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 EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 numbers 1-6368
FORD MOTOR CREDIT COMPANY
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-1612444
- -------------------- -----------------------------------
(State of Incorporation) (I.R.S. employer identification no.)
The American Road, Dearborn, Michigan 48121
- --------------------------------------- ---------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (313) 322-3000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number
of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: 250,000 shares
of common stock as of October 31, 1999.
The registrant meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing
this Form in reduced disclosure format.
PAGE 1 OF 32
EXHIBIT INDEX APPEARS AT PAGE 28.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The interim financial data presented herein are unaudited, but in the
opinion of management reflect all 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 for the year
ended December 31, 1998 (the "10-K Report"). Information relating to earnings
per share is not presented because the registrant, Ford Motor Credit Company
("Ford Credit"), is an indirect wholly owned subsidiary of Ford Motor Company
("Ford").
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Consolidated Statement of Income
and of Earnings Retained for Use in the Business
For the Periods Ended September 30, 1999 and 1998
(in millions)
<TABLE>
<CAPTION>
Third Quarter Nine Months
--------------------------------- --------------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Financing revenue
Operating leases $ 2,422.2 $ 2,431.0 $ 7,345.2 $ 7,257.3
Retail 1,827.4 1,459.4 5,126.8 4,277.1
Wholesale 403.1 366.5 1,217.8 1,247.2
Other 105.7 92.5 299.2 283.6
------------- ------------- ------------- -------------
Total financing revenue 4,758.4 4,349.4 13,989.0 13,065.2
Depreciation on operating leases (1,864.8) (1,791.7) (5,660.2) (5,314.9)
Interest expense (1,836.9) (1,662.0) (5,305.1) (4,963.5)
------------- ------------- ------------- -------------
Net financing margin 1,056.7 895.7 3,023.7 2,786.8
Other revenue
Insurance premiums earned 75.3 68.8 178.1 224.9
Investment and other income 298.3 256.8 903.6 794.5
------------- ------------- ------------- -------------
Total financing margin and revenue 1,430.3 1,221.3 4,105.4 3,806.2
Expenses
Operating expenses 539.0 394.9 1,453.9 1,240.4
Provision for credit losses 301.4 290.2 907.9 882.2
Other insurance expenses 73.8 68.4 172.0 222.7
------------- ------------- ------------- -------------
Total expenses 914.2 753.5 2,533.8 2,345.3
------------- ------------- ------------- -------------
Income before income taxes and minority interests 516.1 467.8 1,571.6 1,460.9
Provision for income taxes 193.7 184.1 587.3 575.0
------------- ------------- ------------- -------------
Income before minority interests 322.4 283.7 984.3 885.9
Minority interests in net income of subsidiaries 5.5 11.3 32.3 35.9
------------- ------------- ------------- -------------
Net income 316.9 272.4 952.0 850.0
Earnings retained for use in the business
Beginning of period 8,446.5 7,905.0 7,911.4 7,327.4
Dividends (350.0) (80.0) (450.0) (80.0)
------------- ------------- ------------- -------------
End of period $ 8,413.4 $ 8,097.4 $ 8,413.4 $ 8,097.4
============= ============= ============= =============
The accompanying notes are an integral part of the financial statements.
</TABLE>
-2-
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Consolidated Balance Sheet
(in millions)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1999 1998 1998
--------------- --------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Assets
Cash and cash equivalents $ 791.9 $ 780.8 $ 504.1
Investments in securities 494.3 725.8 774.0
Finance receivables, net 100,088.4 95,941.6 84,700.6
Net investment, operating leases 33,891.0 34,566.5 35,434.7
Retained interest in securitized assets 3,698.1 1,256.3 1,974.5
Notes and accounts receivable from affiliated companies 5,728.8 1,099.8 1,109.8
Other assets 3,184.7 2,877.0 2,125.6
--------------- --------------- ---------------
Total assets $ 147,877.2 $ 137,247.8 $ 126,623.3
=============== =============== ===============
Liabilities and Stockholder's Equity
Liabilities
Accounts payable
Trade, customer deposits, and dealer reserves $ 2,922.8 $ 3,009.6 $ 3,448.9
Affiliated companies 1,432.0 1,108.1 1,034.4
--------------- --------------- ---------------
Total accounts payable 4,354.8 4,117.7 4,483.3
Debt 124,315.8 114,967.3 104,664.4
Deferred income taxes 3,584.8 3,157.7 3,206.4
Other liabilities and deferred income 4,182.6 4,014.4 3,186.1
--------------- --------------- ---------------
Total liabilities $ 136,438.0 $ 126,257.1 $ 115,540.2
Minority interests in net assets of subsidiaries 408.3 346.0 387.1
Stockholder's Equity
Capital stock, par value $100 a share,
250,000 shares authorized, issued
and outstanding 25.0 25.0 25.0
Paid-in surplus (contributions by stockholder) 4,341.2 4,343.4 4,229.0
Note receivable from affiliated company (1,517.0) (1,517.0) (1,517.0)
Accumulated other comprehensive income/(loss) (231.7) (118.1) (138.4)
Retained earnings 8,413.4 7,911.4 8,097.4
--------------- --------------- ---------------
Total stockholder's equity 11,030.9 10,644.7 10.696.0
--------------- --------------- ---------------
Total liabilities and stockholder's equity $ 147,877.2 $ 137,247.8 $ 126,623.3
=============== =============== ===============
The accompanying notes are an integral part of the financial statements.
</TABLE>
-3-
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the Periods Ended September 30, 1999 and 1998
(in millions)
<TABLE>
<CAPTION>
Nine Months
--------------------------
1999 1998
---------- ----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 952.0 $ 850.0
Adjustments to reconcile net income to net
cash (used in)/provided by operating activities
Provision for credit losses 907.9 882.2
Depreciation and amortization 5,997.3 5,599.7
Gain on sales of finance receivables (57.1) (171.3)
Increase in deferred income taxes 425.1 395.4
Increase in other assets (7,348.5) (182.1)
Increase/(decrease) in other liabilities 470.8 (356.7)
Other 103.6 65.6
---------- ----------
Net cash provided by operating activities 1,451.1 7,082.8
Cash flows from investing activities
Purchase of finance receivables (other than wholesale) (41,546.3) (36,275.4)
Collection of finance receivables (other than wholesale) 27,771.5 21,452.6
Purchase of operating lease vehicles (18,071.8) (14,964.8)
Liquidation of operating lease vehicles 12,833.5 9,311.5
Net change in wholesale receivables (194.6) 4,114.7
Proceeds from sale of receivables 9,520.2 7,769.0
Purchase of investment securities (753.1) (1,654.0)
Proceeds from sale/maturity of investment securities 984.6 1,037.4
Other (156.0) (92.8)
---------- ----------
Net cash used in investing activities (9,612.0) (9,301.8)
Cash flows from financing activities
Proceeds from issuance of long-term debt 24,500.7 15,620.9
Principal payments on long-term debt (9,303.7) (11,605.5)
Change in short-term debt, net (6,351.3) (1,719.2)
Cash dividends paid (450.0) (80.0)
Other (35.9) (187.6)
---------- ----------
Net cash provided by financing activities 8,359.8 2,028.6
Effect of exchange rate changes on cash and cash
equivalents (187.8) 5.0
---------- ----------
Net change in cash and cash equivalents 11.1 (185.4)
Cash and cash equivalents, beginning of period 780.8 689.5
---------- ----------
Cash and cash equivalents, end of period $ 791.9 $ 504.1
========== ==========
Supplementary cash flow information
Interest paid $ 5,075.4 $ 4,894.3
Taxes paid 142.8 139.3
The accompanying notes are an integral part of the financial statements.
</TABLE>
-4-
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes To Financial Statements
Note 1. Finance Receivables, Net (in millions)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1999 1998 1998
-------------- -------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Retail $ 70,696.4 $ 67,732.7 $ 62,228.3
Wholesale 22,668.6 22,650.1 17,696.8
Other 7,822.1 6,838.8 5,963.0
-------------- -------------- --------------
Total finance receivables, net of unearned income 101,187.1 97,221.6 85,888.1
Less: Allowance for credit losses (1,098.7) (1,280.0) (1,187.5)
-------------- -------------- --------------
Finance receivables, net $ 100,088.4 $ 95,941.6 $ 84,700.6
============== ============== ==============
</TABLE>
Note 2. Debt (in millions)
<TABLE>
<CAPTION>
September 30, 1999
----------------------------------
Weighted Average September 30, December 31, September 30,
Interest Rates (A) Maturities 1999 1998 1998
------------------ ------------- -------------- -------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Payable Within One Year:
Commercial paper $ 41,006.9 $ 46,188.2 $ 37,893.1
Other short-term debt (B) 6,414.0 7,445.0 6,023.0
-------------- -------------- --------------
Total short-term debt 47,420.9 53,633.2 43,916.1
Long-term indebtedness payable within
one year (C) 14,228.1 9,689.2 9,601.0
-------------- -------------- --------------
Total payable within one year 61,649.0 63,322.4 53,517.1
Payable After One Year:
Unsecured senior indebtedness
Notes (D) 6.15% 2001-2078 60,733.8 49,899.0 49,635.6
Debentures 3.21% 2001-2006 1,908.5 1,661.1 1,424.5
Unamortized discount (75.6) (25.5) (22.6)
-------------- -------------- --------------
Total unsecured senior indebtedness 62,566.7 51,534.6 51,037.5
Unsecured long-term subordinated notes 8.27% 2005 100.1 110.3 109.8
-------------- -------------- --------------
Total payable after one year 62,666.8 51,644.9 51,147.3
-------------- -------------- --------------
Total debt $ 124,315.8 $ 114,967.3 $ 104,664.4
============== ============== ==============
</TABLE>
[FN]
(A) Rates were variable on 0% of the debt payable after one year including the
effects of interest rate swap agreements.
(B) Includes $840.3 million, $988.6 million, and $186.6 million with affiliated
companies at September 30, 1999, December 31, 1998, and September 30, 1998,
respectively.
(C) Includes $312.9 million, $394.9 million, and $383.6 million with affiliated
companies at September 30, 1999, December 31, 1998, and September 30, 1998,
respectively.
(D) Includes $3,312.5 million, 3,253.9 million, and $4,109.4 million with
affiliated companies at September 30, 1999, December 31, 1998, and
September 30, 1998, respectively.
</FN>
-5-
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes To Financial Statements - Continued
Note 3. Comprehensive Income
Other comprehensive income includes foreign currency translation
adjustments, net unrealized gains and losses on investments in equity
securities, and retained interest in securitized assets. Total comprehensive
income was as follows (in millions):
<TABLE>
<CAPTION>
Third Quarter Nine Months
------------------------------ --------------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income $ 316.9 $ 272.4 $ 952.0 $ 850.0
Other comprehensive income 44.2 91.2 (113.6) 4.1
----------- ----------- ----------- -----------
Total comprehensive income $ 361.1 $ 363.6 $ 838.4 $ 854.1
=========== =========== =========== ===========
</TABLE>
-6-
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
Note 4. Segment information
Segment detail is summarized as follows (in millions):
<TABLE>
<CAPTION>
Ford Credit Personal Ford Credit
North Ford Credit Financial Eliminations/ Financial
America International Services Reclassifications Statements
------------ ------------- ----------- ----------------- ------------
Third Quarter (Unaudited)
- ------------------------------------
<S> <C> <C> <C> <C> <C>
1999
Revenue $ 4,258.9 $ 880.5 $ 107.7 $ (115.1) $ 5,132.0
Income
Income before income taxes 339.3 149.5 21.4 5.9 516.1
Provision for income taxes 86.3 96.6 8.2 2.6 193.7
Net income 253.0 52.9 13.2 (2.2) 316.9
Other disclosures
Depreciation on operating leases 1,698.9 165.0 - 0.9 1,864.8
Interest expense 1,680.3 362.0 - (205.4) 1,836.9
1998
Revenue $ 4,081.2 $ 902.6 $ 100.8 $ (409.6) $ 4,675.0
Income
Income before income taxes 295.9 143.9 23.1 4.9 467.8
Provision for income taxes 112.9 62.3 8.6 0.3 184.1
Net income 183.0 81.6 14.5 (6.7) 272.4
Other disclosures
Depreciation on operating leases 1,680.4 141.8 - (30.5) 1,791.7
Interest expense 1,528.1 430.0 - (296.1) 1,662.0
Nine Months
- ------------------------------------
1999
Revenue $ 12,834.5 $ 2,656.2 $ 256.2 $ (676.2) $ 15,070.7
Income
Income before income taxes 1,059.0 447.2 52.6 12.8 1,571.6
Provision for income taxes 343.1 218.5 20.4 5.3 587.3
Net income 715.9 228.7 32.2 (24.8) 952.0
Other disclosures
Depreciation on operating leases 5,211.9 470.0 - (21.7) 5,660.2
Interest expense 4,877.9 1,139.1 - (711.9) 5,305.1
Finance receivables (including net
investment operating leases) 127,856.1 27,129.1 - (21,005.8) 133,979.4
Total assets 133,794.7 28,541.7 1,691.2 (16,150.4) 147,877.2
1998
Revenue $ 12,128.0 $ 2,615.9 $ 325.7 $ (985.0) $ 14,084.6
Income
Income before income taxes 938.3 434.8 72.1 15.7 1,460.9
Provision for income taxes 357.6 186.1 27.0 4.3 575.0
Net income 580.7 248.7 45.1 (24.5) 850.0
Other disclosures
Depreciation on operating leases 5,040.3 401.6 - (127.0) 5,314.9
Interest expense 4,527.8 1,216.8 - (781.1) 4,963.5
Finance receivables (including net
investment operating leases) 112,887.4 26,536.0 - (19,288.1) 120,135.3
Total assets 110,287.8 28,313.0 1,031.1 (13,008.6) 126,623.3
</TABLE>
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIRD QUARTER 1999 COMPARED WITH THIRD QUARTER 1998
Ford Credit's consolidated net income in the third quarter of 1999 was $317
million, up $45 million or 16% from 1998. Compared with third quarter 1998, the
increase in earnings primarily reflects higher financing volumes, improved
credit loss performance and lower effective tax rates, offset partially by
increased operating expenses.
Credit losses as a percent of average net finance receivables including net
investment in operating leases decreased to 0.71% in the third quarter of 1999
compared with 0.79% in the same period of 1998, reflecting an improvement in
portfolio credit quality.
The effective income tax rate was 37.3% for the third quarter of 1999 compared
with 39.4% for the third quarter of 1998. The decrease in the effective tax rate
resulted from reduced taxes on foreign income.
Higher operating expenses primarily reflect costs related to employee separation
programs and operating costs of recent acquisitions.
Total net finance receivables and net investment in operating leases at
September 30, 1999 were $134.0 billion, up $13.9 billion or 12% from a year
earlier. The increase primarily results from Ford-sponsored special retail
financing programs that are available exclusively through Ford Credit.
During the third quarter of 1999, Ford Credit financed 53% of all new cars and
trucks sold by Ford dealers in the U.S. compared with 50% during the same period
of 1998. In Europe, Ford Credit financed 33% of all new vehicles sold by Ford
dealers compared with 36% during the third quarter of 1998. Ford Credit also
provided retail financing for 0.9 and 0.2 million new and used vehicles in the
U.S. and Europe, respectively. In the third quarter of 1999, Ford Credit
provided wholesale financing for 84% of Ford factory sales in the U.S. and 97%
of Ford factory sales in Europe compared with 85% for the U.S. and 94% for
Europe last year.
FIRST NINE MONTHS 1999 COMPARED WITH FIRST NINE MONTHS 1998
For the first nine months of 1999, Ford Credit's consolidated net income was
$952 million, up $102 million or 12% from the same period in 1998. 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. The deterioration in net financing margins primarily reflects
higher depreciation on operating leases and a shift to lower risk business
driven by Ford-sponsored special retail financing programs.
During the first nine months of 1999, Ford Credit provided retail financing for
47% of all new cars and trucks sold by Ford dealers in the U.S. compared with
42% during the same period of 1998. In Europe, Ford Credit financed 32% of all
new vehicles sold by Ford dealers, unchanged from a year ago. In the first nine
months of 1999, Ford Credit provided retail financing for 2.4 and 0.7 million
new and used vehicles in the U.S. and Europe, respectively. Ford Credit also
provided wholesale financing for 83% of Ford U.S. factory sales and 96% of Ford
Europe factory sales compared with 80% for the U.S. and 95% for Europe in the
first nine months of 1998.
-8-
<PAGE>
FORD CREDIT LIQUIDITY AND CAPITAL RESOURCES
Ford Credit's outstanding debt at September 30, 1999 and at the end of each
of the last four years was as follows (in millions):
<TABLE>
<CAPTION>
September 30, December 31
-----------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Commercial paper & STBAs(a) $ 42,439 $ 48,636 $ 42,311 $ 38,774 $ 40,419
Other short-term debt (b) 4,982 4,997 3,897 4,243 1,781
Long-term debt (including current portion)(c) 76,895 61,334 54,517 55,007 49,980
----------- ----------- ----------- ----------- -----------
Total debt $ 124,316 $ 114,967 $ 100,725 $ 98,024 $ 92,180
=========== =========== =========== =========== ===========
United States $ 96,691 $ 85,394 $ 78,443 $ 76,635 $ 73,178
Europe 14,572 16,653 12,491 14,028 13,013
Other international 13,053 12,920 9,791 7,361 5,989
----------- ----------- ----------- ----------- -----------
Total debt $ 124,316 $ 114,967 $ 100,725 $ 98,024 $ 92,180
=========== =========== =========== =========== ===========
Memo:
Total support facilities (billions) as of
September 30, 1999 and December 31, 1998 - 1995,
respectively:
Ford Credit U.S. $ 26.0 $ 26.9 $ 26.6 $ 27.2 $ 27.4
FCE Bank 5.3 5.3 5.2 5.7 4.7
</TABLE>
[FN]
(a) Short-term borrowing agreements with bank trust departments.
(b) Includes $840 million, $989 million, $831 million, $2,478 million, and
$176 million with affiliated companies at September 30, 1999, December 31, 1998,
December 31, 1997, December 31, 1996, and December 31, 1995, respectively.
(c) Includes $3,625 million, $3,649 million, $3,547 million, $4,237 million
and $1,174 million with affiliated companies at September 30, 1999, December 31,
1998, December 31, 1997, December 31, 1996, and December 31, 1995, respectively.
</FN>
-9-
<PAGE>
Support facilities represent additional sources of funds, if required. At
September 30, 1999, Ford Credit had approximately $18.3 billion of contractually
committed facilities. In addition, approximately $7.7 billion of Ford lines of
credit may be used by Ford Credit at Ford's option. These credit lines have
various maturity dates through June 30, 2004 and may be used, at Ford Credit's
option, by any of its direct or indirect majority-owned subsidiaries. Any such
borrowings will be guaranteed by Ford Credit. Banks also provide $1.5 billion of
contractually committed liquidity facilities to support Ford Credit's asset
backed commercial paper program.
Additionally, at September 30, 1999, there were approximately $4.7 billion
of contractually committed facilities available for use by FCE Bank plc ("FCE
Bank"). In addition, $615 million of Ford lines of credit may be used by FCE
Bank at Ford's option. The lines have various maturity dates through June 30,
2004 and may be used, at FCE Bank's option, by any of its direct or indirect
majority-owned subsidiaries. Any such borrowing will be guaranteed by
FCE Bank.
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
established 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.
Ford Credit anticipates having types (a) and (b) of these hedges, and will
comply with the requirements of SFAS 133 when adopted beginning January 1, 2001.
Ford Credit has not yet determined the effect of adopting SFAS 133.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For legal proceedings affecting Ford Credit, see "Other Information - Ford
- Class Actions - 'Lease Agreement Disclosure' and 'Lease Residual'."
Item 2. Changes in Securities
Not required.
Item 3. Defaults Upon Senior Securities
Not required.
Item 4. Submission of Matters to a Vote of Security Holders
Not required.
Item 5. Other information
-10-
<PAGE>
INFORMATION CONCERNING FORD
Following is a condensed consolidated statement of income (unaudited) of Ford
for the periods ended September 30, 1999 and 1998 (in millions except amounts
per share):
<TABLE>
<CAPTION>
Third Quarter First Nine Months
------------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales and revenues $ 37,973 $ 32,640 $118,140 $106,513
Total costs and expenses 36,238 31,274 109,929 99,058
Operating income 1,735 1,366 8,211 7,455
Gain on spin-off of The Associates - - - 15,955
Automotive net interest income/(loss) (34) 124 15 357
Automotive equity in net loss 15 23 65 31
of affiliated companies
Income before income taxes 1,716 1,513 8,291 23,798
Provision for income taxes 569 482 2,772 2,646
Minority interests in net income 33 30 88 124
of subsidiaries
Net income $ 1,114 $ 1,001 $ 5,431 $ 21,028
Amounts Per Share of Common Stock
and Class B Stock after Preferred
Stock Dividends
Basic income $ 0.92 $ 0.82 $ 4.49 $ 17.29
Diluted income $ 0.90 $ 0.80 $ 4.39 $ 16.90
Cash dividends per share $ 0.46 $ 0.42 $ 1.38 $ 1.26
</TABLE>
-11-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - FORD
OVERVIEW
Ford's third quarter 1999 results and financial condition discussed
below include the third quarter 1999 results and financial condition of
AB Volvo's worldwide passenger car business ("Volvo Car"), which Ford
purchased on March 31, 1999.
Ford's worldwide net income was $1,114 million in the third quarter
of 1999, or $0.90 per diluted share of Common and Class B Stock. These earnings
include a non-recurring profit reduction of $125 million, or $0.10 per diluted
share, to adjust postretirement healthcare and life insurance liabilities of
Ford's Visteon automotive systems operations, reflecting an actuarial
valuation completed during the third quarter of 1999. In the third quarter
of 1998, earnings were $1,001 million, or $0.80 per diluted share. Ford's
worldwide sales and revenues were $38 billion in the third quarter of 1999,
up $5.3 billion from a year ago. The increase in sales and revenues reflects
primarily the contribution from recent acquisitions and a richer vehicle mix.
Vehicle unit sales of cars and trucks were 1,599,000, up 110,000 units.
Stockholders' equity was $26.9 billion at September 30, 1999, up $3.5 billion
from December 31, 1998.
THIRD QUARTER 1999 RESULTS OF OPERATIONS - FORD
Results of Ford's operations by business sector for the third quarter
of 1999 and 1998 are shown below (in millions).
<TABLE>
<CAPTION>
Third Quarter
Net Income/(Loss)
--------------------------------------
1999
O/(U)
1999 1998 1998
------------ ------------ -----------
<S> <C> <C> <C>
Automotive Sector $ 690 $ 646 $ 44
Financial Services Sector 424 355 69
------ ------ ----
Total Ford $1,114 $1,001 $113
====== ====== ====
</TABLE>
-12-
<PAGE>
Automotive Sector
Worldwide earnings for Ford's Automotive sector were $690 million in
the third quarter of 1999, including the $125 million adjustment for retiree
benefits, on sales of $31.3 billion. Earnings in the third quarter of 1998 were
$646 million on sales of $26.5 billion. Adjusted for constant volume and mix,
total automotive costs were down $300 million compared with the third quarter of
1998.
Details of third quarter Automotive Sector earnings are shown below
(in millions).
<TABLE>
<CAPTION>
Third Quarter
Net Income/(Loss)
--------------------------------------
1999
O/(U)
1999 1998 1998
------------ ------------ -----------
<S> <C> <C> <C>
North American Automotive $1,004 $ 900 $ 104
Automotive Outside North America
- Europe (171) (273) 102
- South America (72) (44) (28)
- Other 54 63 (9)
------ ----- -----
Total Automotive Outside
North America (189) (254) 65
Visteon postretirement adjustment (125) - (125)
------ ----- -----
Total Automotive Sector $ 690 $ 646 $ 44
====== ===== =====
</TABLE>
-13-
<PAGE>
Automotive Sector earnings in North America were $1,004 million in the
third quarter of 1999 on sales of $22.7 billion. In the third quarter of 1998,
earnings were $900 million on sales of $20.2 billion. The increase in earnings
reflects primarily improved sales volume and mix of light trucks and luxury
cars, offset partially by costs of $88 million for employee separation programs.
The after-tax return on sales for Ford's North American Automotive sector was
4.5% in the third quarter of 1999, unchanged from a year ago.
In the third quarter of 1999, approximately 4.5 million new cars and
trucks were sold in the United States, up 700,000 units from a year ago.
Ford's share of those unit sales was 23.1% in the third quarter of 1999, down
2.7 percentage points from a year ago. The decline in market share reflects
primarily capacity constraints on several key products due to the strong United
States market and General Motors Corporation's recovery from last year's labor
strike.
Ford's Automotive Sector losses in Europe were $171 million in the
third quarter of 1999, compared with a loss of $273 million a year ago. The
improved results reflect lower costs and improved share of premium vehicle
segments, offset partially by lower share for Ford-branded vehicles. Based on
the present forecast, Ford does not expect to achieve its 1999 milestone for
Europe to improve operating earnings year-over-year.
In the third quarter of 1999, approximately 4.1 million new cars and
trucks were sold in Europe, up 100,000 units from a year ago. Ford's share of
those unit sales was 11.1% in the third quarter of 1999, up 1.1 percentage
points from a year ago. Ford's market share increase is more than accounted
for by the addition of Volvo Car sales.
The European market remains fiercely competitive as a result of
industry overcapacity and Ford will continue to work to balance its capacity
with demand. Ford must continue to strengthen the Ford brand and leverage its
Volvo and Jaguar brands to grow their volume and profitability. Ford is
committed to improving its business in Europe, but it will take at least 2-3
years before Ford achieves acceptable returns.
Ford's Automotive Sector in South America had losses of $72 million in
the third quarter of 1999, compared with losses of $44 million a year ago.
The deterioration in earnings reflects primarily lower industry volume driven by
the weak economy in Brazil, the largest vehicle market in the region, and
lower market share in Brazil.
-14-
<PAGE>
In the third quarter of 1999, approximately 359,000 new cars and
trucks were sold in Brazil, compared with 405,000 a year ago. Ford's share of
those unit sales was 8.7% in the third quarter of 1999, down 4.3 percentage
points from a year ago. The decline in market share reflects primarily model
changeover for the Fiesta and Courier, and increased competition from new and
existing manufacturers who are aggressively competing for the lower industry
volume.
Ford's Visteon operations, included in the Automotive Sector, earned
$155 million on revenues of $4,600 million in the third quarter of 1999.
Earnings in the third quarter of 1998 were $148 million, on revenues of
$4,097 million. These earnings exclude the effect of the adjustment for retiree
benefits, which has been reflected retroactively in Visteon's financial
statements. The earnings increase compared with last year reflects primarily
improved volume and mix, and material cost reductions, offset partially by
revenue reductions, unfavorable foreign currency exchange effects, and
higher interest expense. Visteon's after-tax return on sales in the third
quarter of 1999 was 3.6%, unchanged from a year ago.
Financial Services Sector
Earnings of Ford's 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)
--------------------------------------
1999
O/(U)
1999 1998 1998
----------- ----------- -----------
<S> <C> <C> <C>
Ford Credit $317 $272 $45
Hertz 139 119 20
Minority interests, Eliminations,
and Other (32) (36) 4
---- ---- ---
Total Financial Services Sector $424 $355 $69
==== ==== ===
Memo: Ford's share of earnings in
Hertz $113 $ 96 $17
</TABLE>
Ford Credit's consolidated net income in the third quarter of 1999 was
$317 million, up $45 million or 16% from 1998. The increase in earnings reflects
primarily higher financing volumes, improved credit loss performance and lower
effective tax rates, offset partially by costs related to employee separation
programs.
Earnings at Hertz in the third quarter of 1999 were $139 million (of
which $113 million was Ford's share), compared with earnings of $119 million (of
which $96 million was Ford's share) a year ago.
-15-
<PAGE>
FIRST NINE MONTHS 1999 RESULTS OF OPERATIONS - FORD
Results of Ford's operations by business sector for the first nine
months of 1999 and 1998 are shown below (in millions).
<TABLE>
<CAPTION>
Nine Months
Net Income/(Loss)
--------------------------------------
1999
O/(U)
1999 1998 1998
------------ ------------ -----------
<S> <C> <C> <C>
Automotive Sector $4,272 $ 3,932 $ 340
Financial Services Sector
(excluding The Associates) 1,159 964 195
Gain on Spin-Off of The Associates - 15,955 (15,955)
The Associates (net of Minority Interest) - 177* (177)
------ ------- --------
Total Ford $5,431 $21,028 $(15,597)
====== ======= ========
- - - - -
* Through March 12, 1998
Ford's worldwide earnings in the first nine months of 1999 were $5,431
million. Earnings in the first nine months of 1998 were $21,028 million. This
includes Ford's share of the income from The Associates of $177 million and a
one-time, non-cash gain of $15,955 million related to the spin-off of The
Associates. Worldwide sales and revenues in the first nine months of 1999 were
$118.1 billion, up $11.6 billion from a year ago. Vehicle unit sales of cars and
trucks were 5,302,000, up 293,000 units.
Automotive Sector
Worldwide earnings for Ford's Automotive Sector were $4,272 million in
the first nine months of 1999, on sales of $99.2 billion. Earnings in the first
nine months of 1998 were $3,932 million on sales of $86.9 billion. The earnings
improvement reflects primarily lower costs and improved sales volume and mix,
offset partially by lower net interest income and non-recurring items netting to
a $106 million reduction in earnings. The non-recurring items reflect a $165
million gain from the sale of Ford's interest in AutoEuropa to Volkswagen
AG in the first quarter of 1999, more than offset by a $146 million one-time
inventory-related profit reduction for Volvo Car in the second quarter of 1999,
and a $125 million Visteon-related postretirement adjustment in the third
quarter of 1999.
-16-
<PAGE>
Automotive Sector earnings in the first nine months of 1999 and 1998
are shown below (in millions).
</TABLE>
<TABLE>
<CAPTION>
Nine Months
Net Income/(Loss)
----------------------------------------
1999
O/(U)
1999 1998 1998
------------ ------------ ------------
<S> <C> <C> <C>
North American Automotive $4,561 $3,565 $ 996
Automotive Outside North America
- Europe 83 267 (184)
- South America (357) (75) (282)
- Other 110 175 (65)
------ ------ -----
Total Automotive Outside
North America (164) 367 (531)
Visteon postretirement adjustment (125) - (125)
------ ----- -----
Total Automotive Sector $4,272 $3,932 $ 340
====== ====== =====
</TABLE>
Automotive Sector earnings in North America were $4,561 million in the
first nine months of 1999, up $996 million from the first nine months of 1998.
The increase reflects primarily increased sales volume, an improved mix of light
trucks and luxury cars, and lower material cost, offset partially by lower net
interest income and costs related to employee separation programs. The North
American Automotive after-tax return on sales was 6.3% in the first nine months
of 1999, up 6/10 of a percentage point from a year ago.
In the first nine months of 1999, approximately 13.3 million new cars
and trucks were sold in the United States, up 1.3 million units from a year ago.
Ford's share of those unit sales was 24% in the first nine months of 1999,
down 7/10 of a percentage point from a year ago. The decrease in market
share reflects primarily capacity constraints on several key products due to the
strong United States market and General Motors Corporation's recovery from
last year's labor strike.
Automotive Sector earnings in Europe in the first nine months of 1999
were $83 million, down $184 million from the first nine months a year ago. The
deterioration is explained by lower market share for Ford-branded vehicles,
primarily Mondeo and Fiesta, and unfavorable vehicle mix, offset partially by
lower total costs and improved share of the premium vehicle segments.
In the first nine months of 1999, approximately 13.2 million new cars
and trucks were sold in Europe, up 750,000 units from a year ago. Ford's share
of those unit sales was 10.7% in the first nine months of 1999, unchanged from
a year ago.
-17-
<PAGE>
Automotive Sector losses in South America were $357 million in the
first nine months of 1999, compared with a loss of $75 million in the first nine
months a year ago. The deterioration reflects primarily the same factors as
those described in the discussion of third quarter results of operations. In the
first nine months of 1999, approximately 964,000 new cars and trucks were
sold in Brazil, compared with 1,210,000 a year ago. Ford's share of those unit
sales was 9.4% in the first nine months of 1999, down 4.1 percentage points
from a year ago. The decline in market share reflects primarily shortages of
dealer stocks because of an earlier carrier strike and increased competition
from new and existing manufacturers who are aggressively competing for the lower
industry volume.
Visteon earned $640 million on revenues of $14,435 million in the first
nine months of 1999, compared with $574 million on revenues of $13,200 million
in the first nine months a year ago. The increase in earnings reflects primarily
improved volume and mix, material and manufacturing cost reductions, offset
partially by revenue reductions and unfavorable foreign currency exchange
effects. The after-tax return on sales was 4.5% in the first nine months of
1999, up 2/10 of a percentage point from a year ago.
Financial Services Sector
Financial Services sector earnings in the first nine months of 1999 and
1998 are shown below (in millions).
<TABLE>
<CAPTION>
Nine Months
Net Income/(Loss)
---------------------------------------
1999
O/(U)
1999 1998 1998
------------ ------------ -----------
<S> <C> <C> <C>
Ford Credit $ 952 $ 850 $ 102
Hertz 276 229 47
Minority interests, Eliminations,
and Other (69) (115) 46
------ ------- --------
Financial Services (excluding
The Associates) 1,159 964 195
The Associates - 177* (177)
Gain on Spin-off of
The Associates - 15,955 (15,955)
------ ------- --------
Total Financial Services Sector $1,159 $17,096 $(15,937)
====== ======= ========
Memo: Ford's share of earnings in
Hertz $ 224 $ 185 $ 39
- - - - -
* Through March 12, 1998
</TABLE>
Ford Credit's consolidated net income for the first nine months of 1999
was $952 million, up $102 million or 12% from a year ago. The increase in
earnings reflects primarily higher financing volumes, improved credit loss
performance and lower effective tax rates, offset partially by lower net
financing margins.
-18-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES - FORD
Automotive Sector
At September 30, 1999, Ford's Automotive Sector had $25.7 billion of
cash and marketable securities, up $1.9 billion from December 31, 1998.
Automotive capital expenditures, including the effect of adopting the
accounting change for the capitalization of computer software (Statement of
Position 98-1), totaled $5 billion in the first nine months of 1999, down $700
million from the first nine months of 1998.
At September 30, 1999, Ford's Automotive Sector had total debt of $12.8
billion, compared with $9.8 billion at December 31, 1998. The increase in debt
is more than explained by long-term debt issuances totaling $3.3 billion.
Automotive debt was 32% of Ford's total capitalization (that is, the sum of
Ford stockholders' equity and Automotive debt) at the end of the third quarter
of 1999, two percentage points above the percentage of Automotive debt to
total capitalization at December 31, 1998.
At September 30, 1999, Ford had long-term contractually committed
global credit agreements under which $8.6 billion is available from various
banks; 86% are available through June 30, 2004. The entire $8.6 billion may be
used, at Ford's option, by any affiliate of Ford; however, any borrowing by an
affiliate will be guaranteed by Ford. Ford also has the ability to transfer on
a nonguaranteed basis $8.3 billion of such credit lines in varying portions
to Ford Credit and FCE Bank plc (formerly known as Ford Credit Europe plc).
In addition, at September 30, 1999, $297 million of contractually committed
credit facilities were available to various Automotive Sector affiliates
outside the U.S. Approximately $142 million of these facilities were in use at
September 30, 1999.
Financial Services Sector
At September 30, 1999, Ford's Financial Services Sector had cash and
cash equivalents totaling $1.2 billion, unchanged from December 31, 1998.
Net receivables and lease investments were $141.1 billion at September
30, 1999, up $8.5 billion from December 31, 1998.
Total debt was $132 billion at September 30, 1999, up $9.6 billion from
December 31, 1998.
Outstanding commercial paper at September 30, 1999 totaled $41 billion
at Ford Credit, and $1.5 billion at Hertz, with an average remaining maturity of
33 days and 31 days, respectively.
-19-
<PAGE>
At September 30, 1999, Financial Services Sector had a total of $27.2
billion of contractually committed support facilities (excluding the $8.3
billion available under Ford's global credit agreements). Of these facilities,
$23 billion are contractually committed global credit agreements under which
$18.3 billion and $4.7 billion are available to Ford Credit and FCE Bank plc,
respectively, from various banks; 54% and 66%, respectively of such facilities
are available through June 30, 2004. The entire $18.3 billion may be used, at
Ford Credit's option, by any subsidiary of Ford Credit, and the entire $4.7
billion may be used, at FCE Bank plc's option, by any subsidiary of FCE Bank
plc. Any borrowings by such subsidiaries will be guaranteed by Ford Credit or
FCE Bank plc, as the case may be. At September 30, 1999, $71 million of the Ford
Credit global facilities were in use and $235 million of the FCE Bank plc global
facilities were in use. Other than the global credit agreements, the remaining
portion of the Financial Services Sector support facilities at September 30,
1999 consisted of $2.5 billion of contractually committed support facilities
available to Hertz in the U.S. and $1.7 billion of contractually committed
support facilities available to various affiliates outside the U.S.; at
September 30, 1999, approximately $0.9 billion of these facilities were in use.
Furthermore, banks provide $1,475 million of liquidity facilities to support the
asset-backed commercial paper program of a Ford Credit sponsored special purpose
entity.
NEW ACCOUNTING STANDARDS - FORD
New 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. 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.
Ford anticipate having each of these types of hedges, and Ford will comply with
the requirements of SFAS 133 when adopted by it. Based on the May 1999
announcement by the Financial Accounting Standards Board to delay the
implementation date by one year, Ford expects to adopt SFAS 133 beginning
January 1, 2001. Ford has not yet determined the effect of adopting SFAS 133.
-20-
<PAGE>
OTHER INFORMATION - FORD
Product Liability Matters
Bronco Rollover Jury Verdict. (Previously discussed under Product
Liability Matters involving Ford in Ford Credit's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999 (the "Second Quarter 10-Q Report").)
On September 16, 1999, the trial court granted Ford's motion for a new trial
as to punitive damages, overturning the $290 million punitive award. The court
denied Ford's motion as to compensatory damages. Ford plans to appeal,
seeking a new trial as to all issues.
Class Actions
Flat Glass. (Previously discussed under Class Actions
involving Ford in the 10-K Report.) Pilkington, AFG Industries and Guardian
Industries have entered a tentative settlement agreement with plaintiffs in the
consolidated case. The tentative accord requires these entities to pay $53.7
million in settlement. Ford and PPG Industries are the only remaining
defendants. On October 6, 1999, the court heard oral argument concerning
plaintiff's motion for class certification. On November 5, 1999, the trial judge
granted plaintiffs' motion for class certification and certified two subclasses:
(1) all individuals and entities who, between August 1, 1995, and December 31,
1995, purchased flat glass products in the U.S. from defendants, and (2) all
individuals and entities who, between August 1, 1991 and December 31, 1995,
purchased from defendants fabricated automotive replacement glass for domestic
makes of cars in the U.S. Ford plans to appeal this ruling.
Paint. (Previously discussed under Class Actions involving Ford in
the 10-K Report.) There are three purported class actions currently pending
against Ford alleging defects in the paint process used on several million
vehicles in various model years from 1983 through 1997: Sheldon, pending in
Texas state court, Nienhuis, pending in Illinois state court, and Judy,
recently filed in California state court. (In the Landry case, a
previously reported paint class action pending in Louisiana, the trial court
refused to certify a class and the Court of Appeals refused to hear an
interlocutory appeal from this order before trial. In the Clayman case, another
previously reported paint class action filed in Pennsylvania state court, the
trial court granted Ford's motion to dismiss.) Plaintiffs in these purported
class action cases allege claims for fraud, breach of warranty, and violations
of consumer protection statutes because the paint on their vehicles peeled. They
contend that their paint is defective because Ford did not use spray primer
between the high-build electrocoat ("HBEC") and the color coat. The lack of
-21-
<PAGE>
spray primer allegedly causes the adhesion of the color coat to the HBEC to
deteriorate after extended exposure to ultraviolet radiation from sunlight.
Plaintiffs also allege that Ford knew of the defect and they seek punitive as
well as compensatory damages. In Judy, plaintiffs also seek "disgorgement" of
the profits Ford allegedly gained from using the defective paint process. Ford's
motion to dismiss is pending in Judy. In Nienhuis, plaintiff is seeking leave to
voluntarily dismiss his complaint (although his attorneys might also seek leave
to substitute another named plaintiff). As previously reported, the trial court
in Sheldon certified two subclasses of Texas residents for trial, the Texas
Court of Appeals affirmed, and the Texas Supreme Court granted review. Ford
expects a decision from the Texas Supreme Court at any time.
Ford/Citibank Visa. (Previously discussed under Class Actions
involving Ford in the 10-K Report.) On October 29, 1999, the federal court
dismissed the consolidated proceedings for lack of jurisdiction and sent each
action back to the state court in which it originated. Ford has appealed this
ruling.
Ignition Switch. (Previously discussed under Class Actions
involving Ford in the 10-K Report.) Most of the non-incident class actions
consolidated for pretrial proceedings in New Jersey have been voluntarily
dismissed; only one remains (Rick), and plaintiff in that case is seeking to
amend his complaint to strike the class action allegations. In addition,
plaintiffs have agreed to dismiss the two non-incident class actions pending in
California (Stern and Carr). One non-incident class action remains pending in
Illinois (Fisher); Ford has filed a motion for summary judgment in that case.
In the one remaining incident class, Snodgrass, plaintiffs have filed a renewed
motion to certify a class. That motion will be heard on November 19, 1999.
In the related subrogation actions filed by State Farm and the
California State Automobile Association Inter-insurance Bureau in California,
and consolidated for pretrial proceedings in New Jersey, final rulings on Ford's
motions to dismiss have effectively been deferred until after the cases have
been remanded to California. Ford expects those cases to be remanded in the
near future.
Lease Agreement Disclosure. (Previously discussed under Class Actions
involving Ford Credit in the 10-K Report, Ford Credit's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1999 (the "First Quarter 10-Q Report")
and the Second Quarter 10-Q Report.) A Michigan state court dismissed a
purported class action alleging that Ford Credit and Primus leasing contracts
improperly failed to disclose acquisition and administrative fees that are
included in the amount of a customer's monthly lease payment.
-22-
<PAGE>
Air Bag. (Previously discussed under Class Actions involving Ford in
the 10-K Report and First Quarter 10-Q Report.) The last remaining airbag class
action has been dismissed without prejudice.
Lease Residual. (Previously discussed under Class Actions involving
Ford Credit in the 10-K Report.) Ford Credit and each of the individual
plaintiffs have settled the individual claims arising out of Shore v. Ford
Credit. The trial court in Higginbotham v. Ford Credit granted summary judgment
against the plaintiff and in favor of Ford Credit on all but one claim, and
plaintiff subsequently agreed to dismiss all of her remaining claims against
Ford and Ford Credit. However, the plaintiff is now attempting to reactivate
her purported class statewide class action against Ford Credit in Florida and
to relitigate the issues decided against her in Illinois. Ford and Ford Credit
are optimistic that the federal court in Florida will not permit this.
Windstar Transmission. (Previously discussed under Class Actions
involving Ford in the First Quarter 10-Q Report and the Second Quarter 10-Q
Report.) On October 27, 1999, the trial court dismissed the non-California
plaintiffs, dismissed all except one count (false advertising), and ruled that
any class that might later be certified will be limited to owners who
experienced a malfunction. The dismissals are without prejudice, and plaintiffs
have 20 days to again amend their complaint. It is therefore possible (but not
likely) that some claims could be reinstated. These rulings greatly
improve the prospects for opposing class certification.
Retail Lessee Insurance Coverage. (Previously discussed under Class
Actions involving Ford in the Second Quarter 10-Q Report.) Ford has filed a
motion for summary judgment based on the policy language and the intentions of
the parties.
Seat Backs. (Previously discussed under Class Actions involving Ford
in the Second Quarter 10-K Report.) A fifth statewide class action has been
filed in New Hampshire. Motions to dismiss have been or will be filed in all
five cases.
Lifetime Service Guarantee. (Previously discussed under Class Actions
involving Ford in the 10-K Report.) Plaintiffs' motion to
certify a class will be heard by the trial court on November 15, 1999.
-23-
<PAGE>
Environmental Matters
CCA Lawsuit (Previously discussed under Environmental Matters involving
Ford in the 10-K Report.) CCA has informed Ford that it intends to withdraw its
appeal.
Waste Disposal. The United States Environmental Protection Agency
("EPA") has initiated a civil enforcement action against Ford as a result
of Ford Venezuela's shipment of industrial wastes from its Valencia Assembly
Plant in Venezuela for disposal in Texas. Ford also has received a subpoena
and been notified that it is the subject of a grand jury investigation based on
the same facts. Ford Venezuela shipped the industrial waste to the U.S. for
disposal under the more stringent U.S. disposal requirements because
of the unavailability of adequate disposal facilities in Venezuela and to
ensure proper disposal of the waste. Although Ford believes that the subject
waste is properly classified as non-hazardous under U.S. environmental laws, the
EPA contends that even if the wastes do not exhibit any hazardous
characteristics, they nevertheless may be the product of a process that is
automatically deemed hazardous under applicable regulations. If Ford is
determined to have violated EPA regulations regarding the disposal of hazardous
wastes, Ford could be required to pay substantial fines which could exceed
$100,000. It is impossible at this point in the proceedings to determine what
amount, if any, Ford may be required to pay.
Permit Modification. Ford has received a letter of violation from the
Michigan Department of Environmental Quality alleging that its Rawsonville Plant
located in Michigan failed to obtain a necessary permit modification in
connection with a change in raw material used at the facility. At the agency's
request, Ford has submitted a permit modification application. The failure to
obtain the permit modification could result in a fine in excess of $100,000.
Settlement discussions between Ford and the agency are ongoing.
Ohio Assembly Plant. On September 30, 1999, the EPA filed a
complaint and compliance order against Ford, alleging violations of the Resource
Conservation and Recovery Act ("RCRA") at Ford's Ohio Assembly Plant. The
complaint included a proposed civil penalty. The most significant count in the
complaint alleges that Ford failed to monitor certain paint process equipment at
the plant for air emissions, in violation of RCRA requirements. Ford disputes
the EPA's allegations, including factual assertions and interpretations of law,
and has requested a hearing to contest the charges made in the complaint. Ford
expects to prevail in the challenge to the EPA's complaint. However, if Ford is
unsuccessful, liability in this case may exceed $100,000.
-24-
<PAGE>
Other Matters
OFCCP Proceeding. (Previously discussed under Other Matters
involving Ford in the 10-K Report.) A tentative settlement has been reached
with OFCCP. The settlement addresses all pending compliance investigations
commenced by OFCCP, including the Kentucky matter. The tentative accord requires
Ford to pay $3.8 million in settlement and to hire 75 hourly workers (without
retroactive seniority) scattered among nine manufacturing facilities within
three years.
Governmental Standards
Mobile Source Emissions Control. (Previously discussed under
Governmental Standards involving Ford in 10-K Report and in the Second Quarter
10-Q Report.) In October, the EPA proposed new post-2004 emissions standards
for "heavy-duty" trucks (8,500 - 14,000 lbs. gross vehicle weight). These
proposed standards are likely to pose technical challenges and may affect the
competitive position of full-line vehicle manufacturers such as Ford.
Other Information
Ford has entered into a new collective bargaining agreement with
the United Automobile Workers ("UAW") that will expire on September 14, 2003.
The new UAW agreement will increase Ford's labor costs in respect of
employees represented by the UAW by an average of about 5.5% per year over the
term of the contract. Ford also has entered into a new collective bargaining
agreement with the Canadian Automobile Workers ("CAW") that will expire on
September 21, 2002. The new CAW agreement will increase Ford's labor costs in
respect of employees represented by the CAW by an average of about 6% per year
over the term of the contract.
All local CAW contracts are settled, but management at several of
Ford's plants in the United States are continuing to negotiate to resolve
local issues with the UAW. In addition, Ford will be negotiating new
collective bargaining agreements with labor unions in Europe later this
year. A work stoppage could occur as a result of these negotiations, which,
if protracted, could substantially adversely affect Ford's profits.
As part of the new UAW agreement, Ford also agreed that in
connection with any spin-off, sale or other transfer of its Visteon operations:
(1) all employees who are represented by the UAW and who work at a Visteon
facility on the date of such spin-off, sale or transfer will remain Ford
employees indefinitely and will continue to be covered under Ford's master
agreement with the UAW; (2) Visteon or its successor will continue to use the
services of such employees after any such spin-off, sale or transfer;
(3) Visteon or its successor will agree to adopt a collective bargaining
agreement for hourly employees hired by it after any such spin-off, sale or
transfer that has terms identical to the terms of the current master
agreement between Ford and the UAW and the next two immediately succeeding
master agreements between Ford and the UAW; and (4) Visteon or its successor
will be required to provide any UAW-represented employees hired by it
during the terms of the three master agreements mentioned above with wages,
benefits and other terms and conditions of employment that are identical to
those required to be provided from time to time by Ford to its
UAW-represented employees for the duration of such employee's employment
with, and retirement from, Visteon or such successor.
-25-
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Please refer to the Exhibit Index.
(b) Reports on Form 8-K during the quarter ended September 30, 1999:
<TABLE>
<CAPTION>
FINANCIAL
DATE OF REPORT ITEM STATEMENTS FILED
- -------------- --------------------- ----------------
<S> <C> <C>
July 15, 1999 Item 5 - Other Events None.
</TABLE>
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 CREDIT COMPANY
(Registrant)
/s/ E. S. Acton
November 12, 1999 --------------------------
E. S. Acton
Vice President - Finance
-26-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder
of Ford Motor Credit Company:
We have reviewed the condensed consolidated balance sheet of Ford Motor
Credit Company and Subsidiaries at September 30, 1999 and 1998, and the
related condensed consolidated statements of income and of earnings
retained for use in the business and cash flows for the periods set forth
in this Form 10-Q for the quarter ended September 30, 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 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 and of earnings retained for use
in the business and cash flows for the year then ended (not presented
herein); and in our report dated January 20, 1999, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed
consolidated balance sheet at December 31, 1998 is fairly stated in all
material respects in relation to the consolidated balance sheet from which
it has been derived.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Detroit, Michigan
October 14, 1999
-27-
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
EXHIBIT INDEX
Sequential
Designation Description Method of Filing
- ----------- ------------ -----------------
12-A Calculation of ratio of Filed with this
earnings to fixed charges Report.
of Ford Credit
12-B Calculation of ratio of Filed with this
earnings to fixed charges Report.
of Ford.
15 Letter from Filed with this
PricewaterhouseCoopers LLP Report.
dated October 14, 1999,
regarding unaudited
interim financial infor-
mation.
27 Financial Data Schedule Filed with this
Report.
Exhibit 12-A
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Calculation of Ratio of Earnings
to Fixed Charges
(in millions)
<TABLE>
<CAPTION>
Nine Months For the Years Ended December 31
----------- -------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Fixed Charges
Interest expense $ 5,305.1 $ 6,910.4 $ 6,268.2 $ 6,235.7 $ 5,987.8 $ 4,226.3
Rents 18.9 26.4 26.2 22.2 19.5 16.9
----------- ----------- ----------- ----------- ----------- -----------
Total fixed charges 5,324.0 6,936.8 6,294.4 6,257.9 6,007.3 4,243.2
Earnings
Income before income taxes 1,571.6 1,812.2 1,806.0 2,240.2 2,327.8 2,335.5
Less equity in net income of
affiliated companies 2.6 2.3 1.0 55.3 255.4 232.5
----------- ----------- ----------- ----------- ----------- -----------
Earnings before fixed charges $ 6,893.0 $ 8,746.7 $ 8,099.4 $ 8,442.8 $ 8,079.7 $ 6,346.2
----------- ----------- ----------- ----------- ----------- -----------
Ratio of earnings to fixed charges 1.3 1.3 1.3 1.3 1.3 1.5
</TABLE>
For purposes of the Ford Credit ratio, earnings consist of the sum of
pre-tax income from continuing operations before adjustment for minority
interests in consolidated subsidiaries, plus fixed charges. Fixed charges
consist of interest on borrowed funds, amortization of debt discount, premium,
and issuance expense, and one-third of all rental expense (the proportion deemed
representative of the interest factor).
Exhibit 12-B
Ford Motor Company and Subsidiaries
CALCULATION OF RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(in millions)
<TABLE>
<CAPTION>
Nine
Months For the Years Ended December 31
------------------------------------------------------------
1999 1998 1997 1996 1995 1994
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Earnings
- --------
Income before income taxes $ 8,291 $25,396 $10,939 $ 6,793 $ 6,705 $ 8,789
Equity in net (income)/loss of affiliates
plus dividends from affiliates (21) 78 121 36 179 (182)
Adjusted fixed charges (a) 7,008 9,215 10,911 10,801 10,556 8,122
------- ------- ------- ------- ------- --------
Earnings $15,278 $34,689 $21,971 $17,630 $17,440 $16,729
======= ======= ======= ======= ======= =======
Combined Fixed Charges and
Preferred Stock Dividends
- --------------------------
Interest expense (b) $ 6,764 $ 8,919 $10,570 $10,464 $10,121 $ 7,787
Interest portion of rental expense (c) 202 245 309 300 396 265
Preferred stock dividend requirements of
majority owned subsidiaries and trusts (d) 41 55 55 55 199 160
------- ------- ------- ------- ------- -------
Fixed charges 7,007 9,219 10,934 10,819 10,716 8,212
Ford preferred stock dividend requirements (e) 17 122 82 95 459 472
------- ------- ------- ------- ------- -------
Total combined fixed charges
and preferred stock dividends $ 7,024 $ 9,341 $11,016 $10,914 $11,175 $ 8,684
======= ======= ======= ======= ======= =======
Ratios
- ------
Ratio of earnings to fixed charges 2.2 3.8 (f) 2.0 1.6 1.6 2.0
Ratio of earnings to combined fixed
charges and preferred stock dividends 2.2 3.7 (f) 2.0 1.6 1.6 1.9
</TABLE>
[FN]
- - - - - -
(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.
</FN>
EXHIBIT 15
Ford Motor Credit Company
The American Road
Dearborn, Michigan
Re: Ford Motor Credit Company Registration Statement Nos. 333-75177
and 333-45015 on Form S-3
We are aware that our report dated October 14, 1999 accompanying the
unaudited interim financial information of Ford Motor Credit Company and
subsidiaries for the periods ended June 30, 1999 and 1998 and included
in the Ford Motor Credit Company Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 will be incorporated by reference in the
above 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 L.L.P.
PRICEWATERHOUSECOOPERS L.L.P.
Detroit, Michigan
November 11, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Ford Credit's condensed consolidated balance sheet is unclassified. Therefore,
the following tags listed below are not applicable to Ford Credit: Current
assets and current liabilities. Information relating to earnings per share is
not presented because Ford Credit is an indirect wholly owned subsidiary of Ford
Motor Company.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 792
<SECURITIES> 494
<RECEIVABLES> 100,088
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 147,877
<CURRENT-LIABILITIES> 0
<BONDS> 124,316
0
0
<COMMON> 25
<OTHER-SE> 11,006
<TOTAL-LIABILITY-AND-EQUITY> 147,877
<SALES> 0
<TOTAL-REVENUES> 15,071
<CGS> 0
<TOTAL-COSTS> 13,499
<OTHER-EXPENSES> 7,286
<LOSS-PROVISION> 908
<INTEREST-EXPENSE> 5,305
<INCOME-PRETAX> 1,572
<INCOME-TAX> 587
<INCOME-CONTINUING> 952
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 952
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
