on the
matter pending additional discovery in the case.
In a related matter, State Farm Mutual Automobile Insurance Company ("State
Farm") filed a lawsuit in federal court in California in January 1998 against
Ford and United Technologies Automotive, Inc. State Farm seeks damages for
insurance claims it paid to cover vehicle damage caused by allegedly defective
ignition switches, the deductible amounts paid by its insureds, other
compensatory damages, and attorney's fees and costs. Ford has moved to dismiss
State Farm's claims. Upon Ford's notice of the State Farm action, the Judicial
Panel on Multidistrict Litigation conditionally transferred the action to the
New Jersey federal court where the ignition switch class actions are pending.
State Farm opposed the transfer.
TFI Module. Six purported class actions are pending in state courts on
behalf of owners and lessees of 1983 through 1995 model year Ford vehicles
containing a distributor-mounted thick film ignition (TFI) module. The
plaintiffs allege that distributor-mounted TFI modules are defective because
they have a high propensity to fail due to exposure to engine heat, causing the
engine to stumble, stall, or not start. The plaintiffs in these cases seek pre-
and post-judgment interest, attorneys' fees, disgorgement of profits,
compensatory damages, punitive damages, notice to the public, and the recall and
retrofit of all vehicles with the allegedly defective TFI modules. The cases are
-19-
<PAGE>
Item 3. Legal Proceedings (Continued)
- -------------------------------------
pending in Alabama, California, Illinois, Maryland, Tennessee and Washington.
The Alabama and Tennessee cases were conditionally certified as nationwide class
actions (excluding California). The cases in Illinois, Maryland and Washington
purport to be regional class actions, and the California case is statewide in
scope. The California case is the "lead" case and proceedings in the other cases
are stayed. The California court has certified a class of California residents
who currently own or lease the subject vehicles and California residents who
purchased such vehicles when they were new. The court also certified a sub-class
of consumers pursuing Consumer Legal Remedies Act claims. In February 1998, the
court ordered Ford to produce at its expense a mailing list for purposes of
class notification. The court reserved final decision on all other aspects of
class notice, but has indicated its intention to order the parties to share the
costs of notice. Ford estimates the costs of such notice to be approximately $1
million to $2 million. Ford appealed the California court's class certification
and class notice orders, but the appellate court has declined to hear Ford's
appeals. Ford has filed a motion for leave to appeal these orders to the
California Supreme Court. If leave to appeal is denied, Ford will have the right
to appeal those orders after entry of any final judgment in the case.
In related developments, Ford urged the Safety Administration to review
allegations by plaintiffs and the Safety Administration's former chief
investigator that Ford improperly withheld information and documents during
prior Safety Administration investigations into this matter. In September 1997,
the Safety Administration issued a Special Order requiring Ford to respond to
those allegations under oath, and Ford did so.
Air Bag. Three purported class action lawsuits were filed in Alabama,
Louisiana and Texas state courts alleging that air bags are defective because
they can cause injury, particularly to children and small adults. The Alabama
action appears to be nationwide in scope and purports to represent owners of
1993 through 1996 (and some 1997) model year cars and light trucks with
passenger air bags. The Louisiana and Texas actions purport to represent
residents who purchased vehicles with driver and/or passenger air bags, and
nonresidents who purchased such vehicles in those states. The Alabama action
names as defendants Ford, General Motors Corporation, Chrysler Corporation, and
an Alabama automobile dealership. The Louisiana action was brought against the
same manufacturers, as well as Volvo of North America, Inc., Nissan Motor
Corporation, Toyota Motor Corporation, Honda Motor Company, Ltd. and various
dealerships. The Texas action was brought against Ford, General Motors, Chrysler
and Volvo. However, in February 1998, plaintiffs in the Texas case filed an
amended complaint that did not name Ford as a defendant. The Louisiana and Texas
actions were removed to federal court and consolidated for pretrial proceedings.
Plaintiffs allege that their vehicles are unsuitable for transporting children
and small adults and, therefore, are not worth the purchase price they paid.
They seek compensatory damages, including the alleged diminution in value of
their vehicles and in the Alabama and Louisiana cases, the cost to disable the
air bags or "repair" the vehicles.
Ford/Citibank Visa. Following the June 1997 announcement of the termination
of the Ford/Citibank credit card rebate program, five purported nationwide class
actions and one purported statewide class action were filed against Ford;
Citibank is also a defendant in some of these actions. The actions allege
damages in an amount up to $3,500 for each cardholder who obtained a
Ford/Citibank credit card in reliance on the rebate program and who is precluded
from accumulating discounts toward the purchase or lease of new Ford vehicles
after December 1997 as a result of the termination of the rebate program.
Plaintiffs contend that defendants deceptively breached their contract by
unilaterally terminating the program, that defendants have been unjustly
enriched as a result of the interest charges and fees collected from
cardholders, and further, that defendants conspired to deprive plaintiffs of the
benefits of their credit card agreement. Plaintiffs seek compensatory damages,
or alternatively, reinstatement of the rebate program, and punitive damages,
costs, expenses and attorneys' fees. The five purported nationwide class actions
were filed in state courts in Alabama, Illinois, New York, Oregon and
Washington, and the purported statewide class action was filed in a California
state court. The Alabama court has conditionally certified a class consisting of
Alabama residents. Ford removed all of the cases to federal court and requested
that the Judicial Panel on Multidistrict Litigation consolidate and transfer the
cases to federal court in Washington for pretrial proceedings. Five of the cases
were consolidated and transferred to federal court in Washington. Ford's request
to consolidate and transfer the remaining case is pending. The plaintiff in the
Oregon case has moved to remand the case to state court.
-20-
<PAGE>
Item 3. Legal Proceedings (Continued)
- -------------------------------------
Flat Glass. The Company has been named as a defendant in thirteen purported
class actions brought on behalf of purchasers of flat glass alleging that Ford
and other manufacturers fixed prices and allocated markets in
violation of federal and state antitrust laws. Eleven of the class actions are
nationwide in scope and are pending in federal court and the other two class
actions are statewide in scope and are pending in state courts. The other
defendants include Pilkington plc; Libbey-Owens Ford Co., Inc.; AFG Industries;
PPG Industries, Inc.; Asahi Glass Co., Ltd.; and Guardian Industries Corp. There
are nineteen similar purported class actions pending in various courts in which
the Company is not currently named as a defendant. A total of 27 federal cases
have been consolidated in a single federal court in Pennsylvania for pretrial
proceedings under the multidistrict litigation rules. In the actions involving
Ford, the plaintiffs are seeking economic and treble damages.
Lease Residual. In January 1998 in connection with a case pending in
Illinois state court, Ford and Ford Credit were served with a summons and
intervention counterclaim complaint relating to Ford Credit's leasing practices
(Higginbotham v. Ford Credit). The counterclaim plaintiff, Carla Higginbotham,
is a member of a class that has been conditionally certified for settlement
purposes in Shore v. Ford Credit. In the Shore case, Ford Credit commenced an
action for deficiency against Virginia Shore, a Ford Credit lessee. Shore
counterclaimed for purported violations of the Truth-in-Leasing Act (alleging
that certain lease charges were excessive) and the Truth-in-Lending Act
(alleging that the lease lacked clarity). Shore purported to represent a class
of all similarly situated lessees. Ford was not a party to the Shore case.
Higginbotham objected to the proposed settlement of the Shore case, intervened
as a named defendant, filed separate counterclaims against Ford Credit, and
joined Ford as an additional counterclaim defendant. Higginbotham asserts claims
against Ford Credit for violations of the Consumer Leasing Act, declaratory
judgment concerning the enforceability of early termination provisions in Ford
Credit's leases, and fraud. She also asserts a claim against Ford Credit and
Ford for conspiracy to violate the Truth-in-Lending Act. The Higginbotham
counterclaims allege that Ford Credit inflates the residual values of its leased
vehicles, which results in lower monthly lease payments but higher termination
fees for lessees who exercise their right of early termination. Higginbotham
claims that the early termination fees were not adequately disclosed on the
lease form and that the fees are excessive and illegal because of the allegedly
inflated residual values. She also alleges that Ford dictated the residual
values to Ford Credit and thereby participated in an unlawful conspiracy.
Other Matters
- -------------
Patents--General. A number of claims have been made or may be asserted in
the future against Ford alleging infringement of patents held by others. Ford
believes that it has valid defenses with respect to the claims that have been
asserted. If some of such claims should lead to litigation, however, and if the
claimant were to prevail, Ford could be required to pay substantial damages.
Lemelson Patent Case. In 1992, Ford was sued in federal court in Nevada by
an individual patent owner (Lemelson) seeking damages and an injunction for
alleged infringement of four U.S. patents characterized by Lemelson as covering
machine vision inspection technologies, including bar code reading. Ford filed a
declaratory judgment action in the same court to have these four patents as well
as others of Lemelson's patents directed to machine vision and laser uses
declared invalid, unenforceable and not infringed. Lemelson filed a counterclaim
alleging infringement of the patents added by Ford and several additional
patents. In 1995, Ford filed twelve summary judgment motions to dispose of large
portions of the case. One motion to have the case dismissed was granted in 1996
and reversed in 1997. The U.S. Court of Appeals refused to hear Ford's appeal of
the 1997 reversal until the case is tried. Ford and Lemelson then filed opposing
motions for further proceedings. Lemelson requested that the case be scheduled
for an immediate trial. Ford moved to have the case sent back to the magistrate
judge for consideration of Ford's eleven pending motions for summary judgment.
Mr. Lemelson died in October 1997. In January 1998 the court permitted the
Lemelson Medical, Education & Research Foundation, Limited Partnership to be
substituted as party to the lawsuit. The court also granted Ford's motion to
have the case remanded back to the magistrate judge for further proceedings to
recommend disposition of Ford's remaining summary judgment motions. If Lemelson
were to prevail in this lawsuit, Ford could be required to pay substantial
damages of an as yet indeterminate amount and could become subject to an
injunction preventing future use of any process or product found to be covered
by a valid patent.
-21-
<PAGE>
Item 3. Legal Proceedings (Continued)
- -------------------------------------
OFCCP Proceeding. In April 1997, Ford became the subject of a Department of
Labor administrative enforcement proceeding challenging Ford's compliance with
obligations imposed by Executive Order 11246, which prohibits employment
discrimination and requires affirmative action by government contractors and
subcontractors. The Office of Federal Contract Compliance Programs ("OFCCP")
claims that Ford's Kentucky Truck Plant used a hiring process in 1993 for
entry-level hourly laborer positions that discriminated against female
applicants. OFCCP further claims that Ford failed to make available required
records and otherwise cooperate with the agency during a 1993 compliance review.
OFCCP seeks to cancel Ford's government contracts and to bar Ford from obtaining
future government contracts and seeks an order awarding back pay to the
"affected class of women." If OFCCP prevails, Ford's results of operations could
be substantially adversely effected. Ford believes that, although the offer rate
for women at the Kentucky Truck Plant was less than the percentage of female
applicants in the 1993 interview process, there are sound gender-neutral
explanations for this difference. The Department of Labor has indicated it has
similar concerns about the hourly hiring practices at other Ford facilities and
would like to resolve those concerns as part of a resolution of the Kentucky
Truck proceeding.
FTC Investigation. The Federal Trade Commission and the Department of
Justice are continuing their investigation, commenced in 1995, of the retail
vehicle financing credit practices of Ford Credit for compliance with the Equal
Credit Opportunity Act and Regulation B.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not required.
-22-
<PAGE>
Item 4A. Executive Officers of the Registrant
- ----------------------------------------------
The executive officers of the Registrant and their respective positions and
ages at March 15, 1998 are shown in the table below:
<TABLE>
<CAPTION>
Present Position
with the Registrant
Name Position Held Since Age
---- -------- ---------- ---
<S> <C> <C> <C>
Alex Trotman Chairman of the Board November 1993 64
(1)(2) of Directors, President
and Chief Executive Officer
Director
W. Wayne Booker Vice Chairman November 1996 63
Edward E. Hagenlocker Vice Chairman (Chairman, November 1996 58
Visteon Automotive Systems)
John M. Devine Executive Vice President and November 1996 53
Chief Financial Officer
Jacques A. Nasser Executive Vice President November 1996 50
(President, Ford
Automotive Operations)
Peter J. Pestillo Executive Vice President-- January 1993 59
Corporate Relations
Kenneth Whipple Executive Vice President, March 1988 63
Ford (President, Ford
Financial Services Group);
and Chairman of the Board
of Directors and Chief
Executive Officer, Ford
Motor Credit Company
Richard Parry-Jones Group Vice President-- January 1998 46
Product Development
Robert L. Rewey Group Vice President-- December 1993 59
Marketing, Sales and Service
Charles W. Szuluk Group Vice President November 1996 55
(President, Visteon
Automotive Systems)
</TABLE>
-23-
<PAGE>
Item 4A. Executive Officers of the Registrant (Continued)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Present Position
with the Registrant
Name Position Held Since Age
---- -------- ---------- ---
<S> <C> <C> <C>
Robert H. Transou Group Vice President-- May 1994 58
Manufacturing
Gurminder S. Bedi Vice President-- November 1997 50
Truck Vehicle Center
William W. Boddie Vice President-- January 1998 52
Small and Medium Car
Vehicle Center
Kenneth R. Dabrowski Vice President -- November 1996 54
Quality and Process
Leadership
James D. Donaldson Vice President, Ford: and November 1997 55
President, Ford of Europe
Incorporated
Wayne S. Doran Vice President, Ford; and November 1997 63
Chairman of the Board of
Directors, Ford Motor Land
Development Corporation
Edsel B. Ford II Vice President and Director, December 1993 49
(2) Ford; and President and Chief
Operating Officer, Ford
Motor Credit Company
Ronald E. Goldsberry Vice President--General February 1994 55
Manager, Ford Customer
Service Division
Elliott S. Hall Vice President-- October 1997 59
Civic and External Affairs
John T. Huston Vice President-- May 1994 55
Powertrain Operations
I. Martin Inglis Vice President--Product November 1996 47
and Business Strategy
Kenneth K. Kohrs Vice President-- November 1996 59
Large and Luxury Car
Vehicle Center
Vaughn A. Koshkarian Vice President, Ford; and August 1995 57
Chairman of the Board of
Directors and Chief Operating
Officer, Ford Motor (China) Ltd.
</TABLE>
-24-
<PAGE>
Item 4A. Executive Officers of the Registrant (Continued)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Present Position
with the Registrant
Name Position Held Since Age
---- -------- ---------- ---
<S> <C> <C> <C>
Robert O. Kramer Vice President-- October 1995 59
Human Resources
Roman J. Krygier Vice President--Advanced November 1997 55
Manufacturing Engineering
Malcolm S. Macdonald Vice President and January 1995 57
Treasurer
John W. Martin, Jr. Vice President-- April 1989 61
General Counsel
J.C. Mays Vice President--Design October 1997 43
Carlos E. Mazzorin Vice President--Purchasing May 1994 56
John P. McTague Vice President-- March 1990 59
Technical Affairs
James E. Miller Vice President November 1997 51
Janet G. Mullins Vice President-- January 1998 48
Washington Affairs
James G. O'Connor Vice President-- April 1996 55
General Manager,
Lincoln-Mercury Division
James J. Padilla Vice President, Ford; and November 1996 51
President, Ford Brazil
and Argentina
Helen O. Petrauskas Vice President--Environmental March 1983 53
and Safety Engineering
William F. Powers Vice President--Research February 1996 57
Neil W. Ressler Vice President--Advanced May 1994 58
Vehicle Technology
John M. Rintamaki Secretary July 1993 56
Ross H. Roberts Vice President--General May 1991 60
Manager, Ford Division
Dennis E. Ross Vice President and April 1995 47
Chief Tax Officer
</TABLE>
-25-
<PAGE>
Item 4A. Executive Officers of the Registrant (Continued)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Present Position
with the Registrant
Name Position Held Since Age
---- -------- ---------- ---
<S> <C> <C> <C>
David W. Scott Vice President--Public Affairs July 1986 57
William A. Swift Vice President and Controller-- January 1998 54
Ford Automotive Operations
David W. Thursfield Vice President-- January 1998 52
Vehicle Operations
Henry D. G. Wallace Vice President (Chief Financial November 1997 52
Officer and Vice President,
European Strategic Planning)
Robert J. Womac Vice President (Executive November 1996 54
Vice President, Operations,
Visteon Automotive Systems)
</TABLE>
- ------------------
(1) Also Chairman of the Organization Review and Nominating Committee of the
Board of Directors.
(2) Also a member of the Finance Committee of the Board of Directors.
Some of the officers listed above also are members of one or more
additional committees of the Registrant that are not committees of the Board of
Directors.
All of the above officers, other than Messrs. Mays and Ross, have been
employed by the Registrant or its subsidiaries in one or more capacities during
the past five years. Immediately prior to joining Ford, Mr. Mays served as Vice
President of Design Development at SHR Perceptual Management in Scottsdale,
Arizona. Previously, and since 1993, Mr. Mays was design director responsible
for worldwide design strategy, development and execution for Audi AG in Germany.
Before joining Ford, Mr. Ross had been a partner in the New York law firm of
Davis, Polk & Wardwell since 1989.
Under the By-Laws of the Registrant the executive officers are elected by
the Board of Directors at the Annual Meeting of the Board of Directors held for
this purpose, each to hold office until his or her successor shall have been
chosen and shall have qualified or as otherwise provided in the By-Laws.
-26-
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
- -------------------------------------------------------------------------
The Common Stock of Ford presently is listed on the New York and Pacific
Coast Stock Exchanges in the United States and on certain stock exchanges in
Belgium, France, Germany, Switzerland and the United Kingdom. Ford is in the
process of delisting its stock from stock exchanges in Belgium, France, Germany
and Switzerland.
The high and low sales prices for Ford Common Stock and the dividends paid
per share of Common and Class B Stock for each full quarterly period in the
years indicated were as follows:
<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>
Common Stock price per share*
High $35 $39 1/2 $46 1/8 $50 1/4 $34 7/8 $37 1/4 $34 1/4 $33 7/8
Low 30 3/4 30 38 3/16 41 1/2 27 1/4 31 1/2 29 7/8 30 3/8
Dividends per share of
Common and Class B Stock $0.385 $0.42 $0.42 $0.42 $0.35 $0.35 $0.385 $0.385
- ---------------------------
* Prices reflect New York Stock Exchange Composite Transactions.
</TABLE>
As of February 27, 1998, stockholders of record of Ford included 241,815
holders of Common Stock and 109 holders of Class B Stock.
-27-
<PAGE>
Item 6. Selected Financial Data
- --------------------------------
The following tables set forth selected financial data and other data
concerning Ford for each of the last eleven years (dollar amounts in millions
except per share amounts):
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Automotive
Sales $122,935 $118,023 $110,496 $107,137 $91,568 $84,407 $72,051 $81,844 $82,879 $82,193 $71,797
Operating income/(loss) 6,946 2,516 3,281 5,826 1,432 (1,775) (3,769) 316 4,252 6,612 6,256
Income/(loss) before income taxes
and cumulative effects of
changes in accounting principles 7,082 2,571 3,166 5,997 1,291 (1,952) (4,052) 275 5,156 7,312 6,499
Income/(loss) before cumulative
effects of changes in accounting
principles a/, c/ 4,714 1,655 2,056 3,913 1,008 (1,534) (3,186) 99 3,175 4,609 3,767
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Net income/(loss) 4,714 1,655 2,056 3,913 1,008 (8,628) (3,186) 99 3,175 4,609 3,767
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Financial Services
Revenues $ 30,692 $ 28,968 $ 26,641 $ 21,302 $16,953 $15,725 $16,235 $15,806 $13,267 $10,253 $ 8,096
Income before income taxes and
cumulative effects of changes
in accounting principles 3,857 4,222 3,539 2,792 2,712 1,825 1,465 1,220 874 1,031 1,386
Income before cumulative effects
of changes in accounting
principles b/, d/, e/ 2,206 2,791 2,083 1,395 1,521 1,032 928 761 660 691 858
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Net income 2,206 2,791 2,083 1,395 1,521 1,243 928 761 660 691 858
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Total Company
Income/(loss) before income taxes
and cumulative effects of
changes in accounting principles $ 10,939 $ 6,793 $ 6,705 $ 8,789 $ 4,003 $ (127) $(2,587) $ 1,495 $ 6,030 $ 8,343 $ 7,885
Provision/(credit) for income
taxes 3,741 2,166 2,379 3,329 1,350 295 (395) 530 2,113 2,999 3,226
Minority interests in net income
of subsidiaries 278 181 187 152 124 80 66 105 82 44 34
-------- -------- -------- -------- ------- ------ ------- ------- ------- ------- -------
Income/(loss) before cumulative
effects of changes in accounting
principles a/, b/, c/, d/, e/ 6,920 4,446 4,139 5,308 2,529 (502) (2,258) 860 3,835 5,300 4,625
Cumulative effects of changes in
accounting principles - - - - - (6,883) - - - - -
-------- -------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Net income/(loss) $ 6,920 $ 4,446 $ 4,139 $ 5,308 $ 2,529 $(7,385) $(2,258) $ 860 $ 3,835 $ 5,300 $ 4,625
======== ======== ======== ======== ======= ======= ======= ======= ======= ======= =======
Total Company Data Per Share
of Common and Class B Stock f/
Income/(loss) before cumulative
effects of changes in
accounting principles $ 5.75 $ 3.73 $ 3.58 $ 4.97 $ 2.27 $ (0.73) $ (2.40) $ 0.93 $ 4.11 $ 5.48 $ 4.53
Income/(loss)
Basic 5.75 3.73 3.58 4.97 2.27 (7.81) (2.40) 0.93 4.11 5.48 4.53
Diluted 5.62 3.64 3.33 4.44 2.10 (7.81) (2.40) 0.92 4.06 5.40 4.46
Cash dividends 1.645 1.47 1.23 0.91 0.80 0.80 0.98 1.50 1.50 1.15 0.79
Common stock price range (NYSE)
High 50-1/4 37-1/4 32-7/8 35 33-1/16 24-7/16 18-7/8 24-9/16 28-5/16 27-1/2 28-5/32
Low 30 27-1/4 24-3/4 25-5/8 21-1/2 13-7/8 11-11/16 12-1/2 20-11/16 19-1/32 14-7/32
Average number of shares of Common
and Class B stock outstanding
(in millions) 1,195 1,179 1,071 1,010 986 972 952 926 934 968 1,022
</TABLE>
- - - - - -
a/ 1989 includes an after-tax loss of $424 million from the sale of Rouge
Steel Company.
b/ 1994 includes an after-tax loss of $440 million from the sale of Granite
Savings Bank (formerly First Nationwide Bank).
c/ 1995 includes a gain of $230 million from the dissolution of Autolatina,
the company's joint venture with Volkswagen AG in Brazil and Argentina.
d/ 1996 includes gains of $650 million on the sale of The Associates' common
stock and $95 million on the sale of USL Capital's assets, offset partially
by a net write-down of $233 million for Budget Rent a Car Corporation.
e/ 1997 includes a gain of $269 million on the sale of Hertz common stock.
f/ Share data have been adjusted to reflect stock dividends and stock splits.
-28-
<PAGE>
Item 6. Selected Financial Data (Continued)
- --------------------------------------------
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
(continued) ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Company Balance
Sheet Data at Year-End
Assets
Automotive $ 85,079 $ 79,658 $ 72,772 $ 68,639 $ 61,737 $ 57,170 $ 52,397 $ 50,824 $ 45,819 $ 43,128 $ 39,734
Financial Services 194,018 183,209 170,511 150,983 137,201 123,375 122,032 122,839 115,074 100,239 76,260
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total assets $279,097 $262,867 $243,283 $219,622 $198,938 $180,545 $174,429 $173,663 $160,893 $143,367 $115,994
Long-term debt
Automotive $ 7,047 $ 6,495 $ 5,475 $ 7,103 $ 7,084 $ 7,068 $ 6,539 $ 4,553 $ 1,137 $ 1,336 $ 2,058
Financial Services 73,198 70,641 68,259 58,104 47,900 42,369 43,680 40,779 37,784 30,777 26,009
Stockholders' equity g/ 30,734 26,762 24,547 21,659 15,574 14,753 22,690 23,238 22,728 21,529 18,493
Total Company Facility
and Tooling Data
Capital expenditures for
facilities (excluding
special tools) $ 5,695 $ 5,362 $ 5,455 $ 5,236 $ 4,339 $ 3,613 $ 3,611 $ 4,702 $ 4,412 $ 3,148 $ 2,415
Depreciation 10,404 9,519 8,954 7,207 5,456 4,658 3,956 3,185 2,720 2,458 2,107
Expenditures for special
tools 3,022 3,289 3,542 3,310 2,475 2,177 2,236 2,556 2,354 1,634 1,343
Amortization of special
tools 3,179 3,272 2,765 2,129 2,012 2,097 1,822 1,695 1,509 1,335 1,353
Total Company Employee
Data - Worldwide
Payroll $ 17,187 $ 17,616 $ 16,567 $ 15,853 $ 13,750 $ 13,754 $ 12,850 $ 14,014 $ 13,327 $ 13,010 $ 11,670
Total labor costs 25,546 25,689 23,758 22,985 20,065 19,850 17,998 18,962 18,152 18,108 16,567
Average number of employees 363,892 371,702 346,989 337,728 321,925 325,333 331,977 369,547 366,641 358,939 350,320
Total Company Employee
Data - U.S. Operations
Payroll $ 10,840 $ 10,961 $ 10,488 $ 10,381 $ 8,889 $ 8,019 $ 7,393 $ 8,313 $ 8,654 $ 8,477 $ 7,765
Average number of employees 189,787 189,718 186,387 180,861 166,995 158,501 156,203 180,228 188,402 185,651 180,944
Average hourly labor
costs h/
Earnings $ 22.97 $ 22.30 $ 21.79 $ 21.81 $ 20.94 $ 19.92 $ 19.10 $ 18.44 $ 17.77 $ 17.39 $ 16.50
Benefits 20.48 19.47 18.66 19.13 18.12 19.24 17.97 14.12 13.21 13.07 12.38
-------- -------- ------- -------- -------- -------- -------- -------- -------- -------- --------
Total hourly labor
costs $ 43.45 $ 41.77 $ 40.45 $ 40.94 $ 39.06 $ 39.16 $ 37.07 $ 32.56 $ 30.98 $ 30.46 $ 28.88
======== ======== ======== ======== ======== ======== ======== ======== ======== ======== ========
- - - - - -
</TABLE>
g/ The cumulative effects of changes in accounting principles reduced equity
by $6,883 million in 1992.
h/ Per hour worked (in dollars). Excludes data for subsidiary companies.
-29-
<PAGE>
Item 6. Selected Financial Data (Continued)
- --------------------------------------------
<TABLE>
<CAPTION>
SUMMARY OF VEHICLE UNIT SALES i/
(in thousands) 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
North America
United States
Cars 1,614 1,656 1,767 2,036 1,925 1,820 1,588 1,870 2,201 2,364 2,176
Trucks 2,402 2,241 2,226 2,182 1,859 1,510 1,253 1,416 1,517 1,537 1,480
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total United States 4,016 3,897 3,993 4,218 3,784 3,330 2,841 3,286 3,718 3,901 3,656
Canada 319 258 254 281 256 237 259 257 326 349 349
Mexico 97 67 32 92 91 126 112 89 87 63 35
----- ----- ------ ----- ----- ----- ----- ----- ----- ----- -----
Total North America 4,432 4,222 4,279 4,591 4,131 3,693 3,212 3,632 4,131 4,313 4,040
Europe
Britain 466 516 496 520 464 420 471 607 739 753 628
Germany 460 436 409 386 340 407 501 361 326 332 328
Italy 248 180 193 179 172 266 301 219 153 98 93
Spain 155 155 160 163 117 165 128 155 173 158 159
France 153 194 165 180 150 194 190 185 192 168 162
Other countries 318 339 286 281 250 270 296 289 296 290 285
----- ----- ------ ----- ----- ----- ----- ----- ----- ----- -----
Total Europe 1,800 1,820 1,709 1,709 1,493 1,722 1,887 1,816 1,879 1,799 1,655
Other international
Brazil 214 190 201 164 151 117 137 137 157 154 129
Argentina 143 64 48 54 49 49 26 18 25 30 33
Australia 132 138 139 125 120 105 104 134 154 132 128
Taiwan 79 86 106 97 122 119 107 115 115 88 55
Japan 40 52 57 50 53 64 83 99 82 60 49
Other countries 103 81 67 63 65 71 67 72 65 86 82
----- ----- --- --- --- --- --- --- ---- --- ---
Total other
international 711 611 618 553 560 525 524 575 598 550 476
Total worldwide cars and
trucks 6,943 6,653 6,606 6,853 6,184 5,940 5,623 6,023 6,608 6,662 6,171
Total worldwide tractors j/ - - - - - - 13 66 72 77 64
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total worldwide vehicle
unit sales 6,943 6,653 6,606 6,853 6,184 5,940 5,636 6,089 6,680 6,739 6,235
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
- - - - - -
i/ 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.
j/ Ford's tractor operation, Ford New Holland, was sold on May 6, 1991.
-30-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- ------------------------------------------------------------------------
OVERVIEW
The Company's worldwide net income was a record $6,920 million in 1997, or
$5.62 per diluted share of Common and Class B Stock, compared with $4,446
million, or $3.64 per diluted share in 1996.
The Company's earnings in 1997 were up $2,474 million or 56% from 1996,
reflecting primarily improved Automotive operating results in North America,
South America and Europe, offset partially by lower earnings in Financial
Services. The Company's worldwide sales and revenues were a record $153.6
billion in 1997, up $6.6 billion or 5% from 1996. Vehicle unit sales of cars and
trucks were a record 6,943,000, up 290,000 units or 4% from a year ago.
Stockholders' equity was $30.7 billion at December 31, 1997, compared with $26.8
billion at December 31, 1996.
In 1997, Automotive capital expenditures for new products and facilities
totaled $8.1 billion, down $67 million from 1996. Automotive cash and marketable
securities were a record $20.8 billion at December 31, 1997, up $5.4 billion
from December 31, 1996. Automotive debt at December 31, 1997 totaled $8.1
billion, unchanged from a year ago. Automotive net cash was a record $12.7
billion at December 31, 1997.
The Company's Financial Statements and Notes to Financial Statements on
pages FS-1 through FS-34, including the Report of Independent Accountants,
should be read as an integral part of this review.
Fourth Quarter 1997
- -------------------
In fourth quarter 1997, Ford earned a record $1,796 million, or $1.45 per
diluted share of Common and Class B Stock, compared with $1,204 million, or
$0.99 per diluted share in fourth quarter 1996.
The Company's net income for fourth quarter 1997 and 1996 was as follows
(in millions):
<TABLE>
<CAPTION>
Net Income/(Loss)
---------------------------------------------
Fourth Fourth
Quarter Quarter
1997 1996
-------------------- --------------------
<S> <C> <C>
U.S. Automotive $1,193 $ 628
Automotive Outside U.S.
- Europe 158 (88)
- South America (71) (287)
- Other 61 137
------ -------
Total Automotive Outside U.S. 148 (238)
------ -------
Total Automotive 1,341 390
Financial Services 455 814
------ ------
Total Company $1,796 $1,204
====== ======
</TABLE>
Earnings for Automotive operations in the U.S. improved in fourth quarter
1997, compared with fourth quarter 1996, primarily as a result of cost
reductions (at constant volume and mix).
-31-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
- ------------------------------------------------------------------------
Automotive operations in Europe earned a profit in fourth quarter 1997,
compared with a loss a year ago. The improvement reflected primarily increased
volume and nonrecurrence of 1996 separation costs. Lower losses in South America
in fourth quarter 1997 reflected primarily nonrecurrence of 1996 separation
costs, improved volume and mix, and cost reductions.
Lower earnings for Financial Services operations reflected nonrecurrence of
1996 one-time actions and a higher effective tax rate.
RESULTS OF OPERATIONS
The Company's full year net income for worldwide Automotive operations in
1997, 1996 and 1995, was as follows (in millions):
<TABLE>
<CAPTION>
Net Income/(Loss)
-----------------------------------------------------------
1997 1996 1995
---------------- ---------------- -----------------
<S> <C> <C> <C>
U.S. Automotive $3,706 $2,007 $1,843
Automotive Outside U.S.
- Europe 273 (291) 116
- South America 40 (642) (94)
- Other 695 581 191
------ ------ ------
Total Automotive Outside U.S. 1,008 (352) 213
------ ------ ------
Total Automotive $4,714 $1,655 $2,056
====== ====== ======
</TABLE>
The Company's full year net income for worldwide Financial Services
operations in 1997, 1996 and 1995, was as follows (in millions):
<TABLE>
<CAPTION>
Net Income/(Loss)
-----------------------------------------------------------
1997 1996 1995
---------------- ---------------- -----------------
<S> <C> <C> <C>
Ford Credit $1,031 $1,441 $1,579
The Associates 1,032 857 723
USL Capital - 191 135
Hertz 202 159 105
One-Time Actions
- Gain on sale of Common Stock
of The Associates and Hertz 269 650 -
- Sale of USL Capital assets - 95 -
- Budget Rent a Car write-down - (233) -
Minority Interests, Eliminations and Other (328) (369) (459)
------ ------ ------
Total Financial Services $2,206 $2,791 $2,083
====== ====== ======
Memo: Ford's share of earnings in
----------------------------------
The Associates $ 832 $ 745 $ 723
Hertz 168 159 105
</TABLE>
-32-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
- -----------------------------------------------------------------------
1997 COMPARED WITH 1996
Automotive Operations
- ---------------------
Earnings for Automotive operations in the U.S. were a record $3,706
million, up $1,699 million in 1997 compared with a year ago. The increase
reflected higher margins from ongoing cost, quality, and vehicle mix
improvements. The after-tax return on sales was 4.6% in 1997, up 1.9 points from
a year ago.
The U.S. economy continued on a path of strong growth, low unemployment,
and moderate inflation in 1997. Car and truck industry volumes totaled 15.5
million units in 1997, about the same level as 1996. Ford's combined U.S. car
and truck share was 25%, down 2/10 of a point from 1996.
Automotive operations in Europe returned to profitability in 1997 with
earnings of $273 million compared with a loss of $291 million a year ago. The
improvement reflected primarily lower operating costs (at constant volume and
mix), offset partially by lower volume.
European car and truck industry volumes totaled 15 million units in 1997,
compared with 14.3 million units in 1996. Ford's combined European car and truck
share was 11.4%, down 4/10 of a point from 1996.
Automotive operations in South America returned to profitability, earning
$40 million in 1997 compared with a loss of $642 million a year ago. Higher
earnings reflected primarily improved volume and mix, and lower material costs
(at constant volume and mix). In 1997, car and truck industry volumes in Brazil
(the largest market in South America) totaled 1.9 million units. Ford's combined
car and truck market share in Brazil was 14.5% in 1997, up 3.8 points from 1996.
Automotive Sales and Total Costs
- --------------------------------
Automotive sales totaled $123 billion in 1997, up 4.2% from 1996. Sales in
the U.S. were $81 billion in 1997 compared with $76 billion in 1996; sales
outside the U.S. totaled $42 billion in 1997, unchanged from 1996. Total costs
and expenses were $116 billion in 1997, up $482 million or 4/10 of one percent
from 1996. The increases in sales and total costs and expenses were attributable
to the effects of higher unit volume and a richer sales mix. Adjusted for
constant volume and mix, total automotive costs declined $3 billion in 1997.
Financial Services Operations
- -----------------------------
Earnings for Financial Services operations in 1997 were down $585 million,
compared with a year ago. Excluding the one-time actions in 1997 and 1996 shown
above, results from operations were down $342 million from a year ago.
Lower earnings at Ford Credit in 1997, compared with 1996, resulted
primarily from lower net financing margins, higher credit losses and loss
reserve requirements, and a higher effective tax rate; improved operating costs
and higher financing volumes were a partial offset. Net financing margins
decreased from a year ago, reflecting higher depreciation costs on leased
vehicles (as a result of lower-than-anticipated residuals). These factors have
continued to adversely affect Ford Credit's earnings in 1998. Credit losses as a
percent of average net finance receivables (including net investment in
operating leases) were 0.89% in 1997, compared with 0.78% a year ago, reflecting
higher losses per repossession.
Record earnings at The Associates reflected primarily higher levels of
earning assets and improved net interest margins, offset partially by higher
credit losses. Credit losses as a percent of average net finance receivables
were 2.40% in 1997, compared with 2.03% in 1996.
-33-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
- -----------------------------------------------------------------------
Record earnings at Hertz reflected continued strong performance in the U.S.
car rental market both in terms of increased transaction volume and more
favorable pricing.
1996 COMPARED WITH 1995
The Company's worldwide net income was $4,446 million in 1996, or $3.64 per
diluted share of Common and Class B Stock, compared with $4,139 million, or
$3.33 per diluted share in 1995. The Company's worldwide sales and revenues were
$147 billion in 1996, up $9.9 billion, or 7% from 1995. Vehicle unit sales of
cars and trucks were 6,653,000, up 47,000 units. Stockholders' equity was $26.8
billion at December 31, 1996, compared with $24.5 billion at December 31, 1995.
The Company's earnings in 1996 were up $307 million from 1995, reflecting
primarily improved Automotive results in North America and one-time actions and
record operating earnings in Financial Services; higher operating losses in
South America and Europe and a one-time charge for employee separation programs
were partial offsets.
Automotive Operations
- ---------------------
Earnings for Automotive operations in the U.S. were up $164 million in 1996
compared with 1995. The increase resulted from higher margins (reflecting
improved sales mix and cost reductions), offset partially by higher product
costs and costs for employee separation programs. The after-tax return on sales
was 2.7% in 1996, up 2/10 of a point from 1995.
The U.S. economy grew at a moderate rate in 1996, with interest rates and
inflation at comparatively low levels. Car and truck industry volumes totaled
15.5 million units in 1996, compared with 15.1 million units in 1995. The
increase in industry sales was more than explained by higher truck industry
sales. Ford's combined U.S. car and truck share was 25.2%, down 4/10 of a point
from 1995. Reduced sales of lower margin fleet vehicles accounted for the
decline.
Unfavorable results for Automotive operations in Europe in 1996, compared
with 1995, reflected costs associated with launching new products, adverse
vehicle mix, higher marketing costs, and costs for employee separation programs,
offset partially by higher volume. In 1996, the European automotive industry
experienced increased competition as a result of industry overcapacity, as well
as a market shift to lower profit smaller cars.
European car and truck industry volumes totaled 14.3 million units in 1996,
compared with 13.4 million units in 1995. Ford's combined European car and truck
share was 11.8%, down 4/10 of a point from 1995, reflecting primarily reduced
sales of lower margin fleet vehicles.
Higher losses in 1996 incurred by Automotive operations in South America
reflected primarily higher losses for operations in Brazil as a result of a long
and costly launch process following the dissolution of the Autolatina joint
venture with Volkswagen AG. Costs for employee separation programs, in addition
to increased competition and a market shift to smaller (Fiesta-sized) cars that
resulted in lower market share, also affected results unfavorably. The Company
reestablished operations in Brazil and Argentina in 1996.
Financial Services Operations
- -----------------------------
Earnings for Financial Services operations were up $708 million in 1996,
compared with 1995, including $512 million from one-time actions for the sale of
The Associates' common stock, the sale of USL Capital's assets, and the net
write-down for Budget Rent A Car Corporation. Improvements from operations
totaled $196 million.
-34-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
- -----------------------------------------------------------------------
Ford Credit's earnings in 1996 include a majority ownership (78%) of Ford
Credit Europe, and results for 1995 were restated to reflect this ownership
change. Lower consolidated net income at Ford Credit in 1996, compared with
1995, resulted primarily from the absence of equity in the net income of Ford
Holdings (reflecting the repurchase in first quarter 1996 by Ford Holdings of
substantially all of the shares of Ford Holdings' stock owned by Ford Credit),
higher credit losses and higher loss reserve requirements; higher levels of
earning assets and improved net interest margins were partial offsets. (Ford
Holdings is a holding company which in 1996 owned primarily USL Capital and,
until December 1995, also owned The Associates. Presently, Ford Holdings
primarily owns a minority interest in Ford FSG, Inc.) Depreciation costs
increased as a result of continued growth in operating leases; the related lease
revenues more than offset the increased depreciation. Credit losses as a percent
of average net finance receivables (including net investment in operating
leases) were 0.78% in 1996, compared with 0.51% in 1995.
Record earnings at The Associates in 1996 reflected primarily higher levels
of earning assets, lower operating costs and improved net interest margins,
offset partially by higher credit losses. Credit losses as a percent of average
net finance receivables were 2.03% in 1996, compared with 1.70% in 1995.
Record earnings at Hertz in 1996 reflected primarily higher volume in U.S.
car rental and equipment rental operations, compared with 1995.
LIQUIDITY AND CAPITAL RESOURCES
Automotive Operations
- ---------------------
Automotive cash and marketable securities were $20.8 billion at December
31, 1997, up $5.4 billion from December 31, 1996. The Company paid $2 billion in
cash dividends on its Common Stock, Class B Stock and Preferred Stock during
1997.
Automotive capital expenditures totaled $8.1 billion in 1997, down $67
million from 1996. Capital expenditures were 6.6% of sales in 1997, down 4/10 of
a point from 1996. Ford's spending in 1998 for product change is expected to be
at lower levels.
Automotive debt at December 31, 1997 totaled $8.1 billion, which was 21% of
total capitalization (stockholders' equity and Automotive debt), down from 23%
of total capitalization a year ago.
For a discussion of Ford's support facilities at December 31, 1997, see
Note 9 (pages FS-22 and FS-23) of the Notes to Financial Statements.
Financial Services Operations
- -----------------------------
The Financial Services operations rely heavily on their ability to raise
substantial amounts of funds in the capital markets in addition to collections
on loans and retained earnings. The levels of funds for certain Financial
Services operations are affected by transactions with Ford, such as capital
contributions, dividend payments and the timing of payments for income taxes.
The ability to obtain funds also is affected by debt ratings which, for certain
operations, are closely related to the financial condition and outlook for Ford
and the nature and availability of support facilities, such as revolving credit
and receivables sales agreements.
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.
Support facilities represent additional sources of funds, if required.
-35-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Contition and
Results of Operations (Continued)
- -----------------------------------------------------------------------
For a discussion of support facilities of Ford Credit and other Financial
Services subsidiaries at December 31, 1997, see Note 9 (pages FS-22 and FS-23)
of the Notes to Financial Statements.
SPIN-OFF OF THE ASSOCIATES
On March 2, 1998, the Board of Directors of the Company approved the
spin-off of The Associates by declaring a dividend on Ford's outstanding shares
of Common and Class B Stock consisting in the aggregate of Ford's 80.7% interest
(279.5 million shares) in The Associates. The Board of Directors also declared a
dividend in cash on shares of the Company stock held in employee savings plans
equal to the market value of The Associates stock to be distributed per share of
the Company's Common and Class B Stock. Both the spin-off dividend and the cash
dividend are payable on April 7, 1998 to stockholders of record on March 12,
1998.
Holders of Ford Common and Class B Stock on the record date will be
entitled to receive 0.262085 shares of The Associates common stock for each
share of Ford stock. Based on the closing sale price of The Associates stock of
$81.25 per share on March 2, 1998, the total value of the distribution
(including the cash dividend) will be $25.8 billion or $21.30 per share of Ford
stock. The actual value of the total distribution will depend on the market
value of The Associates stock on the distribution date.
As a result of the spin-off of The Associates, Ford will realize a
one-time, non-taxable gain of about $16.5 billion in first quarter 1998.
In 1996 and 1997, The Associates contributed 16.8% and 12%, respectively,
to Ford's consolidated earnings. Generally, the earnings of The Associates have
been retained by The Associates to fund its growth.
YEAR 2000 DATE CONVERSION
An issue affecting Ford and most other companies is whether computer
systems and applications will recognize and process the year 2000 and beyond.
Ford has a central office to coordinate the identification, evaluation and
implementation of changes to systems and applications to achieve compliance with
the year 2000 date conversion. The Company is in the process of assessing and
implementing necessary changes for all areas of the Company's business which
could be impacted; these include such areas as business computer systems,
technical infrastructure, dealership systems, plant floor equipment, building
infrastructure, end-user computing, affiliates, suppliers and vehicle
components.
The Company has investigated the impact of the year 2000 issue on its
vehicle components and does not anticipate any effect on the operational safety
or performance of its vehicles. The electronic functionality of such components
generally is based on engine cycles or the time elapsed since the vehicle was
started, not any particular date. While the Company will continue to investigate
its vehicle components, at present it does not anticipate any significant
exposure related to the year 2000 issue for its current or future products.
Ford has established accelerated conversion centers in various regions of
the world, and is using these centers, as well as external resources, to address
the year 2000 issue. The Company plans to have necessary modifications made to
most of its critical systems and applications by the end of 1998 and to complete
testing during 1999. The Company, however, has little to no control over whether
its suppliers or dealers will make the appropriate modifications to their
systems and applications on a timely basis. Ford is working actively through the
Automotive Industry Action Group with other manufacturers in assessing and
monitoring supplier readiness. In addition, Ford will rely to a certain extent
on equipment suppliers for the modifications that must be made to certain Ford
manufacturing equipment.
-36-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
- -----------------------------------------------------------------------
Based on assessments completed to date and compliance plans in process,
Ford does not expect that the year 2000 issue, including the cost of making its
critical systems and applications compliant, will have a material effect on its
business operations, consolidated financial condition, cash flows, or results of
operations. However, if appropriate modifications are not made by the Company's
suppliers or dealers on a timely basis, or if the Company's actual costs or
timing for the year 2000 date conversion differ materially from its present
estimates, the Company's operations and financial results could be significantly
adversely affected.
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
New Standards
- -------------
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings
per Share," was issued by the Financial Accounting Standards Board in February
1997. Ford adopted SFAS 128 effective with the 1997 financial statements.
Statement of Financial Accounting Standards No. 130 ("SFAS 130"),
"Reporting Comprehensive Income," was issued by the Financial Accounting
Standards Board in June 1997. This Statement requires all items that must be
recognized under accounting standards as components of comprehensive income to
be reported in a financial statement that is displayed with the same prominence
as other financial statements. Ford will adopt SFAS 130 for 1998.
Statement of Financial Accounting Standards No. 131 ("SFAS 131"),
"Disclosures about Segments of an Enterprise and Related Information," was
issued by the Financial Accounting Standards Board in June 1997. This Statement
establishes standards for reporting information about operating segments in
annual financial statements and requires reporting of selected information about
operating segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. Ford will adopt SFAS 131 for 1998.
Management is evaluating the impact, if any, the Standard will have on the
Company's present segment reporting.
Interpretations
- ---------------
Brazil has been considered a highly inflationary economy since the
implementation of Statement of Financial Accounting Standards No. 52 ("SFAS
52"), "Foreign Currency Translation," for fiscal years beginning on or after
December 15, 1982. The instability of the local currency in a hyperinflationary
economy precludes its use as the functional currency for the measurement of
business operations. Ford has used the U.S. dollar as the functional currency
for its Brazilian operations during this hyperinflationary period.
Beginning January 1, 1998, Brazil no longer is considered a highly
inflationary economy under SFAS 52. The U.S. dollar will continue to be the
designated functional currency for Ford's Brazilian operations in 1998 because
business transactions primarily are U.S. dollar based. Therefore, the change to
a non-highly inflationary designation will have no effect on Ford's consolidated
financial statements in 1998.
The designated functional currency for Ford Brazil will be reviewed
periodically.
-37-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
- -----------------------------------------------------------------------
OUTLOOK
Industry Sales Volumes
- ----------------------
The Company's outlook for car and truck industry sales in 1998 in its major
markets is as follows:
United States - The Company expects car and truck industry
sales in the U.S. in 1998 to be slightly
lower than the 15.5 million units in 1997.
Europe - European car and truck industry sales in 1998
are expected to be about equal to 1997, or
about 15 million units.
Brazil - Fiscal austerity measures implemented in late
1997 by the Brazilian government are expected to
adversely impact 1998 car and truck industry sales
in the region.
1998 Financial Targets
- ----------------------
Ford's management has set and communicated certain Automotive financial
targets for 1998. While the Company hopes to achieve these goals, they should
not be interpreted as projections, expectations or forecasts of 1998 results.
The Automotive financial targets for 1998 are as follows:
<TABLE>
<CAPTION>
1998 Target
----------------------------
<S> <C>
Automotive
----------
North America 5% return on sales
Europe Profitable
South America Breakeven
(present status is a loss)
Total costs Down $1 billion from 1997
(at constant volume and mix)
Capital spending Lower than 1997
</TABLE>
Risk Factors
- ------------
Statements included in this report may constitute "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements involve a number of risks, uncertainties, and other
factors that could cause actual results to differ materially from those stated,
including, without limitation: greater price competition in the U.S. and Europe
resulting from further weakening of Asian currencies or industry overcapacity; a
significant decline in U.S. or European industry sales resulting from slowing
economic growth; economic difficulties in South America resulting from Brazilian
government austerity programs; a market shift from truck sales in the U.S.;
lower-than-anticipated residual values for leased vehicles; increased safety or
emissions regulation resulting in higher costs and/or sales restrictions; work
stoppages at key Company or supplier facilities; and the discovery of defects in
vehicles resulting in recall campaigns or litigation.
-38-
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
- --------------------------------------------------------------------
Ford is exposed to a variety of market risks, including the effects of
changes in foreign currency exchange rates, interest rates and commodity prices.
For Automotive operations, purchases and sales of finished vehicles and
production parts, debt and other payables, subsidiary dividends, and investments
in subsidiaries are frequently denominated in foreign currencies, thereby
creating exposures to changes in exchange rates. In addition, Ford also is
exposed to changes in prices of commodities used in its Automotive operations.
To ensure funding over business and economic cycles and to minimize overall
borrowing costs, Financial Services operations issue debt and other payables
with various maturity and interest rate structures. The maturity and interest
rate structures frequently differ from the invested assets. Exposures to
fluctuations in interest rates are created by the difference in maturities of
liabilities versus the maturities of assets.
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 effect of changes in exchange
rates, interest rates and commodity prices on Ford's earnings generally has been
small relative to other factors that also affect earnings, such as unit sales
and operating margins. For more information on these financial exposures, see
Note 1 (pages FS-9 and FS-10) and Note 14 (pages FS-27 and FS-28) of the Notes
to Financial Statements.
The Company's interest rate risk and its foreign currency exchange rate
risk (risks related to commodity derivative positions are not material) is
quantified as follows.
Interest Rate Risk -- Interest rate swaps (including those with a
currency swap component) are used by Ford, primarily in its Financial
Services operations, to mitigate the effects of interest rate
fluctuations on earnings by changing the characteristics of debt to
match the characteristics of assets. The Company uses a model to
assess the sensitivity of its earnings to changes in market interest
rates. The model recalculates earnings by adjusting the rates
associated with variable rate instruments on the repricing date and
adjusting the rates on fixed rate instruments scheduled to mature in
the subsequent twelve months, effective on their scheduled maturity
date. Interest income and interest expense are then recalculated based
on the revised rates. Assuming an instantaneous increase or decrease
of one percentage point in interest rates applied to all financial
instruments and leased assets, Ford's after-tax earnings would change
by $30 million over a 12-month period.
Foreign Currency Risk -- The Company principally uses derivative
financial instruments to hedge assets, liabilities and firm
commitments denominated in foreign currencies. The Company uses a
value-at-risk (VAR) analysis to assess its exposure to changes in
foreign currency exchange rates. The primary assumptions used in the
VAR analysis are as follows:
- A Monte Carlo simulation was used to calculate changes in the
value of currency derivative instruments (forwards and options)
and all significant underlying exposures. The simulation
generated currency rate scenarios over an 18-month exposure
horizon and a one-month holding period.
-39-
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures About Market Risk (Continued)
- --------------------------------------------------------------------------------
- The VAR analysis calculates the potential risk, with a 99%
confidence level, on firm commitment exposures (cash flows),
including the effects of foreign currency derivatives.
(Translation exposures were not included in the VAR analysis.)
The model assumes currency prices are generally normally
distributed and draws volatility data from the currency markets.
- Estimates of correlations of market factors primarily are drawn
from the JP Morgan RiskMetrics(TM) dataset as of December 31,
1997.
Based on the overall Company currency exposure at December 31, 1997, including
derivative positions, currency movements are projected to affect pre-tax cash
flow by less than $250 million, with a 99% confidence level.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The Financial Statements and Notes to Financial Statements of the
Registrant and the Report of Independent Accountants that are filed as part of
this Report are listed under Item 14. "Exhibits, Financial Statement Schedules,
and Reports on Form 8-K" and are set forth on pages FS-1 through FS-34
immediately following the signature pages of this Report.
Selected quarterly financial data of Ford and its consolidated subsidiaries
for 1997 and 1996 are set forth in Note 18 of the Notes to Financial Statements.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
- -------------------------------------------------------------------------
Not required.
-40-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
The information called for by Item 10 is incorporated by reference from the
information under the captions "Election of Directors" and "Management Stock
Ownership" in the Proxy Statement, except that the information called for by
Item 10 with respect to executive officers of the Registrant appears as Item 4A
under Part I of this Report.
Item 11. Executive Compensation
- --------------------------------
The information called for by Item 11 is incorporated by reference from the
information under the following captions in the Proxy Statement: "Compensation
of Directors", "Compensation and Option Committee Report on Executive
Compensation", "Compensation of Executive Officers", "Stock Options",
"Contingent Stock Rights and Restricted Stock Units", "Stock Performance Graphs"
and "Retirement Plans".
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
The information called for by Item 12 is incorporated by reference from the
information under the caption "Management Stock Ownership" in the Proxy
Statement.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
The information called for by Item 13 is incorporated by reference from the
information under the caption "Certain Relationships and Related Transactions"
in the Proxy Statement.
-41-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- --------------------------------------------------------------------------
(a) 1. Financial Statements - Ford Motor Company and Subsidiaries
- -------------------------------------------------------------------
Consolidated Statement of Income for the years ended December 31, 1997,
1996 and 1995.
Consolidated Balance Sheet at December 31, 1997 and 1996.
Consolidated Statement of Cash Flows for the years ended December 31,
1997, 1996 and 1995.
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1997, 1996 and 1995.
Notes to Financial Statements
Report of Independent Accountants
The Financial Statements, the Notes to Financial Statements and the Report
of Independent Accountants listed above are filed as part of this Report and are
set forth on pages FS-1 through FS-34 immediately following the signatures pages
of this Report.
(a) 2. Financial Statement Schedules
- --------------------------------------
Designation Description
- ----------- -----------
Supplemental
Schedule Condensed Financial Information of Subsidiary
The Financial Statement Schedule listed above is filed as part of this
Report and is set forth on page FSS-1 immediately following page FS-34. The
schedules not filed are omitted because the information required to be contained
therein is disclosed elsewhere in the Financial Statements or the amounts
involved are not sufficient to require submission.
-42-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
- -------------------------------------------------------------------------
(a) 3. Exhibits
- -----------------
<TABLE>
<CAPTION>
Designation Description Method of Filing
- ----------- ----------- ----------------
<S> <C> <C>
Exhibit 3-A Restated Certificate of Incorporation, Filed as Exhibit 4.1 to the Registrant's
of the Registrant dated June 6, 1994. Registration Statement No. 33-55171.*
Exhibit 3-B By-Laws of the Registrant as Filed with this Report.
amended through August 1, 1997.
Exhibit 4 Form of Deposit Agreement dated as of Filed as Exhibit 4-E to the Registrant's
October 29, 1992 among Ford Motor Registration Statement No. 33-53092.*
Company, Chemical Bank, as Depositary,
and the holders from time to time of
Depositary Shares, each representing
1/2,000 of a share of the Registrant's
Series B Cumulative Preferred Stock.
Exhibit 10-A Amended and Restated Profit Filed as Exhibit 10-A to the Registrant's
Maintenance Agreement dated as of Annual Report on Form 10-K for the
July 1, 1993 between the Registrant year ended December 31, 1993.*
and Ford Credit.
Exhibit 10-B Ford Motor Company 1985 Stock Filed as Exhibit 10-D to the Registrant's
Option Plan.** Annual Report on Form 10-K for the
year ended December 31, 1985.*
Exhibit 10-B-1 Amendment dated as of March 8, 1990 Filed as Exhibit 10-C-1 to the
to 1985 Stock Option Plan.** Registrant's Annual Report on Form
10-K for the year ended December 31,
1989.*
Exhibit 10-B-2 Amendment to 1985 Stock Option Plan, Filed as Exhibit 4.C to Amendment No.
effective as of January 8, 1998.** 1 to the Registrant's Registration
Statement No. 33-9722.*
Exhibit 10-C Ford Motor Company Supplemental Filed as Exhibit 10-H to the Registrant's
Compensation Plan as amended through Annual Report on Form 10-K for the
May 8, 1986.** year ended December 31, 1986.*
Exhibit 10-C-1 Amendment to Supplemental Filed as Exhibit 10-F-1 to the
Compensation Plan, dated May 12, 1988.** Registrant's Annual Report on Form
10-K for the year ended Decmeber 31, 1988.*
</TABLE>
-43-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 10-K
(Continued)
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
Designation Description Method of Filing
- ----------- ----------- ----------------
<S> <C> <C>
Exhibit 10-C-2 Amendment to Supplemental Filed as Exhibit 10-D-2 to the
Compensation Plan, dated Registrant's Annual Report on Form
July 8, 1992.** 10-K for the year ended December 31,
1992.*
Exhibit 10-C-2A Amendment to Supplemental Filed as Exhibit 10-C-2A to the
Compensation Plan, effective as of Registrant's Annual Report on Form
March 9, 1994.** 10-K for the year ended December 31,
1996.*
Exhibit 10-C-3 Amendment to Supplemental Filed as Exhibit 10.1 to the Registrant's
Compensation Plan, effective as of Quarterly Report on Form 10-Q for the
March 8, 1995.** quarter ended March 31, 1995.*
Exhibit 10-C-4 Amendment to Supplemental Filed as Exhibit 10.1 to the Registrant's
Compensation Plan, effective as of Quarterly Report on Form 10-Q for the
July 13, 1995.** quarter ended June 30, 1995.*
Exhibit 10-C-5 Amendment to Supplemental Filed as Exhibit 10-C-5 to the
Compensation Plan, effective as of Registrant's Annual Report on Form
January 10, 1996.** 10-K for the year ended December 31,
1995.*
Exhibit 10-C-6 Amendments to Supplemental Filed with this Report.
Compensation Plan, effective as of
October 1, 1997.**
Exhibit 10-C-7 Amendment to Supplemental Filed with this Report.
Compensation Plan, effective as of
December 22, 1997.**
Exhibit 10-C-8 Amendment to Supplemental Filed with this Report.
Compensation Plan, effective as of
May 14, 1998 (subject to
shareholder approval).**
Exhibit 10-D Ford Motor Company Executive Separation Filed as Exhibit 10-D to the Registrant's
Allowance Plan as amended through Annual Report on Form 10-K for the
December 9, 1993 for separations on year ended December 31, 1994.*
or after January 1, 1981.**
Exhibit 10-E Description of Company practices regarding Filed as Exhibit 10-I to the Registrant's
club memberships for executives.** Annual Report on Form 10-K for the
year ended December 31, 1981.*
Exhibit 10-F Description of Company practices regarding Filed as Exhibit 10-J to the Registrant's
travel expenses of spouses of certain Annual Report on Form 10-K for the
executives.** year ended December 31, 1980.*
Exhibit 10-G Ford Motor Company Deferred Compensation Filed as Exhibit 10-H-1 to the
Plan for Non-Employee Directors, as amended Registrant's Annual Report on Form
on July 11, 1991.** 10-K for the year ended December 31,
1991.*
</TABLE>
-44-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
Designation Description Method of Filing
- ----------- ----------- ----------------
<S> <C> <C>
Exhibit 10-G-1 Amendments to Deferred Compensation Plan Filed as Exhibit 10-G-1 to the
for Non-Employee Directors, effective as of Registrant's Annual Report on Form
January 1, 1996.** 10-K for the year ended December 31,
1995.*
Exhibit 10-G-2 Amendment to Deferred Compensation Plan Filed as Exhibit 10-G-2 to the
for Non-Employee Directors, effective as of Registrant's Annual Report on Form
November 14, 1996.** 10-K for the year ended December 31,
1996.*
Exhibit 10-H Ford Motor Company Benefit Equalization Filed as Exhibit 10-H to the Registrant's
Plan, as amended as of January 1, Annual Report on Form 10-K for the
1989.** year ended December 31, 1994.*
Exhibit 10-H-1 Description of Amendments to Benefit Filed as Exhibit 10-H-1 to the
Equalization Plan, adopted January 11, Registrant's Annual Report on Form
1996 and January 25, 1996.** 10-K for the year ended December 31,
1995.*
Exhibit 10-I Description of Financial Counseling Filed as Exhibit 10-N to the Registrant's
Services provided to certain executives.** Annual Report on Form 10-K for the
year ended December 31, 1983.*
Exhibit 10-J Ford Motor Company 1986 Long-Term Filed as Exhibit 10-Q to the Registrant's
Incentive Plan.** Annual Report on Form 10-K for the
year ended December 31, 1985.*
Exhibit 10-J-1 Amendment dated as of June 1, 1990 to Filed as Exhibit 10-N-1 to the
1986 Long-Term Incentive Plan. ** Registrant's Annual Report on Form 10-K
for the year ended December 31, 1990.*
Exhibit 10-K Supplemental Executive Retirement Plan, Filed as Exhibit 10-K to the
as restated and incorporating amendments Registrant's Annual Report on Form
through December 12, 1995.** 10-K for the year ended December 31,
1995.*
Exhibit 10-L Ford Motor Company Restricted Stock Filed as Exhibit 10-P to the Registrant's
Plan for Non-Employee Directors adopted Annual Report on Form 10-K for the
by the Board of Directors on November 10, year ended December 31, 1988.*
1988, and approved by the stockholders at
the 1989 Annual Meeting.**
Exhibit 10-L-1 Amendment to Restricted Stock Plan for Filed as Exhibit 10.1 to the Registrant's
Non-Employee Directors, effective as of Quarterly Report on Form 10-Q for the
August 1, 1996.** quarter ended September 30, 1996.*
Exhibit 10-M Ford Motor Company 1990 Long-Term Filed as Exhibit 10-R to the Registrant's
Incentive Plan, amended as of June 1, Annual Report on Form 10-K for the
1990.** year ended December 31, 1990.*
</TABLE>
-45-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
Designation Description Method of Filing
- ----------- ----------- ----------------
<S> <C> <C>
Exhibit 10-M-1 Amendment to 1990 Long-Term Incentive Filed as Exhibit 10-P-1 to the
Plan, effective as of October 1, 1990.** Registrant's Annual Report on Form
10-K for the year ended
December 31, 1991.*
Exhibit 10-M-2 Amendment to 1990 Long-Term Incentive Filed as Exhibit 10.2 to the Registrant's
Plan, effective as of March 8, 1995.** Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995.*
Exhibit 10-M-3 Amendment to 1990 Long-Term Filed with this Report.
Incentive Plan, effective as of
October 1, 1997.**
Exhibit 10-M-4 Amendment to 1990 Long-Term Filed with this Report
Incentive Plan, effective as of
January 1, 1998 (subject to
shareholder approval).**
Exhibit 10-N Description of Matching Gift Program for Filed as Exhibit 10-Q to the Registrant's
Non-Employee Directors.** Annual Report on Form 10-K for the
year ended December 31, 1991.*
Exhibit 10-O Non-Employee Directors Life Insurance Filed as Exhibit 10-O to the Registrant's
and Optional Retirement Plan Annual Report on Form 10-K for the
(as amended as of January 1, 1993).** year ended December 31, 1994.*
Exhibit 10-P Description of Non-Employee Directors Filed as Exhibit 10-S to the Registrant's
Accidental Death, Dismemberment and Annual Report on Form 10-K for the
Permanent Total Disablement Indemnity.** year ended December 31, 1992.*
Exhibit 10-Q Agreement dated December 10, 1992 Filed as Exhibit 10-T to the Registrant's
between William C. Ford and the Annual Report on Form 10-K for the
Registrant.** year ended December 31, 1992.*
Exhibit 10-R Support Agreement dated as of October 1, Filed as Exhibit 10-T to the Registrant's
1993 between the Registrant and Ford Annual Report on Form 10-K for the
Credit Europe. year ended December 31, 1993.*
Exhibit 10-R-1 Amendment No. 1 dated as of November Filed as Exhibit 10-R-1 to the
15, 1995 to Support Agreement between Registrant's Annual Report on Form
the Registrant and Ford Credit Europe. 10-K for the year ended December 31,
1995.*
Exhibit 10-S Select Retirement Plan Filed as Exhibit 10-S to the Registrant's
adopted on June 9, 1994.** Annual Report on Form 10-K for the
year ended December 31, 1996.*
Exhibit 10-T Ford Motor Company Deferred Filed as Exhibit 10.2 to the Registrant's
Compensation Plan, effective as of Quarterly Report on Form 10-Q for the
July 13, 1995.** quarter ended June 30, 1995.*
</TABLE>
-46-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
Designation Description Method of Filing
- ----------- ----------- ----------------
<S> <C> <C>
Exhibit 10-T-1 Amendments to Deferred Compensation Filed as Exhibit 10-T-1 to the
Plan, effective as of July 13, 1995 and Registrant's Annual Report on Form
October 1, 1995.** 10-K for the year ended December 31,
1995.*
Exhibit 10-T-2 Amendments to Deferred Compensation Filed as Exhibit 10.2 to the Registrant's
Plan, effective as of October 1, 1996.** Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996.*
Exhibit 10-T-3 Amendment to Deferred Compensation Filed as Exhibit 4.4 to the
Plan, effective as of October 1, 1997.** Registrant's Registration
Statement No. 333-47733.*
Exhibit 10-T-4 Amendments to Deferred Compensation Filed as Exhibit 4.5 to the
Plan, effective as of January 1, 1998 Registrant's Registration
(subject to shareholder approval).** Statement No. 333-47733.*
Exhibit 10-U Description of Amendments to Supplemental Filed as Exhibit 10-U to the Registrant's
Executive Retirement Plan and Executive Annual Report on Form 10-K for the
Separation Allowance Plan, adopted year ended December 31, 1995.*
January 25, 1996.**
Exhibit 10-U-2 Description of Amendment to Supplemental Filed as Exhibit 10-U-2 to the
Executive Retirement Plan and Executive Registrant's Annual Report on
Separation Allowance Plan, effective as of Form 10-K for the year
ended July 1, 1996.** December 31, 1996.*
Exhibit 10-V Ford Motor Company Annual Incentive Filed with this Report.
Compensation Plan, effective as of
January 1, 1998 (subject to shareholder
approval).**
Exhibit 10-W Ford Motor Company 1998 Long-Term Filed with this Report.
Incentive Plan, effective as of
January 1, 1998 (subject to shareholder
approval).**
Exhibit 12 Computation of Ratio of Earnings to Filed with this Report.
Combined Fixed Charges and Preferred
Stock Dividends.
Exhibit 21 List of Subsidiaries of the Registrant Filed with this Report.
as of March 15, 1998.
Exhibit 23 Consent of Independent Certified Public Filed with this Report.
Accountants.
Exhibit 24 Powers of Attorney. Filed with this Report.
</TABLE>
- --------------------------
* Incorporated by reference as an exhibit hereto (file number reference 1-3950,
unless otherwise indicated)
** Management contract or compensatory plan or arrangement
-47-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
- -------------------------------------------------------------------------
Instruments defining the rights of holders of certain issues of long-term
debt of the Registrant and of certain consolidated subsidiaries and of any
unconsolidated subsidiary, for which financial statements are required to be
filed with this Report, have not been filed as exhibits to this Report because
the authorized principal amount of any one of such issues does not exceed 10% of
the total assets of the Registrant and its subsidiaries on a consolidated basis.
The Registrant agrees to furnish a copy of each of such instruments to the
Commission upon request.
(b) Reports on Form 8-K
- -------------------------
During the quarter ended December 31, 1997, the Registrant filed the
following Current Reports on Form 8-K:
1. Current Report on Form 8-K dated October 8, 1997 concerning the
Registrant's plan to spin off The Associates.
2. Current Report on Form 8-K dated October 9, 1997 concerning certain lowered
debt ratings of the Registrant and certain of its affiliates.
3. Current Report on Form 8-K dated October 15, 1997 regarding the
consolidated results of operations and financial condition of the
Registrant and its subsidiaries for the three and nine-month periods ended
or at September 30, 1997.
-48-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 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.
FORD MOTOR COMPANY
By: John M. Devine*
----------------------------
(John M. Devine)
Executive Vice President and
Chief Financial Officer
Date: March 17, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Alex Trotman* Director and March 17, 1998
- ------------------------------ Chairman of the Board
(Alex Trotman) of Directors, President
and Chief Executive Officer
(principal executive officer)
Michael D. Dingman* Director and March 17, 1998
- ------------------------------ Chairman of the
(Michael D. Dingman) Compensation and
Option Committee
Edsel B. Ford II* Director and Vice March 17, 1998
- ------------------------------ President, Ford; and
(Edsel B. Ford II) President and Chief
Operating Officer, Ford
Motor Credit Company
William Clay Ford* Director March 17, 1998
- ------------------------------
(William Clay Ford)
William Clay Ford, Jr.* Director and March 17, 1998
- ------------------------------ Chairman of the Finance
(William Clay Ford, Jr.) Committee and the
Environmental and Public
Policy Committee
</TABLE>
-49-
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Irvine O. Hockaday, Jr.* Director and March 17, 1998
- ----------------------------- Chairman of the
(Irvine O. Hockaday, Jr.) Audit Committee
Marie-Josee Kravis* Director March 17, 1998
- -----------------------------
(Marie-Josee Kravis)
Ellen R. Marram* Director March 17, 1998
- -----------------------------
(Ellen R. Marram)
Homer A Neal* Director March 17, 1998
- -----------------------------
(Homer A. Neal)
Carl E. Reichardt* Director March 17, 1998
- -----------------------------
(Carl E. Reichardt)
John L. Thornton* Director March 17, 1998
- -----------------------------
(John L. Thornton)
John M. Devine* Executive Vice President and March 17, 1998
- ----------------------------- Chief Financial Officer
(John M. Devine) (principal financial officer)
William J. Cosgrove* Corporate Controller March 17, 1998
- ----------------------------- (principal accounting officer)
(William J. Cosgrove)
*By: /s/ John M. Rintamaki
-------------------------
(John M. Rintamaki)
Attorney-in-Fact
</TABLE>
<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) (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 Years 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 (Notes 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
======== ========
- - - - -
*Less than $500,000
</TABLE>
The accompanying notes are part of the financial statements.
FS-4
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
For the Years Ended December 31, 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 $ 3,578 $ 3,689 $ 5,750 $ 2,690 $ 4,481 $ 1,739
January 1
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) (575) (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 investments - 5,197 - 2,867 - 4,360
Net investing activity with
Financial Services 258 - 416 - (19) -
Other (285) (569) (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 increase/(decrease) 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 of 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 --
- - - - - -
</TABLE>
*The balances at the beginning and end of each period were less than $500,000.
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, and 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>
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%
</TABLE>
- - - - -
* 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
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
- ----------
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
----------------------------
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 was in effect until February 26,
1998.
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 company's net income and income 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 income 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
- - - - -
* Deferred losses are offset by unrecognized gains on the underlying
transactions or commitments
</TABLE>
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>
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.
COOPERS & LYBRAND L.L.P.
400 Renaissance Center
Detroit, Michigan 48243
313-446-7100
January 26, 1998
FS-34
<PAGE>
<TABLE>
<CAPTION>
Supplemental Schedule
Ford Motor Company
CONDENSED FINANCIAL INFORMATION OF SUBSIDIARY
---------------------------------------------
(in millions)
FORD CAPITAL B.V.
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Current assets $2,046 $1,660
Noncurrent assets 2,390 3,491
------ ------
Total assets $4,436 $5,151
====== ======
Current liabilities $1,551 $1,116
Noncurrent liabilities 2,433 3,544
Minority interests in net
assets of subsidiaries 14 18
Stockholder's equity 438 473
------ ------
Total liabilities and
stockholder's equity $4,436 $5,151
====== ======
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C>
Sales and other revenue $2,527 $2,760 $2,623
Operating income 47 73 224
Income before income taxes 4 18 166
Net (loss)/income (21) (4) 116
</TABLE>
Ford Capital B.V., a wholly-owned subsidiary of Ford Motor Company, was
established primarily for the purpose of raising funds through the issuance of
commercial paper and debt securities. Ford Capital B.V. also holds shares of the
capital stock of Ford Nederland B.V., Ford Motor Company (Belgium) N.V., Ford
Motor Company A/S (Denmark), Ford Poland S.A., and Ford Distribution Sp. z.o.o.,
Ltd. Substantially all of the assets of Ford Capital B.V., other than its
ownership interests in subsidiaries, represent receivables from Ford Motor
Company or its consolidated subsidiaries.
FSS-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Designation Description Method of Filing
- ----------- ----------- ----------------
<S> <C> <C>
Exhibit 3-A Restated Certificate of Incorporation, Filed as Exhibit 4.1 to the Registrant's
of the Registrant dated June 6, 1994. Registration Statement No. 33-55171.*
Exhibit 3-B By-Laws of the Registrant as Filed with this Report.
amended through August 1, 1997.
Exhibit 4 Form of Deposit Agreement dated as of Filed as Exhibit 4-E to the Registrant's
October 29, 1992 among Ford Motor Registration Statement No. 33-53092.*
Company, Chemical Bank, as Depositary,
and the holders from time to time of
Depositary Shares, each representing
1/2,000 of a share of the Registrant's
Series B Cumulative Preferred Stock.
Exhibit 10-A Amended and Restated Profit Filed as Exhibit 10-A to the Registrant's
Maintenance Agreement dated as of Annual Report on Form 10-K for the
July 1, 1993 between the Registrant year ended December 31, 1993.*
and Ford Credit.
Exhibit 10-B Ford Motor Company 1985 Stock Filed as Exhibit 10-D to the Registrant's
Option Plan.** Annual Report on Form 10-K for the
year ended December 31, 1985.*
Exhibit 10-B-1 Amendment dated as of March 8, 1990 Filed as Exhibit 10-C-1 to the
to 1985 Stock Option Plan.** Registrant's Annual Report on Form
10-K for the year ended December 31,
1989.*
Exhibit 10-B-2 Amendment to 1985 Stock Option Plan, Filed as Exhibit 4.C to Amendment No.
effective as of January 8, 1998.** 1 to the Registrant's Registration
Statement No. 33-9722.*
Exhibit 10-C Ford Motor Company Supplemental Filed as Exhibit 10-H to the Registrant's
Compensation Plan as amended through Annual Report on Form 10-K for the
May 8, 1986.** year ended December 31, 1986.*
Exhibit 10-C-1 Amendment to Supplemental Filed as Exhibit 10-F-1 to the
Compensation Plan, dated May 12, 1988.** Registrant's Annual Report on Form
10-K for the year ended Decmeber 31, 1988.*
Exhibit 10-C-2 Amendment to Supplemental Filed as Exhibit 10-D-2 to the
Compensation Plan, dated Registrant's Annual Report on Form
July 8, 1992.** 10-K for the year ended December 31,
1992.*
</TABLE>
<PAGE>
EXHIBIT INDEX (Continued)
<TABLE>
<CAPTION>
Designation Description Method of Filing
- ----------- ----------- ----------------
<S> <C> <C>
Exhibit 10-C-2A Amendment to Supplemental Filed as Exhibit 10-C-2A to the
Compensation Plan, effective as of Registrant's Annual Report on Form
March 9, 1994.** 10-K for the year ended December 31,
1996.*
Exhibit 10-C-3 Amendment to Supplemental Filed as Exhibit 10.1 to the Registrant's
Compensation Plan, effective as of Quarterly Report on Form 10-Q for the
March 8, 1995.** quarter ended March 31, 1995.*
Exhibit 10-C-4 Amendment to Supplemental Filed as Exhibit 10.1 to the Registrant's
Compensation Plan, effective as of Quarterly Report on Form 10-Q for the
July 13, 1995.** quarter ended June 30, 1995.*
Exhibit 10-C-5 Amendment to Supplemental Filed as Exhibit 10-C-5 to the
Compensation Plan, effective as of Registrant's Annual Report on Form
January 10, 1996.** 10-K for the year ended December 31,
1995.*
Exhibit 10-C-6 Amendments to Supplemental Filed with this Report.
Compensation Plan, effective as of
October 1, 1997.**
Exhibit 10-C-7 Amendment to Supplemental Filed with this Report.
Compensation Plan, effective as of
December 22, 1997.**
Exhibit 10-C-8 Amendment to Supplemental Filed with this Report.
Compensation Plan, effective as of
May 14, 1998 (subject to
shareholder approval).**
Exhibit 10-D Ford Motor Company Executive Separation Filed as Exhibit 10-D to the Registrant's
Allowance Plan as amended through Annual Report on Form 10-K for the
December 9, 1993 for separations on year ended December 31, 1994.*
or after January 1, 1981.**
Exhibit 10-E Description of Company practices regarding Filed as Exhibit 10-I to the Registrant's
club memberships for executives.** Annual Report on Form 10-K for the
year ended December 31, 1981.*
Exhibit 10-F Description of Company practices regarding Filed as Exhibit 10-J to the Registrant's
travel expenses of spouses of certain Annual Report on Form 10-K for the
executives.** year ended December 31, 1980.*
Exhibit 10-G Ford Motor Company Deferred Compensation Filed as Exhibit 10-H-1 to the
Plan for Non-Employee Directors, as amended Registrant's Annual Report on Form
on July 11, 1991.** 10-K for the year ended December 31,
1991.*
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX (Continued)
Designation Description Method of Filing
- ----------- ----------- ----------------
<S> <C> <C>
Exhibit 10-G-1 Amendments to Deferred Compensation Plan Filed as Exhibit 10-G-1 to the
for Non-Employee Directors, effective as of Registrant's Annual Report on Form
January 1, 1996.** 10-K for the year ended December 31,
1995.*
Exhibit 10-G-2 Amendment to Deferred Compensation Plan Filed as Exhibit 10-G-2 to the
for Non-Employee Directors, effective as of Registrant's Annual Report on Form
November 14, 1996.** 10-K for the year ended December 31,
1996.*
Exhibit 10-H Ford Motor Company Benefit Equalization Filed as Exhibit 10-H to the Registrant's
Plan, as amended as of January 1, Annual Report on Form 10-K for the
1989.** year ended December 31, 1994.*
Exhibit 10-H-1 Description of Amendments to Benefit Filed as Exhibit 10-H-1 to the
Equalization Plan, adopted January 11, Registrant's Annual Report on Form
1996 and January 25, 1996.** 10-K for the year ended December 31,
1995.*
Exhibit 10-I Description of Financial Counseling Filed as Exhibit 10-N to the Registrant's
Services provided to certain executives.** Annual Report on Form 10-K for the
year ended December 31, 1983.*
Exhibit 10-J Ford Motor Company 1986 Long-Term Filed as Exhibit 10-Q to the Registrant's
Incentive Plan.** Annual Report on Form 10-K for the
year ended December 31, 1985.*
Exhibit 10-J-1 Amendment dated as of June 1, 1990 to Filed as Exhibit 10-N-1 to the
1986 Long-Term Incentive Plan. ** Registrant's Annual Report on Form 10-K
for the year ended December 31, 1990.*
Exhibit 10-K Supplemental Executive Retirement Plan, Filed as Exhibit 10-K to the
as restated and incorporating amendments Registrant's Annual Report on Form
through December 12, 1995.** 10-K for the year ended December 31,
1995.*
Exhibit 10-L Ford Motor Company Restricted Stock Filed as Exhibit 10-P to the Registrant's
Plan for Non-Employee Directors adopted Annual Report on Form 10-K for the
by the Board of Directors on November 10, year ended December 31, 1988.*
1988, and approved by the stockholders at
the 1989 Annual Meeting.**
Exhibit 10-L-1 Amendment to Restricted Stock Plan for Filed as Exhibit 10.1 to the Registrant's
Non-Employee Directors, effective as of Quarterly Report on Form 10-Q for the
August 1, 1996.** quarter ended September 30, 1996.*
Exhibit 10-M Ford Motor Company 1990 Long-Term Filed as Exhibit 10-R to the Registrant's
Incentive Plan, amended as of June 1, Annual Report on Form 10-K for the
1990.** year ended December 31, 1990.*
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX (Continued)
Designation Description Method of Filing
- ----------- ----------- ----------------
<S> <C> <C>
Exhibit 10-M-1 Amendment to 1990 Long-Term Incentive Filed as Exhibit 10-P-1 to the
Plan, effective as of October 1, 1990.** Registrant's Annual Report on Form
10-K for the year ended
December 31, 1991.*
Exhibit 10-M-2 Amendment to 1990 Long-Term Incentive Filed as Exhibit 10.2 to the Registrant's
Plan, effective as of March 8, 1995.** Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995.*
Exhibit 10-M-3 Amendment to 1990 Long-Term Filed with this Report.
Incentive Plan, effective as of
October 1, 1997.**
Exhibit 10-M-4 Amendment to 1990 Long-Term Filed with this Report
Incentive Plan, effective as of
January 1, 1998 (subject to
shareholder approval).**
Exhibit 10-N Description of Matching Gift Program for Filed as Exhibit 10-Q to the Registrant's
Non-Employee Directors.** Annual Report on Form 10-K for the
year ended December 31, 1991.*
Exhibit 10-O Non-Employee Directors Life Insurance Filed as Exhibit 10-O to the Registrant's
and Optional Retirement Plan Annual Report on Form 10-K for the
(as amended as of January 1, 1993).** year ended December 31, 1994.*
Exhibit 10-P Description of Non-Employee Directors Filed as Exhibit 10-S to the Registrant's
Accidental Death, Dismemberment and Annual Report on Form 10-K for the
Permanent Total Disablement Indemnity.** year ended December 31, 1992.*
Exhibit 10-Q Agreement dated December 10, 1992 Filed as Exhibit 10-T to the Registrant's
between William C. Ford and the Annual Report on Form 10-K for the
Registrant.** year ended December 31, 1992.*
Exhibit 10-R Support Agreement dated as of October 1, Filed as Exhibit 10-T to the Registrant's
1993 between the Registrant and Ford Annual Report on Form 10-K for the
Credit Europe. year ended December 31, 1993.*
Exhibit 10-R-1 Amendment No. 1 dated as of November Filed as Exhibit 10-R-1 to the
15, 1995 to Support Agreement between Registrant's Annual Report on Form
the Registrant and Ford Credit Europe. 10-K for the year ended December 31,
1995.*
Exhibit 10-S Select Retirement Plan Filed as Exhibit 10-S to the Registrant's
adopted on June 9, 1994.** Annual Report on Form 10-K for the
year ended December 31, 1996.*
Exhibit 10-T Ford Motor Company Deferred Filed as Exhibit 10.2 to the Registrant's
Compensation Plan, effective as of Quarterly Report on Form 10-Q for the
July 13, 1995.** quarter ended June 30, 1995.*
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX (Continued)
Designation Description Method of Filing
- ----------- ----------- ----------------
<S> <C> <C>
Exhibit 10-T-1 Amendments to Deferred Compensation Filed as Exhibit 10-T-1 to the
Plan, effective as of July 13, 1995 and Registrant's Annual Report on Form
October 1, 1995.** 10-K for the year ended December 31,
1995.*
Exhibit 10-T-2 Amendments to Deferred Compensation Filed as Exhibit 10.2 to the Registrant's
Plan, effective as of October 1, 1996.** Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996.*
Exhibit 10-T-3 Amendment to Deferred Compensation Filed as Exhibit 4.4 to the
Plan, effective as of October 1, 1997.** Registrant's Registration
Statement No. 333-47733.*
Exhibit 10-T-4 Amendments to Deferred Compensation Filed as Exhibit 4.5 to the
Plan, effective as of January 1, 1998 Registrant's Registration
(subject to shareholder approval).** Statement No. 333-47733.*
Exhibit 10-U Description of Amendments to Supplemental Filed as Exhibit 10-U to the Registrant's
Executive Retirement Plan and Executive Annual Report on Form 10-K for the
Separation Allowance Plan, adopted year ended December 31, 1995.*
January 25, 1996.**
Exhibit 10-U-2 Description of Amendment to Supplemental Filed as Exhibit 10-U-2 to the
Executive Retirement Plan and Executive Registrant's Annual Report on
Separation Allowance Plan, effective as of Form 10-K for the year
ended July 1, 1996.** December 31, 1996.*
Exhibit 10-V Ford Motor Company Annual Incentive Filed with this Report.
Compensation Plan, effective as of
January 1, 1998 (subject to shareholder
approval).**
Exhibit 10-W Ford Motor Company 1998 Long-Term Filed with this Report.
Incentive Plan, effective as of
January 1, 1998 (subject to shareholder
approval).**
Exhibit 12 Computation of Ratio of Earnings to Filed with this Report.
Combined Fixed Charges and Preferred
Stock Dividends.
Exhibit 21 List of Subsidiaries of the Registrant Filed with this Report.
as of March 15, 1998.
Exhibit 23 Consent of Independent Certified Public Filed with this Report.
Accountants.
Exhibit 24 Powers of Attorney. Filed with this Report.
- --------------------------
* Incorporated by reference as an exhibit hereto (file number reference 1-3950,
unless otherwise indicated)
** Management contract or compensatory plan or arrangement
</TABLE>
-5-
Ford Motor Company
By-Laws
As Amended Through August 1, 1997
<PAGE>
BY-LAWS
OF
FORD MOTOR COMPANY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I - Offices..........................................................................1
ARTICLE II - Stockholders.....................................................................1
Section 1. Annual Meeting..................................................................1
Section 2. Special Meetings................................................................1
Section 3. Notice of Meetings..............................................................2
Section 4. Quorum..........................................................................2
Section 5. Organization....................................................................2
Section 6. Proxies and Voting..............................................................2
Section 7. Stock Lists.....................................................................2
Section 8. Ratification....................................................................3
Section 9. Judges..........................................................................3
ARTICLE III - Board of Directors...............................................................3
Section 1. Number, Term of Office and Eligibility..........................................3
Section 2. Meetings........................................................................3
Section 3. Notice of Meetings..............................................................4
Section 4. Quorum and Organization of Meetings.............................................4
Section 5. Powers..........................................................................4
Section 6. Reliance upon Books, Reports and Records........................................6
Section 7. Compensation of Directors.......................................................6
ARTICLE IV - Committees.......................................................................6
Section 1. Committees of the Board of Directors............................................6
Section 2. Audit Committee.................................................................7
Section 3. Compensation and Option Committee...............................................7
Section 4. Environmental and Public Policy Committee.......................................7
Section 5. Finance Committee...............................................................8
Section 6. Organization Review and Nominating Committee....................................8
Section 7. Other Committees................................................................9
Section 8. Rules and Procedures............................................................9
Section 9. Application of Article..........................................................9
ARTICLE V - Officers.........................................................................9
Section 1. Officers........................................................................9
Section 2. Office of the Chief Executive..................................................10
Section 3. Chairman of the Board of Directors.............................................10
Section 4. Vice Chairmen of the Board of Directors........................................10
Section 5. President......................................................................10
Section 6. Chief Operating Officer........................................................10
Section 7. Vice Chairmen of the Company, Executive Vice Presidents,
Group Vice Presidents and Vice Presidents................................11
Section 8. Treasurer and Assistant Treasurer..............................................11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Section 9. Secretary and Assistant Secretary..............................................11
Section 10. General Counsel................................................................12
Section 11. Controller.....................................................................12
Section 12. Salaries.......................................................................12
ARTICLE VI - Resignations, Removals and Vacancies...........................................12
Section 1. Resignations..................................................................12
Section 2. Removals......................................................................13
Section 3. Vacancies.....................................................................13
ARTICLE VII - Capital Stock - Dividends - Seal...............................................13
Section 1. Certificates of Shares........................................................13
Section 2. Addresses of Stockholders.....................................................13
Section 3. Lost, Destroyed or Stolen Certificate.........................................14
Section 4. Fixing a Record Date..........................................................14
Section 5. Regulations...................................................................14
Section 6. Corporate Seal................................................................14
ARTICLE VIII - Execution of Contracts and Other Documents.....................................15
Section 1. Contracts, etc................................................................15
Section 2. Checks, Drafts, etc...........................................................15
ARTICLE IX - Fiscal Year....................................................................15
ARTICLE X - Miscellaneous..................................................................15
Section 1. Original Stock Ledger.........................................................15
Section 2. Notices and Waivers Thereof...................................................16
Section 3. Voting upon Stocks............................................................16
ARTICLE XI - Amendments.....................................................................17
</TABLE>
<PAGE>
CERTIFICATION
The undersigned officer of Ford Motor Company, a Delaware
corporation, does hereby certify that the following is a true and
correct copy of the By-Laws of the Company in effect on the date hereof.
Witness my hand and the seal of the Company this day of 19
---------------------
Secretary
<PAGE>
BY-LAWS
OF
FORD MOTOR COMPANY
ARTICLE I
OFFICES
The registered office of the Company shall be in the City of Wilmington,
County of New Castle, State of Delaware. The Company may also have an office in
the City of Dearborn, State of Michigan, and at such other places as the Board
of Directors may from time to time determine or as the business of the Company
may require. The books and records of the Company may be kept (except as
otherwise provided by law) at the office of the Company in the City of Dearborn,
State of Michigan, outside of the State of Delaware, or at such other places as
from time to time may be determined by the Board of Directors.
ARTICLE II
STOCKHOLDERS
Section 1. Annual Meeting.
The annual meeting of the stockholders for the purpose of electing directors
and of transacting such other business as may come before it shall be held in
the City of Detroit, State of Michigan, unless otherwise determined by the Board
of Directors, on the second Thursday of May in each and every year, if not a
legal holiday, and if a legal holiday then on the next day not a legal holiday.
The Board of Directors shall, by resolution duly adopted, fix the place within
the City of Detroit, Michigan, or elsewhere if so determined, and the time for
the holding of each such meeting. At least twenty (20) days' notice shall be
given to each stockholder entitled to vote at such meeting of the place and time
so fixed.
Section 2. Special Meetings.
Special meetings of the stockholders shall be held at the office of the
Company in the City of Dearborn, State of Michigan, unless otherwise determined
by resolution of the stockholders or of the Board of Directors, whenever called
in the manner required by law for purposes as to which there are special
statutory provisions, and for other purposes whenever called by the Chairman of
the Board of Directors, a Vice Chairman of the Board of Directors or the
President, or by resolution of the Board of Directors, and whenever the holders
of thirty percent (30%) or more of the total number of outstanding shares of any
class of stock the holders of which are entitled to vote on every matter that is
to be voted on without regard to class at such meeting shall file with the
Secretary a written application for such meeting stating the time and purpose
thereof.
-1-
<PAGE>
Section 3. Notice of Meetings.
Except as otherwise provided by law, at least twenty (20) days' notice of
stockholders' meetings stating the time and place and the objects thereof shall
be given by the Chairman of the Board of Directors, a Vice Chairman of the Board
of Directors, the President or the Secretary to each stockholder of record
having voting power in respect of the business to be transacted thereat. No
business other than that stated in the notice shall be transacted at any
meeting.
Section 4. Quorum.
At any meeting of the stockholders the number of shares the holders of which
shall be present or represented by proxy in order to constitute a quorum for,
and the votes that shall be necessary for, the transaction of any business shall
be as expressly provided in Article FOURTH of the Certificate of Incorporation,
as amended. At any meeting of stockholders at which a quorum is not present, the
holders of shares entitled to cast a majority of all of the votes (computed, in
the case of each share of Class B Stock, as provided in subsection 1.3 of said
Article FOURTH) which could be cast at such meeting by the holders of
outstanding shares of stock of the Company who are present in person or by proxy
and who are entitled to vote on every matter that is to be voted on without
regard to class at such meeting may adjourn the meeting from time to time.
Section 5. Organization.
The Chairman of the Board of Directors shall act as chairman of meetings of
the stockholders. The Board of Directors may designate any other officer or
director of the Company to act as chairman of any meeting in the absence of the
Chairman of the Board of Directors, and the Board of Directors may further
provide for determining who shall act as chairman of any stockholders meeting in
the absence of the Chairman of the Board of Directors and such designee.
The Secretary of the Company shall act as secretary of all meetings of the
stockholders, but in the absence of the Secretary the presiding officer may
appoint any other person to act as secretary of any meeting.
Section 6. Proxies and Voting.
Every stockholder entitled to vote at any meeting may vote in person, or by
proxy appointed by an instrument in writing, subscribed by such stockholder or
by his or her duly authorized attorney, and filed with the Secretary before
being voted on, but no proxy shall be voted after three years from its date
unless such proxy provides expressly for a longer period. Shares of the
Company's stock belonging to the Company shall not be voted upon directly or
indirectly.
Section 7. Stock Lists.
A complete list of stockholders entitled to vote at any meeting of
stockholders shall be prepared, in alphabetical order by class, by the Secretary
and shall be open to the examination of any stockholder, at the place where the
meeting is to be held, for at least ten days before the meeting and during the
whole time of the meeting.
-2-
<PAGE>
Section 8. Ratification.
Any transaction questioned in any stockholders' derivative suit, or any other
suit to enforce alleged rights of the Company or any of its stockholders, on the
ground of lack of authority, defective or irregular execution, adverse interest
of any director, officer or stockholder, nondisclosure, miscomputation or the
application of improper principles or practices of accounting may be approved,
ratified and confirmed before or after judgment by the Board of Directors or by
the holders of Common Stock and the holders of Class B Stock voting as provided
in subsection 1.6 of Article FOURTH of the Certificate of Incorporation, as
amended, and, if so approved, ratified or confirmed, shall have the same force
and effect as if the questioned transaction had been originally duly authorized,
and said approval, ratification or confirmation shall be binding upon the
Company and all of its stockholders and shall constitute a bar to any claim or
execution of any judgment in respect of such questioned transaction.
Section 9. Judges.
All votes by ballot at any meeting of stockholders shall be conducted by two
judges appointed for the purpose either by the directors or by the meeting. The
judges shall decide upon the qualifications of voters, count the votes and
declare the result.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Number, Term of Office and Eligibility.
Except as provided by the laws of the State of Delaware or by the Certificate
of Incorporation, as amended, the business and the property of the Company shall
be managed by or under the direction of a Board of not less than ten and not
more than twenty directors, the exact number of which shall be fixed from time
to time by resolution of the Board. Each director shall be elected annually by
ballot by the holders of Common Stock and the holders of Class B Stock voting as
provided in subsection 1.6 of Article FOURTH of the Certificate of
Incorporation, as amended, at the annual meeting of stockholders, to serve until
his or her successor shall have been elected and shall have qualified, except as
provided in this Section. No person may be elected or re-elected a director of
the Company if at the time of his or her election or re-election he or she shall
have attained the age of seventy years, and the term of any director who shall
have attained such age while serving as a director shall terminate as of the
time of the first annual meeting of stockholders following his or her seventieth
birthday; provided, however, that the Board by resolution may waive such age
limitation in any year and from year to year with respect to any director or
directors.
Section 2. Meetings.
The directors may hold their meetings outside of the State of Delaware, at
the office of the Company in the City of Dearborn, State of Michigan, or at such
other place as from time to time they may determine.
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The annual meeting of the Board of Directors, for the election of officers
and the transaction of other business, shall be held at the World Headquarters
of the Company in Dearborn, Michigan, on the same day as, and as soon as
practicable following, the annual meeting of stockholders, or at such other time
or place as shall be determined by the Board at its regular meeting next
preceding said annual meeting of stockholders. No notice of said annual meeting
of the Board shall be required to be given to the directors.
Regular meetings of the Board of Directors may be held at such time and place
as shall from time to time be determined by the Board.
Special meetings of the Board of Directors shall be held whenever called by
direction of the Chairman of the Board of Directors, a Vice Chairman of the
Board of Directors or the President or by one-third of the directors then in
office.
Section 3. Notice of Meetings.
The Secretary or an Assistant Secretary shall give notice of the time and
place of holding of meetings of the Board of Directors (excepting the annual
meeting of directors) by mailing such notice not later than during the second
day preceding the day on which such meeting is to be held, or by sending a
cablegram, facsimile transmission, mailgram, radiogram, telegram or other form
of recorded communication containing such notice or delivering such notice
personally or by telephone not later than during the first day preceding the day
on which such meeting is to be held to each director. Unless otherwise stated in
the notice thereof any and all business may be transacted at any meeting.
Section 4. Quorum and Organization of Meetings.
A third of the total number of members of the Board of Directors as
constituted from time to time, but in no event less than three, shall constitute
a quorum for the transaction of business; but if at any meeting of the Board of
Directors there shall be less than a quorum present, a majority of those present
may adjourn the meeting from time to time, and the meeting may be held as
adjourned without further notice or waiver. Except as otherwise provided by law
or by the Certificate of Incorporation, as amended, or by these By-Laws, a
majority of the directors present at any duly constituted meeting may decide any
question brought before such meeting. Meetings shall be presided over by the
Chairman of the Board of Directors, or in his or her absence, by a Vice Chairman
of the Board of Directors or the President, as designated by the Board of
Directors, or in the absence of all of the aforesaid officers by such other
person as the Board of Directors may designate or the members present may
select.
Section 5. Powers.
In addition to the powers and authorities by these By-Laws expressly
conferred upon them, the Board of Directors shall have and may exercise all such
powers of the Company and do all such lawful acts and things that are not by
statute or by the Certificate of Incorporation, as amended, or by these By-Laws
directed or required to be exercised or done by the stockholders. Without
prejudice to or limitation of such general powers and any other powers conferred
by statute, or by the Certificate of Incorporation, as amended, or by these
By-Laws, the Board of Directors shall have the following powers:
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(1) To determine, subject to the requirements of law and of Section 5
of Article FOURTH of the Certificate of Incorporation, as amended, what,
if any, dividends shall be declared and paid to the stockholders out of
net profits, current or accumulated, or out of surplus or other assets
of the Company available for dividends.
(2) To fix, and from time to time to vary, the amount of working
capital of the Company, and to set aside from time to time out of net
profits, current or accumulated, or surplus of the Company such amount
or amounts as they in their discretion may deem necessary and proper as,
or as a safeguard to the maintenance of, working capital, as a reserve
for contingencies, as a reserve for repairs, maintenance, or
rehabilitation, or as a reserve for revaluation of profits of the
Company or for such other proper purpose as may in the opinion of the
directors be in the best interests of the Company; and in their sole
discretion to abolish or modify any such provision for working capital
or any such reserve, and to credit the amount thereof to net profits,
current or accumulated, or to the surplus of the Company.
(3) To purchase, or otherwise acquire for the Company, any business,
property, rights or privileges which the Company may at the time be
authorized to acquire, at such price or consideration and generally on
such terms and conditions as they think fit; and at their discretion to
pay therefor either wholly or partly in money, stock, bonds, debentures
or other securities of the Company.
(4) To create, make and issue mortgages, bonds, deeds of trust, trust
agreements or negotiable or transferable instruments or securities,
secured by mortgage or otherwise, and to do every other act and thing
necessary to effect the same.
(5) To appoint any person or corporation to accept and hold in trust
for the Company any property belonging to the Company, or in which it is
interested, or for any other purpose, and to execute such deeds and do
all things requisite in relation to any such trust.
(6) To delegate any of the powers of the Board in the course of the
business of the Company to any officer, employee or agent, and to
appoint any person the agent of the Company, with such powers (including
the power to subdelegate) and upon such terms as the Board may think
fit.
(7) To remove any officer of the Company with or without cause, and
from time to time to devolve the powers and duties of any officer upon
any other person for the time being.
(8) To confer upon any officer of the Company the power to appoint,
remove and suspend subordinate officers, agents and employees.
(9) To determine who shall be authorized on the Company's behalf,
either generally or specifically, to make and sign bills, notes,
acceptances, endorsements, checks, releases, receipts, contracts,
conveyances, and all other written instruments executed on behalf of the
Company.
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(10) To make and change regulations, not inconsistent with these
By-Laws, for the management of the Company's business and affairs.
(11) To adopt and, unless otherwise provided therein, to amend and
repeal, from time to time, a bonus or supplemental compensation plan for
employees (including employees who are officers or directors) of the
Company or any subsidiary. Power to construe, interpret, administer,
modify or suspend such plan shall be vested in the Board of Directors or
a committee thereof.
(12) To adopt a retirement plan, or plans, for the purpose of making
retirement payments to employees (including employees who are officers
or directors) of the Company or of any subsidiary thereof; and to adopt
a group insurance plan, or plans, for the purpose of enabling employees
(including employees who are officers or directors) of the Company or of
any subsidiary thereof to acquire insurance protection; any such
retirement plan or insurance plan, unless otherwise provided therein,
shall be subject to amendment or revocation by the Board of Directors.
Section 6. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of
Directors and each officer, in the performance of his or her duties, shall be
fully protected in relying in good faith upon the books of account or reports
made to the Company by any of its officials, or by an independent certified
public accountant, or by an appraiser selected with reasonable care by the Board
of Directors or by any such committee, or in relying in good faith upon other
records of the Company.
Section 7. Compensation of Directors.
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, services as members of committees of the
directors; provided, however, that nothing herein contained shall be construed
to preclude any director from serving the Company in any other capacity and
receiving compensation therefor.
ARTICLE IV
COMMITTEES
Section 1. Committees of the Board of Directors.
There are hereby established as committees of the Board of Directors an Audit
Committee, a Compensation and Option Committee, an Environmental and Public
Policy Committee, a Finance Committee, and an Organization Review and Nominating
Committee, each of which shall have the powers and functions set forth in
Sections 2, 3, 4, 5, and 6 hereof, respectively, and such additional powers as
may be delegated to it by the Board of Directors. The Board of Directors may
from time to time establish additional standing committees or special committees
of the Board of Directors, each of which shall have such powers and functions as
may be delegated to it by the Board of Directors. The Board of Directors may
abolish any committee established by or pursuant to this Section 1 as it may
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deem advisable. Each such committee shall consist of two or more directors, the
exact number being determined from time to time by the Board of Directors;
provided, however, that membership on the Audit Committee and on the
Compensation and Option Committee shall be limited to directors who are not
officers or employees of the Company. Designations of the Chairman and members
of each such committee, and, if desired, a Vice Chairman and alternates for
members, shall be made by the Board of Directors. Each such committee shall have
a secretary who shall be designated by its chairman. A vice chairman of a
committee shall act as the chairman of the committee in the absence or
disability of the chairman.
Section 2. Audit Committee.
The Audit Committee shall select and engage, on behalf of the Company,
independent public accountants to (1) audit the books of account and other
corporate records of the Company and (2) perform such other duties as the
Committee may from time to time prescribe. The Committee shall transmit
financial statements certified by such independent public accountants to the
Board of Directors after the close of each fiscal year. The selection of
independent public accountants for each fiscal year shall be made in advance of
the annual meeting of stockholders in such fiscal year and shall be submitted
for ratification or rejection at such meeting. The Committee shall confer with
such accountants and review and approve the scope of the audit of the books of
account and other corporate records of the Company. The Committee shall have the
power to confer with and direct the officers of the Company to the extent
necessary to review the internal controls, accounting practices, financial
structure and financial reporting of the Company. From time to time the
Committee shall report to and advise the Board of Directors concerning the
results of its consultation and review and such other matters relating to the
internal controls, accounting practices, financial structure and financial
reporting of the Company as the Committee believes merit review by the Board of
Directors. The Committee also shall perform such other functions and exercise
such other powers as may be delegated to it from time to time by the Board of
Directors.
Section 3. Compensation and Option Committee.
The Compensation and Option Committee shall fix from time to time the
salaries of members of the Board of Directors who are officers or employees of
the Company and of any and all Vice Chairmen of the Company, Executive Vice
Presidents, Group Vice Presidents and Vice Presidents of the Company. It also
shall perform such functions as may be delegated to it under the provisions of
any bonus, supplemental compensation, special compensation or stock option plan
of the Company.
Section 4. Environmental and Public Policy Committee.
The Environmental and Public Policy Committee shall review all aspects of the
Company's policies and practices that relate to environmental and public policy
considerations facing the Company worldwide. From time to time the Committee
shall report and make recommendations to the Board of Directors concerning the
results of its review and such other matters relating to the foregoing matters
as the Committee believes merit consideration by the Board of Directors. The
Committee also shall perform such other functions and exercise such other powers
as may be delegated to it from time to time by the Board of Directors.
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Section 5. Finance Committee.
The Finance Committee shall include the Chairman of the Board of Directors
together with such other directors as the Board of Directors shall designate.
The Committee during intervals between meetings of the Board of Directors
shall have, and may exercise in such manner as it shall deem to be in the best
interests of the Company, all the powers of the Board of Directors (except with
respect to matters within the powers of the Audit Committee, the Environmental
and Public Policy Committee, or the Compensation and Option Committee)
concerning the determination of financial policies of the Company and the
management of its financial affairs, not inconsistent, however, with law or with
such specific directions as to the conduct of affairs as shall have been given
by the Board of Directors. The Committee also shall perform such other functions
and exercise such other powers as may be delegated to it from time to time by
the Board of Directors. The Committee may redelegate from time to time and to
the full extent permitted by law, in writing, to any officer or employee of the
Company any of such powers.
During intervals between meetings of the Committee, the Chairman, and, if
any, the Vice Chairman, of the Committee shall have and may exercise such of the
powers of the Committee as from time to time shall be conferred upon them by
resolution of the Board of Directors or of the Finance Committee.
All actions by the Committee shall be reported to the Board of Directors and
shall be subject to revision by the Board of Directors, provided no acts or
rights of third parties shall be affected thereby.
Section 6. Organization Review and Nominating Committee.
The Organization Review and Nominating Committee from time to time shall
consider and make recommendations to the Board of Directors, to the Chairman of
the Board of Directors and to the Chief Operating Officer with respect to the
management organization of the Company, the nominations or elections of
directors and officers of the Company and the appointments of such other
employees of the Company as shall be referred to the Committee.
The Committee from time to time shall consider the size and composition of
the Board of Directors and make recommendations to the Board of Directors with
respect to such matters. Prior to the annual meeting of stockholders each year,
and prior to any special meeting of stockholders at which a director is to be
elected, the Committee shall recommend to the Board of Directors persons
proposed to constitute the nominees whose election at such meeting will be
recommended by the Board of Directors.
The authority vested in the Committee by this section shall not derogate from
the power of individual members of the Board of Directors to recommend or place
in nomination persons other than those recommended by the Committee.
The Committee also shall perform such other functions and exercise such other
powers as may be delegated to it from time to time by the Board of Directors.
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Section 7. Other Committees.
The Board of Directors, or any committee, officer or employee of the Company
may establish additional standing committees or special committees to serve in
an advisory capacity or in such other capacities as may be permitted by law, by
the Certificate of Incorporation and by the By-Laws. The members of any such
committee need not be members of the Board of Directors. Any committee
established pursuant to this Section 6 may be abolished by the person or body by
whom it was established as he, she or it may deem advisable. Each such committee
shall consist of two or more members, the exact number being determined from
time to time by such person or body. Designations of members of each such
committee and, if desired, alternates for members, shall be made by such person
or body, at whose will all such members and alternates shall serve. The chairman
of each such committee shall be designated by such person or body.
Each such committee shall have a secretary who shall be designated by the
chairman.
Section 8. Rules and Procedures.
Each committee may fix its own rules and procedures and shall meet at such
times and places as may be provided by such rules, by resolution of the
committee, or by call of the chairman or vice chairman. Notice of meeting of
each committee, other than of regular meetings provided for by its rules or
resolutions, shall be given to committee members. The presence of one-third of
its members, but not less than two, shall constitute a quorum of any committee,
and all questions shall be decided by a majority vote of the members present at
the meeting. All action taken at each committee meeting shall be recorded in
minutes of the meeting.
Section 9. Application of Article.
Whenever any provision of any other document relating to any committee of the
Company named therein shall be in conflict with any provision of this Article
IV, the provisions of this Article IV shall govern, except that if such other
document shall have been approved by the stockholders, voting as provided in the
Certificate of Incorporation, or by the Board of Directors, the provisions of
such other document shall govern.
ARTICLE V
OFFICERS
Section 1. Officers.
The Officers of the Company shall include a Chairman of the Board of
Directors and may include one or more Vice Chairmen of the Board of Directors
and a President, each of whom shall be chosen from among the directors, and one
or more Vice Chairmen of the Company, one or more Executive Vice Presidents, one
or more Group Vice Presidents, one or more Vice Presidents, a Treasurer, a
Controller and a Secretary, each of whom shall be elected by the Board of
Directors to hold office until his or her successor shall have been chosen and
shall have qualified. The Board of Directors may elect or appoint one or more
Assistant Treasurers, one or more Assistant Secretaries, and such other officers
as it may deem necessary, or desirable, each of whom shall have such authority,
shall perform such duties and shall hold office for such term as may be
prescribed by the Board of Directors from time to time. Any person may hold at
one time more than one office.
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Section 2. Office of the Chief Executive.
The Chairman of the Board of Directors and such other members as the Chief
Executive Officer shall designate shall constitute the Office of the Chief
Executive. Subject to the provisions of these By-Laws and to the direction of
the Board of Directors and the Chief Executive Officer, the members of this
Office shall share in the responsibilities for the general management and
control of the affairs and business of the Company.
Section 3. Chairman of the Board of Directors.
The Chairman of the Board of Directors shall be the Chief Executive Officer
of the Company. He or she shall be a member of the Office of the Chief Executive
and, a subject to the provisions of these By-Laws and to the direction of the
Board of Directors, shall have ultimate authority for decisions relating to the
general management and control of the affairs and business of the Company and
shall perform all other duties and exercise all other powers commonly incident
to the position of Chief Executive Officer or which are or from time to time may
be delegated to him or her by the Board of Directors, or which are or may at any
time be authorized or required by law. He or she shall preside at all meetings
of the Board of Directors. He or she may redelegate from time to time and to the
full extent permitted by law, in writing, to officers or employees of the
Company any or all of such duties and powers, and any such redelegation may be
either general or specific. Whenever he or she so shall delegate any of his or
her authority, he or she shall file a copy of the redelegation with the
Secretary of the Company.
Section 4. Vice Chairmen of the Board of Directors.
Subject to the provisions of these By-Laws and to the direction of the Board
of Directors and of the Chief Executive Officer, the Vice Chairmen of the Board
of Directors shall have such powers and shall perform such duties as from time
to time may be delegated to them by the Board of Directors or by the Chief
Executive Officer, or which are or may at any time be authorized or required by
law.
Section 5. President.
Subject to the provisions of these By-Laws and to the direction of the Board
of Directors and of the Chief Executive Officer, the President shall have such
powers and shall perform such duties as from time to time may be delegated to
him or her by the Board of Directors or by the Chief Executive Officer, or which
are or may at any time be authorized or required by law.
Section 6. Chief Operating Officer.
The Chief Operating Officer shall be selected by the Board of Directors from
among the Vice Chairmen of the Board of Directors and the President. Subject to
the provisions of these By-Laws and to the direction of the Board of Directors
and of the Chief Executive Officer, he or she shall have such powers and shall
perform such duties as from time to time may be delegated to him or her by the
Board of Directors or by the Chief Executive Officer, or which are or may at any
time be authorized or required by law. In the absence or disability of the
Chairman of the Board of Directors, or in the event of, and during the period
of, a vacancy in such office, the Chief Operating Officer also shall be the
Chief Executive Officer.
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Section 7. Vice Chairmen of the Company, Executive Vice Presidents, Group
Vice Presidents and Vice Presidents.
Each of the Vice Chairmen of the Company, each of the Executive Vice
Presidents, each of the Group Vice Presidents and each of the other Vice
Presidents shall have such powers and shall perform such duties as may be
delegated to him or her by the Board of Directors, by the Chairman of the Board
of Directors or by the Chief Operating Officer.
In addition, the Board of Directors shall designate one of the Vice Chairmen
of the Company, Executive Vice Presidents, Group Vice Presidents, or Vice
Presidents as the Chief Financial Officer, who, among his or her other powers
and duties, shall provide and maintain, subject to the direction of the Board of
Directors and the Finance Committee, financial and accounting controls over the
business and affairs of the Company. Such office shall maintain, among others,
adequate records of the assets, liabilities and financial transactions of the
Company, and shall direct the preparation of financial statements, reports and
analyses. The Chief Financial Officer shall perform such other duties and
exercise such other powers as are incident to such functions, subject to the
control of the Board of Directors.
Section 8. Treasurer and Assistant Treasurer.
The Treasurer, subject to the direction of the Board of Directors, shall have
the care and custody of all funds and securities which may come into his or her
hands. When necessary or proper he or she shall endorse on behalf of the
Company, for collection, checks, notes and other obligations, and shall deposit
all funds of the Company in such banks or other depositaries as may be
designated by the Board of Directors or by such officers or employees as may be
authorized by the Board of Directors so to designate. He or she shall perform
all acts incident to the office of Treasurer, subject to the control of the
Board of Directors. He or she may be required to give a bond for the faithful
discharge of his or her duties, in such sum and upon such conditions as the
Board of Directors may require.
At the request of the Treasurer, any Assistant Treasurer, in the case of the
absence or inability to act of the Treasurer, temporarily may act in his or her
place. In the case of the death of the Treasurer, or in the case of his or her
absence or inability to act without having designated an Assistant Treasurer to
act temporarily in his or her place, the Assistant Treasurer so to perform the
duties of the Treasurer shall be designated by the Chairman of the Board of
Directors, the Chief Operating Officer, a Vice Chairman of the Company or an
Executive Vice President.
Section 9. Secretary and Assistant Secretary.
The Secretary shall keep the minutes of the meetings of the stockholders and
of the Board of Directors, and, when required, the minutes of meetings of the
committees, and shall be responsible for the custody of all such minutes.
Subject to the direction of the Board of Directors, the Secretary shall have
custody of the stock ledgers and documents of the Company. He or she shall have
custody of the corporate seal and shall affix and attest such seal to any
instrument whose execution under seal shall have been duly authorized. He or she
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shall give notice of meetings and, subject to the direction of the Board of
Directors, shall perform all other duties and enjoy all other powers commonly
incident to his or her office.
At the request of the Secretary, any Assistant Secretary, in the case of the
absence or inability to act of the Secretary, temporarily may act in his or her
place. In the case of the death of the Secretary, or in the case of his or her
absence or inability to act without having designated an Assistant Secretary to
act temporarily in his or her place, the Assistant Secretary or other person so
to perform the duties of the Secretary shall be designated by the Chairman of
the Board of Directors, the Chief Operating Officer, a Vice Chairman of the
Company or an Executive Vice President.
Section 10. General Counsel.
The Company may have a General Counsel who shall be appointed by the Board of
Directors and who shall have general supervision of all matters of a legal
nature concerning the Company.
Section 11. Controller.
The Controller shall have such powers and shall perform such duties as may be
delegated to him or her by the Board of Directors, the Chairman of the Board of
Directors, the Chief Operating Officer or the appropriate Vice Chairman of the
Company, Executive Vice President, Group Vice President or Vice President.
Section 12. Salaries.
Salaries of officers, agents or employees shall be fixed from time to time by
the Board of Directors or by such committee or committees, or person or persons,
if any, to whom such power shall have been delegated by the Board of Directors.
An employment contract, whether with an officer, agent or employee, if expressly
approved or specifically authorized by the Board of Directors, may fix a term of
employment thereunder; and such contract, if so approved or authorized, shall be
valid and binding upon the Company in accordance with the terms thereof,
provided that this provision shall not limit or restrict in any way the right of
the Company at any time to remove from office, discharge or terminate the
employment of any such officer, agent or employee prior to the expiration of the
term of employment under any such contract, except that the Company shall not
thereby be relieved of any continuing liability for salary or other compensation
provided for in such contract.
ARTICLE VI
RESIGNATIONS, REMOVALS AND VACANCIES
Section 1. Resignations.
Any director, officer or agent of the Company, or any member of any
committee, may resign at any time by giving written notice to the Board of
Directors, to the Chairman of the Board of Directors, to a Vice Chairman of the
Board of Directors, to the President or to the Secretary of the Company. Any
such resignation shall take effect at the time specified therein, or if the time
be not specified therein, then upon receipt thereof. The acceptance of such
resignation shall not be necessary to make it effective.
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Section 2. Removals.
At any meeting thereof called for the purpose, the holders of Common Stock
and the holders of Class B Stock voting as provided in subsection 1.6 of Article
FOURTH of the Certificate of Incorporation, as amended, may remove from office
or terminate the employment of any director, officer or agent with or without
cause; and the Board of Directors, by vote of not less than a majority of the
entire Board at any meeting thereof called for the purpose, may, at any time,
remove from office or terminate the employment of any officer, agent or member
of any committee.
Section 3. Vacancies.
Subject to the last sentence of Section 1 of Article III, any vacancy in the
office of any director, officer or agent through death, resignation, removal,
disqualification, increase in the number of directors or other cause may be
filled by the Board of Directors (in the case of vacancies in the Board, by the
affirmative vote of a majority of the directors then in office, even though less
than a quorum remains) and the person so elected shall hold office until his or
her successor shall have been elected and shall have qualified.
ARTICLE VII
CAPITAL STOCK-DIVIDENDS-SEAL
Section 1. Certificates of Shares.
The certificates for shares of the capital stock of the Company shall be in
such form, not inconsistent with the Certificate of Incorporation, as amended,
as shall be approved by the Board of Directors. The certificates shall be signed
by the Chairman of the Board of Directors, a Vice Chairman of the Board of
Directors, the President, a Vice Chairman of the Company, an Executive Vice
President, a Group Vice President or a Vice President, and also by the Treasurer
or an Assistant Treasurer, or the Secretary or an Assistant Secretary. Any and
all signatures may be facsimiles.
All certificates shall bear the name of the person owning the shares
represented thereby, shall state the number of shares represented by such
certificate and the date of issue; and such information shall be entered in the
Company's original stock ledger.
Section 2. Addresses of Stockholders.
It shall be the duty of every stockholder to notify the Company of his or her
post office address and of any change therein. The latest address furnished by
each stockholder shall be entered on the original stock ledger of the Company
and the latest address appearing on such original stock ledger shall be deemed
conclusively to be the post office address and the last-known post office
address of such stockholder. If any stockholder shall fail to notify the Company
of his or her post office address, it shall be sufficient to send corporate
notices to such stockholder at the address, if any, understood by the Secretary
to be his or her post office address, or in the absence of such address, to such
stockholder, at the General Post Office in the City of Wilmington, State of
Delaware.
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Section 3. Lost, Destroyed or Stolen Certificate.
Any person claiming a stock certificate in lieu of one lost, destroyed or
stolen, shall give the Company an affidavit as to his, her or its ownership of
the certificate and of the facts which go to prove that it has been lost,
destroyed or stolen. If required by the Board of Directors, he, she or it also
shall give the Company a bond, in such form as may be approved by the Board of
Directors, sufficient to indemnify the Company against any claim that may be
made against it on account of the alleged loss of the certificate or the
issuance of a new certificate.
Section 4. Fixing a Record Date.
The Board of Directors may fix in advance a date not exceeding (i) sixty (60)
days preceding the date of any meeting of stockholders, or the date for payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of stock shall go into effect (other than
conversions or exchanges pursuant to Sections 2, 3 or 4 of Article FOURTH of the
Certificate of Incorporation, as amended), as a record date for the
determination of the stockholders entitled to notice of and to vote at any such
meeting and any adjournment thereof, or entitled to payment of any such dividend
or to any such allotment of rights or to exercise the rights in respect of any
such change, or conversion or exchange of stock (other than conversions or
exchanges pursuant to Sections 2, 3 or 4 of Article FOURTH of the Certificate of
Incorporation, as amended), or (ii), ten (10) days after adoption of the
resolution fixing such date, as a record date for the determination of the
stockholders entitled to consent in writing to corporate action; and in any such
case, such stockholders and only such stockholders, as shall be stockholders of
record on the date so fixed, shall be entitled, subject to the provisions of
Article FOURTH of the Certificate of Incorporation, as amended, to such notice
of and to vote at such meeting and any adjournment thereof or to receive payment
of such dividend or to receive such allotment of rights or to exercise such
rights or to give such consent, as the case may be, notwithstanding any transfer
of any stock on the books of the Company after such record date.
Section 5. Regulations.
The Board of Directors shall have power and authority to make all such rules
and regulations not inconsistent with any of the provisions of Sections 2, 3, 4
or 5 of Article FOURTH of the Certificate of Incorporation, as amended, as it
may deem expedient, concerning the issue, transfer and registration of
certificates for shares of the stock of the Company.
Section 6. Corporate Seal.
The corporate seal shall have inscribed thereon the name of the Company, the
year of its organization, and the words "Corporate Seal" and "Delaware." If and
when so authorized by the Board of Directors, a duplicate of the seal may be
kept and used by the Secretary or Treasurer or by any Assistant Secretary or
Assistant Treasurer.
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<PAGE>
ARTICLE VIII
EXECUTION OF CONTRACTS AND OTHER DOCUMENTS
Section 1. Contracts, etc.
Except as otherwise prescribed in these By-Laws, such officers, employees or
agents of the Company as shall be specified by the Board of Directors shall
sign, in the name and on behalf of the Company, all deeds, bonds, contracts,
mortgages and other instruments or documents, the execution of which shall be
authorized by the Board of Directors; and such authority may be general or
confined to specific instances. Except as so authorized by the Board of
Directors, no officer, agent or employee of the Company shall have power or
authority to bind the Company by any contract or engagement or to pledge,
mortgage, sell or otherwise dispose of its credit or any of its property or to
render it pecuniarily liable for any purpose or in any amount.
Section 2. Checks, Drafts, etc.
Except as otherwise provided in these By-Laws, all checks, drafts, notes,
bonds, bills of exchange or other orders, instruments or obligations for the
payment of money shall be signed by such officer or officers, employee or
employees, or agent or agents, as the Board of Directors shall by resolution
direct. The Board of Directors may, in its discretion, also provide by
resolution for the countersignature or registration of any or all such orders,
instruments or obligations for the payment of money.
ARTICLE IX
FISCAL YEAR
The fiscal year of the Company shall begin the first day of January in each
year.
ARTICLE X
MISCELLANEOUS
Section 1. Original Stock Ledger.
As used in these By-Laws and in the Certificate of Incorporation, as amended,
the words "original stock ledger" shall mean the record maintained by the
Secretary of the Company of the name and address of each of the holders of
shares of any class of stock of the Company, and the number of shares and the
numbers of the certificates for such shares held by each of them, taking into
account transfers at the time made by and recorded on the transfer sheets of
each of the Transfer Agents of the Company although such transfers may not then
have been posted in the record maintained by the Secretary.
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<PAGE>
Section 2. Notices and Waivers Thereof.
Whenever any notice whatever is required by these By-Laws or by the
Certificate of Incorporation, as amended, or by any of the laws of the State of
Delaware to be given to any stockholder, director or officer, such notice,
except as otherwise provided by the laws of the State of Delaware, may be given
personally or by telephone or be given by cablegram, facsimile transmission,
mailgram, radiogram, telegram or other form of recorded communication, addressed
to such stockholder at the address set forth as provided in Section 2 of Article
VII, or to such director or officer at his or her Company location, if any, or
at such address as appears on the books of the Company, or the notice may be
given in writing by depositing the same in a post office, or in a regularly
maintained letter box, in a postpaid, sealed wrapper addressed to such
stockholder at the address set forth in Section 2 of Article VII, or to such
director or officer at his or her Company location, if any, or such address as
appears on the books of the Company.
Any notice given by cablegram, mailgram, radiogram or telegram shall be
deemed to have been given when it shall have been delivered for transmission.
Any notice given by facsimile transmission or other form of recorded
communication shall be deemed to have been given when it shall have been
transmitted. Any notice given by mail shall be deemed to have been given when it
shall have been mailed.
A waiver of any such notice in writing, including by cablegram, facsimile
transmission, mailgram or telegram, signed or dispatched by the person entitled
to such notice or by his or her duly authorized attorney, whether before or
after the time stated therein, shall be deemed equivalent to the notice required
to be given, and the presence at any meeting of any person entitled to notice
thereof shall be deemed a waiver of such notice as to such person.
Section 3. Voting upon Stocks.
The Board of Directors (whose authorization in this connection shall be
necessary in all cases) may from time to time appoint an attorney or attorneys
or agent or agents of the Company, or may at any time or from time to time
authorize the Chairman of the Board of Directors, any Vice Chairman of the Board
of Directors, the President, any Vice Chairman of the Company, any Executive
Vice President, any Group Vice President, any Vice President, the Treasurer or
the Secretary to appoint an attorney or attorneys or agent or agents of the
Company, in the name and on behalf of the Company, to cast the votes which the
Company may be entitled to cast as a stockholder or otherwise in any other
corporation or association, any of the stock or securities of which may be held
by the Company, at meetings of the holders of the stock or other securities of
such other corporation or association, or to consent in writing to any action by
any such other corporation or association, and the Board of Directors or any
aforesaid officer so authorized may instruct the person or persons so appointed
as to the manner of casting such votes or giving such consent, and the Board of
Directors or any aforesaid officer so authorized may from time to time authorize
the execution and delivery, on behalf of the Company and under its corporate
seal, or otherwise, of such written proxies, consents, waivers or other
instruments as may be deemed necessary or proper in the premises.
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<PAGE>
ARTICLE XI
AMENDMENTS
The Board of Directors shall have power to make, alter, amend or repeal the
By-Laws of the Company by vote of not less than a majority of the entire Board
at any meeting of the Board. The holders of Common Stock and the holders of
Class B Stock voting as provided in subsection 1.6 of Article FOURTH of the
Certificate of Incorporation, as amended, shall have power to make, alter, amend
or repeal the By-Laws at any regular or special meeting, if the substance of
such amendment be contained in the notice of such meeting of stockholders.
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Exhibit 10-C-6
AMENDMENTS TO
FORD MOTOR COMPANY
SUPPLEMENTAL COMPENSATION PLAN
(Effective as of October 1, 1997)
Paragraph 23c is amended to read as follows:
"23c. The term 'Subsidiary' shall mean, as applied with respect to any
person or legal entity specified, (i) a person or legal entity a majority
of the voting stock of which is owned or controlled, directly or
indirectly, by the person or legal entity specified or (ii) a limited
liability company a majority of the membership interest of which is owned
or controlled, directly or indirectly, by the person or legal entity
specified."
The first sentence of Paragraph 23e is amended to read as follows:
"The term 'Eligible Subsidiary' shall mean, for any particular year for
which awards are made, (i) any Consolidated Subsidiary which does not have
a Subsidiary Reserve Plan in effect for such year (provided, however, that
any Consolidated Subsidiary which has a Subsidiary Reserve Plan in effect
for any year shall constitute an Eligible Subsidiary for such year (a) with
respect to all persons employed by such Consolidated Subsidiary who are not
eligible for awards under such Subsidiary Reserve Plan and (b) if the
Compensation and Option Committee shall so determine, with respect to all
persons employed by such Consolidated Subsidiary who are eligible for
awards under such Subsidiary Reserve Plan, during a transition period of
not more than five years (as determined by such Committee) following the
effective date of such Subsidiary Reserve Plan), or (ii) any unconsolidated
Subsidiary substantially all of the voting stock or membership interest, as
applicable, of which is owned, directly or indirectly, by the Company or by
a Consolidated Subsidiary at any time during such year and which the
Compensation and Option Committee in its sole discretion shall have
determined should be regarded as eligible for the purposes of this Plan for
such year."
AMENDMENT TO SUPPLEMENTAL COMPENSATION PLAN
-------------------------------------------
(Effective December 22, 1997)
Paragraph 10 is amended by adding the following new Paragraph 10h at the end
thereof:
"10h. Deferral of Awards of Common Stock. Anything in this Plan to
the contrary notwithstanding, the Compensation and Option Committee
may determine the manner and extent to which Employees who are
eligible to participate in this Plan may defer awards of Common Stock
made under the 1986 Long-term Incentive Plan or the 1990 Long-Term
Incentive Plan as if such awards of Common Stock had been awards of
supplemental compensation. In no event shall any such awards of
Common Stock be debited to the Reserve under this Plan"
Exhibit 10-C-8
AMENDMENT OF FORD MOTOR COMPANY
SUPPLEMENTAL COMPENSATION PLAN
Partial Termination of Plan
- ---------------------------
1. Subject to approval of the stockholders of the Company, the Ford Motor
Company Supplemental Compensation Plan adopted in 1955, as amended (the "1955
Plan"), is hereby terminated effective as of May 14, 1998 (the "Effective
Date"), except as hereinafter provided, and no further awards shall be made
under the 1955 Plan.
Definitions
- -----------
2. As used in this Amendment, terms that are not defined herein shall have
the meanings ascribed to them in the 1955 Plan.
Payment of Previous Awards
- --------------------------
3. Subject to the provisions contained in Paragraphs 4 and 5 hereof, with
respect to the payment in stock or cash of all or part of certain "contingent
credits" (as such term is used in the 1955 Plan) and/or other outstanding unpaid
amounts of supplemental compensation and earnings thereon ("other deferred
amounts") deferred under the Company's Deferred Compensation Plan (the "DC
Plan"), each award and each installment of contingent credits or other deferred
amounts which shall not have been paid prior to the Effective Date, shall
continue to be payable, and shall be paid, in the manner and subject to all of
the terms and conditions provided in the 1955 Plan and the DC Plan, as
applicable, and all of the provisions of the 1955 Plan necessary or desirable to
carry out the intent of this Paragraph 3 are hereby continued in effect for such
purpose, it being understood that no Employee or other person shall have under
any circumstances any interest, vested or contingent, in any particular share of
stock, property or asset of the Company or of any Eligible Subsidiary by virtue
of any award of supplemental compensation or any contingent credit or other
deferred amounts.
The Reserve
- -----------
4. As of the Effective Date, the Reserve shall be debited by an amount
equal to the total amount of the Reserve on such date and a corresponding amount
shall be credited to the income of the Company. In the event that any debit to
the Reserve is required to be made after the Effective Date under the 1955 Plan,
the aforementioned debit shall constitute full compliance with and satisfaction
of such requirement.
<PAGE>
Continuation in Effect of
Other Provisions of the 1955 Plan
- ---------------------------------
5. In addition to the provisions of the 1955 Plan which are continued in
effect by Paragraph 3 hereof, Paragraphs 4 and 5 (except as such Paragraphs are
amended by Paragraph 4 hereof) and Paragraphs 15, 16, 17, 18, 19, 20, 21, 22, 23
and 24 of the 1955 Plan are hereby continued in effect, except that no
amendment, modification, suspension or termination of the 1955 Plan, as hereby
amended, after the Effective Date shall affect any right or obligation with
respect to any award made prior to such date.
Exhibit 10-M-3
AMENDMENT TO
FORD MOTOR COMPANY
1990 LONG-TERM INCENTIVE PLAN
-----------------------------
(Effective as of October 1, 1997)
The second sentence of paragraph (b) of Article 1 is amended to read as follows:
"The term 'subsidiary' as used herein shall mean (i) any corporation a
majority of the voting stock of which is owned directly or indirectly by
the Company or (ii) any limited liability company a majority of the
membership interest of which is owned directly or indirectly by the
Company."
Exhibit 10-M-4
AMENDMENT TO FORD MOTOR COMPANY
1990 LONG-TERM INCENTIVE PLAN
-----------------------------
(Effective as of January 1, 1998, subject to shareholder approval of
terms of options and stock awards under 1998 Long-Term Incentive Plan)
Paragraph (a) of Article 14 of the Plan is amended to read as follows:
"14. (a) Term. The Plan shall terminate as of January 1, 1998 except with
respect to Plan Awards then outstanding."
Exhibit 10-V
FORD MOTOR COMPANY ANNUAL INCENTIVE COMPENSATION PLAN
(Effective as of January 1, 1998, subject to shareholder approval)
1. Purpose. This Plan, which shall be known as the "Ford Motor Company
Annual Incentive Compensation Plan" and is hereinafter referred to as the
"Plan", is intended to provide annual incentive compensation to Plan
participants based on the achievement of established performance objectives.
2. Definitions. As used in the Plan, the following terms shall have the
following meanings, respectively:
(a) The term "Affiliate" shall mean, as applied with respect to any
person or legal entity specified, a person or legal entity that directly or
indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, the person or legal entity specified.
(b) The term "Annual Incentive Compensation Committee" shall mean the
committee comprised of two or more officers of the Company designated members of
such Committee by the Compensation and Option Committee.
(c) The term "Award" shall mean the cash compensation awarded under the
Plan with respect to a Performance Period to a participant eligible under
Section 5(b).
(d) The term "Committee" shall mean, unless the context otherwise
requires:
(i) The Compensation and Option Committee for all matters affecting
any Section 16 Person.
(ii) The Annual Incentive Compensation Committee for all matters
affecting employees other than Section 16 Persons.
(e) The term "Company" or "Ford" generally shall mean Ford Motor Company.
When used in the Plan with respect to employment, the term "Company" shall
include subsidiaries of the Company.
(f) The term "Compensation and Option Committee" shall mean the
Compensation and Option Committee of the Board of Directors of the Company.
(g) The term "Covered Employee" shall mean a Key Employee who is a
"covered employee" within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended.
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<PAGE>
(h) The term "DC Plan" shall mean the Company's Deferred Compensation
Plan, as amended.
(i) The term "Employee'" shall mean any person who is regularly employe
by the Company or one of its Subsidiaries at a salary (as distinguished from a
pension, retirement allowance, severance pay, retainer, commission, fee under a
contract or other arrangement, or hourly, piecework or other wage) and is
enrolled on the active employment rolls of the Company or a Subsidiary,
including, but without limitation, any employee who also is an officer or
director of the Company or one of its Subsidiaries.
(j) The term "Exceptional Contribution Fund" shall mean, with respect to
Awards for a Performance Period, the dollar amount designated by the
Compensation and Option Committee pursuant to Section 13 for purposes of
increasing the amount of Awards to be made to participants who are not Covered
Employees based on exceptional individual, unit, group or Company performance.
(k) The term "Key Employee" shall mean an Employee of the Company
determined by the Committee to be a Key Employee for purposes of the Plan.
(l) The term "Maximum Award Pool" shall mean the maximum aggregate amount
of all Awards which may be made to participants for a Performance Period
determined by the Compensation and Option Committee pursuant to Section 12.
(m) The term "Maximum Individual Award" shall mean the maximum amount of an
Award to a Covered Employee for a Performance Period, as set forth in Section
10.
(n) The term "participant" shall mean a Key Employee selected by the
Committee to participate in the Plan for a Performance Period.
(o) The term "Performance Criteria" shall mean, with respect to any Award
for a Performance Period that may be made to a participant who is a Covered
Employee, one or more of the following objective business criteria established
by the Compensation and Option Committee with respect to the Company and/or any
Subsidiary, division, business unit or component thereof upon which the
Performance Goals for a Performance Period are based: asset charge, asset
turnover, automotive return on sales, capacity utilization, capital employed in
the business, capital spending, cash flow, cost structure improvements,
complexity reductions, customer loyalty, diversity, earnings growth, earnings
per share, economic value added, environmental health and safety, facilities and
tooling spending, hours per vehicle, increase in customer base, inventory
turnover, market price appreciation, market share, net cash balance, net income,
net income margin, net operating cash flow, operating profit margin, order to
delivery time, plant capacity, process time, profits before tax,
quality/customer satisfaction, return on assets, return on capital, return on
equity, return on net operating assets, return on sales, revenue growth, sales
margin, sales volume, total shareholder return, vehicles per employee, warranty
performance to budget, variable margin and working capital. The term
"Performance Criteria" shall mean, with respect to any Award that may be made to
a participant who is not a Covered Employee, one or more of the business
criteria applicable to Covered Employees for the Performance Period and any
other criteria based on individual, business unit, group or Company performance
selected by the Compensation and Option Committee.
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<PAGE>
(p) The term "Performance Goals" shall mean the one or more goals
established by the Compensation and Option Committee based on one or more
Performance Criteria pursuant to Section 7 for the purpose of measuring
performance in determining the amount, if any, of an Award for a Performance
Period.
(q) The term "Performance Formula" shall mean, with respect to a
Performance Period, the one or more objective formulas established by the
Compensation and Option Committee pursuant to Section 7 and applied against the
Performance Goals in determining whether and the extent to which Awards have
been earned for the Performance Period.
(r) The term "Performance Period" or "Period" shall mean, with respect to
which a particular Award may be made under the Plan, the Company's fiscal year
or other twelve consecutive month period designated by the Compensation and
Option Committee for the purpose of measuring performance against Performance
Goals.
(s) The term "Pro Forma Award Amount" shall mean, with respect to an Award
to be made for a Performance Period, the amount determined by the Committee
pursuant to Section 9.
(t) The term "SC Plan" shall mean the Company's Supplemental Compensation
Plan, as amended.
(u) The term "Section 16 Person" shall mean any employee who is subject to
the reporting requirements of Section 16(a) or the liability provisions of
Section 16(b) of the Securities Exchange Act of 1934, as amended.
(v) The term "Subsidiary" shall mean (i) any corporation a majority of the
voting stock of which is owned or controlled, directly or indirectly, by the
Company or (ii) any limited liability company a majority of the membership
interest of which is owned or controlled, directly or indirectly, by the
Company.
(w) The term "Target Award" shall mean, with respect to a Performance
Period, the Target Award amount established for each applicable salary grade or
band of participants by the Committee pursuant to Section 6 hereof.
(x) The term "Total Pro Forma Award Pool" shall mean, with respect to
Awards for a Performance Period, the amount described in Section 11.
3. Effective Date. The Plan shall be effective as of January 1, 1998.
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<PAGE>
4. Administration. Except as otherwise expressly provided, the Compensation
and Option Committee shall have full power and authority to construe, interpret
and administer the Plan. The Compensation and Option Committee shall make all
decisions relating to matters affecting Section 16 Persons, but may otherwise
delegate any of its authority under the Plan. The Compensation and Option
Committee and the Annual Incentive Compensation Committee each may at any time
adopt or terminate, and may from time to time, amend, modify or suspend such
rules, regulations, policies and practices as they in their sole discretion may
determine in connection with the administration of, or the performance of their
respective responsibilities under, the Plan.
5. Eligibility.
(a) Eligibility to Participate. All Key Employees are eligible to be
selected to participate in the Plan. The Committee shall, in its sole
discretion, designate which Key Employees will be participants for the
applicable Performance Period.
(b) Eligibility for Awards. An Award with respect to a Performance Period
may be made pursuant to Section 14 of the Plan to (i) participants for such
Performance Period who shall have been an employee at any time during such
Performance Period, or to (ii) the spouse, children or legal representatives, as
the Committee in its sole discretion shall determine, of any such person whose
employment shall have been terminated by reason of his or her death during such
Performance Period.
(c) Eligibility of Compensation and Option Committee Members. No person
while a member of the Compensation and Option Committee shall be eligible to
participate under the Plan or receive an Award.
6. Determination of Target Awards. Within 90 days of the commencement of a
Performance Period, the Committee shall establish the Target Award for each
applicable salary grade or band of Key Employees selected to participate in the
Plan with respect to a Performance Period, subject to any limitations
established by the Compensation and Option Committee. The fact that a Target
Award is established for a participant's salary grade or band for a Performance
Period shall not entitle such participant to receive an Award.
7. Selection of Performance Criteria and Establishment of Performance Goals
and Performance Formula; Minimum Threshold Objective. Within 90 days of the
commencement of a Performance Period, the Compensation and Option Committee
shall select the Performance Criteria and establish the related Performance
Goals be used to measure performance for a Performance Period and the
Performance Formula to be used to determine what portion, if any, of an Award
has been earned for the Performance Period. The Performance Criteria may be
expressed in absolute terms or relate to the performance of other companies or
to an index. Within that same 90 day period, the Compensation and Option
Committee may establish a minimum threshold objective for any Performance Goal
for any Performance Period, which if not met, would result in no Award being
made to any participant with such Performance Goal for such Performance Period.
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<PAGE>
8. Adjustments to Performance Goals, Performance Formula or Performance
Criteria. For purposes of determining Awards for participants who are not
Covered Employees, the Compensation and Option Committee may adjust or modify
any of the Performance Goals, Performance Formula and/or the Performance
Criteria for any Performance Period in order to prevent the dilution or
enlargement of the rights of such participants under the Plan (i) in the event
of, or in anticipation of, any unusual or extraordinary item, transaction, event
or development, (ii) in recognition of, or in anticipation of, any other unusual
or nonrecurring event affecting the Company or the financial statements of the
Company or Ford Credit, or in anticipation of, changes in applicable laws,
regulations, accounting principles or business conditions, and (iii) for any
other reason or circumstance deemed relevant to the Compensation and Option
Committee in its sole discretion.
9. Determination of Pro Forma Award Amount. As soon as practicable
following the end of a Performance Period, the Committee shall determine the Pro
Forma Award Amount for any Award to be made to a participant for a Performance
Period by applying the applicable Performance Formula for the participant for
the Performance Period against the accomplishment of the related Performance
Goals for such participant.
10. Maximum Individual Award for Covered Employees.. The Maximum Individual
Award for a Performance Period to a participant who is a Covered Employee is
$10,000,000.
11. Total Pro Forma Award Pool. The Total Pro Forma Award Pool for all
Awards for a Performance Period shall equal the sum of the Pro Forma Award
Amounts for all participants for the Performance Period.
12. Determination of Maximum Award Pool. The Compensation and Option
Committee shall determine the amount of the Maximum Award Pool for a Performance
Period which shall not exceed the sum of the Total Pro Forma Award Pool plus the
amount of the Exceptional Contribution Fund for such Period.
13. Determination of Exceptional Contribution Fund. The Compensation and
Option Committee shall determine the amount of the Exceptional Contribution Fund
which may be used for increasing the size of Awards for a Performance Period
above the applicable Pro Forma Award Amount to participants who are not Covered
Employees. Unless otherwise determined by the Compensation and Option Committee,
the amount of the Exceptional Contribution Fund shall not exceed 15% of the
Total Pro Forma Award Pool for the applicable Performance Period.
14. Determination of Individual Awards. Subject to achievement of any
applicable minimum threshold objectives established under Section 7, fulfillment
of the conditions set forth in Section 17 and compliance with the Maximum
Individual Award limitation under Section 10 and the eligibility requirements
set forth in paragraph (b) of Section 5, the Committee shall, as soon as
practicable following the end of a Performance Period, determine the amount of
each Award to be made to a participant under the Plan for the Performance
Period, which amount shall, except as otherwise provided below, be the Pro Forma
Award Amount determined for such participant for such Period pursuant to Section
9. The Committee may in its sole discretion reduce the amount of any Award that
otherwise would be awarded to any participant for any Performance Period. In
addition, the Committee may in its sole discretion increase the amount of any
Award that otherwise would be awarded to any participant who is not a Covered
Employee for a Performance Period to an amount that is higher than the
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<PAGE>
applicable Pro Forma Award Amount based on exceptional individual, unit, group
or Company performance; provided, however, that the total amount of all Awards
made for a Performance Period shall not exceed the related Maximum Award Pool.
Individual Award amounts may be less than or greater than 100% of the related
Target Award. The determinations by the Annual Incentive Compensation Committee
of individual Award amounts for Employees who are not Section 16 Persons shall
be subject to a maximum funding amount and any other limitations specified by
the Compensation and Option Committee. Notwithstanding anything contained in the
Plan to the contrary, the Committee may determine in its sole discretion not to
make an Award to a particular participant or to all participants selected to
participate in the Plan for any Performance Period.
15. Distribution and Form of Awards.
(a) General. Except as otherwise provided in paragraph (b) or (c) of this
Section 15 or in Section 17, distribution of Awards for a Performance Period
shall be made on or as soon as practicable after the distribution date for such
Awards determined by the Compensation and Option Committee, which date shall in
no event be later than the March 15 following the end of the applicable
Performance Period, and shall be payable in cash.
(b) Deferral of Awards. Subject to the terms, conditions and eligibility
requirements of the DC Plan, Key Employees who receive an Award under the Plan
are eligible to defer payment of all or part of such Award under the DC Plan
under the same terms as if such Award had been an award of supplemental
compensation made under the SC Plan.
(c) Mandatory Deferral of Awards. The Compensation and Option Committee
shall determine whether and the extent to which any Awards under the Plan will
be mandatorily deferred and the terms of any such deferral. Unless otherwise
determined by the Compensation and Option Committee, Awards may be mandatorily
deferred by such Committee in the same manner as if they had been awards of
supplemental compensation made under the SC Plan.
16. Designation of Beneficiaries and Effect of Death.
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<PAGE>
(a) Designation of Beneficiaries. A participant may file with the Company a
written designation of a beneficiary or beneficiaries (subject to such
limitations as to the classes and number of beneficiaries and contingent
beneficiaries and such other limitations as the Compensation and Option
Committee from time to time may prescribe) to receive, in the event of the death
of the participant, undistributed amounts of any Award that would have been
payable to such participant had he or she been living and that was not deferred
under any Company deferral arrangement or plan. A participant shall be deemed to
have designated as beneficiary or beneficiaries under the Plan the person or
persons who receive such participant's life insurance proceeds under the basic
Company Life Insurance Plan unless such participant shall have assigned such
life insurance or shall have filed with the Company a written designation of a
different beneficiary or beneficiaries under the Plan. A participant may from
time to time revoke or change any such designation of beneficiary and any
designation of beneficiary under the Plan shall be controlling over any
testamentary or other disposition; provided, however, that if the Committee
shall be in doubt as to the right of any such beneficiary to receive any such
payment, the same may be paid to the legal representatives of the participant,
in which case the Company, the Committee and the members thereof shall not be
under any further liability to anyone.
(b) Distribution Upon Death. Subject to the provisions of Section 15,
paragraph (a) of this Section 16 and, if applicable, the DC Plan or any other
deferral plan or arrangement, in the event of the death of any participant prior
to distribution of an Award, the total value of such participant's Award shall
be distributed in cash in one lump sum in accordance with paragraph (a) of
Section 15 to any beneficiary or beneficiaries designated or deemed designated
by the participant pursuant to paragraph (a) of this Section 16 who shall
survive such participant (to the extent such designation is effective and
enforceable at the time of such participant's death) or, in the absence of such
designation or such surviving beneficiary, to the legal representative of such
person, at such time (or as soon thereafter as practicable) and otherwise as if
such person were living and had fulfilled all applicable conditions as to
earning out set forth in, or established pursuant to Section 17 and, if
applicable, the DC Plan or any other deferral plan or arrangement, provided such
conditions shall have been fulfilled by such person until the time of his or her
death.
17. Conditions to Payment of Awards.
(a) Effect of Competitive Activity. Anything in the Plan notwithstanding,
and subject to paragraph (c) hereof and, if applicable, any conditions under the
DC Plan or any other deferral plan or arrangement relating to payment of an
Award, if the employment of any participant shall terminate, for any reason
other than death, prior to the distribution date established pursuant to
paragraph (a) of Section 15 for payment of an Award, such participant shall
receive payment of an Award only if, during the entire period from the making of
an Award until such distribution date, such participant shall have earned out
such Award.
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<PAGE>
(i) by continuing in the employ of the Company or a Subsidiary thereof, or
(ii) if his or her employment shall have been terminated for any reason
other than death, by (a) making himself or herself available, upon request, at
reasonable times and upon a reasonable basis, to consult with, supply
information to and otherwise cooperate with the Company or any Subsidiary
thereof with respect to any matter that shall have been handled by him or her or
under his or her supervision while he or she was in the employ of the Company or
any Subsidiary thereof, and (b) refraining from engaging in any activity that is
directly or indirectly in competition with any activity of the Company or any
Subsidiary thereof.
(b) Nonfulfillment of Competitive Activity Conditions; Waiver of Conditions
Under the Plan. In the event of a participant's nonfulfillment of any condition
set forth in paragraph (a) above, such participant's rights under the Plan to
receive or defer payment of an Award under the Plan shall be forfeited and
canceled; provided, however, that the nonfulfillment of such condition may at
any time (whether before, at the time of or subsequent to termination of
employment) be waived in the following manner:
(i) with respect to a participant who at any time shall have been a Section
16 Person, such waiver may be granted by the Compensation and Option Committee
upon its determination that in its sole judgment there shall not have been and
will not be any substantial adverse effect upon the Company or any Subsidiary
thereof; and
(ii) with respect to any other participant, such waiver may be granted by
the Annual Incentive Compensation Committee (or any committee appointed by it)
upon its determination that in its sole judgment there shall not have been and
will not be any such substantial adverse effect.
(c) Effect of Inimical Conduct. Anything in the Plan to the contrary, the
right of a participant, following termination of such participant's employment
with the Company, to receive payment or to defer payment of an Award under
Section 15 shall terminate on and as of the date on which it his been determined
that such participant at any time (whether before or subsequent to termination
of such participant's employment) acted in a manner inimical to the best
interests of the Company. Any such determination shall be made by (i) the
Compensation and Option Committee with respect to any participant who at any
time shall have been a Section 16 Person, and (ii) the Annual Incentive
Compensation Committee (or any committee appointed by it for the purpose) with
respect to any other participant. Such Committee (or any such other committee)
may make such determination at any time prior to payment in full of an Award.
Conduct which constitutes engaging in any activity that is directly or
indirectly in competition with any activity of the Company or any Subsidiary
thereof shall be governed by paragraph (a)(ii) of this Section 17 and shall not
be subject to any determination under this paragraph (c).
18. Limitations. A participant shall not have any interest in any Award
until it is distributed in accordance with the Plan. The fact that a Key
Employee has been selected to be a participant for a Performance Period shall
not in any manner entitle such participant to receive an Award for such period.
The determination as to whether or not such participant shall be paid an Award
for such Performance Period shall be determined solely in accordance with the
provisions of Sections 14 and 17 hereof. All payments and distributions to be
made thereunder shall be paid from the general assets of the Company. Nothing
contained in the Plan, and no action taken pursuant to its provisions, shall
create or be construed to create a trust of any kind, or a fiduciary
relationship between the Company and any employee, former employee or any other
person. The Plan shall not constitute part of any participant's or employee's
employment contract with the Company or any participating subsidiary.
Participation in the Plan shall not create or imply a right to continued
employment.
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19. Withholding of Taxes, etc. The Company shall have the right to withhold
an amount sufficient to satisfy any federal, state or local income taxes, FICA
or Medicare taxes or other amounts that the Company may be required by law to
pay with respect to any Award, including withholding payment from a
participant's current compensation.
20. No Assignment of Benefits. No rights or benefits under the Plan shall,
except as otherwise specifically provided by law, be subject to assignment
(except for the designation of beneficiaries pursuant to paragraph (a) of
Section 16), nor shall such rights or benefits be subject to attachment or legal
process for or against a participant or his or her beneficiary or beneficiaries,
as the case may be.
21. Administration Expense. The entire expense of offering and
administering the Plan shall be borne by the Company and its participating
Subsidiaries and shall not be charged against the Reserve under the SC Plan.
22. Access of Independent Certified Public Accountants and Committee to
Information. The Company's independent certified public accountants shall have
full access to the books and records of the Company and its Subsidiaries, and
the Company shall furnish to such accountants such information as to the
financial condition and operations of the Company and its Subsidiaries as such
accountants may from time to time request, in order that such accountants may
take any action required or requested to be taken by them under the Plan. The
Executive Vice President and Chief Financial Officer or, in the event of his or
her absence or disability to act, the principal accounting officer of the
Company shall furnish to the Committee such information as the Committee may
request to assist it in carrying out or interpreting this Plan. Neither such
accountants, in reporting amounts required or requested under the Plan, nor the
Executive Vice President and Chief Financial Officer, or any other director,
officer or employee of the Company, in furnishing information to such
accountants or to the Committee, shall be liable for any error therein, if such
accountants or other person, as the case may be, shall have acted in good faith.
23. Amendment, Modification, Suspension and Termination of the Plan;
Rescissions and Corrections. The Compensation and Option Committee, at any time
may terminate, and at any time and from time to time, and in any respect, may
amend or modify the Plan or suspend any of its provisions; provided, however,
that no such amendment, modification, suspension or termination shall, without
the consent of a participant, adversely affect any right or obligation with
respect to any Award theretofore made. The Committee at any time may rescind or
correct any actions made in error or that jeopardize the intended tax status or
legal compliance of the Plan.
24. Indemnification and Exculpation.
(a) Indemnification. Each person who is or shall have been a member of the
Compensation and Option Committee or a member of the Annual Incentive
Compensation Committee shall be indemnified and held harmless by the Company
against and from any and all loss, cost, liability or expense that may be
imposed upon or reasonably incurred by such person in connection with or
resulting from any claim, action, suit or proceeding to which such person may be
or become a party or in which such person may be or become involved by reason of
any action taken or failure to act under the Plan and against and from any and
all amounts paid by such person in settlement thereof (with the Company's
written approval) or paid by such person in satisfaction of a judgment in any
such action, suit or proceeding, except a judgment in favor of the Company based
upon a finding of such person's lack of good faith; subject, however, to the
condition that upon the institution of any claim, action, suit or proceeding
against such person, such person shall in writing give the Company an
opportunity, at its own expense, to handle and defend the same before such
person undertakes to handle and defend it on such person's behalf. The right of
indemnification shall not be exclusive of any other right to which such person
may be entitled as a matter of law or otherwise, or any power that the Company
may have to indemnify or hold such person harmless.
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(b) Exculpation. Each member of the Compensation and Option Committee and
each member of the Annual Incentive Compensation Committee shall be fully
justified in relying or acting in good faith upon any information furnished in
connection with the administration of the Plan or any appropriate person or
persons other than such person. In no event shall any person who is or shall
have been a member of the Compensation and Option Committee or a member of the
Annual Incentive Compensation Committee be held liable for any determination
made or other action taken or any omission to act in reliance upon any such
information, or for any action (including the furnishing of information) taken
or any failure to act, if in good faith.
25. Finality of Determinations. Each determination, interpretation or other
action made or taken pursuant to the provisions of the Plan by the Compensation
and Option Committee or the Annual Incentive Compensation Committee shall be
final and shall be binding and conclusive for all purposes and upon all persons,
including, but without limitation thereto, the Company, its stockholders, the
Compensation and Option Committee and each of the members thereof, the Annual
Incentive Compensation Committee and each of the members thereof, and the
directors, officers, and employees of the Company, the Plan participants, and
their respective successors in interest.
26. Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Michigan.
Exhibit 10-W
FORD MOTOR COMPANY
1998 LONG-TERM INCENTIVE PLAN
(Effective as of January 1, 1998,
subject to shareholder approval)
PURPOSE
1.(a) Purpose. This Plan, known as the "1998 Long-Term Incentive Plan" (the
"Plan"), is intended to provide an incentive to certain salaried employees of
Ford Motor Company (the "Company"), and of its subsidiaries, in order to
encourage them to remain in the employ of the Company and to increase their
interest in the Company's success. It is intended that this purpose be effected
through awards or grants of stock options and various other rights with respect
to shares of the Company's Common Stock (collectively, the "Plan Awards"), as
provided herein, to eligible employees ("Participants").
(b) Company; Subsidiary; Employee. The term "Company" when used with
reference to employment shall include subsidiaries of the Company. The term
"subsidiary" shall mean (i) any corporation a majority of the voting stock of
which is owned directly or indirectly by the Company or (ii) any limited
liability company a majority of the membership interest of which is owned,
directly or indirectly, by the Company. The term "employee" shall be deemed to
include any person who is an employee of any joint venture corporation or
partnership, or comparable entity, in which the Company has a substantial equity
interest (a "Joint Venture"), provided such person was an employee of the
Company immediately prior to becoming employed by such Joint Venture.
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ADMINISTRATION
2.(a) Compensation and Option Committee. The Compensation and Option
Committee of the Company's Board of Directors (the "Committee") shall administer
the Plan and perform such other functions as are assigned to it under the Plan.
The Committee is authorized, subject to the provisions of the Plan, from time to
time to establish such rules and regulations as it may deem appropriate for the
proper administration of the Plan, and to make such determinations under, and
such interpretations of, and to take such steps in connection with, the Plan and
the Plan Awards as it may deem necessary or advisable, in each case in its sole
discretion.
<PAGE>
(b) Delegation of Authority. The Committee may delegate any or all of its
powers and duties under the Plan, including, but not limited to, its authority
to grant waivers pursuant to Article 8, to one or more other committees as it
shall appoint, pursuant to such conditions or limitations as the Committee may
establish; provided, however, that the Committee shall not delegate its
authority to (1) make Plan Awards under the Plan, except as otherwise provided
in Articles 4 and 5, (2) act on matters affecting any Participant who is subject
to the reporting requirements of Section 16(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or the liability provisions of Section
16(b) of the Exchange Act (any such Participant being called a "Section 16
Person") or (3) amend or modify the Plan pursuant to the provisions of paragraph
(b) of Article 14.
(c) Eligibility of Committee Members. No person while a member of the
Committee or any committee of the Board of Directors administering the Plan
shall be eligible to hold or receive a Plan Award.
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STOCK AVAILABLE FOR PLAN AWARDS
3.(a) Stock Subject to Plan. The stock to be subject to or related to Plan
Awards shall be shares of the Company's Common Stock of the par value of $1.00
per share ("Stock"), and may be either authorized and unissued or held in the
treasury of the Company. The maximum number of shares of Stock with respect to
which Plan Awards may be granted under the Plan, subject to adjustment in
accordance with the provisions of Article 11, in each calendar year during any
part of which the Plan is in effect shall be 2% of the total number of issued
shares of Stock as of December 31 of the calendar year immediately preceding
such year (the number of shares determined by application of such percentage in
any calendar year being called the "2% Limit" for such year); provided, however,
that such percentage may be increased to up to 3% in any one or more calendar
years, in which event the excess over 2% in any such calendar year shall be
applied to the reduction of the aggregate number of shares that otherwise would
have been available for Plan Awards pursuant to this paragraph (a) and paragraph
(c) of this Article 3 in subsequent calendar years during the term of the Plan,
in inverse order commencing with the year 2008. Notwithstanding the foregoing,
(i) the aggregate number of shares that may be issued upon exercise of
"incentive stock options" (as defined in paragraph (a)(l) of Article 5) shall
not exceed 2% of the number of shares authorized under the Company's Certificate
of Incorporation at the date of adoption of the Plan (subject to adjustment in
accordance with the provisions of Article 11), (ii) the maximum number of shares
subject to Options (as defined below), with or without any related Stock
Appreciation Rights (as defined below), that may be granted pursuant to Article
5 to any Covered Executive during any calendar year during any part of which the
Plan is in effect shall be 2.5% of the maximum number of shares of Stock with
respect to which Plan Awards may be granted during such year under the Plan
determined in accordance with this paragraph (a), subject to adjustment in
accordance with the provisions of Article 11 and (iii) the maximum number of
shares of Stock that may be granted as Final Awards (as defined below) pursuant
to Article 4 to any Covered Executive during any calendar year during any part
of which the Plan is in effect shall be 500,000, subject to adjustment in
accordance with the provisions of Article 11.
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(b) Computation of Stock Available for Plan Awards. For the purpose of
computing the total number of shares of Stock remaining available for Plan
Awards at any time in each calendar year during which the Plan is in effect,
there shall be debited against the total number of shares determined to be
available pursuant to paragraphs (a) and (c) of this Article 3 (i) the maximum
number of shares of Stock subject to issuance upon exercise of Options (as
defined below) granted in such year, (ii) the number of shares of Stock
representing 150% of the Target Awards under Performance Stock Rights (as
defined below) granted in such calendar year, and (iii) the number of shares of
Stock related to Other Stock-Based Awards (as defined below) granted in such
year, as determined by the Committee in each case as at the dates on which such
Plan Awards were granted.
(c) Unused, Forfeited and Reacquired Shares. Any unused portion of the 2%
Limit for any calendar year shall be carried forward and shall be made available
for Plan Awards in succeeding calendar years. The shares involved in the
unexercised or undistributed portion of any terminated, expired or forfeited
Plan Award (including, without limitation, the shares representing 150% of any
Target Award that are not included in the related Final Award also shall be made
available for further Plan Awards. Any shares of Stock made available for Plan
Awards pursuant to this paragraph (c) shall be in addition to the shares
available pursuant to paragraph (a) of this Article 3.
PERFORMANCE STOCK RIGHTS AND FINAL AWARDS
4.(a) Grant of Performance Stock Rights. The term "Performance Stock Right"
("Right"), shall mean the right to receive, without payment to the Company, up
to the number of shares of Stock described therein, subject to the terms and
provisions of the Right and the Plan. The Committee, at any time and from time
to time while the Plan is in effect, may grant, or authorize the granting of,
Rights to such officers and other key salaried employees of the Company, whether
or not members of the Board of Directors, as it may select and for such numbers
of shares based on such dollar amounts as it shall designate, subject to the
provisions of this Article 4 and Article 3. Notwithstanding anything contained
in the Plan to the contrary, the Committee may authorize a committee of two or
more Company officers appointed by it to determine the amount of individual
grants of Rights and related Final Awards to key employees of the Company
selected by such committee who are not officers or directors of the Company,
subject to the provisions of Articles 3 and 4 and subject to a maximum number of
shares of Stock and any other limitations specified by the Committee.
(b) Terms and Provisions of Performance Stock Rights. Prior to the grant of
any Right, the Committee shall determine the terms and provisions of each Right,
including, without limitation, (i) the number of shares of Stock to be earned
under such Right if 100% of each of the Performance Goals is achieved (the
"Target Award"), as adjusted pursuant to Article 11, (ii) one or more
performance goals ("Performance Goals") based on one or more Performance
Criteria (as defined below) to be used to measure performance under such Right,
(iii) the formula (the "Performance Formula") to be applied against the
Performance Goals in determining the percentage (which shall not exceed 150%) of
the Target Award (as adjusted pursuant to Article 11) used to determine the
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number of shares of Stock earned under such Right, (iv) the period of time for
which such performance is to be measured (the "Performance Period"), which shall
commence not earlier than 90 days prior to the date of grant of such Right, and
(v) the period of time, if any, during which the disposition of shares of Stock
covered by any Final Award relating to such Right shall be restricted as
provided in paragraph (a) of Article 9 (the "Restriction Period"); provided,
however, that the Committee may establish the Restriction Period applicable to
any Right at the time of or at any time prior to the granting of the related
Final Award rather that at the time of granting such Right. Within 90 days of
commencement of a Performance Period, the Committee may establish a minimum
threshold objective for any Performance Goal for such Performance Period, which
if not met, would result in no Final Award being made to any Participant with
such Goal for such Period. During and after the Performance Period, but prior to
the grant of a Final Award relating to any Right granted to a Participant who is
not a "Covered Executive" (as defined below), the Committee may adjust the
Performance Goals, Performance Formula and Target Award and otherwise modify the
terms and provisions of such Right, subject to the terms and conditions of the
Plan. Each Right shall be evidenced by a letter, an agreement or such other
document as the Committee may determine. The term "Performance Criteria" shall
mean, with respect to any Right granted to a Participant who is a Covered
Executive, one or more of the following objective business criteria established
by the Committee with respect to the Company and/or any subsidiary, division,
business unit or component thereof upon which the Performance Goals for a
Performance Period are based: asset charge, asset turnover, automotive return on
sales, capacity utilization, capital employed in the business, capital spending,
cash flow, cost structure improvements, complexity reductions, customer loyalty,
diversity, earnings growth, earnings per share, economic value added,
environmental health and safety, facilities and tooling spending, hours per
vehicle, increase in customer base, inventory turnover, market price
appreciation, market share, net cash balance, net income, net income margin, net
operating cash flow, operating profit margin, order to delivery time, plant
capacity, process time, profits before tax, quality/customer satisfaction,
return on assets, return on capital, return on equity, return on net operating
assets, return on sales, revenue growth, sales margin, sales volume, total
shareholder return, vehicles per employee, warranty performance to budget,
variable margin and working capital. The term "Performance Criteria" shall mean,
with respect to any Right granted to a Participant who is not a Covered
Executive, one or more of the business criteria applicable to Covered Executives
for the Performance Period and any other criteria based on individual, business
unit, group or Company performance selected by the Committee. The Performance
Criteria may be expressed in absolute terms or relate to the performance of
other companies or to an index. The term "Covered Executive" shall mean the
Chief Executive Officer and the other four highest compensated officers of the
Company at year-end whose compensation is required to be reported in the Summary
Compensation Table of the Proxy Statement.
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(c) Dividend Equivalents on Rights. (1) If the Committee shall determine,
each Participant to whom a Right is granted shall be entitled to receive payment
of the same amount of cash that such Participant would have received as cash
dividends if, on each record date during the entire Performance Period relating
to such Right, such Participant had been the holder of record of a number of
shares of Stock equal to 100% of the related Target Award (as adjusted pursuant
to Article 11). In the case of any Right granted to a Participant after the
commencement of the related Performance Period, any such payment relating to any
dividend payable prior to the date of grant of such Right shall be made at the
same time as the payment relating to the first dividend paid after such date of
grant. Such cash payments are hereinafter called "dividend equivalents".
(2) Notwithstanding the provisions of paragraph (c)(1) of this Article 4
relating to dividend equivalents, the Committee may determine that, in lieu of
receiving all or any portion of any such dividend equivalent in cash, a
Participant shall receive an award of full shares of Stock having a value (as
determined by the Committee) approximately equal to the portion of such dividend
equivalent that was not paid in cash. Certificates for shares of Stock so
awarded shall be issued as of the payment date for the related cash dividend,
and the shares of Stock covered thereby shall be treated in the same manner as
shares of Stock representing Final Awards, subject to the terms and conditions
of the Plan, including, without limitation, the provisions of paragraphs (b),
(d) and (e) of Article 4 and Articles 8, 9, and 11.
(d) Final Awards. (1) As soon as practicable following the completion of
the Performance Period relating to any Right, but not later than 12 months
following such completion, the Committee shall determine the percentage (which
shall not exceed 150%) of the Target Award (as adjusted pursuant to Article 11)
which shall be used to determine the number of shares of Stock to be awarded
finally to the Participant who holds such Right. Such number of shares of Stock
is called the "Final Award". Each Final Award shall represent only full shares
of Stock, and any fractional share that would otherwise result from such Final
Award calculation shall be disregarded. In making such determination, the
Committee shall apply the applicable Performance Formula for the Participant for
the Performance Period against the accomplishment of the related Performance
Goals. The Committee may, in its sole discretion, reduce the amount of any Final
Award that otherwise would be awarded to any Participant for any Performance
Period. In addition, the Committee may, in its sole discretion, increase the
amount of any Final Award that otherwise would be awarded to any Participant who
is not a Covered Executive, subject to the maximum Final Award amount of 150% of
the related Target Award (as adjusted pursuant to Article 11), taking into
account (i) the extent to which the Performance Goals provided in such Right
was, in the Committee's sole opinion, achieved, (ii) the individual performance
of such Participant during the related Performance Period and (iii) such other
factors as the Committee may deem relevant, including, without limitation, any
change in circumstances or unforeseen events, relating to the Company, the
economy or otherwise, since the date of grant of such Right. The Committee shall
notify such Participant of such Participant's Final Award as soon as practicable
following such determination.
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(2) Following the determination of each Final Award, the Company shall
issue or cause to be issued certificates for the number of shares of Stock
representing such Final Award, registered in the name of the Participant who
received such Final Award. Such Participant shall thereupon become the holder of
record of the number of shares of Stock evidenced by such certificates, entitled
to dividends, voting rights and other rights of a holder thereof, subject to the
terms and provisions of the Plan, including, without limitation, the provisions
of paragraph (e) of this Article 4 and Articles 8, 9 and 11. If the Committee
has determined that dividend equivalents shall be payable to a Participant with
respect to any Right pursuant to paragraph (c) of this Article 4, concurrently
with the issuance of such certificates, the Company shall deliver to such
Participant an amount equal to the amount of the cash dividends that such
Participant would have received with respect to the shares of Stock representing
such Final Award, prior to the date on which such Participant shall have become
the holder of record of such shares, if such Participant had become such a
holder of record immediately following completion of the Performance Period
relating to such Final Award. The Committee may require that such certificates
bear such restrictive legend as the Committee may specify and be held by the
Company in escrow or otherwise pursuant to any form of agreement or instrument
that the Committee may specify.
(3) Notwithstanding the provisions of paragraphs (d)(l) and (2) of this
Article 4 or any other provision of the Plan, in the case of any Right held by a
Participant who is an employee of a foreign subsidiary or foreign branch of the
Company or of a foreign Joint Venture, or held by a Participant who is in any
other category specified by the Committee, the Committee may specify that such
Participant's Final Award shall not be represented by certificates for shares of
Stock but shall be represented by rights approximately equivalent (as determined
by the Committee) to the rights that such Participant would have received if
certificates for shares of Stock had been issued in the name of such Participant
in accordance with paragraphs (d)(l) and (2) of this Article 4 (such rights
being called "Stock Equivalents"). Subject to the provisions of Article 11 and
the other terms and provisions of the Plan, if the Committee shall so determine,
each Participant who holds Stock Equivalents shall be entitled to receive the
same amount of cash that such Participant would have received as dividends if
certificates for shares of Stock had been issued in the name of such Participant
pursuant to paragraphs (d)(l) and (2) of this Article 4 covering the number of
shares equal to the number of shares to which such Stock Equivalents relate.
Notwithstanding any other provision of the Plan to the contrary, the Stock
Equivalents representing any Final Award may, at the option of the Committee, be
converted into an equivalent number of shares of Stock or, upon the expiration
of the applicable Restriction Period, into cash, under such circumstances and in
such manner as the Committee may determine.
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(4) If the Restriction Period relating to any Final Award shall expire
while the Participant who was granted such Award is employed by the Company, the
certificates for the shares of Stock issued in such Participant's name with
respect to such Final Award, and certificates for a number of shares of Stock
equal to the number of shares represented by any Stock Equivalents then held by
such Participant with respect to such Final Award, shall be delivered to such
Participant as soon as practicable, free of all restrictions and restrictive
legends.
(e) Effect of Termination of Employment or Death. (1) If a Participant's
employment with the Company shall be terminated, prior to the expiration of the
Restriction Period relating to any Right granted to such Participant, by reason
of discharge, release in the best interest of the Company, voluntary quit or
retirement without the approval of the Company, such Right, and any shares of
Stock or Stock Equivalents issued in the name of such Participant as a Final
Award relating to such Right, shall be forfeited and cancelled forthwith unless
the Committee shall grant an appropriate waiver. Any such waiver shall be
granted in accordance with the procedure specified in paragraph (b) of Article 8
(in which event the reference in such paragraph (b) to "the nonfulfillment of
such condition" shall be deemed to refer to such Participant's termination for
any of the reasons specified above).
(2) If a Participant's employment with the Company shall be terminated for
any reason other than a reason specified in paragraph (e)(l) of this Article 4,
except death, prior to or concurrently with the expiration of the Restriction
Period relating to any Right granted to such Participant,
(i) certificates for any shares of Stock issued in such Participant's name
prior to such termination of employment as a Final Award relating to such
Right, and certificates for a number of shares of Stock equal to the number
of shares represented by any Stock Equivalents then held by such
Participant with respect to such Final Award, shall be delivered to such
Participant as soon as practicable, free of all restrictions and
restrictive legends; and
(ii) subject to the provisions of Article 8, certificates for any shares of
Stock issued in such Participant's name following such termination of
employment as a Final Award relating to such Right (whether relating to a
Performance Period ended prior to such termination or subsequent thereto)
shall be delivered to such Participant as soon as practicable, free of all
restrictions and restrictive legends.
(3) If a Participant's employment with the Company shall be terminated at
any time by reason of a sale or other disposition (including, without
limitation, a transfer to a Joint Venture) of the division, operation or
subsidiary in which such Participant was employed or to which such Participant
was assigned, unless the Committee shall specify otherwise, any Rights then held
by such Participant, and any shares of Stock or Stock Equivalents issued in the
name of such Participant as a Final Award relating to such Rights, shall be
dealt with as provided in paragraph (e)(2) of this Article 4.
(4) If a Participant shall die while in the employ of the Company, any
Rights then held by such Participant shall remain in effect. Such Rights, and
any shares of Stock then issued in the name of such Participant (but not yet
distributed to such Participant), and any such shares thereafter issuable with
respect to such Rights, as Final Awards under the Plan, shall be transferred or
issued and delivered to the beneficiary designated pursuant to Article 10 or, if
no such designation is in effect, to the executor or administrator of the estate
of such Participant, free of all restrictions and restrictive legends. With
regard to any Stock Equivalents then held by such Participant, certificates for
a number of shares of Stock equal to the number of shares represented thereby
shall be issued and delivered to such beneficiary, executor or administrator,
free of all restrictions and restrictive legends.
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(5) Subject to the provisions of Article 8, if a Participant shall die
following termination of employment, any rights then held by such Participant
shall remain in effect. Such Rights, and any shares of Stock then issued in
Rights then held by such Participant shall remain in effect. Such Rights, and
any shares of Stock then issued in the name of such Participant (but not yet
distributed to such Participant), and any such shares thereafter issuable with
respect to such Rights, as Final Awards under the Plan, shall be transferred or
issued and delivered to the beneficiary designated pursuant to Article 10 or, if
no such designation is in effect, to the executor or administrator of the estate
of such Participant, free of all restrictions and restrictive legends. With
regard to any Stock Equivalents then held by such Participant, certificates for
a number of shares of Stock equal to the number of shares represented thereby
shall be issued and delivered to such beneficiary, executor or administrator,
free of all restrictions and restrictive legends.
(6) Notwithstanding any other provision of the Plan to the contrary, if a
Participant's employment with the Company shall for any reason terminate prior
to the later of (a) the date of expiration of the period of six months following
the commencement of the Performance Period relating to any Right (or such other
period as the Committee may specify) or (b) the date six months following the
date of grant of such Right, such Right shall be forfeited and cancelled
forthwith unless the Committee shall determine otherwise.
(7) Notwithstanding any provision of the Plan to the contrary, (i) the
Committee may at any time establish a Restriction Period applicable to the Stock
to be represented by any Final Award, and such Restriction Period shall remain
in effect until such time (which may be later than the date of the Participant's
retirement or other termination of employment) as the Committee may determine;
and (ii) the Committee may determine that no shares of Stock or certificates
therefor shall be delivered to any Participant until the date of expiration of
the applicable Restriction Period (or such earlier date as the Committee may
determine).
OPTIONS AND STOCK APPRECIATION RIGHTS
5.(a) Grant of Options. (1) The Board of Directors, at any time and from
time to time while the Plan is in effect, may authorize the granting of Options
to such officers and other key salaried employees of the Company, whether or not
members of the Board of Directors, as it may select from among those nominated
by the Committee, and for such numbers of shares as it shall designate, subject
to the provisions of this Article 5 and Article 3; provided, however, that no
Option shall be granted to a Participant for a larger number of shares than the
Committee shall recommend for such Participant. Each Option granted pursuant to
the Plan shall be designated at the time of grant as either an "incentive stock
option" ("ISO"), as such term is defined in the Internal Revenue Code of 1986,
as amended (the "Code"), or its successors (or shall otherwise be designated as
an option entitled to favorable treatment under the Code) or as a "nonqualified
stock option" ("NQO") (ISOs and NQOs being individually called an "Option" and
collectively called "Options").
(2) Without in any way limiting the authority provided in paragraph (a)(l)
of this Article 5, the Board of Directors may authorize the Committee to
authorize the granting of Options, at any time and from time to time while the
Plan is in effect, to such officers and other key salaried employees of the
Company, whether or not members of the Board of Directors, as the Committee may
select, subject to the provisions of this Article 5 and Article 3 and subject to
such other limitations as the Board of Directors may specify. In addition, to
the extent such authority has been delegated to the Committee pursuant to this
Article 5, the Committee may authorize a committee of two or more Company
officers appointed by it to determine the amount and date of individual Option
grants for key employees selected by such committee who are not officers or
directors of the Company, subject to Articles 3 and 5 and subject to a maximum
number of shares of Stock and any other limitations specified by the
Committee.
-9-
<PAGE>
(3) The date on which an Option shall be granted shall be the date of
authorization of such grant or such later date as may be determined at the time
such grant is authorized. Any individual may hold more than one Option.
(b) Price. In the case of each Option granted under the Plan the
option price shall be the fair market value of Stock on the date of grant of
such Option; provided, however, that in the case of any Option granted to an
employee of a foreign subsidiary or a foreign branch of the Company or of a
foreign Joint Venture the Board of Directors may in its discretion fix an option
price in excess of the fair market value of Stock on such date. The term "fair
market value" when used with reference to the option price shall mean the
average of the highest price and the lowest price at which Stock shall have been
sold regular way on the New York Stock Exchange on the date of grant of such
Option. In the event that any Option shall be granted on a date on which there
were no such sales of Stock on such Exchange, the fair market value of Stock on
such date shall be deemed to be the average of such highest price and lowest
price on the next preceding day on which there were such sales.
(c) Grant of Stock Appreciation Rights. (1) The Board of Directors may
authorize the granting of Stock Appreciation Rights (as defined below) to such
Participants who are granted Options under the Plan as it may select from among
those nominated therefor by the Committee. The Committee may authorize the
granting of Stock Appreciation Rights to such Participants as are granted
Options under the Plan pursuant to paragraph (a) of this Article 5. Each Stock
Appreciation Right shall relate to a specific Option granted under the Plan and
may be granted concurrently with the Option to which it relates or at any time
prior to the exercise, termination or expiration of such Option.
(2) The term "Stock Appreciation Right" shall mean the right to receive,
without payment to the Company and as the Participant may elect, either (a) that
number of shares of Stock determined by dividing (i) the total number of shares
of Stock subject to the related Option (or the portion or portions thereof which
the Participant from time to time elects to use for purposes of this clause (a),
multiplied by the amount by which the fair market value of a share of Stock on
the day the right is exercised exceeds the option price (such amount being
hereinafter referred to as the "Spread"), by (ii) the fair market value of a
share of Stock on the exercise date; or (b) cash in an amount determined by
multiplying (i) the total number of shares of Stock subject to the related
Option (or the portion or portions thereof which the Participant from time to
time elects to use for purposes of this clause (b)), by (ii) the amount of the
Spread; or (c) a combination of shares of Stock and cash, in amounts determined
as set forth in clauses (a) and (b) above; provided, however, that the total
number of shares which may be received upon exercise of a Stock Appreciation
Right for Stock shall not exceed the total number of shares subject to the
related Option or portion thereof, and the total amount of cash which may be
received upon exercise of a Stock Appreciation Right for cash shall not exceed
the fair market value on the date of exercise of the total number of shares
subject to the related Option or portion thereof.
-10-
<PAGE>
(3) The Committee may impose such conditions as it may deem appropriate
upon the exercise of an Option or a Stock Appreciation Right, including, without
limitation, a condition that the Stock Appreciation Right may be exercised only
in accordance with rules and regulations adopted by the Committee from time to
time.
(4) The right of a Participant to exercise a Stock Appreciation Right shall
be cancelled if and to the extent the related Option is exercised. The right of
a Participant to exercise an Option shall be cancelled if and to the extent that
shares covered by such Option are used to calculate shares or cash received upon
exercise of a related Stock Appreciation Right.
(5) The fair market value of Stock on the date of exercise of a Stock
Appreciation Right shall be determined as of such exercise date in the same
manner as the fair market value of Stock on the date of grant of an Option is
determined pursuant to paragraph (b) of this Article 5.
(6) If any fractional share of Stock would otherwise be payable to a
Participant upon the exercise of a Stock Appreciation Right, the Participant
shall be paid a cash amount equal to the same fraction of the fair market value
(determined as described above) of the Stock on the date of exercise.
(d) Stock Option Agreement. Each Option and related Stock Appreciation
Right shall be evidenced by a Stock Option Agreement in such form and containing
such provisions not inconsistent with the provisions of the Plan as the
Committee from time to time shall approve. Each Stock Option Agreement shall
provide that the Participant shall agree to remain in the employ of the Company
for such period from the date of grant of such Option or combination of Options
or related Stock Appreciation Rights as shall be provided in the Stock Option
Agreement; provided, however, that the Company's right to terminate the
employment of the Participant at any time, with or without cause, shall not be
restricted by such agreement.
(e) Terms of Options and Stock Appreciation Rights. Each Option and related
Stock Appreciation Right granted under the Plan shall be exercisable on such
date or dates, during such period, for such number of shares and subject to such
further conditions as shall be determined pursuant to the provisions of the
Stock Option Agreement with respect to such Option and related Stock
Appreciation Right; provided, however, that a Stock Appreciation Right shall not
be exercisable prior to or later than the time the related Option could be
exercised; and provided, further, that in any event no Option or related Stock
Appreciation Right shall be exercised beyond ten years from the date of grant of
the Option.
(f) Effect of Termination of Employment or Death. (1) Except as provided in
paragraphs (f)(2), (3) and (4) of this Article 5, if, prior to the date that any
Option or Stock Appreciation Right shall first have become exercisable, the
Participant's employment with the Company shall be terminated by the Company,
with or without cause, or by the act, death, incapacity or retirement of the
Participant, the Participant's right to exercise such Option or Stock
Appreciation Right shall terminate on the date of such termination of employment
and all rights thereunder shall cease.
-11-
<PAGE>
(2) Notwithstanding the provisions of paragraph (f)(l) of this Article 5,
if the Participant's employment with the Company shall be terminated by reason
of retirement, release because of disability or death, and the Participant had
remained in the employ of the Company for at least six months following the date
of any Stock Option Agreement under the Plan between such Participant and the
Company, and subject to the provisions of Article 8, all such Participant's
rights under such Stock Option Agreement shall continue in effect or continue to
accrue for the period ending on the date ten years from the date of grant of any
Option (or such shorter period as the Committee may specify), subject, in the
event of the Participant's death prior to such date, to the provisions of
paragraph (f)(7) of this Article 5 and subject to any other limitation on the
exercise of such rights in effect at the date of exercise.
(3) Notwithstanding the provisions of paragraph (f)(l) of this Article 5,
if the Participant's employment with the Company shall be terminated under
mutually satisfactory conditions, and the Participant had remained in the employ
of the Company for at least six months following the date of any Stock Option
Agreement under the Plan between the Participant and the Company, and subject to
the provisions of Article 8, all such Participant's rights under such Stock
Option Agreement shall continue in effect or continue to accrue until the date
three months after the date of such termination (but not later than the date ten
years from the date of grant of any Option), subject, in the event of the
Participant's death during such three-month period, to the provisions of
paragraph (f)(7) of this Article 5 and subject to any other limitation on the
exercise of such rights in effect at the date of exercise.
(4) Notwithstanding any other provision of the Plan to the contrary, if a
Participant's employment with the Company shall be terminated at any time by
reason of a sale or other disposition (including, without limitation, a transfer
to a Joint Venture) of the division, operation or subsidiary in which such
Participant was employed or to which such Participant was assigned, all such
Participant's rights under any Option and any related Stock Appreciation Right
granted to him or her shall continue in effect and continue to accrue until the
date five years after the date of such termination or such earlier or later date
as the Committee may specify (but not later than the date ten years from the
date of grant of any Option), provided such Participant shall satisfy both of
the following conditions:
(a) such Participant, at the date of such termination, had remained in the
employ of the Company for at least three months following the grant of such
Option and Stock Appreciation Right, and
-12-
<PAGE>
(b) such Participant continues to be or becomes employed in such division,
operation or subsidiary following such sale or other disposition and remains in
such employ until the date of exercise of such Option or Stock Appreciation
Right (unless the Committee, or any committee appointed by it for the purpose,
shall waive this condition (b)).
Upon termination of such Participant's employment with such (former)
division, operation or subsidiary following such sale or other disposition, any
then existing right of such Participant to exercise any such Option or Stock
Appreciation Right shall be subject to the following limitations: (i) if such
Participant's employment is terminated by reason of disability, death or
retirement with the approval of his or her employer, such Participant's rights
shall continue as provided in the preceding sentence with the same effect as if
his or her employment had not terminated; (ii) if such Participant's employment
is terminated by reason of discharge or voluntary quit, such Participant's
rights shall terminate on the date of such termination of employment and all
rights under such Option and Stock Appreciation Right shall cease; and (iii) if
such Participant's employment is terminated for any reason other than a reason
set forth in the preceding clauses (i) and (ii), such Participant shall have the
right, within three months after such termination, to exercise such Option or
Stock Appreciation Right to the extent that it or any installment thereof shall
have accrued at the date of such termination and shall not have been exercised,
subject in the case of any such termination to the provisions of Article 8 and
any other limitation on the exercise of such Option and Stock Appreciation Right
in effect at the date of exercise.
(5) If, on or after the date that any Option or Stock Appreciation Right
shall first have become exercisable, a Participant's employment with the Company
shall be terminated for any reason except retirement, release because of
disability, death, release because of a sale or other disposition of the
division, operation or subsidiary in which such Participant was employed or to
which such Participant was assigned, release under mutually satisfactory
conditions, discharge, release in the best interest of the Company or voluntary
quit, such Participant shall have the right, within three months after such
termination, to exercise such Option or Stock Appreciation Right to the extent
that it or any installment thereof shall have accrued at the date of such
termination of employment and shall not have been exercised, subject to the
provisions of Article 8 and any other limitation on the exercise of such Option
or Stock Appreciation Right in effect at the date of exercise.
(6) If a Participant's employment with the Company shall be terminated at
any time by reason of discharge, release in the best interest of the Company or
voluntary quit, the Participant's right to exercise such Option or Stock
Appreciation Right shall terminate on the date of such termination of employment
and all rights thereunder shall cease.
-13-
<PAGE>
(7) If a Participant shall die within the applicable period specified in
paragraph (f)(2), (3), (4) or (5) of this Article 5, the beneficiary designated
pursuant to Article 10 or, if no such designation is in effect, the executor or
administrator of the estate of the decedent or the person or persons to whom the
Option or Stock Appreciation Right shall have been validly transferred by the
executor or administrator pursuant to will or the laws of descent and
distribution shall have the right, within the same period of time as the period
during which the Participant would have been entitled to exercise such Option or
Stock Appreciation Right (except that (a) in the case of a Participant to whom
paragraph (f)(5) of this Article 5 applies, such Participant's Option or Stock
Appreciation Right may be exercised only to the extent that it or any
installment thereof shall have accrued at the date of death and shall not have
been exercised; and (b) the period of time within which any Option or Stock
Appreciation Right shall be exercisable following the date of the Participant's
death shall not be less than one year (unless the Option by its terms expires
earlier)), subject to the provision that no Option or related Stock Appreciation
Right shall be exercised under any circumstances beyond ten years from the date
of grant of such Option, and to any other limitation on the exercise of such
Option or Stock Appreciation Right in effect at the date of exercise. No
transfer of an Option or Stock Appreciation Right by the Participant, other than
by filing a written designation of beneficiary pursuant to Article 10, shall be
effective to bind the Company unless the Company shall have been furnished with
written notice of such transfer and a copy of the will and/or such other
evidence as the Committee may deem necessary to establish the validity of the
transfer. No transfer shall be effective without the acceptance by the
designated beneficiary or other transferee of the terms and conditions of such
Option or Stock Appreciation Right.
(g) Payment for Option Shares. (1) Payment for shares of Stock purchased
upon exercise of an Option granted hereunder shall be made, either in full or,
if the Committee shall so determine and at the election of the Participant, in
installments, in such manner as provided in the applicable Stock Option
Agreement.
(2) Unless the Committee shall provide otherwise in any form of Stock
Option Agreement, any payment for shares of Stock purchased upon exercise of an
Option granted hereunder may be made in cash, by delivery of shares of Stock
beneficially owned by the Participant or by a combination of cash and Stock, at
the election of the Participant; provided, however, that any shares of Stock so
delivered shall have been beneficially owned by the Participant for a period of
not less than six months prior to the date of exercise. Any such shares of Stock
so delivered shall be valued at their fair market value on the date of such
exercise, which shall be determined as of such date in the same manner as the
fair market value of Stock on the date of grant of an Option is determined
pursuant to paragraph (b) of this Article 5. The Committee shall determine
whether and if so the extent to which actual delivery of share certificates to
the Company shall be required.
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<PAGE>
STOCK AND OTHER STOCK-BASED
AND COMBINATION AWARDS
6.(a) Grants of Other Stock-Based Awards. The Committee, at any time and
from time to time while the Plan is in effect, may grant to such officers and
other salaried employees of the Company, whether or not members of the Board of
Directors, as it may select, Plan Awards pursuant to which Stock is or may in
the future be acquired, or Plan Awards valued or determined in whole or part by
reference to, or otherwise based on, Stock (including but not limited to Plan
Awards denominated in the form of "stock units", grants of so-called "phantom
stock" and options containing terms or provisions differing in whole or in part
from Options granted pursuant to Article 5) (such Plan Awards being hereinafter
called "Other Stock-Based Awards"). Other Stock-Based Awards may be granted
either alone, in addition to, in tandem with or as an alternative to any other
kind of Plan Award, grant or benefit granted under the Plan or under any other
employee plan of the Company, including a plan of any acquired entity.
(b) Terms and Conditions. Subject to the provisions of the Plan, the
Committee shall have authority to determine the time or times at which Other
Stock-Based Awards shall be made, the number of shares of Stock or stock units
and the like to be granted or covered pursuant to such Plan Awards (subject to
the provisions of Article 3) and all other terms and conditions of such Plan
Awards, including, but not limited to, whether such Plan Awards shall be payable
or paid in cash, Stock or otherwise.
(c) Consideration for Other Stock-Based Awards. In the discretion of the
Committee, any Other-Stock Based Award may be granted as a Stock bonus for no
consideration other than services rendered; provided, however, that in the event
an Other Stock-Based Award shall be granted to a Participant who is a Section 16
Person under which shares of Stock are or may in the future be issued for any
other type of consideration, the amount of such consideration shall either be
(i) equal to the amount (such as the par value of such shares) required to be
received by the Company in order to assure compliance with applicable state law
or (ii) equal to or greater than 50% of the fair market value of such shares (as
determined in accordance with paragraph (b) of Article 5) on the date of grant
of such Other Stock-Based Award.
CASH AWARDS TO EMPLOYEES OF
FOREIGN SUBSIDIARIES OR BRANCHES OR JOINT VENTURES
7. Notwithstanding any other provision of the Plan to the contrary, the
Committee may determine to permit a Participant, other than a Section 16 Person,
who is an employee of a foreign subsidiary or a foreign branch of the Company or
of a foreign Joint Venture to receive cash in lieu of any Plan Award or shares
of Stock that would otherwise have been granted to or delivered to such
Participant under the Plan, in such amount as the Committee may determine in its
sole discretion.
PAYMENT OF PLAN AWARDS AND CONDITIONS THEREON
8.(a) Effect of Competitive Activity. Anything contained in the Plan to the
contrary notwithstanding, if the employment of any Participant shall terminate,
for any reason other than death, while any Plan Award to such Participant is
outstanding hereunder, and such Participant has not yet received the Stock
covered by such Plan Award or otherwise received the full benefit of such Plan
Award, such Participant, if otherwise entitled thereto, shall receive such Stock
or benefit only if, during the entire period from the date of such Participant's
termination to the date of such receipt, such Participant shall have earned out
such Plan Award by (i) making himself or herself available, upon request, at
reasonable times and upon a reasonable basis, to consult with, supply
information to and otherwise cooperate with the Company or any subsidiary
thereof with respect to any matter that shall have been handled by him or her or
under his or her supervision while he or she was in the employ of the Company or
of any subsidiary thereof, and (ii) refraining from engaging in any activity
that is directly or indirectly in competition with any activity of the Company
or any subsidiary thereof.
-15-
<PAGE>
(b) Nonfulfillment of Competitive Activity Conditions: Waivers Under the
Plan. In the event of a Participant's nonfulfillment of any condition set forth
in paragraph (a) of this Article 8 such Participant's rights under any Plan
Award shall be forfeited and cancelled forthwith; provided, however, that the
nonfulfillment of such condition may at any time (whether before, at the time of
or subsequent to termination of employment) be waived in the following manner:
(i) with respect to any such Participant who at any time shall have been a
Section 16 Person, such waiver may be granted by the Committee upon its
determination that in its sole judgment there shall not have been and will
not be any substantial adverse effect upon the Company or any subsidiary
thereof by reason of the nonfulfillment of such condition; and
(ii) with respect to any other such Participant, such waiver may be granted
by the Committee (or any committee appointed by it for the purpose) upon
its determination that in its sole judgment there shall not have been and
will not be any such substantial adverse effect.
(c) Effect of Inimical Conduct. Anything contained in the Plan to the
contrary notwithstanding, all rights of a Participant under any Plan Award shall
cease on and as of the date on which it has been determined by the Committee
that such Participant at any time (whether before or subsequent to termination
of such Participant's employment) acted in a manner inimical to the best
interests of the Company or any subsidiary thereof.
(d) Tax and Other Withholding. Prior to any distribution of cash, Stock or
Other Stock-Based Awards (including payments under paragraph (c) of Article 4)
to any Participant, appropriate arrangements (consistent with the Plan and any
rules adopted hereunder) shall be made for the payment of any taxes and other
amounts required to be withheld by federal, state or local law.
(e) Substitution. The Committee, in its sole discretion, may substitute a
Plan Award (except ISOs) for another Plan Award or Plan Awards of the same or
different type.
NON-TRANSFERABILITY OF PLAN AWARDS;
RESTRICTIONS ON DISPOSITION AND EXERCISE OF PLAN AWARDS
9.(a) Restrictions on Transfer of Rights or Final Awards. (i) No Right or
(ii) until the expiration of the applicable Restriction Period, no shares of
Stock covered by any Final Award determined under paragraph (d) of Article 4,
shall be transferred, pledged, assigned or otherwise disposed of by a
Participant, except as permitted by the Plan, without the consent of the
Committee, otherwise than by will or the laws of descent and distribution;
provided, however, that the Committee may permit, on such terms as it may deem
appropriate, use of Stock included in any Final Award as partial or full payment
upon exercise of an Option under the Plan or a stock option under any Stock
Option Plan of the Company prior to the expiration of the Restriction Period
relating to such Final Award.
-16-
<PAGE>
(b) Restrictions on Transfer of Options or Stock Appreciation Rights.
Unless the Committee determines otherwise, no Option or related Stock
Appreciation Right shall be transferable by a Participant otherwise than by will
or the laws of descent and distribution, and during the lifetime of a
Participant the Option or Stock Appreciation Right shall be exercisable only by
such Participant or such Participant's guardian or legal representative.
(c) Restrictions on Transfer of Certain Other Stock-Based Awards. Unless
the Committee determines otherwise, no Other-Stock Based Award which constitutes
an option or similar right shall be transferable by a Participant otherwise than
by will or the laws of descent and distribution, and during the lifetime of a
Participant any such Other-Stock Based Award shall be exercisable only by such
Participant or such Participant's guardian or legal representative.
DESIGNATION OF BENEFICIARIES
10. Anything contained in the Plan to the contrary notwithstanding, a
Participant may file with the Company a written designation of a beneficiary or
beneficiaries under the Plan (subject to such limitations as to the classes and
number of beneficiaries and contingent beneficiaries and such other limitations
as the Committee from time to time may prescribe), subject to the provisions of
paragraph (e) of Article 4 and paragraph (f) of Article 5. A Participant shall
be deemed to have designated as beneficiary or beneficiaries under the Plan the
person or persons who receive such Participant's life insurance proceeds under
the basic Company Life Insurance Plan unless such Participant shall have
assigned such life insurance or shall have filed with the Company a written
designation of a different beneficiary or beneficiaries under the Plan. A
Participant may from time to time revoke or change any such designation of
beneficiary. Any designation of beneficiary under the Plan shall be controlling
over any other disposition, testamentary or otherwise; provided, however, that
if the Committee shall be in doubt as to the entitlement of any such beneficiary
to any Right, Final Award, Option, Stock Appreciation Right or Other Stock-Based
Award, the Committee may determine to recognize only the legal representative of
such Participant, in which case the Company, the Committee and the members
thereof shall not be under any further liability to anyone. In the event of the
death of any Participant, the term "Participant" as used in the Plan shall
thereafter be deemed to refer to the beneficiary designated pursuant to this
Article 10 or, if no such designation is in effect, the executor or
administrator of the estate of such Participant, unless the context otherwise
requires.
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<PAGE>
MERGER, CONSOLIDATION, STOCK DIVIDENDS, ETC.
ll.(a) Adjustments. In the event of any merger, consolidation,
reorganization, stock split, stock dividend or other event affecting Stock, an
appropriate adjustment shall be made in the total number of shares available for
Plan Awards and in all other provisions of the Plan that include a reference to
a number of shares, and in the numbers of shares covered by, and other terms and
provisions of, outstanding Plan Awards.
(b) Committee Determinations. The foregoing adjustments and the manner of
application of the foregoing provisions shall be determined by the Committee in
its sole discretion. Any such adjustment may provide for the elimination of any
fractional share which might otherwise become subject to a Plan Award.
ACCELERATION OF PAYMENT
OR MODIFICATION OF PLAN AWARDS
12. Notwithstanding any other provision of the Plan, the Committee, in the
event of the death of a Participant or in any other circumstance, may accelerate
distribution of any Plan Award in its entirety or in a reduced amount, in cash
or in Stock, or modify any Plan Award, in each case on such basis and in such
manner as the Committee may determine in its sole discretion.
RIGHTS AS A STOCKHOLDER
13. A Participant shall not have any rights as a stockholder with respect
to any share covered by any Plan Award until such Participant shall have become
the holder of record of such share.
TERM, AMENDMENT, MODIFICATION
AND TERMINATION OF THE PLAN
14. (a) Term. The Plan shall terminate on May 1, 2008, except with respect
to Plan Awards then outstanding.
(b) Amendment, Modification and Termination. The Board of Directors, upon
recommendation of the Committee, at any time may amend, modify or terminate the
Plan, and the Committee at any time may amend or modify the Plan; provided,
however, that no such action of the Board of Directors or the Committee, without
approval of the stockholders, may (a) increase the total number of shares of
Stock with respect to which Plan Awards may be granted under the Plan, (b)
extend the term of the Plan as set forth in paragraph (a) of this Article 14 or
(c) permit any person while a member of the Committee or any committee of the
Board of Directors administering the Plan to be eligible to receive or hold a
Plan Award; provided, however, that neither the Board of Directors nor the
Committee may amend or modify the Plan so as to increase the maximum number of
shares determinable pursuant to the last sentence of paragraph (a) of Article 3.
-18-
<PAGE>
INDEMNIFICATION AND EXCULPATION
15.(a) Indemnification. Each person who is or shall have been a member of
the Board of Directors or of the Committee or of any committee of the Board of
Directors administering the Plan or of any committee appointed by the foregoing
committees shall be indemnified and held harmless by the Company against and
from any and all loss, cost, liability or expense that may be imposed upon or
reasonably incurred by such person in connection with or resulting from any
claim, action, suit or proceeding to which such person may be or become a party
or in which such person may be or become involved by reason of any action taken
or failure to act under the Plan and against and from any and all amounts paid
by such person in settlement thereof (with the Company's written approval) or
paid by such person in satisfaction of a judgment in any such action, suit or
proceeding, except a judgment in favor of the Company based upon a finding of
such person's lack of good faith; subject, however, to the condition that, upon
the institution of any claim, action, suit or proceeding against such person,
such person shall in writing give the Company an opportunity, at its own
expense, to handle and defend the same before such person undertakes to handle
and defend it on such person's behalf. The foregoing right of indemnification
shall not be exclusive of any other right to which such person may be entitled
as a matter of law or otherwise, or any power that the Company may have to
indemnify or hold such person harmless.
(b) Exculpation. Each member of the Board of Directors or of the Committee
or of any committee of the Board of Directors administering the Plan or any
committee appointed by the foregoing committees, and each officer and employee
of the Company, shall be fully justified in relying or acting in good faith upon
any information furnished in connection with the administration of the Plan by
any appropriate person or persons other than such person. In no event shall any
person who is or shall have been a member of the Board of Directors or of the
Committee or of any committee of the Board of Directors administering the Plan
or of any committee appointed by the foregoing committees, or an officer or
employee of the Company, be held liable for any determination made or other
action taken or any omission to act in reliance upon any such information, or
for any action (including the furnishing of information) taken or any failure to
act, if in good faith.
EXPENSES OF PLAN
16. The entire expense of offering and administering the Plan shall be
borne by the Company and its participating subsidiaries.
FINALITY OF DETERMINATIONS
17. Each determination, interpretation, or other action made or taken
pursuant to the provisions of the Plan by the Board of Directors or the
Committee or any committee of the Board of Directors administering the Plan or
any committee appointed by the foregoing committees shall be final and shall be
binding and conclusive for all purposes and upon all persons, including, but
without limitation thereto, the Company, the stockholders, the Committee and
each of the members thereof, and the directors, officers, and employees of the
Company and its subsidiaries, the Participants, and their respective successors
in interest.
-19-
Exhibit 12
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CALCULATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
----------------------------------------------------------------------------------------
(in millions)
For the Years Ended December 31
-----------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Earnings
Income/(Loss) before income taxes
and cumulative effects of changes
in accounting principles $10,939 $ 6,793 $ 6,705 $ 8,789 $ 4,003
Equity in net loss/(income) of
affiliates plus dividends from
affiliates 121 36 179 (182) (98)
Adjusted fixed charges a/ 10,911 10,801 10,556 8,122 7,648
------- ------- ------- ------- -------
Earnings $21,971 $17,630 $17,440 $16,729 $11,553
======= ======= ======= ======= =======
Combined Fixed Charges and
Preferred Stock Dividends
Interest expense b/ $10,570 $10,464 $10,121 $ 7,787 $ 7,351
Interest portion of rental expense c/ 309 300 396 265 266
Preferred stock dividend requirements
of majority owned subsidiaries and
trusts d/ 55 55 199 160 115
------- ------- ------- ------- -------
Fixed charges 10,934 10,819 10,716 8,212 7,732
Ford preferred stock dividend
requirements e/ 82 95 459 472 442
------- ------- ------- ------- -------
Total combined fixed charges
and preferred stock dividends $11,016 $10,914 $11,175 $ 8,684 $ 8,174
======= ======= ======= ======= =======
Ratios
Ratio of earnings to fixed charges 2.0 1.6 1.6 2.0 1.5
Ratio of earnings to combined fixed
charges and preferred stock dividends 2.0 1.6 1.6 1.9 1.4
</TABLE>
- - - - - -
a/ Fixed charges, as shown below, adjusted to exclude the amount of interest
capitalized during the period and preferred stock dividend requirements of
majority owned subsidiaries and trusts.
b/ Includes interest, whether expensed or capitalized, and amortization of
debt expense and discount or premium relating to any indebtedness.
c/ One-third of all rental expense is deemed to be interest.
d/ Preferred stock dividend requirements of Ford Holdings, Inc. (1995 - 1993),
increased to an amount representing the pre-tax earnings which would be
required to cover such dividend requirements based on Ford's effective
income tax rates. Beginning in the fourth quarter 1995, includes
requirements related to company-obligated mandatorily redeemable preferred
securities of a subsidiary trust.
e/ Preferred stock dividend requirements of Ford Motor Company, increased to
an amount representing the pre-tax earnings which would be required to
cover such dividend requirements based on Ford's effective income tax
rates.
Exhibit 21
Ford Motor Company
SUBSIDIARIES OF THE REGISTRANT AS OF MARCH 15, 1998*
----------------------------------------------------
Organization Jurisdiction
- ------------ ------------
Cadiz Electronica, S.A. Spain
Carplastic S.A. de C.V. Mexico
Ford Argentina S.A. Argentina
Ford Automotive Holdings England
Ford Motor Company Limited England
Jaguar Limited England
Ford Brasil Ltda. Brazil
Ford Capital B.V. The Netherlands
Ford Electronics and Refrigeration Corporation Delaware, U.S.A.
Ford Electronics Manufacturing Corporation Canada
Ford Enhanced Investment Partnership Michigan, U.S.A.
Ford Espana S.A. Spain
Ford Export Services B.V. The Netherlands
Ford FSG, Inc. Delaware, U.S.A.
Associates First Capital Corporation** Delaware, U.S.A.
Associates Corporation of North America** Delaware, U.S.A.
ACONA B.V.** The Netherlands
AIC Corporation** Japan
Ford Motor Credit Company Delaware, U.S.A.
The American Road Insurance Company Michigan, U.S.A.
Ford Credit Auto Receivables Corporation Delaware, U.S.A.
Ford Credit International, Inc. Delaware, U.S.A.
Ford Credit Canada Limited Canada
Ford Credit Europe plc England
Primus Automotive Financial Services, Inc. New York, U.S.A.
Ford Global Technologies, Inc. Michigan, U.S.A.
Ford Holdings, Inc. Delaware, U.S.A.
Ford Motor Land Development Delaware, U.S.A.
Ford International Capital Corporation Delaware, U.S.A.
Ford Investment Partnership Michigan, U.S.A.
Ford Italiana S.p.A. Italy
Ford Motor Company (Austria) K.G. Austria
Ford Motor Company (Belgium) N.V. Belgium
Ford Motor Company of Canada, Limited Ontario, Canada
Essex Manufacturing Ontario, Canada
Ford Motor Company of Australia Limited Australia
Ford Lio Ho Motor Company Ltd. Taiwan
Ford Motor Company (Japan), Ltd. Japan
Ford Motor Company, S.A. de C.V. Mexico
Ford Motor de Venezuela, S.A. Venezuela
Ford Nederland B.V. The Netherlands
Ford Treasury Services Dublin Ireland
Ford Werke AG Germany
Groupe Ford France SAS France
Ford Aquitaine Industrie SAS France
Ford Ardennes Industrie SAS France
Ford France Automobile SAS France
The Hertz Corporation Delaware, U.S.A.
Transcon Insurance Limited
452 Other U.S. Subsidiaries
324 Other Non-U.S. Subsidiaries
* Subsidiaries are not shown by name in the above list if, considered in the
aggregate as a single subsidiary, they would not constitute a significant
subsidiary.
**Following the spin-off to the Registrant's shareholders of Associates First
Capital Corporation on April 7, 1998, these companies will no longer be
subsidiaries of the Registrant.
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, 333-02407, 333-02735, 333-20725, 333-27993,
333-28181, 333-46295, 333-47443, 333-47445, 333-47451, 333-47733 and
333-47735 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 which is included in this Annual Report on
Form 10-K.
/s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
400 Renaissance Center
Detroit, Michigan 48243
March 17, 1998
Exhibit 24
FORD MOTOR COMPANY
Certificate of Assistant Secretary
-----------------------------------
The undersigned, Peter J. Sherry, Jr., an Assistant Secretary of FORD MOTOR
COMPANY, a Delaware corporation (the "Company"), DOES HEREBY CERTIFY that the
following resolutions were adopted at a meeting of the Board of Directors of the
Company duly called and held on March 12, 1998 and that the same are in full
force and effect:
RESOLVED, That preparation of an Annual Report of the Company on Form
10-K for the year ended December 31, 1997 (the "10-K Report"), including
exhibits and other documents, to be filed with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of 1934,
as amended, be and hereby is in all respects authorized and approved; that
the draft 10-K Report presented to this meeting be and hereby is approved
in all respects; that the directors and appropriate officers of the
Company, and each of them, be and hereby are authorized to sign and
execute in their own behalf, or in the name and on behalf of the Company,
or both, as the case may be, the 10-K Report, and any and all amendments
thereto, with such changes therein as such directors and officers may deem
necessary, appropriate or desirable, as conclusively evidenced by their
execution thereof; and that the appropriate officers of the Company,
and each of them, be and hereby are authorized to cause the 10-K Report
and any such amendments, so executed, to be filed with the Commission.
RESOLVED, That each officer and director who may be required to sign
and execute the 10-K Report or any amendment thereto or document in
connection therewith (whether in the name and on behalf of the Company,
or as an officer or director of the Company, or otherwise), be and hereby
is authorized to execute a power of attorney appointing J. M. Devine,
W. J. Cosgrove, J. W. Martin, Jr., J. M. Rintamaki, L. J. Ghilardi and
N. A. Patino, and each of them, severally, his or her true and lawful
attorney or attorneys to sign in his or her name, place and stead in any
such capacity the 10-K Report and any and all amendments thereto and
documents in connection therewith, and to file the same with the
Commission, each of said attorneys to have power to act with or without
the other, and to have full power and authority to do and perform in the
name and on behalf of each of said officers and directors who shall have
executed such power of attorney, every act whatsoever which such
attorneys, or any of them, may deem necessary, appropriate or desirable to
be done in connection therewith as fully and to all intents and purposes
as such officers or directors might or could do in person.
WITNESS my hand as of this 17th day of March, 1998.
/s/Peter J. Sherry, Jr.
-----------------------
Peter J. Sherry, Jr.
Assistant Secretary
(SEAL)
<PAGE>
POWER OF ATTORNEY WITH RESPECT TO
ANNUAL REPORT OF FORD MOTOR COMPANY ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997
Each of the undersigned, a director, officer or employee of FORD MOTOR
COMPANY, appoints each of J. M. Devine, W. J. Cosgrove, J. W. Martin, Jr., J. M.
Rintamaki, L. J. Ghilardi and N. A. Patino his or her true and lawful attorney
and agent to do any and all acts and things and execute any and all instruments
which the attorney and agent may deem necessary or advisable in order to enable
FORD MOTOR COMPANY to comply with the Securities Exchange Act of 1934, and any
requirements of the Securities and Exchange Commission, in connection with the
Annual Report of FORD MOTOR COMPANY on Form 10-K for the year ended December 31,
1997 and any and all amendments thereto, as authorized at a meeting of the Board
of Directors of FORD MOTOR COMPANY held on March 12, 1998, including, but not
limited to, power and authority to sign his or her name (whether on behalf of
FORD MOTOR COMPANY, or as a director, officer or employee of FORD MOTOR COMPANY,
or by attesting the seal of FORD MOTOR COMPANY, or otherwise) to such
instruments and to such Annual Report and any amendments thereto, and to file
them with the Securities and Exchange Commission. The undersigned ratifies and
confirms all that any of the attorneys and agents shall do or cause to be done
by virtue hereof. Any one of the attorneys and agents shall have, and may
exercise, all the powers conferred by this instrument.
Each of the undersigned has signed his or her name as of the 12th day of
March, 1998.
/s/Alex Trotman /s/Michael D. Dingman
- ---------------------------- -----------------------------
(Alex Trotman) (Michael D. Dingman)
/s/Edsel B. Ford II /s/William Clay Ford
- ---------------------------- -----------------------------
(Edsel B. Ford II) (William Clay Ford)
/s/William Clay Ford, Jr. /s/Irvine O. Hockaday, Jr.
- ---------------------------- -----------------------------
(William Clay Ford, Jr.) (Irvine O. Hockaday, Jr.)
/s/Marie-Josee Kravis /s/Ellen R. Marram
- ---------------------------- ------------------------------
(Marie-Josee Kravis) (Ellen R. Marram)
/s/Homer A. Neal /s/Carl E. Reichardt
- ---------------------------- -------------------------------
(Homer A. Neal) (Carl E. Reichardt)
/s/John L. Thornton /s/John M. Devine
- ---------------------------- -------------------------------
(John L. Thornton) (John M. Devine)
/s/William J. Cosgrove
- ----------------------------
(William J. Cosgrove)
