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 September 30, 2000 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)
One American Road, Dearborn, Michigan 48126
------------------------------------- -----
(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 September 30, 2000, the Registrant had outstanding 1,825,383,706
------------------ -------------
shares of Common Stock and 70,852,076 shares of Class B Stock.
----------
Exhibit index located on sequential page number 25
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
HIGHLIGHTS
----------
Third Quarter Nine Months
---------------------------- ---------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Worldwide vehicle unit sales of
cars and trucks (in thousands)
- North America 1,104 1,050 3,724 3,507
- Outside North America 550 549 1,839 1,795
--------- --------- --------- ---------
Total 1,654 1,599 5,563 5,302
========= ========= ========= =========
Sales and revenues (in millions)
- Automotive $ 32,582 $ 30,645 $ 106,123 $ 97,788
- Financial Services 7,482 6,635 21,354 18,948
--------- --------- --------- ---------
Total $ 40,064 $ 37,280 $ 127,477 $ 116,736
========= ========= ========= =========
Net income (loss) (in millions)
- Automotive $ 391 $ 535 $ 2,995 $ 3,632
- Financial Services 497 424 1,338 1,159
--------- --------- --------- ---------
Income from continuing operations 888 959 4,333 4,791
- Discontinued operation (Visteon) - 155 309 640
- Loss on spin-off of Visteon - - (2,252) -
--------- --------- --------- ---------
Total $ 888 $ 1,114 $ 2,390 $ 5,431
========= ========= ========= =========
Capital expenditures (in millions)
- Automotive $ 1,932 $ 1,812 $ 4,884 $ 4,521
- Financial Services 102 150 565 435
--------- --------- --------- ---------
Total $ 2,034 $ 1,962 $ 5,449 $ 4,956
========= ========= ========= =========
Automotive capital expenditures as a
percentage of sales 5.9% 5.9% 4.6% 4.6%
Stockholders' equity at September 30
- Total (in millions) $ 18,273 $ 26,961 $ 18,273 $ 26,961
- Annualized after-tax return on average Common
and Class B stockholders' equity 19.1% 17.7% 16.9% 28.2%
Automotive net cash at September 30
(in millions)
- Cash and marketable securities $ 18,599 $ 23,721 $ 18,599 $ 23,721
- Debt 11,987 12,420 11,987 12,420
--------- --------- --------- ---------
Automotive net cash $ 6,612 $ 11,301 $ 6,612 $ 11,301
========= ========= ========= =========
After-tax return on sales
- North American Automotive 3.3% 3.9% 5.5% 5.5%
- Total Automotive 1.2% 1.7% 2.9% 3.7%
Shares of Common and Class B Stock
(in millions)
- Average number outstanding 1,649 1,209 1,354 1,210
- Number outstanding at September 30 1,896 1,208 1,896 1,208
Common Stock price (per share)
(adjusted to reflect Visteon spin-off
and Value Enhancement Plan)
- High $26-5/8 $31 $30-1/8 $35-1/8
- Low 24-3/16 26-5/8 22-7/8 26-5/8
AMOUNTS PER SHARE OF COMMON AND
CLASS B STOCK AFTER PREFERRED
STOCK DIVIDENDS
Income assuming dilution
- Automotive $ 0.23 $ 0.44 $ 2.17 $ 2.94
- Financial Services 0.30 0.34 0.97 0.93
--------- --------- --------- ---------
Subtotal 0.53 0.78 3.14 3.87
- Discontinued operation (Visteon) - 0.12 0.23 0.52
- Loss on spin-off of Visteon - - (1.64) -
--------- --------- --------- ---------
Total $ 0.53 $ 0.90 $ 1.73 $ 4.39
========= ========= ========= =========
Cash dividends $ 0.50 $ 0.46 $ 1.50 $ 1.38
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
VEHICLE UNIT SALES
------------------
For the Periods Ended September 30, 2000 and 1999
(in thousands)
Third Quarter Nine Months
------------------------ --------------------------
2000 1999 2000 1999
-------- -------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
North America
United States
Cars 411 376 1,342 1,228
Trucks 603 596 2,068 2,015
----- ----- ----- -----
Total United States 1,014 972 3,410 3,243
Canada 59 50 218 188
Mexico 31 28 96 76
----- ----- ----- -----
Total North America 1,104 1,050 3,724 3,507
Europe
Britain 114 134 368 396
Germany 66 72 240 273
Italy 50 39 157 149
Spain 36 38 130 135
France 36 37 119 129
Sweden 32 21 90 54
Other countries 81 79 331 299
----- ----- ----- -----
Total Europe 415 420 1,435 1,435
Other international
Brazil 33 35 96 90
Australia 34 32 95 96
Taiwan 13 13 54 45
Argentina 12 16 39 44
Japan 5 8 22 25
Other countries 38 25 98 60
----- ----- ----- -----
Total other international 135 129 404 360
----- ----- ----- -----
Total worldwide vehicle unit sales 1,654 1,599 5,563 5,302
===== ===== ===== =====
</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.
2
<PAGE>
Part I. Financial Information
-----------------------------
Item 1. Financial Statements
-----------------------------
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
For the Periods Ended September 30, 2000 and 1999
(in millions)
Third Quarter Nine Months
-------------------------- ---------------------------
2000 1999 2000 1999
---------- ----------- ------------ ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
AUTOMOTIVE
Sales $32,582 $30,645 $106,123 $97,788
Costs and expenses (Note 5)
Cost of sales 29,679 27,879 94,772 86,412
Selling, administrative and other expenses 2,338 2,029 7,061 6,102
------- ------- -------- -------
Total costs and expenses 32,017 29,908 101,833 92,514
Operating income 565 737 4,290 5,274
Interest income 382 354 1,139 1,039
Interest expense 367 371 1,012 993
------- ------- ------- -------
Net interest income (expense) 15 (17) 127 46
Equity in net income (loss) of affiliated companies (61) 11 (64) 33
Net revenue (expense) from transactions with
Financial Services 9 (17) 19 (62)
------- ------- ------- -------
Income before income taxes - Automotive 528 714 4,372 5,291
FINANCIAL SERVICES
Revenues 7,482 6,635 21,354 18,948
Costs and expenses
Interest expense 2,451 1,988 6,975 5,701
Depreciation 2,427 2,333 7,033 6,881
Operating and other expenses 1,257 1,206 3,717 3,304
Provision for credit and insurance losses 482 383 1,347 1,146
------- ------- ------- -------
Total costs and expenses 6,617 5,910 19,072 17,032
Net revenue (expense) from transactions with
Automotive (9) 17 (19) 62
------- ------- ------- -------
Income before income taxes - Financial Services 856 742 2,263 1,978
------- ------- ------- -------
TOTAL COMPANY
Income before income taxes 1,384 1,456 6,635 7,269
Provision for income taxes 449 473 2,199 2,400
------- ------- -------- -------
Income before minority interests 935 983 4,436 4,869
Minority interests in net income of subsidiaries 47 24 103 78
------- ------- -------- -------
Income from continuing operations 888 959 4,333 4,791
Income from discontinued operation (Note 2) - 155 309 640
Loss on spin-off of discontinued operation (Note 2) - - (2,252) -
------- ------- -------- -------
Net income (loss) $ 888 $ 1,114 $ 2,390 $ 5,431
======= ======= ======== =======
Income attributable to Common and Class B Stock
after preferred stock dividends $ 884 $ 1,110 $ 2,379 $ 5,420
Average number of shares of Common and Class B
Stock outstanding 1,649 1,209 1,354 1,210
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
Basic Income (Note 9)
Income from continuing operations $ 0.54 $ 0.79 $ 3.21 $ 3.96
Net income $ 0.54 $ 0.92 $ 1.77 $ 4.49
Diluted Income (Note 9)
Income from continuing operations $ 0.53 $ 0.78 $ 3.14 $ 3.87
Net income $ 0.53 $ 0.90 $ 1.73 $ 4.39
Cash dividends $ 0.50 $ 0.46 $ 1.50 $ 1.38
</TABLE>
The accompanying notes are part of the financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
--------------------------
(in millions)
September 30, December 31,
2000 1999
--------------- ---------------
(unaudited)
<S> <C> <C>
ASSETS
Automotive
Cash and cash equivalents $ 3,352 $ 2,793
Marketable securities 15,247 18,943
-------- --------
Total cash and marketable securities 18,599 21,736
Receivables 4,523 5,267
Inventories (Note 6) 8,189 5,684
Deferred income taxes 2,645 3,762
Other current assets 5,006 3,831
Current receivable from Financial Services 2,052 2,304
-------- --------
Total current assets 41,014 42,584
Equity in net assets of affiliated companies 2,863 2,539
Net property 35,600 36,528
Deferred income taxes 3,795 2,454
Net assets of discontinued operation (Note 2) - 1,566
Other assets 12,938 13,530
-------- --------
Total Automotive assets 96,210 99,201
Financial Services
Cash and cash equivalents 2,310 1,588
Investments in securities 752 733
Finance receivables, net 121,094 113,298
Net investment in operating leases 47,321 42,471
Other assets 10,975 11,123
Receivable from Automotive 3,623 1,835
-------- --------
Total Financial Services assets 186,075 171,048
-------- --------
Total assets $282,285 $270,249
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive
Trade payables $ 14,465 $ 14,292
Other payables 3,789 3,778
Accrued liabilities 22,981 18,488
Income taxes payable 634 1,709
Debt payable within one year 731 1,338
-------- --------
Total current liabilities 42,600 39,605
Long-term debt 11,256 10,398
Other liabilities 31,987 29,283
Deferred income taxes 303 1,223
Payable to Financial Services 3,623 1,835
-------- --------
Total Automotive liabilities 89,769 82,344
Financial Services
Payables 4,607 3,550
Debt 149,779 139,919
Deferred income taxes 9,507 7,078
Other liabilities and deferred income 7,624 6,775
Payable to Automotive 2,052 2,304
-------- --------
Total Financial Services liabilities 173,569 159,626
Company-obligated mandatorily redeemable preferred securities
of a subsidiary trust holding solely junior subordinated debentures
of the Company (Note 7) 674 675
Stockholders' equity
Capital stock
Preferred Stock, par value $1.00 per share (aggregate
liquidation preference of $177 million) * *
Common Stock (par value $0.01 and $1.00 per share as of 2000 and
1999, respectively; 1,837 and 1,151 million shares issued as of 2000
and 1999, respectively) 18 1,151
Class B Stock, par value $0.01 and $1.00 per share as of 2000 and
1999, respectively (71 million shares issued) 1 71
Capital in excess of par value of stock 5,969 5,049
Accumulated other comprehensive income (3,913) (1,856)
ESOP loan and treasury stock (1,176) (1,417)
Earnings retained for use in business 17,374 24,606
-------- --------
Total stockholders' equity 18,273 27,604
-------- --------
Total liabilities and stockholders' equity $282,285 $270,249
======== ========
- - - -
</TABLE>
*Less than $1 million
The accompanying notes are part of the financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
For the Periods Ended September 30, 2000 and 1999
(in millions)
Nine Months 2000 Nine Months 1999
--------------------------- --------------------------
Financial Financial
Automotive Services Automotive Services
------------- ----------- ------------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash and cash equivalents at January 1 $ 2,793 $ 1,588 $ 3,143 $ 1,151
Cash flows from operating activities before securities trading 10,891 11,497 10,127 10,350
Net sales (purchases) of trading securities 4,041 151 (1,248) (148)
------- -------- ------- --------
Net cash flows from operating activities 14,932 11,648 8,879 10,202
Cash flows from investing activities
Capital expenditures (4,884) (565) (4,521) (435)
Acquisitions of receivables and lease investments - (69,257) - (61,657)
Collections of receivables and lease investments - 41,426 - 38,358
Net acquisitions of daily rental vehicles - (2,482) - (2,025)
Purchases of securities (374) (415) (1,681) (759)
Sales and maturities of securities 29 412 1,385 988
Proceeds from sales of receivables and lease investments - 12,502 - 9,520
Net investing activity with Financial Services 92 - (430) -
Cash paid for acquisitions (Note 3) (2,487) (87) (5,808) -
Other - 226 314 (4)
------- ------- ------- --------
Net cash used in investing activities (7,624) (18,240) (10,741) (16,014)
Cash flows from financing activities
Cash dividends (2,185) - (1,682) (3)
Value Enhancement Plan payments (5,440) - - -
Net purchases of Common Stock (185) - (265) -
Changes in short-term debt (841) (8,140) 184 (2,210)
Proceeds from issuance of other debt 1,917 31,397 1,925 26,925
Principal payments on other debt (823) (14,896) (156) (18,796)
Net debt repayments from discontinued operation 650 - - -
Net cash distribution (to) from discontinued operation (85) - 291 -
Net financing activity with Automotive - (92) - 430
Other 14 (409) 338 (62)
------- ------- ------- -------
Net cash (used in)/provided by financing activities (6,978) 7,860 635 6,284
Effect of exchange rate changes on cash (23) (294) (45) (197)
Net transactions with Automotive/Financial Services 252 (252) 187 (187)
------- ------- ------- -------
Net increase (decrease) in cash and cash equivalents 559 722 (1,085) 88
------- ------- ------- --------
Cash and cash equivalents at September 30 $ 3,352 $ 2,310 $ 2,058 $ 1,239
======= ======== ======= ========
</TABLE>
The accompanying notes are part of the financial statements.
5
<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 (i) financial statements contained in the registrant's
Annual Report on Form 10-K (the "10-K Report") for the year ended
December 31, 1999 and (ii) restated financial statements contained in the
registrant's Current Report on Form 8-K filed September 18, 2000. For
purposes of Notes to Financial Statements, "Ford", the "Company" or "we"
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.
2. Discontinued Operation - On June 28, 2000, we distributed 130 million
shares of Visteon, which represented its 100% ownership interest, by means
of a tax-free spin-off in the form of a dividend on Ford Common and Class B
Stock. Our financial statements for and at the end of 1999 and the first
and second quarters of 2000 have been restated to reflect Visteon as a
"discontinued operation".
3. Purchase of Land Rover Business - On June 30, 2000, we purchased the Land
Rover business from the BMW Group for approximately three billion euros.
Approximately two-thirds of the purchase price (equivalent of $1.9 billion
at June 30) was paid at time of closing. The remainder will be paid in
2005. The acquisition involves the entire Land Rover line of products, and
related assembly and engineering facilities. It does not include Rover's
passenger car business or financial services business.
The acquisition has been accounted for as a purchase. The assets acquired,
liabilities assumed and the results of operations, since the date of
acquisition, are included in our financial statements on a consolidated
basis.
The purchase price for Land Rover has been allocated, on a preliminary
basis, to the assets acquired and liabilities assumed based on estimated
fair value as of the acquisition date. The excess of the purchase price
over the estimated fair value of tangible net assets acquired is
approximately $800 million and is primarily being amortized on a
straight-line basis over 40 years.
Assuming the acquisition had taken place on January 1, 2000 and 1999,
unaudited pro forma revenue for Ford (Automotive) would have been
approximately $108.7 billion and $101.4 billion for each of the nine month
periods ended September 30, respectively. Pro forma effects on net income
from continuing operations would not have been material.
4. Value Enhancement Plan - On August 7, 2000, we announced the final results
of our recapitalization, known as our Value Enhancement Plan ("VEP"). Under
the VEP, Ford shareholders exchanged each of their old Ford common or Class
B shares for one new Ford common or Class B share, as the case may be,
plus, at their election, either $20 in cash, 0.748 additional new Ford
common shares, or a combination of $5.17 in cash and 0.555 additional new
Ford common shares.
In accordance with generally accepted accounting principles, prior period
shares and earnings per share amounts were not adjusted. Third quarter 2000
average diluted shares of 1.678 billion were calculated based on an average
of 1.222 billion shares for the period prior to the VEP and an average of
1.929 billion shares for the period subsequent to the VEP.
6
<PAGE>
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
5. Selected Automotive Costs and Expenses are summarized as follows (in
millions):
<TABLE>
<CAPTION>
Third Quarter Nine Months
---------------------- ------------------------
2000 1999 2000 1999
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Depreciation $734 $715 $2,146 $1,999
Tooling Amortization 574 641 1,776 1,773
Pension benefits 75 111 89 317
</TABLE>
Acquisition of Land Rover - Under U.S. accounting rules, we were required
to write-up inventory acquired to fair value, resulting in a one-time
increase to third quarter 2000 cost of sales of $162 million ($106 million
after tax).
European Charges - Following an extensive business review of the Ford brand
operations in Europe, the Company recorded a pre-tax charge in Automotive
cost of sales of $1,568 million in the second quarter of 2000. This charge
included $1.1 billion for asset impairments and $468 million for
restructuring costs. The effect on after-tax earnings was $1,019 million.
As of September 30, 2000, we have spent or utilized approximately $150
million related to the restructuring charge; the remaining $318 million is
expected to be incurred in the time period specified in the original plan.
Acquisition of AB Volvo's worldwide passenger car business ("Volvo Car") -
Under U.S. accounting rules, we were required to write-up inventory
acquired to fair value, resulting in a one-time increase to second quarter
1999 cost of sales of $224 million ($146 million after tax).
Dissolution of AutoEuropa Joint Venture - Effective January 1, 1999, our
joint venture for the production of mini-vans with Volkswagon AG in
Portugal (AutoEuropa) was dissolved, resulting in a $255 million pre-tax
gain ($165 million after-tax) in the first quarter of 1999.
6. Automotive Inventories are summarized as follows (in millions):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Raw materials, work in process and supplies $2,768 $2,035
Finished products 5,421 3,649
------ ------
Total inventories $8,189 $5,684
====== ======
U.S. inventories $2,616 $1,811
</TABLE>
7. 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.
8. 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):
<TABLE>
<CAPTION>
Third Quarter Nine Months
------------------------ -------------------------
2000 1999 2000 1999
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $ 888 $1,114 $ 2,390 $ 5,431
Other comprehensive income (979) 267 (2,057) (177)
------- ------ ------- -------
Total comprehensive income $ (91) $1,381 $ 333 $ 5,254
======= ====== ======= =======
</TABLE>
The reduction in other comprehensive income in 2000 primarily reflects
foreign currency translation adjustments related to the strengthening of
the U.S. dollar relative to European currencies.
7
<PAGE>
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
9. 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 third quarter
shares outstanding reflect the issuance of new shares as a result of the
Value Enhancement Plan (Note 4).
The calculation of diluted income per share of Common and Class B Stock
takes into account the effect of dilutive potential common stock, such as
stock options.
Income per share of Common and Class B Stock was as follows (in millions,
except per share amounts):
<TABLE>
<CAPTION>
Third Quarter 2000 Third Quarter 1999
--------------------- ----------------------
Income Shares Income Shares
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Income from continuing operations $ 888 1,649 $ 959 1,209
Preferred stock dividend requirements (4) - (4) -
Issuable and uncommitted ESOP shares - (6) - (3)
------ ----- ------ ----
Basic income and shares from continuing operations $ 884 1,643 $ 955 1,206
Basic income per share from continuing operations $ 0.54 $ 0.79
Basic income per share from discontinued operation - 0.13
------ ------
Basic income per share $ 0.54 $ 0.92
Basic income and shares from continuing operations $ 884 1,643 $ 955 1,206
Net dilutive effect of options - 35 - 25
------ ----- ------ -----
Diluted income and shares from continuing operations $ 884 1,678 $ 955 1,231
Diluted income per share from continuing operations $ 0.53 $ 0.78
Diluted income per share from discontinued operation - 0.12
------ ------
Diluted income per share $ 0.53 $ 0.90
</TABLE>
<TABLE>
<CAPTION>
Nine Months 2000 Nine Months 1999
--------------------- ----------------------
Income Shares Income Shares
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Income from continuing operations $4,333 1,354 $4,791 1,210
Preferred stock dividend requirements (11) - (11) -
Issuable and uncommitted ESOP shares - (7) - (4)
------ ----- ------ -----
Basic income and shares from continuing operations $4,322 1,347 $4,780 1,206
Basic income per share from continuing operations $ 3.21 $ 3.96
Basic income per share from discontinued operation 0.23 0.53
Basic loss per share on spin-off of discontinued operation (1.67) -
------ ------
Basic income per share $ 1.77 $ 4.49
Basic income and shares from continuing operations $4,322 1,347 $4,780 1,206
Net dilutive effect of options - 28 - 29
------ ----- ------ -----
Diluted income and shares from continuing operations $4,322 1,375 $4,780 1,235
Diluted income per share from continuing operations $ 3.14 $ 3.87
Diluted income per share from discontinued operation 0.23 0.52
Diluted loss per share on spin-off of discontinued operation (1.64) -
------ ------
Diluted income per share $ 1.73 $ 4.39
</TABLE>
8
<PAGE>
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
10. Segment Information - Ford's business is divided into two business sectors
- Automotive and Financial Services (including Ford Credit and Hertz);
detail is summarized as follows (in millions):
<TABLE>
<CAPTION>
Financial Services Sector
------------------------------- ---------------------------------
Third Quarter Auto Ford Other Elims/
------------------------------- Sector Credit Hertz Fin Svcs Other Total
----------- ----------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
2000
Revenues
External customer $ 32,582 $ 5,948 $ 1,424 $ 103 $ 7 $ 40,064
Intersegment 760 43 8 11 (822) -
-------- -------- ------- ------ ------- --------
Total Revenues $ 33,342 $ 5,991 $ 1,432 $ 114 $ (815) $ 40,064
======== ======== ======= ====== ======= ========
Income from continuing
operations $ 391 $ 386 $ 143 $ 3 $ (35) $ 888
1999
Revenues
External customer $ 30,645 $ 5,075 $ 1,339 $ 216 $ 5 $ 37,280
Intersegment 558 57 9 43 (667) -
-------- -------- ------- ------ ------- --------
Total Revenues $ 31,203 $ 5,132 $ 1,348 $ 259 $ (662) $ 37,280
======== ======== ======= ====== ======= ========
Income from continuing
operations $ 535 $ 317 $ 139 $ (5) $ (27) $ 959
</TABLE>
<TABLE>
<CAPTION>
Financial Services Sector
------------------------------- ---------------------------------
Nine Months Auto Ford Other Elims/
------------------------------- Sector Credit Hertz Fin Svcs Other Total
----------- --------- ------------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
2000
Revenues
External customer $106,123 $ 17,217 $ 3,826 $ 285 $ 26 $127,477
Intersegment 3,256 123 23 115 (3,517) -
-------- -------- ------- ------ ------- --------
Total Revenues $109,379 $ 17,340 $ 3,849 $ 400 $(3,491) $127,477
======== ======== ======= ====== ======= ========
Income from continuing
operations $ 2,995 $ 1,126 $ 303 $ (26) $ (65) $ 4,333
Total assets $ 99,659 $169,894 $11,191 $9,228 $(7,687) $282,285
1999
Revenues
External customer $ 97,788 $ 14,899 $ 3,528 $ 519 $ 2 $116,736
Intersegment 3,025 172 25 136 (3,358) -
-------- -------- ------- ------ ------- --------
Total Revenues $100,813 $ 15,071 $ 3,553 $ 655 $(3,356) $116,736
======== ======== ======= ====== ======= ========
Income from continuing
operations $ 3,632 $ 952 $ 276 $ (15) $ (54) $ 4,791
Total assets a/ $100,924 $147,877 $10,159 $9,107 $(6,312) $261,755
- - - - -
</TABLE>
a/ Net assets of discontinued operation of $2,051 as of September 30, 1999
are included in Auto Sector total assets.
"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.
"Eliminations/Other" data includes intersegment eliminations and minority
interests. Interest income for the operating segments in the Financial
Services Sector is reported as "Revenue".
9
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders
Ford Motor Company
We have reviewed the accompanying consolidated balance sheet of Ford Motor
Company and its subsidiaries as of September 30, 2000, and the related
consolidated statement of income for each of the three-month and nine-month
periods ended September 30, 2000 and 1999 and the condensed consolidated
statement of cash flows for the nine-month periods ended September 30, 2000 and
1999. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally 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 review, we are not aware of any material modifications that should
be made to the accompanying consolidated interim financial statements for them
to be in conformity with accounting principles generally accepted in the United
States of America.
We previously audited in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet as of
December 31, 1999, and the related consolidated statements of income,
stockholders' equity and of cash flows for the year then ended (not presented
herein), and in our report dated January 24, 2000, except for note 2, which is
as of June 28, 2000, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet as of December 31, 1999, is fairly
stated in all material respects in relation to the consolidated balance sheet
from which it has been derived.
PricewaterhouseCoopers LLP
October 17, 2000
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
-------------
In addition to specific explanations discussed below, comparisons between
Ford's 2000 and 1999 third quarter and nine months results are influenced
by the following important events:
o On August 7, 2000, we announced the final results of our
recapitalization, known as our Value Enhancement Plan ("VEP"), which
became effective on August 2, 2000. Under the VEP, Ford shareholders
exchanged each of their old Ford common or Class B shares for one new
Ford common or Class B share, as the case may be, plus, at their
election, either $20 in cash, 0.748 additional new Ford common shares,
or a combination of $5.17 in cash and 0.555 additional new Ford common
shares. As a result of the elections made by shareholders under the
VEP, the total cash elected was $5.7 billion and the total number of
new Ford common and Class B shares issued and becoming outstanding was
1.893 billion. See note 4 of the Notes to Financial Statements for a
description of the effect of the VEP on earnings per share.
o On June 30, 2000, we purchased the Land Rover business from the BMW
Group. Land Rover's results and financial condition are included in
our financial statements on a consolidated basis beginning in the
third quarter of 2000.
o On June 28, 2000, we distributed 130 million shares of Visteon
Corporation, which represented our 100% ownership interest, by means
of a tax-free spin-off in the form of a dividend on Ford Common and
Class B Stock. Visteon has been reflected as a discontinued operation
through June 30, 2000. Our third quarter 2000 results and financial
condition exclude completely Visteon's results and financial
condition.
o On March 31, 1999, we purchased AB Volvo's worldwide passenger car
business ("Volvo Car"). Volvo Car's results and financial condition
have been included in our financial statements on a consolidated basis
since the second quarter of 1999.
THIRD QUARTER RESULTS OF OPERATIONS
Our worldwide net income was $888 million in the third quarter of 2000, or
$0.53 per diluted share of Common and Class B Stock. In the third quarter of
1999, earnings from continuing operations were $959 million, or $0.78 per
diluted share. Worldwide sales and revenues were $40.1 billion in the third
quarter of 2000, up $2.8 billion from a year ago, reflecting primarily higher
unit volume and the addition of Land Rover. Unit sales of cars and trucks were
1,654,000, up 55,000 units, reflecting primarily the addition of Land Rover unit
sales.
Results by business sector for the third quarter of 2000 and 1999 are shown
below (in millions).
<TABLE>
<CAPTION>
Third Quarter
Net Income
--------------------------------------
2000
O/(U)
2000 1999 1999
------------ ----------- -----------
<S> <C> <C> <C>
Automotive sector $ 391 $ 535 $(144)
Financial Services sector 497 424 73
------ ------ -----
Income from continuing operations 888 959 (71)
Income from discontinued operation - 155 (155)
------ ------ -----
Total Company net income $ 888 $1,114 $(226)
====== ====== =====
</TABLE>
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
-------------
Automotive Sector
-----------------
Worldwide earnings for our Automotive sector were $391 million in the third
quarter of 2000, on sales of $32.6 billion. These earnings include a one-time
profit reduction of $106 million related to the acquisition of Land Rover,
reflecting the write-up of inventory to fair value. Excluding this profit
reduction, third quarter 2000 earnings would have been $497 million. Earnings in
the third quarter of 1999 were $535 million, on sales of $30.6 billion. These
earnings include one-time profit reductions of $79 million and $125 million
related to salaried separations and post-retirement benefits, respectively.
Excluding these unusual items, third quarter 1999 earnings would have been $739
million.
Details of third quarter Automotive sector earnings from continuing
operations are shown below (in millions).
<TABLE>
<CAPTION>
Third Quarter
Net Income/(Loss)
-----------------------------------
2000
O/(U)
2000 1999 1999
----------- ---------- ----------
<S> <C> <C> <C>
North American Automotive $ 769 $ 867 $ (98)
Automotive outside North America
- Europe (297) (156) (141)
- South America (64) (86) 22
- Rest of World (17) 35 (52)
------ ----- ------
Total Automotive outside
North America (378) (207) (171)
Post-retirement benefit adjustment - (125) 125
------ ----- -----
Total Automotive sector $ 391 $ 535 $(144)
====== ===== ======
</TABLE>
Automotive sector earnings in North America were $769 million in the third
quarter of 2000, on sales of $23.4 billion. In the third quarter of 1999,
earnings were $867 million, on sales of $22.4 billion. The after-tax return on
sales for our North American Automotive sector was 3.3% in the third quarter of
2000, down 6/10 of a percentage point from a year ago. The decrease in earnings
and returns is more than explained by the impact of the Firestone tire recall,
discussed in Part II "Other Information", Item 1 "Legal Proceedings - Other
Matters". The profit impact amounted to approximately $300 million ($500 million
pre-tax), about one-half of which includes lost profits from a three-week
production shut-down at selected plants and the other half includes primarily
costs incurred in facilitating and accelerating Firestone's recall effort.
Although we expect to make up in the fourth quarter the production lost in the
third quarter, costs relating to Firestone's recall may continue in the fourth
quarter and beyond.
In the third quarter of 2000, approximately 4.6 million new cars and trucks
were sold in the United States, up 67,000 units from a year ago. Our share of
those unit sales was 22.8%, down 3/10 of a percentage point from a year ago.
Our Automotive sector loss in Europe was $297 million in the third quarter
of 2000, compared with a loss of $156 million a year ago. The deterioration
reflects primarily the European share of the Land Rover one-time profit
reduction ($76 million), lower pricing and increased warranty coverage in the
United Kingdom, loss of production from fuel cost-related labor disruptions, and
launch costs for the new Mondeo model.
In the third quarter of 2000, approximately 4.1 million new cars and trucks
were sold in our nineteen primary European markets, down 349,000 units from a
year ago. Our share of those unit sales was 10.7%, unchanged from a year ago.
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations(Continued)
-------------
Our Automotive sector loss in South America was $64 million in the third
quarter of 2000, compared with a loss of $86 million a year ago. The improvement
reflected primarily improved revenue and cost reductions.
In the third quarter of 2000, approximately 386,000 new cars and trucks
were sold in Brazil, compared with 359,000 a year ago. Our share of those unit
sales was 9.2%, up 5/10 of a percentage point from a year ago, in part
reflecting new products.
Automotive sector results outside North America, Europe, and South America
("Rest of World") were a loss of $17 million in the third quarter of 2000,
compared with earnings of $35 million in the third quarter of 1999. The decline
reflected primarily the effects of unfavorable exchange rates at Mazda.
Financial Services Sector
-------------------------
Earnings of our Financial Services sector consist primarily of two
segments, Ford Credit and Hertz. Details of third quarter Financial Services
sector earnings are shown below (in millions).
<TABLE>
<CAPTION>
Third Quarter
Net Income/(Loss)
--------------------------------------
2000
O/(U)
2000 1999 1999
----------- ---------- -----------
<S> <C> <C> <C>
Ford Credit $386 $317 $69
Hertz 143 139 4
Minority interests, eliminations,
and other (32) (32) -
---- ---- ---
Total Financial Services sector $497 $424 $73
==== ==== ===
Memo: Ford's share of earnings in Hertz $116 $113 $ 3
</TABLE>
Ford Credit's consolidated net income in the third quarter of 2000 was $386
million, up $69 million or 22% from 1999. The increase in earnings reflected
primarily improved net financing margins and a higher level of receivables,
offset partially by higher credit losses and operating costs associated with the
restructuring of North American operations.
Earnings at Hertz in the third quarter of 2000 were $143 million (of which
$116 million was Ford's share), compared with earnings of $139 million (of which
$113 million was Ford's share) a year ago. The increase in earnings reflected
primarily strong volume-related performance, offset partially by downward
pricing pressure and higher interest costs.
FIRST NINE MONTHS RESULTS OF OPERATIONS
Our worldwide earnings from continuing operations in the first nine months
of 2000 were $4,333 million. Earnings from continuing operations in the first
nine months of 1999 were $4,791 million. Worldwide sales and revenues in the
first nine months of 2000 were $127.5 billion, up $10.7 billion from a year ago.
Unit sales of cars and trucks were 5,563,000, up 261,000 units.
13
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations(Continued)
-------------
Results of our operations by business sector for the first nine months of
2000 and 1999 are shown below (in millions).
<TABLE>
<CAPTION>
Nine Months
Net Income/(Loss)
-----------------------------------
2000
O/(U)
2000 1999 1999
----------- ----------- -----------
<S> <C> <C> <C>
Automotive sector $ 2,995 $3,632 $ (637)
Financial Services sector 1,338 1,159 179
------- ------ -------
Income from continuing operations 4,333 4,791 (458)
Income from discontinued operation 309 640 (331)
Loss on spin-off of discontinued operation (2,252) - (2,252)
------- ------ -------
Total Company net income $ 2,390 $5,431 $(3,041)
======= ====== =======
</TABLE>
Automotive Sector
-----------------
Automotive sector earnings from continuing operations in the first nine
months of 2000 and 1999 are shown below (in millions).
<TABLE>
<CAPTION>
Nine Months
Net Income/(Loss)
------------------------------------
2000
O/(U)
2000 1999 1999
----------- ----------- ------------
<S> <C> <C> <C>
North American Automotive $ 4,279 $3,944 $ 335
Automotive outside North America
- Europe (1,163) 80 (1,243)
- South America (209) (344) 135
- Rest of World 88 77 11
------- ------ ------
Total Automotive outside
North America (1,284) (187) (1,097)
Post-retirement benefit adjustment - (125) 125
------- ------ -------
Total Automotive sector $ 2,995 $3,632 $ (637)
======= ====== =======
</TABLE>
Worldwide earnings for our Automotive sector were $2,995 million in the
first nine months of 2000, on sales of $106.1 billion. Earnings in the first
nine months of 1999 were $3,632 million, on sales of $97.8 billion. Unusual
items included in Automotive net income during these periods are shown below (in
millions):
<TABLE>
<CAPTION>
Nine Months
Gain/(Charge)
-------------------------
2000 1999
---------- ------------
<S> <C> <C>
- Asset impairment and restructuring costs for
Ford brand operations in Europe (second quarter) $(1,019)
- Inventory-related profit reduction for Land Rover
acquisition (third quarter) (106)
- Gain on sale of interest in AutoEuropa (first quarter) $ 165
- Inventory-related profit reduction for Volvo acquisition
(second quarter) (146)
- Employee separation costs in North America (third quarter) (79)
- Post-retirement benefit adjustment (third quarter) (125)
------- -----
Total unusual items $(1,125) $(185)
======= =====
</TABLE>
Excluding these unusual items, Automotive net income from continuing
operations in the first nine months of 2000 would have been $4,120 million,
compared with $3,817 million in the same period a year ago. This improvement
reflected higher net revenue and increased volume.
14
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations(Continued)
-------------
In the first nine months of 2000, our total Automotive costs were down $200
million compared with a year ago, adjusted for constant volume and mix. We had
set a target to reduce total Automotive costs by $1 billion in 2000 (at constant
volume and mix); however, we now expect cost reductions in 2000 to be in the
range of $700 million to $800 million. We will not be able to overcome higher
warranty costs associated with our 3.8-liter engine in the first quarter and the
costs associated with the Firestone tire recall in the third quarter to achieve
the original target.
Automotive sector earnings in North America were $4,279 million in the
first nine months of 2000, up $335 million from the first nine months of 1999.
The increase reflects primarily higher revenue resulting from improved mix. The
North American Automotive after-tax return on sales was 5.5% in the first nine
months of 2000, unchanged from a year ago.
In the first nine months of 2000, approximately 13.9 million new cars and
trucks were sold in the United States, up 700,000 units from a year ago. Our
share of those unit sales was 24%, unchanged from a year ago.
Our Automotive sector loss in Europe in the first nine months of 2000 was
$1,163 million, compared with earnings of $80 million in the first nine months a
year ago. The decline primarily reflected the second quarter 2000 charge of
$1,019 million related to asset impairment and restructuring costs for Ford
brand operations.
In the first nine months of 2000, approximately 14 million new cars and
trucks were sold in our nineteen primary European markets, down 179,000 units
from a year ago. Our share of those unit sales was 10.1%, down 2/10 of a
percentage point from a year ago, reflecting a decrease in demand for
Ford-branded vehicles.
Our Automotive sector loss in South America was $209 million in the first
nine months of 2000, compared with a loss of $344 million in the first nine
months a year ago. The improvement reflected primarily improved revenue and cost
reductions. In the first nine months of 2000, approximately 1,046,000 new cars
and trucks were sold in Brazil, compared with 964,000 a year ago. Our share of
those unit sales was 9.3%, down 1/10 of a percentage point.
Financial Services Sector
-------------------------
Higher earnings at Ford Credit and Hertz in the first nine months of 2000,
compared with the first nine months of 1999, reflected primarily the same
factors as those described in the discussion of third quarter results of
operations. Details of Financial Services sector earnings in the first nine
months of 2000 and 1999 are shown below (in millions).
<TABLE>
<CAPTION>
Nine Months
Net Income/(Loss)
-----------------------------------
2000
O/(U)
2000 1999 1999
---------- ---------- -----------
<S> <C> <C> <C>
Ford Credit $1,126 $ 952 $ 174
Hertz 303 276 27
Minority interests, eliminations,
and other (91) (69) (22)
------ ------ ------
Total Financial Services sector $1,338 $1,159 $ 179
====== ====== ======
Memo: Ford's share of earnings in Hertz $ 246 $ 224 $ 22
</TABLE>
15
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations(Continued)
-------------
LIQUIDITY AND CAPITAL RESOURCES
Automotive Sector
-----------------
At September 30, 2000, our Automotive sector had $18.6 billion of cash and
marketable securities, down $3.1 billion from December 31, 1999, more than
explained by the Value Enhancement Plan and the acquisition of Land Rover.
Automotive capital expenditures totaled $4.9 billion in the first nine
months of 2000, up $400 million from the first nine months of 1999.
At September 30, 2000, our Automotive sector had total debt of $12.0
billion, compared with $11.7 billion at December 31, 1999. Automotive debt at
September 30, 2000 was 40% of total capital (the sum of our stockholders' equity
and Automotive debt), up 10 percentage points from December 31, 1999. The
increase reflected primarily a decrease in stockholders' equity of $9.3 billion,
reflecting the Value Enhancement Plan, the Visteon spin-off, and a reduction in
other comprehensive income reflecting foreign currency translation adjustments
related primarily to the strengthening of the U.S. dollar relative to European
currencies.
Financial Services Sector
-------------------------
At September 30, 2000, our Financial Services sector had cash and cash
equivalents totaling $2.3 billion, up $722 million from December 31, 1999.
Finance receivables and net investments in operating leases were $168.4 billion
at September 30, 2000, up from $155.8 billion at December 31, 1999.
Total debt was $149.8 billion at September 30, 2000, up $9.9 billion from
December 31, 1999.
Outstanding commercial paper at September 30, 2000 totaled $35 billion at
Ford Credit and $2.1 billion at Hertz, with an average remaining maturity of 25
days and 16 days, respectively.
HERTZ PURCHASE
On September 21, 2000, we announced that we propose to acquire, through a
merger transaction, the 18.5% of outstanding stock of Hertz that we do not
already own. The proposal is subject to approval of the Hertz board of
directors, the board's favorable recommendation to Hertz shareholders and the
negotiation, execution and performance of a definitive merger agreement. In the
proposed merger, public shareholders of Hertz would receive $30 for each of the
approximately 20 million shares of Hertz Class A Common stock they own.
NEW ACCOUNTING STANDARDS
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. We will adopt SFAS 133 (as amended by SFAS 138) beginning January 1,
2001. We are in the process of completing our review to determine the impact of
the new standard on income and equity. There are certain issues that still need
to be resolved by the Derivative Implementation Group that may impact us. Also,
since the impact is dependent on future market rates and future derivative
actions prior to year-end, it is not fully determinable at this time.
16
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations(Continued)
-------------
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". We have examined our revenue recognition practices in light of
interpretive guidance and do not expect a material impact when SAB 101 is
adopted in the fourth quarter of 2000.
OTHER FINANCIAL INFORMATION
PricewaterhouseCoopers LLP, our independent public accountants, performed a
limited review of the financial data presented on pages 2 through 10 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.
17
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
--------------------------
Environmental Matters
---------------------
Rawsonville Plant. (Previously discussed on page 23 of Ford's Annual Report
on Form 10-K for the year ended December 31, 1999 (the "10-K Report"). In
connection with the spin-off by Ford to its stockholders of Ford's ownership
interest in Visteon Corporation ("Visteon"), as between Ford and Visteon,
Visteon has agreed to assume responsibility for the defense of, and any
prospective liability that may result from, this enforcement matter.
On Board Diagnostics Investigation. (Previously discussed on page 23 of the
10-K Report.) We are in the process of concluding an agreement with the
California Air Resources Board ("CARB") to conduct a voluntary recall of
California vehicles. No civil penalties will be imposed. The recall also will
include states that have adopted California standards. The issue remains pending
with the United States Environmental Protection Agency ("EPA").
Class Actions
-------------
Hertz Minority Shareholder Fiduciary Duty Class Actions. Thirteen class
actions have been filed in Delaware state court on behalf of minority
shareholders of The Hertz Corporation ("Hertz") against Ford, Hertz, and the
directors of Hertz, alleging that the defendants breached their fiduciary duties
to the minority shareholders of Hertz by Ford proposing, on September 20, 2000,
a merger transaction under which the minority shareholders would receive $30 per
share for the shares of Hertz stock they own. The plaintiffs allege that the
consideration offered is unfair and inadequate, was not negotiated at arms
length and was designed to benefit Ford by "capping" the value of the stock, and
would deny them the full value of their stock. They seek to enjoin or rescind
the transaction, recover damages and profits, and an award of attorneys' fees.
We expect all of these actions to be consolidated into a single court
proceeding.
Ford Credit Debt Collection Class Actions. Three class actions have been
filed against Ford Credit and Primus alleging unfair debt collection practices.
In Pertuso, plaintiffs allege that Ford Credit's policies and practices for
obtaining reaffirmation agreements violate Federal law and constitute an unfair
collection practice. This case has been dismissed at the trial court level and
is now on appeal. All appellate briefing and oral argument is complete and we
await a decision on the appeal from the Sixth Circuit. Molloy and Dubois are two
nationwide class action lawsuits brought by the same group of plaintiff
attorneys. Both cases allege that Ford Credit attempts to collect on discharged,
non-reaffirmed debts in violation of the Bankruptcy Code and the Fair Debt
Collection Practices Act. In Molloy, our motion to dismiss was denied and we are
proceeding with discovery. The Dubois case was recently filed and we have filed
a motion to dismiss.
TFI Module Class Action. (Previously discussed on page 24 of the 10-K
Report.) On October 11, the California court in the Howard case found that Ford
violated California law by concealing a safety defect. The court ruled that
California consumers who paid to replace distributor mounted TFI modules were
entitled to restitution, that Ford would be required to recall the vehicles in
the class, and that plaintiffs were entitled to attorneys' fees and expenses.
The amount and method of restitution and the nature and scope of the recall will
be determined in further hearings to be scheduled before a special master.
Ignition Switch Class Action. (Previously discussed on page 24 of the 10-K
Report and on page 19 of Ford's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000 (the "Second Quarter 10-Q Report").) The renewed motion for
class certification in Snodgrass has been denied. We currently have no class
actions pending on this issue.
18
<PAGE>
Item 1. Legal Proceedings
--------------------------
(continued)
Retail Lessee Insurance Coverage Class Action. (Previously discussed on
page 26 of the 10-K Report). A hearing on Ford's motion for summary judgment,
and on Plaintiffs' motion for class certification, has been scheduled for
October 27, 2000.
Head Gasket Class Action. (Previously discussed on page 27 of the 10-K
Report and on page 19 of the Second Quarter 10-Q Report.) Plaintiffs in the
Illinois suit have acknowledged that the extended Owner Notification Program
("ONP") provides the relief sought in their complaint, and they now seek only
attorney fees (alleging that they were responsible for the decision to extend
the ONP). On October 13, 2000, our motion to dismiss the Ohio case was granted.
3.8 Liter Engine Transmission Class Actions. (Previously discussed on page
27 of the 10-K Report and on page 17 of the First Quarter 10-Q Report.) Ford's
motion to dismiss the Pennsylvania case was granted, and plaintiffs have
indicated that they will appeal. The remaining cases address only the 1995
Windstar.
Other Matters
-------------
Rouge Powerhouse Insurance Litigation. (Previously discussed on page 17 of
the First Quarter 10-Q Report and on page 20 of the Second Quarter 10-Q Report.)
In early June 2000, Ford filed an action in state court against Factory Mutual
Insurance Company and a number of other Ford property insurance carriers for
breach of contract under property insurance policies for failure to pay claims
in respect of losses incurred by Ford related to the February 1, 1999 Rouge
Powerhouse explosion. As reported earlier, insurers of Rouge Steel Company
(including Factory Mutual) had previously filed two subrogation actions against
the Company. Both of these actions have now been ordered to arbitration.
Additionally, carriers of suppliers to Rouge Steel have filed three other
subrogation actions with claims totaling approximately $20 million.
Firestone Tire Recall and Litigation. On August 9, 2000,
Bridgestone/Firestone, Inc. ("Firestone") announced a recall of all Firestone
ATX and ATX II tires (P235/75R15) produced in North America since 1991 and
Wilderness AT tires of that same size manufactured at Firestone's Decatur,
Illinois plant. Firestone estimated that about 6.5 million of the affected tires
were still in service on the date the recall was announced. The recall was
announced following an analysis by Ford and Firestone that identified a
statistically significant incidence of tread separation occurring in the
affected tires. Most of the affected tires were installed as original equipment
on Ford Explorer sport utility vehicles. We estimate that sufficient tires will
be available to provide for the completion of the recall by the end of November.
Neither Ford nor Firestone has determined the root cause of the tread
separation incidents. The National Highway Traffic Safety Administration
("NHTSA") is investigating this matter both to make an independent root cause
assessment and to determine whether Firestone's recall should be expanded to
include other Firestone tires. NHTSA has issued a "Consumer's Advisory" on an
additional 1.4 million Firestone tires, which Firestone has agreed to replace as
part of a customer satisfaction program.
Four Congressional hearings were held in September before various
subcommittees of the U.S. House and Senate. Ford provided the Congressional
staffs with voluminous documentation and testified at the hearings, along with
representatives of Firestone, NHTSA and consumer groups. Following the hearings,
Congress passed legislation (discussed below under "Government Standards") that
will significantly expand NHTSA's information-gathering, regulatory oversight
and enforcement authority, including criminal provisions.
19
<PAGE>
Item 1. Legal Proceedings
--------------------------
(continued)
In the U.S., the recall and tread separation related accidents have led to
a significant number of personal injury, class action and other lawsuits against
Ford and Firestone. Most of the lawsuits were filed after the recall
announcement. Most of the class actions have been filed on behalf of persons who
have never been in an accident. The class actions seek to expand the scope of
the recall to include other tires and to award to consumers the cost of
replacing those tires or the alleged diminution in the value of the vehicle
caused by the allegedly defective tires. Several of the individual personal
injury lawsuits and class actions also seek punitive damages.
Some of the class actions were filed against Ford in federal court, but
most were filed in state courts. We removed every class action filed in state
court to federal court and we asked the panel on Multi-District Litigation
("MDL") to consolidate as many cases as possible in one federal court for
discovery and other pre-trial purposes. The MDL panel issued an order
consolidating the cases for discovery and pre-trial purposes in the United
States District Court for the Southern District of Indiana. These class actions
and lawsuits could result in Ford having to pay compensatory and/or punitive
damages in very large amounts and could result in recall campaigns, sanctions,
or other relief that would require very large expenditures.
In addition, a consortium of about 40 state attorneys general is reviewing
the circumstances leading up to the Firestone recall. We are scheduling meetings
with various individual state attorneys general to brief them on the background
of this matter. The consortium has appointed an Executive Committee to lead the
information-gathering effort. The Executive Committee consists of the state
attorneys general from Connecticut, Florida, Georgia, Illinois, Maryland,
Tennessee, Texas and Wisconsin.
The Company also has been served with shareholder derivative and securities
fraud lawsuits. The shareholder derivative actions filed against the Board of
Directors and the Company allege that the Company's board members breached their
fiduciary duties to the Company and shareholders by failing to inform themselves
adequately regarding Firestone tires, failing to take certain actions regarding
the design of the Explorer, failing to report problems with Firestone tires and
to stop using Firestone tires as original equipment, failing to recall all
affected tires in a timely manner, and mismanaging the recall once it was
announced. The plaintiffs seek injunctive relief and damages, a return of all
director compensation during the period of the alleged breaches and attorneys'
fees.
The securities fraud class actions allege that from early 1999 through the
announcement of the Firestone tire recall, Ford made misrepresentations about
the safety of Ford products and the Explorer in particular, and allegedly failed
to disclose material facts about problems with Firestone tires and the safety of
Explorers equipped with Firestone tires. The plaintiffs claim that, as a result
of these misrepresentations or omissions, they purchased Ford stock at inflated
prices and were damaged when the price of the stock fell upon announcement of
the recall and subsequent revelations.
Several governmental authorities in Venezuela are conducting investigations
of accidents in Venezuela involving Explorers equipped with Firestone tires most
of which were locally made. Ford of Venezuela implemented a customer
satisfaction program in May 2000 to replace, at no cost to the customer, all
Firestone Wilderness tires on Explorers and light trucks in Venezuela, Columbia
and Ecuador. On September 5, 2000, Firestone announced its own recall of the
same type of tires covered by Ford of Venezuela's customer satisfaction program,
specifically the 16 inch Wilderness Tires, some of which were mislabeled as
having 5 plies when they in fact had 4. Ford of Venezuela will complete the tire
replacement customer satisfaction program in Venezuela in October and in
Colombia and Ecuador by the end of November. An investigation is being conducted
by the prosecutor's office in Caracas to determine whether criminal charges
should be brought against any Firestone and Ford of Venezuela directors,
officers and managers following a report submitted by the consumer protection
agency of the Venezuelan government, INDECU, to the Venezuelan Attorney General.
The report alleged that several
20
<PAGE>
Item 1. Legal Proceedings
--------------------------
(continued)
unsubstantiated defects in the Explorer had contributed to the rollover
accidents as well as recommending an additional investigation because the
parties had not taken action sooner. INDECU also has indicated it may open an
administrative proceeding to determine if fines up to $11,000 per complaint it
has received from consumers should be levied against Firestone and/or Ford of
Venezuela. On October 4, 2000, Ford of Venezuela management appeared before a
conciliation hearing held by INDECU with some of the injured parties. Ford of
Venezuela indicated it was unable to accept conciliation because it would have
constituted an admission of responsibility for the failure of the tires but
offered to submit the claims of the injured parties to binding arbitration in
Venezuela. No response has been received to this offer, however, INDECU has
indicated it will convoke the injured parties again to determine if they are
willing to accept arbitration. If not, INDECU's head has indicated he will open
an administrative proceeding against Ford. On October 11, 2000, Ford of
Venezuela management testified at a congressional hearing held in Venezuela. The
Venezuelan congress has designated a sub commission to investigate the cause and
handling of the Firestone tire tread separation cases and has designated a
technical commission composed primarily of Venezuelan university professors to
study the causes and provide a report on their findings.
21
<PAGE>
Item 5. Other Information
--------------------------
Government Standards
--------------------
Mobile Source Emissions Control. (Previously discussed on page 14 of the
10-K Report). The EPA finalized its post-2004 emissions standards for
"heavy-duty" trucks (8,500-14,000 lbs. Gross vehicle weight) in July 2,000. The
standards were finalized largely as proposed.
As mentioned previously, California adopted new vehicle emission
regulations in late 1998 that establish stringent new standards for passenger
cars, light-duty and medium-duty trucks, and medium-duty passenger vehicles for
the 2004 through 2010 model years. Recently, Massachusetts has formally adopted
these new California standards. Several other states, including New York,
Vermont, and Maine, appear to be in the process of adopting these California
standards as well. The adoption of these standards by other states could pose
compliance problems if such states attempt to impose California's fleet-wide
average emission limits on their own unique mix of vehicles.
Motor Vehicle Safety. (Previously discussed on page 16 of the 10-K Report).
As previously reported, the National Highway Traffic Safety Administration (the
"Safety Administration") published a supplemental notice of a proposed advanced
air bag rule in November 1999. The Safety Administration issued a final advanced
air bag rule on May 12, 2000. In the first stage of the new rule phase-in, an
unbelted barrier crash test of 25 mph replaces the existing sled test. Phase-in
starts in September 2003 requiring compliance by 35% of all vehicles produced by
a manufacturer, followed by 65% in 2004 and 100% in 2005. As expected, other
requirements include: numerous out-of-position tests, a new family of test
dummies, a 25 mph offset barrier crash test, and stringent new injury criteria.
The second stage of phase-in requires a 35 mph belted barrier crash test with a
mid-sized male dummy, same as the current New Car Assessment Program test.
Second stage phase-in starts at 35% in 2007, followed by 65% in 2008 and 100% in
2009.
The Safety Administration issued a request for comments on its proposed
vehicle rollover propensity consumer information program in the June 1, 2000
Federal Register with comments due by July 31, 2000. The proposal indicates that
the Safety Administration tentatively has decided that a "static stability
factor" should be used to indicate rollover risk in single vehicle crashes as
part of a New Car Assessment Program. It is anticipated that the Safety
Administration will assign "star ratings" to vehicles based on static stability
factor results. The Safety Administration plans to evaluate static stability
factors for 2001 model year vehicles as a pilot program, and may restrict the
public availability of star ratings.
Proposed legislation has been introduced in the U.S. Senate (S. 2070) and
the U.S. House (H.R. 4145) that would require the Safety Administration to
improve vehicle crash test standards for child restraints by simulating an array
of crash conditions such as side impact, rear impact and rollover. The bills
also would require vehicle manufacturers to design child restraints to minimize
head injuries during side impact and rollover and require child restraints to
have side impact protection. In response to the proposed legislation, the Safety
Administration is developing a comprehensive child passenger safety improvement
plan that is likely to be published in the Federal Register this fall for
comment.
In response to the Firestone tire recall, Congress has passed legislation
that will significantly expand NHTSA's information-gathering, regulatory
oversight and enforcement authority, including criminal provisions. The Act,
which has been sent to the President for signature into law, is called the
Transportation Recall Enhancement, Accountability, and Documentation (TREAD)
Act. The TREAD Act establishes new reporting requirements for motor vehicles,
motor vehicle equipment and tires, including reporting to NHTSA information on
foreign recalls and information received by the manufacturer that may assist the
agency in the identification of safety defects. The obligation of vehicle
manufacturers to provide, on a cost-free basis, a remedy for vehicles with an
identified safety defect or non-compliance issue is extended from eight years to
ten years by the new legislation. Potential civil penalties are increased from
$1,000 to $5,000 per day for certain statutory violations, with a maximum
penalty of $15,000,000 for a related series of violations, unless the violation
was willful and intentional, in which case no cap applies. Similar penalties are
included for violation of the reporting requirements. Criminal penalties are
introduced for persons who make false statements to the government or withhold
information with the intent to
22
<PAGE>
Item 5. Other Information
--------------------------
(continued)
mislead the government about safety defects that have caused death or grievous
bodily harm. The penalty may be a fine of $100,000, imprisonment for not more
than 15 years, or both. The TREAD Act also addresses the availability of parts
during a recall, reimbursement for parts replaced immediately prior to a recall,
and the resale of replaced equipment. NHTSA is charged to update the motor
vehicle safety standards applicable to tires and to improve tire labeling
standards. NHTSA also is required to promulgate a dynamic vehicle rollover test
to be used for consumer information and a rule requiring an in-vehicle warning
system designed to signal when a tire is significantly under-inflated. Finally,
the TREAD Act authorizes appropriations for the authorized activities and
addresses a number of public information and standard setting rulemakings. This
legislation and the ensuing regulations will have a significant effect on the
automotive industry, particularly on the way information is shared with NHTSA
and the way recalls are administered.
End of Life Vehicle Proposal. (Previously discussed on page 19 of the 10-K
Report). The European Commission has published a revised draft proposal to
introduce an obligation for motor vehicle manufacturers to take back end-of-life
vehicles registered after July 1, 2002 with no cost to the last owner. Vehicles
registered after this date, must be taken back, cost-free to the last owner, as
of January 1, 2007. The proposed directive also imposes 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 2006, and bans the use
of certain substances in vehicles beginning with vehicles registered after July
1, 2003. Member States may apply these provisions prior to the dates mentioned
above.
23
<PAGE>
<TABLE>
<CAPTION>
Supplemental Schedule
Ford Motor Company
CONDENSED FINANCIAL INFORMATION OF SUBSIDIARY
---------------------------------------------
(in millions)
Ford Capital B.V.
-----------------
September 30, December 31,
2000 1999
---------------- --------------
(unaudited)
<S> <C> <C>
Current assets $ 612 $ 579
Noncurrent assets 2,032 2,372
------ ------
Total assets $2,644 $2,951
====== ======
Current liabilities $1,401 $1,088
Noncurrent liabilities 987 1,680
Minority interests in net
assets of subsidiaries 1 2
Stockholder's equity 255 181
------ ------
Total liabilities and
stockholder's equity $2,644 $2,951
====== ======
</TABLE>
<TABLE>
<CAPTION>
Third Quarter Nine Months
--------------------- ----------------------
2000 1999 2000 1999
-------- --------- -------- ---------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Sales and other revenue $516 $514 $1,732 $1,896
Operating income 28 (27) 134 104
Income before income taxes 5 (33) 94 71
Net income/(loss) (1) (15) 43 46
</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. 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., Ford Distribution Sp. z.o.o.,
Ltd, and Oyj Ford Abp (Finland). Ford Capital B.V. also has an investment in
Detroit Downtown Properties, Inc. 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.
24
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
--------
Please refer to the Exhibit Index on Page 24.
(b) Reports on Form 8-K
-------------------
The Registrant filed the following Current Reports on Form 8-K during
the quarter ended September 30, 2000:
Current Report on Form 8-K dated July 19, 2000 included information
relating to Ford's second quarter 2000 financial results.
Current Report on Form 8-K dated August 9, 2000 included information
relating to the Bridgestone/Firestone Inc. tire recall.
Current Report on Form 8-K dated September 14, 2000 included
information relating to our $5 billion stock repurchase program.
Current Report on Form 8-K dated June 28, 2000 included a restatement
of our 1999 Annual Report on Form 10-K to treat Visteon as a
discontinued operation and information relating to our Value
Enhancement Plan.
Current Report on Form 8-K dated September 21, 2000 included
information relating to Ford's proposal to acquire the outstanding
minority interests in The Hertz Corporation.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FORD MOTOR COMPANY
-------------------------------------
(Registrant)
Date: October 30, 2000 By: /s/L.E. Hansen
---------------- ----------------------------------
L.E. Hansen
Vice President & Controller
(principal accounting officer)
25
<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
July 31, 2000, relating to Financial Information.
Exhibit 27.1 Financial Data Schedule, Automotive Sector, for the Six Months Ended
June 30, 2000 (included with electronic EDGAR filing only).
Exhibit 27.2 Financial Data Schedule, Financial Services Sector, for the Six Months Ended
June 30, 2000 (included with electronic EDGAR filing only).
Exhibit 27.3 Financial Data Schedule, Conglomerate Totals, for the Six Months Ended June 30,
2000 (included with electronic EDGAR filing only).
</TABLE>
26
