UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
- --- EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the transition period from to
------------- ------------
Commission file number 1-3950
FORD MOTOR COMPANY
(Exact name of registrant as specified in its charter)
Incorporated in Delaware 38-0549190
------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
The American Road, Dearborn, Michigan 48121
---------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 313-322-3000
Indicate by checkmark 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 X . No .
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date: As of March 31, 1999, the Registrant had outstanding 1,139,920,793 shares
of Common Stock and 70,852,076 shares of Class B Stock.
Exhibit index located on sequential page number 19
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
HIGHLIGHTS
----------
First Quarter
----------------------------
1999 1998
------------ ------------
(unaudited)
<S> <C> <C>
Worldwide vehicle unit sales of cars and trucks
(in thousands)
- North America 1,220 1,057
- Outside North America 554 670
----- -----
Total 1,774 1,727
===== =====
Sales and revenues (in millions)
- Automotive $ 31,933 $ 29,076
- Financial Services 5,952 7,508
--------- ---------
Total $ 37,885 $ 36,584
========= =========
Net income (in millions)
- Automotive $ 1,651 $ 1,235
- Financial Services (including income of
The Associates through March 12, 1998) 328 456
--------- ---------
Subtotal 1,979 1,691
- Gain on spin-off of The Associates - 15,955
--------- ---------
Total $ 1,979 $ 17,646
========= =========
Capital expenditures (in millions)
- Automotive $ 1,338 $ 2,101
- Financial Services 144 98
--------- ---------
Total $ 1,482 $ 2,199
========= =========
Automotive capital expenditures as a percentage
of sales 4.2% 7.2%
Stockholders' equity at March 31
- Total (in millions) $ 24,747 $ 21,497
- After-tax return on Common and Class B
stockholders' equity 33.0% 24.8%
Automotive net cash at March 31
(in millions)
- Cash and marketable securities $ 23,456 $ 21,277
- Debt 11,477 8,178
--------- ---------
Automotive net cash $ 11,979 $ 13,099
========= =========
After-tax return on sales
- North American Automotive 6.6% 5.0%
- Total Automotive 5.2% 4.3%
Shares of Common and Class B Stock (in millions)
- Average number outstanding 1,211 1,210
- Number outstanding at March 31 1,211 1,213
Common Stock price (per share)
(adjusted to reflect The Associates spin-off)
- High $66-1/2 $43-5/8
- Low 55-1/4 28-5/16
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
AFTER PREFERRED STOCK DIVIDENDS
Income assuming dilution
- Automotive $ 1.33 $ 0.99
- Financial Services (including income of
The Associates through March 12, 1998) 0.27 0.37
--------- ---------
Subtotal 1.60 1.36
- Premium on Series B Preferred Stock repurchase - (0.07)
- Gain on spin-off of The Associates - 12.94
--------- ---------
Total $ 1.60 $ 14.23
========= =========
Cash dividends $ 0.46 $ 0.42
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
VEHICLE UNIT SALES
------------------
For the Periods Ended March 31, 1999 and 1998
(in thousands)
First Quarter
--------------------
1999 1998
-------- --------
(unaudited)
<S> <C> <C>
North America
United States
Cars 404 391
Trucks 739 564
----- -----
Total United States 1,143 955
Canada 58 74
Mexico 19 28
----- -----
Total North America 1,220 1,057
Europe
Britain 126 142
Germany 90 106
Italy 50 70
Spain 43 37
France 38 39
Other countries 99 108
----- -----
Total Europe 446 502
Other international
Australia 30 30
Brazil 22 42
Taiwan 17 29
Argentina 14 30
Japan 7 8
Other countries 18 29
----- -----
Total other international 108 168
----- -----
Total worldwide vehicle unit sales 1,774 1,727
===== =====
</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.
Prior period restated to correct reported unit sales.
-3-
<PAGE>
<TABLE>
<CAPTION>
Part 1. Financial Information
-----------------------------
Item 1. Financial Statements
- -----------------------------
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
For the Periods Ended March 31, 1999 and 1998
(in millions, except amounts per share)
First Quarter
-----------------------
1999 1998
-------- --------
(unaudited)
<S> <C> <C>
AUTOMOTIVE
Sales $31,933 $29,076
Costs and expenses (Note 2)
Costs of sales 27,615 25,354
Selling, administrative and other expenses 1,931 1,916
------- -------
Total costs and expenses 29,546 27,270
Operating income 2,387 1,806
Interest income 340 322
Interest expense 293 199
------- -------
Net interest income 47 123
Equity in net income/(loss) of affiliated 50 (10)
companies
Net expense from transactions with
Financial Services (28) (48)
------- -------
Income before income taxes - Automotive 2,456 1,871
FINANCIAL SERVICES
Revenues 5,952 7,508
Costs and expenses
Interest expense 1,888 2,370
Depreciation 2,157 2,037
Operating and other expenses 997 1,583
Provision for credit and insurance losses 391 708
------- -------
Total costs and expenses 5,433 6,698
Net revenue from transactions with Automotive 28 48
Gain on spin-off of The Associates (Note 5) - 15,955
------- -------
Income before income taxes - Financial Services 547 16,813
-------- -------
TOTAL COMPANY
Income before income taxes 3,003 18,684
Provision for income taxes 1,005 972
------- -------
Income before minority interests 1,998 17,712
Minority interests in net income of subsidiaries 19 66
------- -------
Net income $ 1,979 $17,646
======= =======
Income attributable to Common and Class B Stock
after preferred stock dividends $ 1,975 $17,551
Average number of shares of Common and Class B
Stock outstanding 1,211 1,210
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
Basic income (Note 6) $ 1.64 $ 14.48
Diluted income (Note 6) $ 1.60 $ 14.23
Cash dividends $ 0.46 $ 0.42
</TABLE>
The accompanying notes are part of the financial statements.
Prior period costs of sales and selling, administrative and other expenses
restated.
-4-
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
--------------------------
(in millions)
March 31, December 31,
1999 1998
------------ --------------
(unaudited)
<S> <C> <C>
ASSETS
Automotive
Cash and cash equivalents $ 4,187 $ 3,685
Marketable securities 19,269 20,120
-------- --------
Total cash and marketable securities 23,456 23,805
Receivables 2,668 2,604
Inventories (Note 7) 5,542 5,656
Deferred income taxes 3,169 3,239
Other current assets 3,174 3,405
Current receivable from Financial Services 284 0
-------- --------
Total current assets 38,293 38,709
Equity in net assets of affiliated companies (Note 3) 9,210 2,401
Net property 36,882 37,320
Deferred income taxes 3,056 3,175
Other assets 6,999 7,139
-------- --------
Total Automotive assets 94,440 88,744
Financial Services
Cash and cash equivalents 1,743 1,151
Investments in securities 804 968
Net receivables and lease investments 133,976 132,567
Other assets 14,590 13,227
Receivable from Automotive 958 888
-------- --------
Total Financial Services assets 152,071 148,801
-------- --------
Total assets $246,511 $237,545
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive
Trade payables $ 12,489 $ 13,368
Other payables 2,290 2,755
Accrued liabilities 20,000 16,925
Income taxes payable 1,529 1,404
Debt payable within one year 1,501 1,121
Current payable to Financial Services 0 70
-------- --------
Total current liabilities 37,809 35,643
Long-term debt 9,976 8,713
Other liabilities 31,240 30,133
Deferred income taxes 745 751
Payable to Financial Services 958 818
-------- --------
Total Automotive liabilities 80,728 76,058
Financial Services
Payables 3,614 3,555
Debt 124,887 122,324
Deferred income taxes 5,754 5,488
Other liabilities and deferred income 5,821 6,034
Payable to Automotive 284 0
-------- --------
Total Financial Services liabilities 140,360 137,401
Company-obligated mandatorily redeemable preferred securities of a subsidiary
trust holding solely junior subordinated debentures of the Company (Note 8) 676 677
Stockholders' equity
Capital stock
Preferred Stock, par value $1.00 per share (aggregate liquidation preference
of $177 million) * *
Common Stock, par value $1.00 per share (1,151 million shares issued) 1,151 1,151
Class B Stock, par value $1.00 per share (71 million shares issued) 71 71
Capital in excess of par value of stock 5,147 5,283
Accumulated other comprehensive income (1,820) (1,670)
ESOP loan and treasury stock (879) (1,085)
Earnings retained for use in business 21,077 19,659
-------- --------
Total stockholders' equity 24,747 23,409
-------- --------
Total liabilities and stockholders' equity $246,511 $237,545
======== ========
- - - - -
*Less than $1 million
</TABLE>
The accompanying notes are part of the financial statements.
-5-
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
For the Periods Ended March 31, 1999 and 1998
(in millions)
First Quarter 1999 First Quarter 1998
-------------------------- -------------------------
Financial Financial
Automotive Services Automotive Services
------------ ---------- ------------ ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash and cash equivalents at January 1 $ 3,685 $ 1,151 $ 6,316 $ 1,618
Cash flows from operating activities before securities trading 2,957 1,830 3,138 4,463
Net sales/(purchases) of trading securities 922 99 108 (113)
------- --------- ------- --------
Net cash flows from operating activities 3,879 1,929 3,246 4,350
Cash flows from investing activities
Capital expenditures (1,338) (144) (2,101) (98)
Purchase of leased assets 0 - (110) -
Acquisitions of receivables and lease investments - (18,304) - (27,772)
Collections of receivables and lease investments - 12,859 - 19,289
Net acquisitions of daily rental vehicles - (768) - (611)
Purchases of securities (392) (309) (123) (569)
Sales and maturities of securities 321 367 62 491
Proceeds from sales of receivables and lease investments - 2,045 - 2,368
Net investing activity with Financial Services 39 - 403 -
Volvo acquisition (Note 3) (2,966) - - -
Other 167 (3) 269 (661)
------- -------- ------- --------
Net cash used in investing activities (4,169) (4,257) (1,600) (7,563)
Cash flows from financing activities
Cash dividends (561) (1) (519) (1)
Issuance/(Purchases) of Common Stock (136) - 93 -
Preferred stock - Series B repurchase, Series A redemption 0 - (420) -
Changes in short-term debt 121 (968) 76 1,882
Proceeds from issuance of other debt 1,632 9,097 337 7,996
Principal payments on other debt (151) (5,282) (812) (5,650)
Net financing activity with Automotive - (39) - (403)
Spin-off of The Associates cash - - - (508)
Other 178 5 (323) 53
------- -------- ------- --------
Net cash (used in)/provided by financing activities 1,083 2,812 (1,568) 3,369
Effect of exchange rate changes on cash (77) (106) (9) 69
Net transactions with Automotive/Financial Services (214) 214 419 (419)
------- -------- ------- --------
Net increase/(decrease) in cash and cash equivalents 502 592 488 (194)
------- -------- ------- --------
Cash and cash equivalents at March 31 $ 4,187 $ 1,743 $ 6,804 $ 1,424
======= ======== ======= ========
</TABLE>
The accompanying notes are part of the financial statements.
-6-
<PAGE>
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
1. Financial Statements - The financial data presented herein are unaudited,
but in the opinion of management reflect those adjustments necessary for a
fair presentation of such information. Results for interim periods should
not be considered indicative of results for a full year. Reference should
be made to the financial statements contained in the registrant's Annual
Report on Form 10-K (the "10-K Report") for the year ended
December 31, 1998. For purposes of Notes to Financial Statements, "Ford"
or the "Company" means Ford Motor Company and its majority owned
subsidiaries unless the context requires otherwise. Certain amounts for
prior periods were reclassified to conform with present period
presentation.
Accounting Changes
------------------
In the first quarter of 1999, we adopted Statement of Position ("SOP")
98-1, "Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use". This SOP requires entities to capitalize certain
internal-use software costs once certain criteria are met. Our practice has
been to expense the costs of obtaining or developing internal-use software
as incurred.
Beginning in 1999, we changed from an accelerated method to the
units-of-production method for special tooling amortization. This change is
being made to recognize that special tooling retains its value more
uniformly over time and more closely aligns tooling amortization with
vehicle production volumes, providing a better matching of costs and
revenues.
Also beginning in 1999, we modified our plant and equipment retirement
policy to reflect gains and losses in income in the year of retirement.
Previously, the cost of retired assets, net of salvage proceeds, was
charged to accumulated depreciation. The plant and equipment retirement
change in accounting principle is being made to better reflect the results
of asset disposal/sale decisions.
Adoption of these changes did not have a material effect on our financial
statements.
2. Selected Automotive costs and expenses are summarized as follows (in
millions):
First Quarter
------------------
1999 1998
---- ----
Depreciation $746 $680
Amortization 572 718
Dissolution of AutoEuropa Joint Venture - Effective January 1, 1999, our
joint venture for the production of minivans with Volkswagen AG in Portugal
(AutoEuropa) was dissolved resulting in a $255 million pre-tax gain
($165 million after-tax).
3. Purchase of AB Volvo's Worldwide Passenger Car Business - On
March 31, 1999, we purchased AB Volvo's worldwide passenger car business
("Volvo Car") for approximately $6.45 billion. The acquisition price
consisted of a cash payment of approximately $2 billion on March 31, 1999,
a deferred payment obligation to AB Volvo of approximately $1.6 billion
due March 31, 2001, and Volvo Car automotive-related net indebtedness of
approximately $2.9 billion.
In addition to the cash payment to Volvo, on March 31, 1999 approximately
$1 billion was paid to reduce Volvo Car's automotive indebtedness and
for acquisition-related costs. Most of the remaining automotive
indebtedness of Volvo Car was repaid on April 12, 1999. The purchase price
payment and debt repayments were funded from our cash reserves.
The acquisition will be accounted for as a purchase. The assets purchased,
liabilities assumed, and the results of operations of Volvo Car will be
included in our financial statements on a consolidated basis beginning in
the second quarter of 1999. Our investment in Volvo Car at March 31, 1999
is included in Equity in Net Assets of Affiliated Companies.
4. Purchase of Kwik-Fit Holdings plc - On April 12, 1999, we announced that we
had reached an agreement with the board of Kwik-Fit Holdings plc
("Kwik-Fit") for a cash tender offer of all the outstanding capital stock
of Kwik-Fit, Europe's largest independent car maintenance and repair
company.
Our offer price is (pound)5.60 (approximately the equivalent of $9.05) per
share, or an aggregate of (pound)1,008 million (approximately the
equivalent of $1.6 billion).
Our offer is contingent on receipt of applicable regulatory approvals and
acceptances from holders of at least 90% of the outstanding shares of
Kwik-Fit. The directors of Kwik-Fit have unanimously recommended that
Kwik-Fit shareholders accept our offer.
-7-
<PAGE>
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
5. 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 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 Company stock
held in U.S. 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 were paid
on April 7, 1998 to stockholders of record on March 12, 1998.
Holders of Ford Common and Class B Stock on the record date received
0.262085 shares of The Associates common stock for each share of Ford
stock, and participants in U.S. employee savings plans on the record date
received $22.12 in cash per share of Ford stock, based on the
volume-weighted average price of The Associates stock of $84.3849 per share
on April 7, 1998. The total value of the distribution (including the
$3.2 billion cash dividend) was $26.8 billion or $22.12 per share of Ford
stock.
As a result of the spin-off of The Associates, Ford realized a gain of
$15,955 million based on the fair value of The Associates as of the record
date, March 12, 1998, in first quarter 1998. Ford has received a ruling
from the U.S. Internal Revenue Service that the distribution qualifies as a
tax-free transaction for U.S. federal income tax purposes.
The Company's results in first quarter 1998 include Ford's share of The
Associates earnings through the record date, March 12 ($177 million, or
$0.14 a share).
6. Income Per Share of Common and Class B Stock - 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 shares
issuable under employee savings and compensation plans.
The Company had Series A Preferred Stock convertible to Common Stock until
January 9, 1998. Other obligations, such as stock options, are considered
to be dilutive potential common stock. The calculation of diluted income
per share of Common and Class B Stock takes into account the effect of
dilutive potential common stock.
Income per share of Common and Class B Stock was as follows (in millions,
except per share amounts):
<TABLE>
<CAPTION>
First Quarter 1999 First Quarter 1998
-------------------- --------------------
Income Shares Income Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income $1,979 1,211 $17,646 1,210
Preferred stock dividend requirements (4) - (95) -
Issuable and uncommitted ESOP shares - (5) - 2
------ ----- ------- -----
Basic income and shares $1,975 1,206 $17,551 1,212
Basic income per share $ 1.64 $ 14.48
----------------------
Basic income and shares $1,975 1,206 $17,551 1,212
Net dilutive effect of options - 31 - 20
Convertible preferred stock and other 0 0 0 1
------ ----- ------- -----
Diluted income and shares $1,975 1,237 $17,551 1,233
Diluted income per share $ 1.60 $ 14.23
------------------------
</TABLE>
7. Automotive inventories are summarized as follows (in millions):
----------------------
March 31, December 31,
1999 1998
--------- ------------
Raw materials, work in process and supplies $2,771 $2,887
Finished products 2,771 2,769
Total inventories $5,542 $5,656
====== ======
U.S. inventories $1,988 $1,832
-8-
<PAGE>
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
8. Company-Obligated Mandatorily Redeemable Preferred Securities of a
Subsidiary Trust - The sole asset of Ford Motor Company Capital Trust I
(the "Trust"), which is the obligor on the Preferred Securities of such
Trust, is $632 million principal amount of 9% Junior Subordinated
Debentures due 2025 of Ford Motor Company.
9. Comprehensive Income - Other comprehensive income includes foreign currency
translation adjustments, minimum pension liability adjustments, and net
unrealized gains and losses on investments in equity securities. Total
comprehensive income is summarized as follows (in millions):
First Quarter
---------------------
1999 1998
------ -------
Net income $1,979 $17,646
Other comprehensive income (150) (188)
------ -------
Total comprehensive income $1,829 $17,458
====== =======
10. Segment Information - Ford has identified four primary operating segments:
Automotive, Visteon, Ford Credit and Hertz. Segment selection was based
upon internal organizational structure, the way in which these operations
are managed and their performance evaluated by management and our Board of
Directors, the availability of separate financial results and materiality
considerations. Segment detail is summarized as follows (in millions):
<TABLE>
<CAPTION>
Automotive Sector Financial Services Sector
------------------ ------------------------------
Total Total
First Quarter Auto- Ford Other Elims/ Auto Fin Svcs
motive Visteon Credit Hertz Fin Svcs Other Sector Sector
------- ------- -------- ------ -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999
- ----
Revenues
External customer revenues $31,597 $ 417 $ 4,863 $1,031 $ 56 $ (79) $31,933 $ 5,952
Intersegment revenues 1,188 4,355 57 2 71 (5,673) 0 0
------- ------ -------- ------ ------- ------- ------- --------
Total Revenues $32,785 $4,772 $ 4,920 $1,033 $ 127 $(5,752) $31,933 $ 5,952
======= ====== ======== ====== ======= ======= ======= ========
Net income $ 1,443 $ 208 $ 300 $ 49 $ (12) $ (9) $ 1,651 $ 328
Total assets $89,905 $9,771 $140,643 $9,293 $ 6,266 $(9,367) $94,440 $152,071
1998
- ----
Revenues
External customer revenues $28,866 $ 307 $ 4,492 $ 897 $ 2,117 $ (95) $29,076 $ 7,508
Intersegment revenues 1,231 4,071 67 2 131 (5,502) 0 0
------- ------ -------- ------ ------- ------- ------- --------
Total Revenues $30,097 $4,378 $ 4,559 $ 899 $ 2,248 $(5,597) $29,706 $ 7,508
======= ====== ======== ====== ======= ======= ======= ========
Net income $ 1,046 $ 189 $ 278 $ 35 $16,147 a/ $ (49) $ 1,235 $ 16,411
Total assets $81,631 $8,780 $124,533 $7,665 $ 9,346 $(8,717) $85,504 $137,734
- - - - - -
</TABLE>
a/ Includes $15,955 non-cash gain (not taxed) on spin-off of The Associates in
the first quarter of 1998 (Note 5).
"Other Financial Services" data is an aggregation of miscellaneous smaller
Financial Services Sector business components, including Ford Motor Land
Development Corporation, Ford Leasing Development Company, Ford Leasing
Corporation, and Granite Management Corporation, and certain unusual
transactions (footnoted). Also included is data for The Associates, which was
spun off from Ford in 1998.
"Eliminations/Other" data includes intersegment eliminations and minority
interest calculations. Interest income for the operating segments in the
Financial Services Sector is reported as "Revenue". Included in the Visteon
segment's external customer revenues are sales to outside fabricators for
inclusion in components sold to Ford's Automotive segment.
-9-
<PAGE>
[PricewaterhouseCoopers LLP letterhead]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Ford Motor Company
We have reviewed the consolidated balance sheet of Ford Motor Company and
Subsidiaries at March 31, 1999 and the related consolidated statement of income
and condensed consolidated statement of cash flows for the periods set forth in
the accompanying unaudited financial statements. These financial statements are
the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists primarily of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet at December 31, 1998 and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended (not presented herein); and in our report dated January 21,
1999, we expressed an unqualified opinion on those consolidated financial
statements.
/s/ PricewaterhouseCoopers LLP
April 14, 1999
-10-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- ------------------------------------------------------------------------
OVERVIEW
Our worldwide net income was $1,979 million in the first quarter of
1999, or $1.60 per diluted share of Common and Class B Stock. Excluding a
$165 million gain from the sale of our interest in AutoEuropa to Volkswagen AG,
our operating income would have been $1,814 million, or $1.46 per diluted share
of Common and Class B Stock. This compares with first quarter 1998 operating
income of $1,514 million, or $1.22 per diluted share, excluding all income and
a one-time gain related to The Associates, and a one-time earnings per share
reduction of $0.07 per share resulting from the premium paid to repurchase our
Series B Cumulative Preferred Stock.
Our worldwide sales and revenues were $37.9 billion in the first quarter of
1999, up $1.3 billion from a year ago. Vehicle unit sales of cars and trucks
were 1,774,000, up 47,000 units. Stockholders' equity was $24.7 billion at
March 31, 1999, up $1.3 billion from December 31, 1998.
RESULTS OF OPERATIONS
Results of our operations by major business sector are shown below (in
millions). Our Automotive sector, which includes Automotive operations and
Visteon Automotive Systems, earned $1,651 million in the first quarter of 1999.
This compares with earnings of $1,235 million in the first quarter of 1998. Our
Financial Services sector had earnings of $328 million in first quarter 1999.
This compares with $279 million in the first quarter of 1998, excluding all
income and a one-time gain related to The Associates detailed below.
<TABLE>
<CAPTION>
First Quarter
Net Income/(Loss)
--------------------------------
1999
O/(U)
1999 1998 1998
------ ------- --------
<S> <C> <C> <C>
Automotive Sector $1,651 $ 1,235 $ 416
Financial Services Sector 328 279 49
------ ------- --------
Total Operations $1,979 $ 1,514 $ 465
Gain on Spin-Off of The Associates - 15,955 (15,955)
The Associates (net of Minority Interest) - 177 (177)
------ ------- --------
Total Company $1,979 $17,646 $(15,667)
====== ======= ========
</TABLE>
FIRST QUARTER 1999 COMPARED WITH FIRST QUARTER 1998
Automotive Sector
- -----------------
Worldwide earnings for our Automotive sector were $1,651 million in the
first quarter of 1999 on sales of $31.9 billion. Excluding a $165 million gain
from the sale of our interest in AutoEuropa to Volkswagen AG, our first quarter
1999 earnings would have been $1,486 million, compared with earnings of
$1,235 million in the first quarter of 1998 on sales of $29.1 billion. The
increase in operating earnings reflects higher sales volumes in the U.S., offset
partially by lower sales volumes in Europe and South America. Adjusted for
constant volume and mix, total costs in the Automotive sector declined
$100 million compared with the first quarter of 1998.
-11-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
- ------------------------------------------------------------------------
Details of Automotive sector earnings are shown below (in millions).
<TABLE>
<CAPTION>
First Quarter
Net Income/(Loss)
--------------------------------
1999
O/(U)
1999 1998 1998
------ ------- --------
<S> <C> <C> <C>
North American Automotive $1,588 $1,010 $ 578
Automotive Outside North America
- Europe 165 230 (65)
- South America (165) (45) (120)
- Other 63 40 23
------ ----- -----
Total Automotive Outside
North America 63 225 (162)
------ ------ -----
Total Automotive Sector $1,651 $1,235 $ 416
====== ====== =====
</TABLE>
Automotive sector earnings in North America were $1,588 million in the
first quarter of 1999 on sales of $24.4 billion, compared with $1,010 million a
year ago on sales of $20.7 billion. The increase reflects primarily higher sales
volume and lower costs, offset partially by higher marketing costs and lower net
interest income. The after-tax return on sales for our North American Automotive
sector was 6.6% in the first quarter of 1999.
In the first quarter of 1999, 4 million new cars and trucks were sold in
the United States, up from 3.6 million units a year ago. Our share of those unit
sales was 24.4% in the first quarter of 1999, unchanged from a year ago.
Our Automotive sector earnings in Europe were $165 million in the first
quarter of 1999, down $65 million from a year ago. The deterioration is
explained by lower sales volumes, reflecting primarily a lower market share, and
higher fixed marketing costs, offset partially by the gain from the sale of our
interest in AutoEuropa.
In the first quarter of 1999, 4.4 million new cars and trucks were sold in
Europe, up from 4.3 million units a year ago. Our share of those unit sales was
9.8% in the first quarter of 1999, down 1.6 percentage points from a year ago.
Our market share declined because of intense competitive conditions in Europe.
Our Automotive sector in South America lost $165 million in the first
quarter of 1999, compared with a loss of $45 million a year ago. The decline was
the result of lower volume and revenue, resulting from the devaluation of the
Real in Brazil and weak economic conditions throughout the region, offset
partially by lower costs. We are looking at all of our options to address the
business equation in South America.
In the first quarter of 1999, 276,000 new cars and trucks were sold in
Brazil, compared with 384,000 a year ago. Our share of those unit sales was
9% in the first quarter of 1999, down 4.7 percentage points from a year ago. The
decline in market share reflects production and transportation interruptions
caused by labor disruptions, which have been resolved, and an increasingly
competitive market.
Our Visteon operations earned $208 million on revenues of $4,772 million in
the first quarter of 1999, compared with earnings of $189 million on revenues of
$4,378 million in the first quarter of 1998. This earnings improvement reflects
primarily favorable volume and mix and material cost reductions, offset
partially by lower revenue from negotiated price reductions. Visteon's after-tax
return on sales in the first quarter of 1999 was 4.3%, unchanged from a year
ago.
-12-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
- ------------------------------------------------------------------------
Financial Services Sector
- -------------------------
Earnings of our Financial Services sector consist primarily of two
segments, Ford Credit and Hertz. Details of Financial Services sector earnings
are shown below (in millions).
<TABLE>
<CAPTION>
First Quarter
Net Income/(Loss)
--------------------------------
1999
O/(U)
1999 1998 1998
------ ------- ---------
<S> <C> <C> <C>
Ford Credit $300 $ 278 $ 22
Hertz 49 35 14
Minority Interests, Eliminations,
and Other (excluding The Associates) (21) (34) 13
---- ------ --------
Financial Services (excluding
The Associates) 328 279 49
Gain on Spin-Off of The Associates - 15,955 (15,955)
The Associates (net of Minority Interest) - 177* (177)
---- ------- --------
Total Financial Services Sector $328 $16,411 $(16,083)
==== ======= ========
Memo: Ford's share of earnings in
Hertz 40 29 11
------
* Through March 12, 1998
</TABLE>
Ford Credit's consolidated net income in the first quarter of 1999 was
$300 million, up $22 million or 7.9% from a year ago. The increase in earnings
primarily reflects higher financing volumes, improved credit loss performance,
and lower effective tax rates, offset partially by lower net financing margins.
Lower financing margins reflect higher depreciation expense for leased vehicles.
Earnings at Hertz in the first quarter of 1999 were $49 million (of which
$40 million was Ford's share), compared with earnings of $35 million (of which
$29 million was Ford's share) a year ago. The increase in earnings reflects
primarily higher revenues and improved profit margins in worldwide car rental
operations.
LIQUIDITY AND CAPITAL RESOURCES
Automotive Sector
- -----------------
At March 31, 1999, our Automotive sector had $23.5 billion of cash and
marketable securities, down $349 million from December 31, 1998. The decline was
more than explained by the acquisition of Volvo Cars, offset partially by
operating cash flows and a global debt issuance of $1.5 billion.
Automotive capital expenditures, including the effect of adopting the
accounting change for the capitalization of computer software (Statement of
Position 98-1) discussed below, totaled $1.3 billion in the first quarter of
1999, down from $2.1 billion in the first quarter of 1998, which was unusually
high. Our target for capital expenditures for 1999 remains at $8.5 billion.
At March 31, 1999, our Automotive sector had total debt of $11.5 billion,
compared with $9.8 billion at December 31, 1998. This amount was 31.7% of our
total capitalization (that is, the sum of our stockholders' equity and
Automotive debt) at the end of the first quarter of 1999, compared with 30% of
total capitalization at December 31, 1998.
-13-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
- ------------------------------------------------------------------------
Financial Services Sector
- -------------------------
At March 31, 1999, our Financial Services sector had cash and marketable
securities totaling $1.7 billion, up $592 million from December 31, 1998.
Net receivables and lease investments were $134 billion at March 31, 1999,
up $1.4 billion from December 31, 1998.
Total debt was $124.9 billion at March 31, 1999, up $2.6 billion from
December 31, 1998.
Outstanding commercial paper at March 31, 1999 totaled $46.8 billion at
Ford Credit, and $2.1 billion at Hertz, with an average remaining maturity of
27 days and 35 days, respectively.
For a discussion of support facilities available to our Automotive and
Financial Services sector, see Note 9 of our Notes to Financial Statements for
the year ended December 31, 1998, which are included in our Annual Report on
Form 10-K for 1998.
VOLVO
On March 31, 1999, we purchased AB Volvo's worldwide passenger car business
("Volvo Car") for approximately $6.45 billion. The acquisition price consisted
of a cash payment of approximately $2 billion on March 31, 1999, a deferred
payment obligation to AB Volvo of approximately $1.6 billion due March 31, 2001,
and Volvo Car automotive-related net indebtedness of approximately $2.9 billion.
In addition to the cash payment to AB Volvo, on March 31, 1999
approximately $1 billion was paid to reduce Volvo Car's automotive indebtedness
and for acquisition-related costs. Most of the remaining automotive indebtedness
of Volvo Car was repaid on April 12, 1999. The purchase price payment and debt
repayments were funded from our cash reserves.
The acquisition will be accounted for as a purchase. The assets purchased,
liabilities assumed and the results of operations of Volvo Car will be included
in our financial statements on a consolidated basis beginning in the second
quarter of 1999. Our investment in Volvo Car at March 31, 1999 is included in
Equity in Net Assets of Affiliated Companies.
KWIK-FIT
On April 12, 1999, we announced that we had reached an agreement with the
board of Kwik-Fit Holdings plc ("Kwik-Fit) for a cash tender offer for all the
outstanding capital stock of Kwik-Fit. Kwik-Fit is Europe's largest independent
car maintenance and repair company, with over 1,900 service points in the United
Kingdom, Ireland and continental Europe.
Our offer price is (pound)5.60 (approximately the equivalent of $9.05) per
share, or an aggregate of (pound)1,008 million (approximately the equivalent of
$1.6 billion).
Our offer is contingent on receipt of applicable regulatory approvals and
acceptances from holders of at least 90% of the outstanding shares of Kwik-Fit.
The directors of Kwik-Fit have unanimously recommended that Kwik-Fit
shareholders accept our offer.
-14-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
- -------------------------------------------------------------------------
NEW ACCOUNTING STANDARDS AND CHANGES
New Standards
- -------------
In the first quarter of 1999, we adopted Statement of Position ("SOP")
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use". This SOP requires entities to capitalize certain internal-use
software costs once certain criteria are met. Our practice has been to expense
the costs of obtaining or developing internal-use software as incurred. Adoption
of this standard did not have a material effect on first quarter earnings.
Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities," was issued by
the Financial Accounting Standards Board in June 1998. This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires recognition of all derivatives as either assets
or liabilities on the balance sheet and measurement of those instruments at fair
value. If certain conditions are met, a derivative may be designated
specifically as (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment referred to as
a fair value hedge, (b) a hedge of the exposure to variability in cash flows of
a forecasted transaction (a cash flow hedge), or (c) a hedge of the foreign
currency exposure of a net investment in a foreign operation, an unrecognized
firm commitment, an available-for-sale security, or a forecasted transaction. We
anticipate having each of these types of hedges, and we will comply with the
requirements of SFAS 133 when we adopt it. We expect to adopt SFAS 133 beginning
January 1, 2000. We have not yet determined the effect of adopting SFAS 133.
Accounting Changes
- ------------------
Beginning in 1999, we changed from an accelerated method to the
units-of-production method for special tooling amortization. This change is
being made to recognize that special tooling retains its value more uniformly
over time and more closely aligns tooling amortization with vehicle production
volumes, providing a better matching of costs and revenues.
Also beginning in 1999, we modified our plant and equipment retirement
policy to reflect gains and losses in income in the year of retirement.
Previously, the cost of retired assets, net of salvage proceeds, was charged to
accumulated depreciation. The change in accounting principle for plant and
equipment retirement is being made to better reflect the results of asset
disposal/sale decisions.
Adoption of these changes did not have a material effect on our financial
statements.
OTHER FINANCIAL INFORMATION
PricewaterhouseCoopers LLP, our independent public accountants, performed a
limited review of the financial data presented on pages 4 through 9 inclusive.
The review was performed in accordance with standards for such reviews
established by the American Institute of Certified Public Accountants. The
review did not constitute an audit; accordingly, PricewaterhouseCoopers LLP did
not express an opinion on the aforementioned data. The financial data include
any material adjustments or disclosures proposed by PricewaterhouseCoopers LLP
as a result of their review.
-15-
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
- -------------------------
Class Actions
- -------------
Air Bag. (Previously discussed in the first full paragraph on page 24 of Ford's
Annual Report on Form 10-K for year ended December 31, 1998 (the "10-K
Report").) Upon reconsideration of the trial court's decision to deny
defendants' motion for change of venue, the Alabama Supreme Court would not
overturn the trial court's ruling. Our motion to dismiss this action continues
to be pending.
Lease Agreement Disclosure. (Previously discussed in the first full paragraph on
page 25 of the 10-K Report.) In addition to the seven of the twenty cases
discussed in the 10-K Report as having been dismissed in various state courts,
the actions pending in Florida, New Jersey and Tennessee state courts were
recently dismissed on the basis that itemization of monthly lease charges is not
required under federal or state law.
Windstar Transmission. A purported class action has been filed in California
state court alleging that 1995 Ford Windstar vehicles are defective because they
contain a 3.8 liter engine with a defective transmission. Plaintiffs allege
transmissions in the Windstar prematurely suffered from serious shifting
problems and acceleration failures, requiring early replacement at a substantial
expense to owners and lessees. They seek compensatory damages, punitive damages,
attorneys' and experts' fees and additional unspecified relief. Plaintiffs do
not specifically seek damages for any alleged personal injuries suffered by
purported class members. The California class action is nationwide in scope and
purports to represent all persons or entities in the United States who own or
lease any model 1995 Ford Windstar. After Ford removed the case to federal
court, the state court granted Plaintiffs' motion to remand the case back to Los
Angeles County court. Ford plans to file a motion for judgment on the pleadings.
-16-
<PAGE>
<TABLE>
<CAPTION>
Supplemental Schedule
Ford Motor Company
CONDENSED FINANCIAL INFORMATION OF SUBSIDIARY
---------------------------------------------
(in millions)
Ford Capital B.V.
-----------------
March 31, December 31,
1999 1998
-------------- --------------
(unaudited)
<S> <C> <C>
Current assets $ 658 $ 621
Noncurrent assets 2,374 2,388
------ ------
Total assets $3,032 $3,009
====== ======
Current liabilities $ 582 $ 394
Noncurrent liabilities 2,249 2,430
Minority interests in net
assets of subsidiaries 0 15
Stockholder's equity 201 170
------ ------
Total liabilities and
stockholder's equity $3,032 $3,009
====== ======
</TABLE>
<TABLE>
<CAPTION>
First Quarter
----------------------------------
1999 1998
--------------- -------------
(unaudited)
<S> <C> <C>
Sales and other revenue $683 $641
Operating income 84 27
Income before income taxes 69 18
Net income 41 6
</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.
-17-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
--------
Please refer to the Exhibit Index on page 19.
(b) Reports on Form 8-K
-------------------
The Registrant filed the following Current Reports on Form 8-K during
the quarter ended March 31, 1999:
Current Report on Form 8-K dated January 14, 1999 included
additional detail on one-time charges expected for the fourth quarter
1998.
Current Report on Form 8-K dated January 21, 1999 included
information relating to Ford's 1998 financial results.
Current Report on Form 8-K dated January 28, 1999 included
information relating to Ford's agreement with AB Volvo to buy its
worldwide passenger vehicle business.
Current Report on Form 8-K dated February 2, 1999 included the
consolidated financial statements of Ford and its subsidiaries for
the year ended December 31, 1998.
Current Report on Form 8-K dated February 5, 1999 included
information regarding the registration of debt securities, and the
explosion at the Rouge Complex.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FORD MOTOR COMPANY
--------------------------------
(Registrant)
Date: April 19, 1999 By: /s/ W. A. Swift
-------------- -----------------------------
W. A. Swift
Vice President - Corporate Controller
(principal accounting officer)
-18-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Designation Description
------------------------- ----------------------------------------------------------------------------
<S> <C>
Exhibit 12 Ford Motor Company and Subsidiaries Calculation of Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends.
Exhibit 15 Letter of PricewaterhouseCoopers LLP, Independent Public Accountants, dated
April 19, 1999, relating to Financial Information.
Exhibit 18 Letter of PricewaterhouseCoopers LLP, Independent Public Accountants, dated
March 31, 1999 relating to changes in accounting principles.
-19-
</TABLE>
<TABLE>
<CAPTION>
Exhibit 12
Ford Motor Company and Subsidiaries
CALCULATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
----------------------------------------------------------------------------------------
(in millions)
First For the Years Ended December 31
Quarter ------------------------------------------------------------
1999 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Earnings
- --------
Income before income taxes $ 3,003 $25,396 $10,939 $ 6,793 $ 6,705 $ 8,789
Equity in net (income)/loss of affiliates
plus dividends from affiliates (41) 78 121 36 179 (182)
Adjusted fixed charges a/ 2,268 9,215 10,911 10,801 10,558 8,122
------- ------- ------- ------- ------- -------
Earnings $ 5,230 $34,689 $21,971 $17,630 $17,440 $16,729
======= ======= ======= ======= ======= =======
Combined Fixed Charges and
Preferred Stock Dividends
- --------------------------
Interest expense b/ $ 2,192 $ 8,919 $10,570 $10,464 $10,121 $ 7,787
Interest portion of rental expense c/ 61 245 309 300 396 265
Preferred stock dividend requirements of
majority owned subsidiaries and trusts d/ 14 55 55 55 199 160
------- ------- ------- ------- ------- -------
Fixed charges 2,267 9,219 10,934 10,819 10,716 8,212
Ford preferred stock dividend requirements e/ 6 122 82 95 459 472
------- ------- ------- ------- ------- -------
Total combined fixed charges
and preferred stock dividends $ 2,273 $ 9,341 $11,016 $10,914 $11,175 $ 8,684
======= ======= ======= ======= ======= =======
Ratios
- ------
Ratio of earnings to fixed charges 2.3 3.8 f/ 2.0 1.6 1.6 2.0
Ratio of earnings to combined fixed
charges and preferred stock dividends 2.3 3.7 f/ 2.0 1.6 1.6 1.9
</TABLE>
- - - - - -
a/ Fixed charges, as shown above, 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 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 Motor Company's effective income tax
rates.
f/ Earnings used in calculation of this ratio include the $15,955 million gain
on the spin-off of The Associates. Excluding this gain, the ratio is 2.0.
Exhibit 15
Ford Motor Company
The American Road
Dearborn, Michigan
Re: Ford Motor Company Registration Statements Nos. 2-95018, 2-95020,
33-9722, 33-14951, 33-19036, 33-36043, 33-36061, 33-39402, 33-50194,
33-50238, 33-54275, 33-54283, 33-54344, 33-54348, 33-54735, 33-54737,
33-58255, 33-58785, 33-58861, 33-61107, 33-62227, 33-64605, 33-64607,
333-02735, 333-20725, 333-27993, 333-28181, 333-46295, 333-47443,
333-47445, 333-47451, 333-47733, 333-47735, 333-49545, 333-49547,
333-49551, 333-52399, 333-58695, 333-58697, 333-58701, 333-65703,
333-70447, and 333-74313 on Form S-8, and 333-52485, 333-67209, and
333-67211 on Form S-3
We are aware that our report dated April 14, 1999 accompanying the unaudited
interim financial information of Ford Motor Company for the periods ended March
31, 1999 and 1998 and included in the Ford Motor Company Quarterly Report on
Form 10-Q for the quarter ended March 31, 1999 will be incorporated by reference
in the Registration Statements. Pursuant to Rule 436(c) under the Securities Act
of 1933, this report should not be considered a part of the Registration
Statements prepared or certified by us within the meaning of Sections 7 and 11
of the Act.
/s/ PricewaterhouseCoopers LLP
400 Renaissance Center
Detroit, Michigan 48243
April 19, 1999
Exhibit 18
March 31, 1999
Ford Motor Company
The American Road
Dearborn, MI 48121
We are providing this letter to you for inclusion as an exhibit to your Form
10-Q filing pursuant to Item 601 of Regulation S-K.
We have read management's justification for the following prospective changes in
accounting, effective January 1, 1999 and contained in Ford Motor Company's (the
"Company") Form 10-Q for the quarter ended March 31, 1999:
1. The Company changed its method of special tooling depreciation from the
sum-of-the-years-digits method to the units of production method. This
change is being made to recognize that special tooling retains its value
more uniformly over time and more closely aligns tooling amortization with
vehicle production volumes, providing a better matching of costs and
revenues.
2. The Company changed its plant and equipment retirement policy to reflect
gains and losses in the year of retirement. Previously, the cost of retired
assets, net of salvage proceeds, was charged to accumulated depreciation.
The plant and equipment retirement change in accounting principle is being
made to better reflect the results of asset sale and disposal decisions.
Based on our reading of the data and discussions with Company officials about
the business judgment and business planning factors relating to the changes, we
believe management's justification to be reasonable. Accordingly, in reliance on
management's determination regarding elements of business judgment and business
planning, we concur that the newly adopted accounting principles described above
are preferable in the Company's circumstances to the methods previously applied.
We have not audited any financial statements of the Company as of any date or
for any period subsequent to December 31, 1998, nor have we audited the
application of the changes in accounting principles disclosed in the Company's
Form 10-Q for the three months ended March 31, 1999; accordingly, our comments
are subject to revision on completion of an audit of the financial statements
that include the accounting changes.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Detroit, Michigan
