SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 2, 1999
----------------
FORD MOTOR CREDIT COMPANY
(Exact name of registrant as specified in its charter)
Delaware 1-6368 38-1612444
- ----------------------- ----------------------- -------------------
(State or other juris- (Commission File Number (IRS Employer
diction of incorporation Number) Identification No.)
The American Road, Dearborn, Michigan 48121
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 313-322-3000
<PAGE>
<PAGE 2>
ITEM 5. Other Events.
The 1998 Audit of Consolidated Financial Statements of Ford Motor Credit
Company and Subsidiaries together with the Report of Independent Accountants of
PricewaterhouseCoopers LLP, independent certified public accountants is
filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated
by reference herein.
The news release dated January 21, 1999 of Ford Motor Company and
subsidiaries for the year ended December 31, 1998 is filed as Exhibit 99.2 to
this Current Report on Form 8-K and is incorporated by reference herein.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
EXHIBITS
Designation Description Method of Filing
- ----------- ----------- ----------------
Exhibit 23 Consent of Pricewater- Filed with this Report.
waterhouseCoopers LLP.
Exhibit 27 Financial Data Schedule. Filed with this Report.
Exhibit 99.1 1998 Audit of Consolidated Filed with this Report.
Financial Statements of
Ford Motor Credit Company
and Subsidiaries together
with the Report of
Independent Accountants of
PricewaterhouseCoopers
LLP, independent certified
public accountants.
Exhibit 99.2 News release dated Filed with this Report.
January 21, 1999 of
Ford Motor Company and
Subsidiaries for the year
ended December 31, 1998
with attachments.
Exhibit 99.3 News release dated Filed with this Report.
January 28, 1999 of
Ford Motor Company
announcing its plans
to acquire the passenger
car business of AB Volvo.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on the date indicated.
FORD MOTOR CREDIT COMPANY
(Registrant)
Date: February 2, 1999 By:/s/R. P. Conrad
-----------------
R. P. Conrad
Assistant Secretary
<PAGE>
<PAGE 3>
EXHIBIT INDEX
Designation Description
- ----------- -----------
Designation Description
- ----------- -----------
Exhibit 23 Consent of Pricewater-
waterhouseCoopers LLP.
Exhibit 27 Financial Data Schedule.
Exhibit 99.1 1998 Audit of Consolidated
Financial Statements of
Ford Motor Credit Company
and Subsidiaries together
with the Report of
Independent Accountants of
PricewaterhouseCoopers
LLP, independent certified
public accountants.
Exhibit 99.2 News release dated
January 21, 1999 of
Ford Motor Company and
Subsidiaries for the year
ended December 31, 1998
with attachments.
Exhibit 99.3 News release dated
January 28, 1999 of
Ford Motor Company
announcing its plans
to acquire the passenger
car business of AB Volvo.
EXHIBIT 23
CONSENT OF PRICEWATERHOUSECOOPERS LLP
Re: Ford Motor Credit Company Registration Statement
Nos. 333-50611, 333-45015, 333-41059, 33-62973 and 33-24928
on Form S-3
We consent to the incorporation by reference in the above Ford
Motor Credit Company Registration Statements of our report dated
January 20, 1999 on our audits of the consolidated financial
statements of Ford Motor Credit Company and Subsidiaries at
December 31, 1998 and 1997 and for each of the three years in the
period ended December 31, 1998 included in Ford Motor Credit
Company's Current Report on Form 8-K dated January 29, 1999.
PRICEWATERHOUSECOOPERS LLP
/s/ PricewaterhouseCoopers LLP
Detroit, Michigan
February 2, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
Ford Credit's condensed consolidated balance sheet is unclassified. Thereof, the
following pages 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>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 781
<SECURITIES> 726
<RECEIVABLES> 95,942
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 137,248
<CURRENT-LIABILITIES> 0
<BONDS> 114,967
0
0
<COMMON> 25
<OTHER-SE> 10,619
<TOTAL-LIABILITY-AND-EQUITY> 126,257
<SALES> 0
<TOTAL-REVENUES> 19,302
<CGS> 0
<TOTAL-COSTS> 17,490
<OTHER-EXPENSES> 9,401
<LOSS-PROVISION> 1,179
<INTEREST-EXPENSE> 6,910
<INCOME-PRETAX> 1,812
<INCOME-TAX> 680
<INCOME-CONTINUING> 1,084
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,084
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 99.1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Ford Motor Credit Company:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, stockholder's equity and cash flows
present fairly, in all material respects, the financial position of Ford Motor
Credit Company and its subsidiaries at December 31, 1998 and 1997, and the
results of their operations and their cash flows for the three years ended
December 31, 1998 in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
/s/ PricewaterhouseCoopers LLP
Detroit, Michigan
January 20, 1999
<PAGE>
<TABLE>
<CAPTION>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions)
For the Years Ended December 31
--------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Financing revenue
Operating leases $ 9,661.4 $ 8,895.2 $ 8,223.6
Retail 6,209.6 5,226.9 5,000.7
Wholesale 1,620.4 1,588.4 1,645.8
Other 398.9 391.4 477.5
--------- --------- ---------
Total financing revenue 17,890.3 16,101.9 15,347.6
Depreciation on operating leases (7,327.4) (6,188.2) (5,537.6)
Interest expense (6,910.4) (6,268.2) (6,259.7)
--------- --------- ---------
Net financing margin 3,652.5 3,645.5 3,550.3
Other revenue
Insurance premiums earned 292.9 298.3 225.7
Investment and other income 1,119.3 944.9 1,132.2
--------- --------- ---------
Total financing margin and revenue 5,064.7 4,888.7 4,908.2
Expenses
Operating expenses 1,777.0 1,477.4 1,467.4
Provision for credit losses 1,179.5 1,338.2 993.3
Other insurance expenses 296.0 267.1 207.3
--------- --------- ---------
Total expenses 3,252.5 3,082.7 2,668.0
--------- --------- ---------
Income before income taxes 1,812.2 1,806.0 2,240.2
Provision for income taxes 680.2 726.8 731.6
--------- --------- ---------
Income before minority interests 1,132.0 1,079.2 1,508.6
Minority interests in net income of subsidiaries 47.8 48.4 68.0
--------- --------- ---------
Net income $ 1,084.2 $ 1,030.8 $ 1,440.6
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
December 31
---------------------------
1998 1997
--------- ----------
<S> <C> <C>
Assets
Cash and cash equivalents $ 780.8 $ 689.5
Investments in securities 725.8 887.9
Finance receivables, net 95,941.6 81,312.6
Net investment, operating leases 34,566.5 34,746.0
Retained interest in securitized assets 1,256.3 998.6
Accounts receivable from affiliated companies 1,099.8 734.2
Other assets 2,877.0 2,604.5
---------- ----------
Total assets $137,247.8 $121,973.3
========== ==========
Liabilities and Stockholder's Equity
Liabilities
Accounts payable
Trade, customer deposits, and dealer reserves $ 3,009.6 $ 2,835.0
Affiliated companies 1,108.1 2,815.7
---------- ----------
Total accounts payable 4,117.7 5,650.7
Debt 114,967.3 100,725.0
Deferred income taxes 3,157.7 2,732.2
Other liabilities and deferred income 4,014.4 2,803.2
---------- ----------
Total liabilities 126,257.1 111,911.1
Minority interests in net assets of subsidiaries 346.0 477.7
Stockholder's Equity
Capital stock, par value $100 a share, 250,000 shares
authorized, issued and outstanding 25.0 25.0
Paid-in surplus (contributions by stockholder) 4,343.4 3,891.6
Note receivable from affiliated company (1,517.0) (1,517.0)
Accumulated other comprehensive income/(loss) (118.1) (142.5)
Retained earnings 7,911.4 7,327.4
---------- ----------
Total stockholder's equity 10,644.7 9,584.5
---------- ----------
Total liabilities and stockholder's equity $137,247.8 $121,973.3
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(in millions)
Accumulated Other
Comprehensive Income/(Loss)
---------------------------
Note Unrealized
Receivable Gain/(Loss)
Paid from Foreign on
Capital in Affiliated Retained Currency Investments
Stock Surplus Company Earnings Translation in Securities Total
------- --------- ---------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $ 25.0 $ 1,904.5 $ - $ 6,724.5 $ (14.2) $ 30.9 $ 8,670.7
Comprehensive income
Net income - - - 1,440.6 - - 1,440.6
Foreign currency translation - - - - 13.3 - 13.3
Unrealized gain
(net of tax of $13.3) - - - - - 26.0 26.0
------ --------- --------- --------- ------- ------ ---------
Total comprehensive income,
net of tax - - - 1,440.6 13.3 26.0 1,479.9
Paid-in surplus - 1,843.1 - - - - 1,843.1
Note receivable
Addition - - (2,949.0) - - - (2,949.0)
Payments - - 1,432.0 - - - 1,432.0
Dividends
Cash - - - (949.0) - - (949.0)
Other - - - (324.0) - - (324.0)
------ --------- --------- --------- ------- ------ ---------
Year Ended December 31, 1996 $ 25.0 $ 3,747.6 $(1,517.0) $ 6,892.1 $ (0.9) $ 56.9 $ 9,203.7
Comprehensive income
Net income - - - 1,030.8 - - 1,030.8
Foreign currency translation - - - - (188.5) - (188.5)
Unrealized loss
(net of tax of $6.8) - - - - - (10.0) (10.0)
------ --------- --------- --------- ------- ------ ---------
Total comprehensive income,
net of tax - - - 1,030.8 (188.5) (10.0) 832.3
Paid-in surplus - 144.0 - - - - 144.0
Cash dividends - - - (595.5) - - (595.5)
------ --------- --------- --------- ------- ------ ---------
Year ended December 31, 1997 $ 25.0 $ 3,891.6 $(1,517.0) $ 7,327.4 $(189.4) $ 46.9 $ 9,584.5
Comprehensive income
Net income - - - 1,084.2 - - 1,084.2
Foreign currency translation - - - - 29.3 - 29.3
Unrealized gain
(net of tax of $12.3) - - - - - 20.5 20.5
Less: Reclassification adjustment
for gains realized in net
income (net of tax of $15.3) - - - - - (25.4) (25.4)
------ --------- --------- --------- ------- ------ ---------
Total comprehensive income,
net of tax - - - 1,084.2 29.3 (4.9) 1,108.6
Paid-in surplus - 451.8 - - - - 451.8
Cash dividends - - - (500.2) - - (500.2)
------ --------- --------- --------- ------- ------ ---------
Year ended December 31, 1998 $ 25.0 $ 4,343.4 $(1,517.0) $ 7,911.4 $(160.1) $ 42.0 $10,644.7
====== ========= ========= ========= ======= ====== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
For the Years Ended December 31
---------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 1,084.2 $ 1,030.8 $ 1,440.6
Adjustments to reconcile net income to net cash provided by
operating activities
Provision for credit losses 1,179.5 1,338.2 993.3
Depreciation and amortization 7,366.3 6,398.9 5,870.4
Gain on sales of finance receivables (192.7) (64.5) (55.9)
Increase/(decrease) in deferred income taxes 356.4 (92.8) 1,105.6
(Increase)/decrease in other assets (1,353.6) 451.6 (1,465.4)
(Decrease)/increase in other liabilities (52.8) 155.0 1,467.8
Other 260.2 302.6 (272.1)
--------- --------- ---------
Net cash provided by operating activities 8,647.5 9,519.8 9,084.3
--------- --------- ---------
Cash flows from investing activities
Purchase of finance receivables (other than wholesale) (48,886.3) (38,396.0) (38,895.3)
Collection of finance receivables (other than wholesale) 28,033.7 32,207.8 33,477.7
Purchase of operating lease vehicles (19,156.7) (22,917.6) (21,264.0)
Liquidation of operating lease vehicles 12,798.1 12,164.0 10,340.5
Net change in wholesale receivables (797.6) (1,759.1) (2,127.6)
Proceeds from sales of receivables 7,907.8 3,850.4 4,668.7
Purchase of investment securities (1,911.7) (2,732.3) (4,730.1)
Proceeds from sale/maturity of investment securities 2,073.8 3,169.9 5,767.4
Other (37.7) (148.9) 110.4
--------- --------- ---------
Net cash used in investing activities (19,976.6) (14,561.8) (12,652.3)
--------- --------- ---------
Cash flows from financing activities
Proceeds from issuance of long-term debt 18,186.7 11,826.6 13,433.5
Principal payments on long-term debt (12,922.1) (10,340.8) (8,322.4)
Change in short-term debt, net 6,541.2 2,212.2 816.9
Cash dividends paid (500.2) (595.5) (949.0)
Other 35.6 (57.5) (169.0)
--------- --------- ---------
Net cash provided by financing activities 11,341.2 3,045.0 4,810.0
Effect of exchange rate changes on cash and cash equivalents 79.2 (29.5) (4.1)
--------- --------- ---------
Net change in cash and cash equivalents 91.3 (2,026.5) 1,237.9
Cash and cash equivalents, beginning of year 689.5 2,716.0 1,478.1
--------- --------- ---------
Cash and cash equivalents, end of year $ 780.8 $ 689.5 $ 2,716.0
========= ========= =========
Supplementary cash flow information
Interest paid $ 6,526.6 $ 6,117.3 $ 5,207.7
Taxes paid/(received) 325.9 520.2 (291.9)
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Ford
Motor Credit Company and its majority owned domestic and foreign subsidiaries
and joint ventures ("Ford Credit"). Affiliates that are 20-50 percent owned are
included in the consolidated financial statements on an equity basis. Ford
Credit is an indirect wholly owned subsidiary of Ford Motor Company ("Ford").
Use of estimates as determined by management is required in the preparation of
consolidated financial statements in conformity with generally accepted
accounting principles. Actual results could differ from these estimates and
assumptions. Certain amounts in prior years' financial statements have been
reclassified to conform with current year presentation.
Nature of Operations
Ford Credit operates in many locations around the world, the most
significant of which are the United States and Europe. Ford Credit's reportable
operating segments include Ford Credit North America, Ford Credit International,
and Personal Financial Services. Ford Credit North America consists of the
United States and Canada. Ford Credit International consists of all other
countries. Personal Financial Services consists of insurance operations and new
business ventures.
Ford Credit's financing operations primarily consist of: the purchase
from franchised Ford vehicle dealers of retail installment sale contracts and
retail leases; wholesale financing and capital loans to franchised Ford vehicle
dealers and other franchises associated with such dealers; and loans to vehicle
leasing companies. Ford Credit conducts insurance operations through its wholly
owned subsidiary, The American Road Insurance Company ("TARIC").
Revenue Recognition
Revenue from finance receivables is recognized using the interest
(actuarial) method. Certain loan origination costs are deferred and amortized to
financing revenue over the life of the related loans using the interest method.
Rental revenue on operating leases is recognized on a straight-line basis over
the term of the lease. Initial direct costs related to leases are deferred and
amortized over the term of the lease. The accrual of interest on loans is
discontinued at the time a loan is determined to be impaired. Subsequent amounts
of interest collected are recognized in income only if full recovery of the
remaining principal is expected. Other amounts collected are generally
recognized first as a reduction of principal. Any remaining amounts are treated
as a loss recovery.
Agreements with Ford and other affiliates provide for interest
supplements and other support payments to Ford Credit on certain financing and
leasing transactions. These payments are recognized as income over the period
that the related finance receivables and leases are outstanding.
Insurance premiums are earned over the policy periods on bases related
to amounts at risk. Premiums from extended service plan contracts and other
contractual liability coverage's are earned over the life of the policy based on
historical loss experience. Physical damage insurance premiums covering vehicles
financed at wholesale by Ford Credit and its finance subsidiaries are recognized
as income on a monthly basis as billed. Other physical damage, credit life, and
credit disability premiums are earned over the life of the related policies,
primarily on the sum-of-the-digits basis. Certain costs of acquiring new
business are deferred and amortized over the terms of the related policies on
the same basis on which premiums are earned. Direct and ceded insurance premiums
are earned over the life of the policy based on historical loss experience for
contractual liability policies, and on the sum-of-the-digits basis for credit
life and disability policies. Ceded insurance agreements do not relieve TARIC of
its primary obligation to policyholders.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 1. ACCOUNTING POLICIES - Continued
Sale of Receivables and Operating Leases
Statement of Financial Accounting Standards No. 125 ("SFAS 125"),
"Accounting for Transfer and Servicing of Financial Assets and Extinguishment of
Liabilities", was adopted prospectively effective January 1, 1997, and did not
have any material effect on the consolidated financial statements.
Ford Credit periodically sells finance receivables through special
purpose subsidiaries, retains the servicing rights and certain other beneficial
interests, and receives a servicing fee which is recognized as collected over
the remaining term of the related sold finance receivables. Estimated gains or
losses from the sale of finance receivables are recognized in the period in
which the sale occurs. In determining the gain or loss on each qualifying sale
of finance receivables, the investment in the sold receivable pool is allocated
between the portion sold and the portion retained based on their relative fair
values at the date of sale (see Note 7). The retained interest includes interest
only (IO) strips, subordinated certificates, restricted cash held by
securitization trusts, and allowance for credit losses. These financial
instruments are recorded at market.
Ford Credit also periodically sells vehicles subject to operating
leases to special purpose subsidiaries under sale-leaseback arrangements. The
leaseback arrangements are structured as operating leases. Pursuant to these
transactions, the vehicles sold are removed from the balance sheet and any gain
on sale is deferred and amortized over the period of the leaseback arrangement.
Ford Credit continues to service the leases and is paid a servicing fee which is
recognized as received. Ford Credit also retains certain residual value and
credit risk which is considered in the calculation of the gain on sale.
Depreciation
Depreciation expense on operating leases is provided on a straight-line
basis over the term of the lease in an amount necessary to reduce the leased
vehicle to its estimated residual value at the end of the lease term. Gains or
losses upon disposal and adjustments to reflect impairment of the vehicle's
residual value are also included in depreciation expense.
Residual Values
The Company has significant investments in the residual values of its
leasing portfolios. Residual values represent estimates of the value of the
assets at the end of the contract terms and are initially calculated based on
appraisals and estimates. Residual values are reviewed on a regular basis to
determine that recorded amounts are appropriate. Estimated reserves for residual
values are based on assumptions as to used car prices at lease termination and
the number of vehicles that will be returned to the Company. These assumptions
and the related reserve may change based on changing market conditions.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 1. ACCOUNTING POLICIES - Continued
Allowance for Credit Losses
An allowance for estimated credit losses is established during the
period in which receivables or vehicles leased are acquired and is based on
historical experience and other factors that affect collectibility. The
allowance for estimated credit losses includes a provision for certain
non-homogenous, impaired loans. Impaired loans are measured based on the present
value of expected future cash flows discounted at the loan's effective interest
rate. Finance receivables and lease investments are charged to the allowance for
credit losses when an account is deemed to be uncollectible, taking into
consideration the financial condition of the borrower or lessee, the value of
the collateral, recourse to guarantors and other factors. Collateral held for
resale included in other assets is carried at its estimated fair value at the
date of repossession net of estimated disposal costs. Recoveries on finance
receivables and lease investments previously charged off as uncollectible are
credited to the allowance for credit losses.
Insurance Liabilities
A liability for reported insurance claims and an estimate of unreported
insurance claims which is based on past experience is included in other
liabilities and deferred income.
Derivative Financial Instruments
Ford Credit operates in many countries worldwide, and is exposed to
market risks, including the effects of changes in interest rates and foreign
currency exchange rates. Ford Credit issues debt and other payables with various
maturities, interest rate structures and in various currencies to ensure funding
over business and economic cycles and to minimize overall borrowing costs. The
maturity and interest rate structures frequently differ from the invested
assets. Exposure to fluctuations in interest rates is created by differences in
maturities of liabilities versus maturities of assets. Financial exposure is
monitored and managed in accordance with Ford Credit's established policies and
procedures.
Ford Credit has entered into agreements to manage exposures to
fluctuations in interest rates and foreign exchange. These agreements are used
to hedge interest rate exposure and to hedge debt denominated in foreign
currencies. All such instruments are classified as "held for purposes other than
trading"; company policy specifically prohibits the use of derivatives for
speculative purposes.
Interest rate swap agreements are used to manage the effects of
interest rate fluctuations by changing the interest rate characteristics of Ford
Credit's debt to match the interest rate characteristics of related assets. All
interest rate swap agreements are designated to hedge either a specific debt
issue or pool of debt. The differential paid or received on interest rate swap
agreements is recognized on an accrual basis as an adjustment to interest
expense. Gains and losses on terminated interest rate swaps are amortized and
reflected in interest expense over the remaining term of the underlying debt.
Foreign currency agreements, including swaps and forward contracts, are
used to manage foreign exchange exposure. All currency swaps and forward
contracts are designated to hedge specific foreign currency denominated debt
instruments or intercompany loans. The differential paid or received on these
contracts is recognized on an accrual basis as an adjustment to interest
expense. Unrealized gains or losses are recognized concurrently with foreign
currency translation gains and losses on the underlying debt.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 1. ACCOUNTING POLICIES - Continued
Foreign Currency Translation
Revenues, costs and expenses of foreign subsidiaries are translated to
U.S. dollars at average-period exchange rates. Assets and liabilities of foreign
subsidiaries are translated to U.S. dollars at year-end exchange rates with the
effects of these translation adjustments being reported as a separate component
of accumulated other comprehensive income in stockholder's equity. The change in
this account results from translation adjustments recorded during the year.
Cash Equivalents
Ford Credit considers investments purchased with a maturity of three
months or less to be cash equivalents.
NOTE 2. ADDITIONS TO PAID-IN SURPLUS
Additions to paid-in surplus represent contributions from Ford due to
the reorganization of the Financial Services sector.
NOTE 3. INVESTMENTS IN SECURITIES
Investments in securities consist of debt, municipal, corporate,
mortgage-backed and other securities. Available-for-sale securities are recorded
at fair value with unrealized gains and losses excluded from income and
reported, net of tax, as a separate component of accumulated other comprehensive
income in stockholder's equity. Held-to-maturity securities are recorded at
amortized cost. Equity securities which do not have readily determinable fair
values are recorded at cost. The basis of cost used in determining realized
gains and losses is specific identification.
The fair value of substantially all securities was estimated based on
quoted market prices. For securities for which there were no quoted market
prices, the estimate of fair value was based on similar types of securities that
are traded in the market.
The amortized cost and fair value of investments in available-for-sale
securities and held-to-maturity securities at December 31, 1998, by contractual
maturity, were as follows:
<TABLE>
<CAPTION>
Available-for-Sale Held-to-Maturity
----------------------- ----------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
----------- ---------- ---------- ----------
(in millions)
<S> <C> <C> <C> <C>
Due in one year or less $ 22.7 $ 22.9 $ 1.5 $ 1.5
Due after one year through five years 162.1 163.7 2.6 2.7
Due after five years through ten years 97.6 99.3 2.8 2.9
Due after ten years 138.2 140.7 0.4 0.6
Mortgage-backed securities 198.3 200.7 - -
Equity securities 34.9 91.2 - -
---------- --------- ---------- ----------
Total $ 653.8 $ 718.5 $ 7.3 $ 7.7
========== ========= ========== ==========
</TABLE>
Proceeds from sales of available-for-sale securities were $2.1 billion
and $3.2 billion in 1998 and 1997, respectively. Gross realized gains and losses
for 1998 were $48.1 million and $3.4 million, respectively. Gross realized gains
and losses for 1997 were $95.1 million and $7.4 million, respectively. Gross
realized gains and losses for 1996 were not material.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 3. INVESTMENTS IN SECURITIES - Continued
Investments in securities at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ------------ -----------
Available-for-sale securities (in millions)
<S> <C> <C> <C> <C>
Corporate debt securities $ 187.8 $ 2.9 $ (1.6) $ 189.1
Mortgage-backed securities 198.3 2.8 (0.4) 200.7
Debt securities issued by U.S. government and agencies 146.6 3.0 (0.2) 149.4
Equity securities 35.0 57.7 (1.4) 91.3
Debt securities issued by foreign governments 23.2 0.2 - 23.4
Municipal securities 62.9 1.7 - 64.6
----------- ----------- ------------ -----------
Total available-for-sale securities 653.8 68.3 (3.6) 718.5
----------- ----------- ------------ -----------
Held-to-maturity securities
Corporate debt securities 1.5 - - 1.5
Debt securities issued by U.S. government and agencies 5.8 0.4 - 6.2
----------- ----------- ------------ -----------
Total held-to-maturity securities 7.3 0.4 - 7.7
----------- ----------- ------------ -----------
Total investments in securities $ 661.1 $ 68.7 $ (3.6) $ 726.2
=========== =========== ============ ===========
Investments in securities at December 31, 1997 were as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
Available-for-sale securities (in millions)
Corporate debt securities $ 265.2 $ 6.0 $ (0.1) $ 271.1
Mortgage-backed securities 238.4 1.9 (0.6) 239.7
Debt securities issued by U.S. government and agencies 194.1 2.0 (0.1) 196.0
Equity securities 53.0 65.1 (2.1) 116.0
Debt securities issued by foreign governments 21.4 0.1 - 21.5
Municipal securities 13.0 0.1 (0.1) 13.0
Total available-for-sale securities ------------ ------------ ------------ ------------
785.1 75.2 (3.0) 857.3
------------ ------------ ------------ ------------
Held-to-maturity securities
Corporate debt securities 15.3 - - 15.3
Debt securities issued by U.S. government and agencies 6.4 0.3 - 6.7
Other debt securities 3.2 - - 3.2
------------ ------------ ------------ ------------
Total held-to-maturity securities 24.9 0.3 - 25.2
------------ ------------ ------------ ------------
Total investments in securities with readily
determinable fair values 810.0 75.5 (3.0) 882.5
Other non-marketable equity securities 5.7 - - 5.7
----------- ------------ ------------ ------------
Total investments in securities $ 815.7 $ 75.5 $ (3.0) $ 888.2
=========== ============ ============ ============
</TABLE>
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 4. FINANCE RECEIVABLES
Net finance receivables at December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(in millions)
<S> <C> <C>
Retail $ 67,732.7 $ 55,601.0
Wholesale 22,650.1 21,605.5
Other 6,838.8 5,275.9
------------ ------------
Total finance receivables, net of unearned income 97,221.6 82,482.4
Less: Allowance for credit losses (1,280.0) (1,169.8)
------------ ------------
Finance receivables, net $ 95,941.6 $ 81,312.6
============ ============
</TABLE>
At December 31, 1998, finance receivables include $1.5 billion owed by
three customers with the largest receivable balances.
The contractual maturities of total finance receivables net of unearned
income outstanding at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Due in Year Ending December 31 Due
--------------------------------------------- After
1999 2000 2001 2001 Total
---- ---- ---- ---- -----
(in millions)
<S> <C> <C> <C> <C> <C>
Retail $ 31,293.8 $ 19,802.6 $ 10,465.5 $ 6,170.8 $ 67,732.7
Wholesale 22,645.9 2.1 0.7 1.4 22,650.1
Other 4,844.1 125.7 118.0 1,751.0 6,838.8
---------- ---------- ---------- ---------- ----------
Total $ 58,783.8 $ 19,930.4 $ 10,584.2 $ 7,923.2 $ 97,221.6
========== ========== ========== ========== ==========
</TABLE>
It is Ford Credit's experience that a substantial portion of finance
receivables are repaid before contractual maturity dates. The above table,
therefore, is not to be regarded as a forecast of future cash collections.
The aggregate receivable balances related to accounts past due 60 days
or more at December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(in millions)
<S> <C> <C>
Retail $ 473.5 $ 496.8
Wholesale 73.2 35.4
Other 31.6 58.6
--------- ---------
Total $ 578.3 $ 590.8
========= =========
</TABLE>
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 4. FINANCE RECEIVABLES - Continued
Included in retail and other receivables are investments in direct
financing leases related to the leasing of motor vehicles.
<TABLE>
<CAPTION>
1998 1997
---- ----
(in millions)
<S> <C> <C>
Net investment in direct financing leases
Minimum lease rentals $ 3,359.2 $ 2,743.9
Estimated residual values 3,720.2 2,527.0
Less: Allowance for credit losses (79.8) (42.5)
--------- ---------
Net investment in direct financing leases $ 6,999.6 $ 5,228.4
========= =========
</TABLE>
Minimum direct financing lease rentals, net of interest payments, for
each of the five succeeding years are as follows (in millions): 1999 - $1,505.7;
2000 - $1,019.0; 2001 - $598.9; 2002 - $202.6; 2003 - $32.9; thereafter - $0.1.
NOTE 5. NET INVESTMENT, OPERATING LEASES
Operating leases at December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(in millions)
<S> <C> <C>
Investment in operating leases
Vehicles, at cost $42,663.3 $41,925.5
Lease initial direct costs 62.7 64.9
Less: Accumulated depreciation (7,891.3) (6,942.8)
Allowance for credit losses (268.2) (301.6)
--------- ---------
Net investment in operating leases $34,566.5 $34,746.0
========= =========
</TABLE>
Future minimum rentals on operating leases are as follows (in millions):
1999 - $7,018.2; 2000 - $3,652.1; 2001 - $1,577.3; 2002 - $176.9; 2003 - $7.3.
NOTE 6. ALLOWANCE FOR CREDIT LOSSES
Following is an analysis of the allowance for credit losses related to
finance receivables and operating leases for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(in millions)
<S> <C> <C> <C>
Balance, beginning of year $ 1,471.4 $ 1,217.6 $ 1,054.9
Additions 1,179.5 1,338.2 993.3
Deductions
Losses 1,242.7 1,239.1 1,020.7
Recoveries (203.3) (232.0) (190.7)
--------- ---------- ----------
Net losses 1,039.4 1,007.1 830.0
Other changes, principally amounts related to finance
receivables and operating leases sold 63.3 77.3 0.6
--------- ---------- ----------
Net deductions 1,102.7 1,084.4 830.6
--------- ---------- ----------
Balance, end of year $ 1,548.2 $ 1,471.4 $ 1,217.6
========= ========== ==========
</TABLE>
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 7. RETAINED INTEREST IN SECURITIZED ASSETS
Ford Credit has sold retail and wholesale receivables through special
purpose subsidiaries. Ford Credit's servicing portfolio relating to these
finance receivable sales amounted to $13.5 billion, $10.0 billion, and $8.9
billion at December 31, 1998, 1997, and 1996, respectively. Ford Credit
periodically sells vehicles subject to operating leases to special purpose
subsidiaries under sale-leaseback arrangements. Ford Credit's servicing
portfolio related to these sales amounted to $394.9 million, $947.5 million, and
$1,388.7 million at December 31, 1998, 1997, and 1996, respectively. The
interest only strips, subordinated certificates, and restricted cash held by
securitization trusts are subject to limited recourse provision. Reserves for
estimated losses related to these assets are provided based principally on
historical loss experience. The following summarizes the components of retained
interest in securitized assets for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
(in millions)
<S> <C> <C>
Interest only strips $ 404.8 $ 293.3
Subordinated certificates 841.5 686.9
Restricted cash held by securitization trusts 109.5 103.5
Less: Allowance for credit losses (99.5) (85.1)
---------- ----------
Total retained interest in securitized assets $ 1,256.3 $ 998.6
========== ==========
</TABLE>
NOTE 8. OTHER ASSETS
Other assets at December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(in millions)
<S> <C> <C>
Investment in used vehicles held for resale, at estimated fair value $ 764.1 $ 1,042.3
Deferred charges and other assets 1,168.9 987.0
Collateral held for resale 356.4 419.4
Prepaid reinsurance premiums 383.1 -
Property and equipment, net of accumulated depreciation of $139.6
in 1998 and $105.1 in 1997 204.5 155.8
---------- ----------
Total other assets $ 2,877.0 $ 2,604.5
========== ==========
</TABLE>
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 9. DEBT
Debt at December 31 was as follows:
<TABLE>
<CAPTION>
Weighted-Average (A)
Interest Rates Book Value
--------------------- -----------------------------
1998 1997 1998 1997
---- ---- ---- ----
Payable Within One Year (in millions)
<S> <C> <C> <C> <C>
Commercial paper (B) $ 46,188.2 $ 40,856.8
Other short-term debt (C) 7,445.0 5,351.0
------------ -----------
Total short-term debt 5.69% 5.83% 53,633.2 46,207.8
Long-term indebtedness payable within one
year (D) (E) 5.74% 6.64% 9,689.2 9,572.6
------------ -----------
Total payable within one year 5.69% 5.97% 63,322.4 55,780.4
Payable After One Year
Secured indebtedness 20.14% 18.63% 5.2 13.5
Unsecured senior indebtedness
Notes (F) 6.25% 6.64% 49,893.8 43,584.1
Debentures 3.97% 4.50% 1,661.1 1,247.6
Unamortized discount (25.5) (3.0)
------------ -----------
Total secured and unsecured senior
indebtedness 51,534.6 44,842.2
Unsecured long-term subordinated notes 8.50% 8.29% 110.3 102.4
------------ -----------
Total payable after one year (E) 51,644.9 44,944.6
------------ -----------
Total debt 5.91% 6.25% $ 114,967.3 $ 100,725.0
============ ===========
</TABLE>
(A) Excludes the effect of interest rate swap agreements.
(B) The average remaining maturities of commercial paper was 30 days at
December 31, 1998 and 24 days at December 31, 1997.
(C) Includes $988.6 million and $830.5 million with affiliated companies
at December 31, 1998 and 1997,respectively.
(D) Includes $394.9 million and $1,716.0 million with affiliated
companies at December 31, 1998 and 1997, respectively.
(E) Secured and unsecured senior notes and debentures mature at various
dates through 2078. Maturities are as follows (in millions):
1999 - $9,689.2; 2000 - $11,246.9; 2001 - $10,970.3; 2002 - $8,790.8;
2003 - $9,552.0; thereafter - $11,084.9.
(F) Includes $2,483.0 million and $1,830.6 million with affiliated companies at
December 31, 1998 and 1997, respectively.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 9. DEBT - Continued
<TABLE>
<CAPTION>
1998 1997
---- ----
Payable After One Year (A) (in millions)
<S> <C> <C>
Fixed interest rates $ 33,724.6 $ 30,602.9
Variable interest rates (generally based on
LIBOR or other short-term rates) 17,920.3 14,341.7
---------- ----------
Total payable after one year $ 51,644.9 $ 44,944.6
========== ==========
</TABLE>
(A) Excludes the effect of interest rate swap agreements.
Ford Credit and certain of its subsidiaries have entered into interest
rate swap agreements to manage exposures to fluctuations in interest rates. The
agreements decreased the overall weighted-average interest rate on total debt
from 5.91% to 5.75% as of December 31, 1998 and decreased the overall
weighted-average interest rate on total debt from 6.25% to 6.17% as of December
31, 1997. In addition, the agreements decreased the Ford Credit's overall
weighted-average effective interest rates for full year 1998 from 6.46% to 6.42%
and increased full year 1997 from 6.50% to 6.54%. The agreements decreased the
long-term obligations payable after one year subject to variable interest rates
as of December 31, 1998 and 1997 to $0 and $9,741.6 million, respectively. The
effect of these agreements is to reduce the effect of interest rate changes on
profitability. Approximately 34% of Ford Credit's interest rate swaps mature in
1999 and approximately 93% mature by 2003.
Certain of these obligations are denominated in currencies other than
the currency of the country of the issuer. Foreign currency swap and forward
agreements are used to hedge exposure to changes in exchange rates of these
obligations.
NOTE 10. SUPPORT FACILITIES
Support facilities represent additional sources of funds, if required.
At December 31, 1998, Ford Credit had approximately $19.2 billion of
contractually committed facilities. In addition, $7.7 billion of Ford lines of
credit may be used by Ford Credit at Ford's option. The lines have various
maturity dates through June 30, 2003 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 December 31, 1998, there were approximately $4.7
billion of contractually committed facilities available for FCE Bank plc's ("FCE
Bank") use. In addition, $615 million of Ford credit lines may be used by FCE
Bank at Ford's option. The lines have various maturity dates through June 30,
2003 and may be used, at FCE Bank's option, by any of its direct or indirect
majority-owned subsidiaries. Any such borrowings will be guaranteed by FCE Bank.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 11. INCOME TAXES
The provision for income taxes was estimated as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(in millions)
<S> <C> <C> <C>
Currently payable/(refundable)
U.S. federal $ 15.9 $ 572.1 $ (501.7)
Foreign 264.3 231.9 138.1
State and local - 15.3 (10.4)
---------- ---------- ----------
Total currently payable/(refundable) 280.2 819.3 (374.0)
Deferred tax (benefit)/liability
U.S. federal 390.5 (136.3) 1,050.3
Foreign (37.8) 32.8 56.2
State and local 47.3 11.0 (0.9)
---------- ---------- ----------
Total deferred 400.0 (92.5) 1,105.6
---------- ---------- ----------
Total provision $ 680.2 $ 726.8 $ 731.6
========== ========== ==========
A reconciliation of the provision for income taxes as a percentage of
income before income taxes, excluding equity in net income of affiliated
companies and minority interest in net income of a joint venture, with the
United States statutory tax rate for the last three years is shown below:
1998 1997 1996
---- ---- ----
U.S. statutory tax rate 35.0% 35.0% 35.0%
Effect of (in percentage points)
Taxes attributable to foreign source income 0.6 3.7 1.5
State and local income taxes 1.7 1.7 1.5
Investment income not subject to tax or subject to tax at reduced rates (0.2) (0.2) (0.9)
Rate adjustments on deferred taxes - (0.7) (1.9)
Other 0.5 0.8 (1.4)
---- ---- ----
Effective tax rate 37.6% 40.3% 33.8%
==== ==== ====
</TABLE>
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 11. INCOME TAXES - Continued
Deferred income taxes reflect the estimated tax effect of temporary
differences between the bases of assets and liabilities for financial reporting
purposes and those amounts as measured by tax laws and regulations. The
components of deferred income tax assets and liabilities as of December 31 were
as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(in millions)
<S> <C> <C>
Deferred Tax Liabilities
Leasing transactions $ 4,627.9 $ 3,560.3
Finance receivables 526.5 225.5
Purchased tax benefits 301.5 293.0
Sales of receivables 118.9 87.6
Other 173.8 272.3
---------- ----------
Total deferred tax liabilities 5,748.6 4,438.7
Deferred Tax Assets
Provision for credit losses 955.6 749.9
Net operating losses and foreign tax credits 833.4 234.5
Alternative minimum tax 298.0 289.9
Employee benefit plans 131.0 120.6
Other 372.9 311.6
---------- ----------
Total deferred tax assets 2,590.9 1,706.5
---------- ----------
Net deferred tax liabilities $ 3,157.7 $ 2,732.2
========== ==========
</TABLE>
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 12. Postretirement Health Care and Life Insurance Benefits
Ford Credit and certain of its subsidiaries provide selected health
care and life insurance benefits for retired employees under unfunded plans
sponsored by Ford and certain of its subsidiaries. Ford Credit's U.S. and
Canadian employees may become eligible for those benefits if they retire while
working for Ford Credit; however, benefits and eligibility rules may be modified
from time to time. The estimated cost for postretirement health care benefits is
accrued on an actuarially determined basis.
Increasing the assumed health care cost trend rate by one percentage
point is estimated to increase the aggregate service and interest cost
components of net postretirement benefit expense for 1998 by approximately $5
million and the accumulated postretirement benefit obligation at December 31,
1998 by approximately $50 million. A decrease of one percentage point would
reduce service and interest cost by approximately $4 million and decrease the
December 31, 1998 postretirement benefit obligation by approximately $39
million.
Net postretirement benefit expense was as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
Costs Recognized in Income (in millions)
<S> <C> <C> <C>
Service cost $ 9.7 $ 7.8 $ 8.3
Interest cost 16.4 14.6 14.4
Curtailments 1.5 - -
Amortization of prior service cost (0.2) (0.2) (0.3)
Amortization of losses/(gains) 0.1 - (1.4)
------------ ------------ ------------
Net postretirement benefit expense $ 27.5 $ 22.2 $ 21.0
============ ============ ============
Discount rate for expense 7.0% 7.5% 7.3%
Initial health care cost trend rate 6.6% 6.6% 9.5%
Ultimate health care cost trend rate 5.0% 5.0% 5.5%
Number of years to ultimate trend rate 10 10 10
The year-end status of these plans was as follows at December 31:
1998 1997
------------- -------------
Change in Benefit Obligation (in millions)
Benefit obligation at January 1 $ 239.4 $ 210.7
Service cost 9.7 7.8
Interest cost 16.4 14.6
Sale of Ford New Holland Credit Company - (5.3)
Curtailments 1.5 -
Benefits paid (6.3) (5.7)
Actuarial loss 40.0 17.3
------------- -------------
Benefit obligation at December 31 $ 300.7 $ 239.4
============= =============
Funded Status of the Plan
Benefit obligation $ (300.7) $ (239.4)
Unamortized prior service cost (1.0) (1.2)
Unamortized net losses/(gains) 25.4 (14.6)
------------- -------------
Net amount recognized $ (276.3) $ (255.2)
============= =============
Amounts Recognized in the Balance Sheet consist of:
Accrued liabilities $ (276.3) $ (255.2)
============= =============
Assumptions as of December 31
Discount rate 6.5% 7.0%
Initial health care cost trend rate 7.0% 6.6%
Ultimate health care cost trend rate 5.0% 5.0%
Number of years to ultimate trend rate 9 10
</TABLE>
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 13. TRANSACTIONS WITH AFFILIATED COMPANIES
An agreement with Ford provides for payments by Ford to Ford Credit
that would maintain Ford Credit's consolidated income before income taxes and
net income at specified minimum levels. No payments were required under the
agreement during 1998, 1997, or 1996.
Ford Credit and its subsidiaries, from time to time, purchase accounts
receivable of certain divisions and subsidiaries of Ford. The amount of such
receivables outstanding was $3,887.4 million at December 31, 1998 and $3,664.4
million at December 31, 1997. Agreements with Ford and other affiliates also
provide for payments to Ford Credit for interest supplements and other support
costs on certain financing and leasing transactions. Amounts included in the
income statement for these and other transactions with Ford were as follows (in
millions): 1998 - $2,395.2; 1997 - $1,778.5; 1996 - $1,432.7. Ford Credit and
its subsidiaries purchase from Ford and affiliates certain vehicles which were
previously acquired by Ford principally from its fleet and rental car customers.
The fair values of these vehicles held for resale and included in other assets
at December 31 were as follows (in millions): 1998 - $862.8; 1997 - $1,089.5.
Ford Credit also has entered into a sale-leaseback agreement with Ford for
vehicles leased to employees of Ford and its subsidiaries. The net investment in
these vehicles included in operating leases at December 31 was as follows (in
millions): 1998 - $796.9; 1997 - $731.2.
Ford Credit and Ford revised their intercompany tax sharing agreement
in 1997 effective for years ended after December 31, 1994. Ford Credit recorded
a deferred tax asset for amounts due from Ford under the revised agreement. Ford
compensates Ford Credit for the temporary use of these funds. The interest
income earned and included in income was as follows (in millions): 1998 - $49.9;
1997 - $41.6; 1996 - $0.
Ford Credit holds a promissory note from Ford Holdings, Inc. for $1,517
million which is classified against stockholder's equity. Interest income
earned on the promissory note was as follows (in millions): 1998 - $88.5;
1997 - $91.6; 1996 - $93.5.
Ford Credit and its subsidiaries receive technical and administrative
advice and services from Ford and its subsidiaries, occupy office space
furnished by Ford and its subsidiaries and utilize data processing facilities
maintained by Ford. Payments to Ford and its subsidiaries for such advice and
services are charged to operating expenses and were as follows (in millions):
1998 - $130.6; 1997 - $120.7; 1996 - $113.9.
Retirement benefits are provided under defined benefit plans for
employees of Ford Credit and its subsidiaries in the United States by the Ford
General Retirement Plan and for employees of the foreign subsidiaries in Europe,
Australia, and Canada by the respective Ford retirement plans. Employee
retirement plan costs allocated to Ford Credit and its subsidiaries from Ford
and charged to operating expenses were as follows (in millions): 1998 - $16.9;
1997 - $13.6; 1996 - $16.6.
Earned premiums reinsured to a Ford-owned affiliate were as follows (in
millions): 1998 - $53.0; 1997 - $1.5; 1996 - $0. Loss and loss adjustment
expense recoveries from the same affiliate were as follows (in millions):
1998 - $29.4; 1997 - $0.6; 1996 - $0.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 14. LITIGATION AND CLAIMS
Various legal actions, governmental proceedings and other claims are
pending or may be instituted or asserted in the future against Ford Credit and
its subsidiaries. Certain of the pending legal actions are, or purport to be,
class actions. Some of these matters involve or may involve compensatory,
punitive, or antitrust or other treble damage claims in very significant amounts
or other relief which, if granted, would require very significant expenditures.
Litigation is subject to many uncertainties, the outcome of individual
litigated matters is not predictable with assurance and it is reasonably
possible that some of the foregoing matters could be decided unfavorably to Ford
Credit or the subsidiary involved. Although the amount of liability at December
31, 1998 with respect to these matters cannot be ascertained, Ford Credit
believes that any resulting liability should not materially affect the
consolidated financial position or results of operations of Ford Credit and its
subsidiaries.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 15. FINANCIAL INSTRUMENTS
Book and Estimated Fair Value of Financial Instruments
The estimated fair value of financial instruments held by Ford Credit
and its subsidiaries at December 31, and the valuation techniques used to
estimate the fair value, were as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------- ----------------------------
Estimated Estimated
Book Fair Book Fair
Value Value Value Value
----------- ----------- ----------- -----------
Assets (in millions)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 780.8 $ 780.8 $ 689.5 $ 689.5
Investments in securities 725.8 726.2 887.9 888.2
Finance receivables, net 88,838.6 88,712.5 75,971.9 75,475.1
Retained interest in securitized assets 1,256.3 1,256.3 998.6 998.6
Liabilities
Debt payable within one year $ 63,322.4 $ 63,386.3 $ 55,780.4 $ 55,780.4
Debt payable after one year 51,644.9 53,095.7 44,944.6 45,828.2
Derivative Contracts:
Foreign exchange instruments
Contracts with unrealized gains $ 161.1 $ 433.8 $ 64.8 $ 115.9
Contracts with unrealized losses (506.7) (363.2) (814.3) (898.4)
Interest rate instruments
Contracts with unrealized gains 104.3 935.1 80.6 546.9
Contracts with unrealized losses (107.7) (243.3) (70.9) (159.9)
</TABLE>
Cash and Cash Equivalents. The book value approximates fair value
because of the short maturity of these instruments.
Investments in Securities. The estimated fair value of investments in
marketable equity and debt securities are estimated based on market prices. Book
value of investments in non-marketable equity securities approximate fair value.
Finance Receivables, Net. The fair value of substantially all finance
receivables is estimated by discounting future cash flows using an estimated
discount rate which reflects the current credit, interest rate and prepayment
risks associated with similar types of instruments. For receivables with short
maturities, the book values approximate fair values. Certain leases are excluded
from the fair market valuation of finance receivables.
Retained Interest in Securitized Assets. The fair value of interest
only strips are recorded at the present value of actual and estimated future
cash flows discounted at rates commensurate with this type of instrument. The
fair value of subordinated certificates are estimated based on market prices.
Book value of restricted cash and allowance for credit losses approximates fair
value.
Debt Payable Within One Year. For maturities of 3 months or less, the
book value approximates fair value because of the short maturities of these
instruments. For maturities greater than 3 months to one year, fair value is
estimated based on quoted market prices or current rates for similar debt with
the same maturities.
Debt Payable After One Year. The fair value is estimated based on
quoted market prices or current rates for similar debt with the same remaining
maturities.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 15. FINANCIAL INSTRUMENTS - Continued
Financial Instruments with Off-Balance-Sheet Risk
The following sections describe the various off-balance-sheet financial
instruments that Ford Credit and its subsidiaries held as of December 31, 1998
and 1997. Also included is a brief discussion of the estimated fair value of
those contracts and certain risks associated with holding those contracts
through maturity.
Foreign Exchange Instruments. Ford Credit and certain of its
subsidiaries have entered into foreign currency swap and forward agreements to
manage exposure to foreign exchange rate fluctuations. At December 31, 1998 and
1997, the total notional amount of Ford Credit's foreign exchange instruments
outstanding was $14.5 billion and $12.5 billion, respectively. These agreements
hedge principal and interest payments on debt issues that are denominated in
foreign currencies. The fair value of these foreign exchange agreements was
estimated using current market interest and foreign exchange rates.
Interest Rate Instruments. Ford Credit and certain of its subsidiaries
have entered into interest rate instrument agreements to manage exposure to
fluctuations in interest rates. The underlying notional amount of interest rate
instruments was $97.3 billion at December 31, 1998 and $86.6 billion at December
31, 1997, respectively.
The differential paid or received on interest rate swap agreements is
recognized on an accrual basis as an adjustment to interest expense. The book
value of an interest rate swap agreement represents the differential receivable
or payable with a swap counterparty since the last settlement date.
The fair value of an interest rate swap is the estimated amount Ford
Credit would receive or pay to terminate the agreement. The fair value is
calculated using current market rates for similar instruments with the same
remaining maturities. Unrealized gains and losses are netted for individual
counterparties where legally permissible.
Counterparty Credit Risk
Ford Credit manages its foreign currency and interest rate counterparty
credit risks by limiting exposure and by monitoring the financial condition of
counterparties. The amount of exposure Ford Credit may have to a single
counterparty on a worldwide basis is limited by company policy. In the unlikely
event that a counterparty fails to meet the terms of a foreign currency or an
interest rate instrument, risk is limited to the fair value of the instrument.
Concentrations
The business of Ford Credit is substantially dependent upon Ford Motor
Company. Any protracted reduction or suspension of Ford's production or sale of
vehicles, resulting from a decline in demand, a work stoppage, governmental
action, adverse publicity, or other event, could have a substantial adverse
effect on Ford Credit.
The majority of Ford Credit's finance receivables are geographically
diversified through the United States. Foreign finance receivables are
concentrated in Europe, Canada, and Australia. Ford Credit controls its credit
risk through credit standards, limits on exposure and by monitoring the
financial condition of other parties. TARIC has credit risk related to
receivables from reinsurers which are collateralized by trust funds, letters of
credit, or custodial accounts.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 16. STOCK OPTIONS
Ford Credit employees participate in the stock option plans of Ford.
Ford Credit has stock options outstanding under Ford's 1985 Stock Option Plan,
the 1990 Long-Term Incentive Plan, and the 1998 Long-Term Incentive Plan. Grants
may be made under the 1998 Plan through April 2008. Options granted in 1997
under the 1990 Plan and options granted under the 1998 Plan become exercisable
33% after one year from the date of grant, 66% after two years and in full after
three years. In general, options granted under the 1985 Plan and options granted
prior to 1997 under the 1990 Plan become exercisable 25% after one year from the
date of grant, 50% after two years, 75% after three years and in full after four
years. Options under all Plans expire after 10 years.
Information concerning stock options for Ford Credit's employees for
the years ended December 31 was as follows (shares in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------------------------- ------------------------ -------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Subject to Option Shares Price Shares Price Shares Price
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period 2,419 $ 28.44 2,446 $ 26.93 2,267 $ 25.22
New grants (based on fair value of
common stock at dates of grant) 912 41.28 430 32.05 423 32.69
Associates adjustment * 1,057 - -
Transferred into Ford Credit 331 21.26 - -
Exercised ** (1,005) 45.13 (404) 23.19 (190) 20.32
Transferred out of Ford Credit (492) 20.47 - -
Surrendered upon exercise of stock
appreciation rights - (53) 22.44 (40) 23.03
Terminated and expired (22) 37.82 - (14) 31.14
------- ------- -------
Outstanding at end of period 3,200 26.39 2,419 28.44 2,446 26.93
Outstanding but not exercisable (1,721) (1,078) (1,021)
------- ------- -------
Exercisable at end of period 1,479 19.58 1,341 25.85 1,425 23.61
======= ======= =======
</TABLE>
* Outstanding stock options and related exercise prices were adjusted to
preserve the intrinsic value of options as a result of The Associates spin-off
in l998.
** Exercised at option prices ranging from $20.06 to $61.13 during 1998,
$15.00 to $32.69 during 1997 and $13.42 to $29.06 during 1996.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 16. STOCK OPTIONS - Continued
The estimated fair value as of date of grant of options granted in
1998, 1997 and 1996, using the Black-Scholes option-pricing model, was as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Estimated fair value per share of options granted during the year $9.25 $5.76 $6.93
Assumptions:
Annualized dividend yield 4.1% 4.8% 4.3%
Common stock price volatility 28.1% 22.1% 25.2%
Risk-free rate of return 5.7% 6.7% 6.2%
Expected option term (in years) 5 5 5
</TABLE>
Ford Credit measures compensation cost using the intrinsic value
method. Accordingly, no compensation cost for stock options has been
recognized. If compensation cost had been determined based on the estimated
fair value of options granted since 1995, the pro forma effects on Ford
Credit's net income would not have been material.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 17. SEGMENT INFORMATION
Ford Credit adopted Statement of Financial Accounting Standard No. 131
("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information," effective with year end 1998. SFAS 131 establishes standards for
reporting information about operating segments in annual financial statements
and requires that enterprises report selected information about operating
segments in interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
Ford Credit's reportable operating segments include Ford Credit North
America, Ford Credit International, and Personal Financial Services. Ford Credit
North America consists of the United States and Canada. Ford Credit
International consists of all other countries. Personal Financial Services
consists of insurance operations and new business ventures.
Financial results for Ford Credit's operating segments have been
prepared using a management approach which included certain securitized assets
not included in Ford Credit's balance sheet. This is consistent with the basis
and manner in which Ford Credit management internally reviews financial
information for the purposes of assisting in making internal operating
decisions. Results were as follows (in millions):
<TABLE>
<CAPTION>
Ford
Credit Ford Personal Ford Credit
North Credit Financial Eliminations/ Financial
1998 America International Services Reclassifications Statements
- ---- ------------ --------------- -------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue $ 16,220.5 $ 3,542.4 $ 427.1 $ (887.5) $ 19,302.5
Income
Income before income taxes 1,128.0 545.3 77.0 61.9 1,812.2
Net income 729.4 315.3 49.9 (10.4) 1,084.2
Other disclosures
Depreciation on operating
leases 6,922.4 537.4 - (132.4) 7,327.4
Interest expense 6,042.1 1,646.7 - (778.4) 6,910.4
Provision for income taxes 398.6 230.0 27.1 24.5 680.2
Finance receivables
(including net investment
operating leases)* 117,424.6 28,361.6 - (15,278.1) 130,508.1
Total assets 115,469.3 29,818.2 1,364.5 (9,404.2) 137,247.8
</TABLE>
* Ford Credit managed receivables exclude allowance for credit losses
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 17. SEGMENT INFORMATION - Continued
<TABLE>
<CAPTION>
Ford
Credit Ford Personal Ford Credit
North Credit Financial Eliminations/ Financial
1997 America International Services Reclassifications Statements
- ---- ------------ --------------- -------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue $ 15,304.7 $ 3,238.9 $ 476.5 $ (1,675.0) $ 17,345.1
Income
Income before income taxes 1,143.0 520.0 152.0 (9.0) 1,806.0
Net income 697.5 285.1 95.1 (46.9) 1,030.8
Other disclosures
Depreciation on operating
leases 6,213.8 534.2 - (559.8) 6,188.2
Interest expense 5,650.8 1,398.6 - (781.2) 6,268.2
Provision for income taxes 445.5 234.9 56.9 (10.5) 726.8
Finance receivables
(including net investment
operating leases)* 107,859.7 25,165.5 - (16,966.6) 116,058.6
Total assets 105,508.4 26,649.3 1,021.3 (11,205.7) 121,973.3
1996
- ----
Revenue $ 14,417.1 $ 2,919.0 $ 295.2 $ (925.8) $ 16,705.5
Income
Income before income taxes 1,601.4 488.0 35.6 115.2 2,240.2
Net income 1,038.4 290.9 23.7 87.6 1,440.6
Other disclosures
Depreciation on operating
leases 5,412.1 319.1 - (193.6) 5,537.6
Interest expense 5,298.3 1,376.8 - (415.4) 6,259.7
Provision for income taxes 583.9 192.3 11.9 (56.5) 731.6
Finance receivables
(including net investment
operating leases) * 98,495.9 25,495.4 - (12,498.1) 111,493.2
Total assets 98,865.7 26,403.4 751.0 (4,323.7) 121,696.4
</TABLE>
* Ford Credit managed receivables exclude allowance for credit losses
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 17. SEGMENT INFORMATION - Continued
Total revenue, income before income taxes, net income, finance
receivables, and assets identifiable with United States, Europe, and other
foreign operations were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
Revenue (in millions)
<S> <C> <C> <C>
United States operations $ 14,396.8 $ 13,912.5 $ 13,214.9
European operations 2,314.4 1,916.8 2,137.2
Other foreign operations 2,591.3 1,515.8 1,353.4
------------ ----------- ------------
Total revenue $ 19,302.5 $ 17,345.1 $ 16,705.5
============ =========== ============
Income before income taxes
United States operations $ 1,292.4 $ 1,245.8 $ 1,717.6
European operations 431.7 383.5 358.1
Other foreign operations 88.1 176.7 164.5
------------ ----------- ------------
Total income before income taxes $ 1,812.2 $ 1,806.0 $ 2,240.2
============ =========== ============
Net income
United States operations $ 791.8 $ 736.4 $ 1,124.7
European operations 246.1 207.5 221.3
Other foreign operations 46.3 86.9 94.6
------------ ----------- ------------
Total net income $ 1,084.2 $ 1,030.8 $ 1,440.6
============ =========== ============
Finance receivables at December 31 (including net investment
operating leases)
United States operations $ 94,945.4 $ 87,721.2 $ 82,225.0
European operations 21,588.7 17,148.1 18,100.0
Other foreign operations 13,974.0 11,189.3 11,168.2
------------ ----------- ------------
Total finance receivables $ 130,508.1 $ 116,058.6 $ 111,493.2
============ =========== ============
Assets at December 31
United States operations $ 99,991.8 $ 92,457.2 $ 93,234.5
European operations 22,473.0 17,867.7 18,743.9
Other foreign operations 14,783.0 11,648.4 9,718.0
------------ ----------- ------------
Total assets $ 137,247.8 $ 121,973.3 $ 121,696.4
============ =========== ============
</TABLE>
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected financial data by calendar quarter were as follows:
<TABLE>
<CAPTION>
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
--------- --------- --------- --------- ----------
(in millions)
<S> <C> <C> <C> <C> <C>
1998
- ----
Total financing revenue $ 4,208.7 $ 4,494.2 $ 4,337.1 $ 4,850.3 $ 17,890.3
Depreciation on operating leases 1,682.0 1,841.2 1,791.7 2,012.5 7,327.4
Interest expense 1,610.5 1,691.0 1,662.0 1,946.9 6,910.4
Total financing margin and revenue 1,266.0 1,318.9 1,221.3 1,258.5 5,064.7
Provision for credit losses 321.5 270.5 290.2 297.3 1,179.5
Net income 277.8 299.8 272.4 234.2 1,084.2
1997
- ----
Total financing revenue $ 3,929.8 $ 3,955.6 $ 4,149.0 $ 4,067.5 $ 16,101.9
Depreciation on operating leases 1,445.5 1,467.8 1,624.1 1,650.8 6,188.2
Interest expense 1,559.0 1,565.8 1,551.8 1,591.6 6,268.2
Total financing margin and revenue 1,238.5 1,219.7 1,234.4 1,196.1 4,888.7
Provision for credit losses 355.7 296.4 370.1 316.0 1,338.2
Net income 275.9 279.0 257.7 218.2 1,030.8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12-A
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in millions)
For the Years Ended December 31
----------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Fixed Charges
Interest expense $ 6,910.4 $ 6,268.2 $ 6,235.7 $ 5,987.8 $ 4,226.3
Rents 26.4 26.2 22.2 19.5 16.9
----------- ----------- ----------- ----------- -----------
Total fixed charges 6,936.8 6,294.4 6,257.9 6,007.3 4,243.2
Earnings
Income before income taxes 1,812.2 1,806.0 2,240.2 2,327.8 2,335.5
Less equity in net income from affiliated companies 2.3 1.0 55.3 255.4 232.5
Less minority interests in net income of subsidiaries 47.8 48.4 68.0 65.5 59.3
----------- ----------- ----------- ----------- -----------
Earnings before fixed charges $ 8,698.9 $ 8,051.0 $ 8,374.8 $ 8,014.2 $ 6,286.9
=========== =========== =========== =========== ===========
Ratio of earnings to fixed charges 1.3 1.3 1.3 1.3 1.5
=========== =========== =========== =========== ===========
</TABLE>
For purposes of the Ford Credit ratio, earnings consist of income taxes and
fixed charges. Income before income taxes of Ford Credit includes the equity in
net income of all unconsolidated affiliates and minority interests in net income
of subsidiaries. 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 99.2
Global News, The American Road, P.O. Box 1899, Dearborn, MI 48121-1899
Telephone: 313-322-9600; Fax: 313-845-0570
E-Mail: [email protected]; Internet: http://media.ford.com
Contact: Media Inquiries Securities Analysts Shareholder Inquiries
Jim Cain Mike Holland (800) 555-5259 or
313-322-3428 313-323-8221 (313) 845-8540
FORD EARNS $6.6 BILLION BEFORE CHARGES IN 1998, UP 10 PERCENT
Momentum Continues with 11th Consecutive Quarter of Improved Operating Earnings
DEARBORN, January 21, 1999 -- Ford Motor Company [NYSE: F] earned $5,939 million
in 1998, or $4.72 per diluted common and Class B share, excluding earnings from
The Associates [NYSE: AFS] and the gain that resulted from Ford's spin-off of
that company. Excluding these and other one-time factors, Ford's operating
earnings were $6,570 million, up $582 million, or 10 percent on a comparable
basis; earnings per share were $5.30 per share, up $0.44 per share.
"The transformation of Ford continued to gain momentum in 1998," said Jacques
Nasser, president and chief executive officer. "Our quality is the best it has
ever been, we improved our operating efficiency and our products continue to be
well received by customers. As a result, we were able to achieve our eleventh
consecutive quarter of improved operating earnings.
"We delivered a total return to investors of 89 percent, which placed the
performance of Ford stock in the top quartile of S&P 500 companies for the
second year in a row," Nasser added. "Maintaining this level of performance for
shareholders over time is one of our financial milestones. To continue to
deliver, we know we must increase our consumer focus, strengthen our brands,
provide the best total value to consumers, develop leaders at all levels of the
company and be responsible in corporate citizenship."
Ford's 1998 operating earnings of $6,570 million exclude previously announced
one-time charges for employee separation programs and asset write-downs totaling
$631 million ($0.51 per share), earnings from The Associates of $177 million
($0.14 per share), the one-time gain resulting from The Associates spin-off of
$15,955 million ($12.90 per share) and a one-time earnings per share reduction
($0.07) for the premium paid to repurchase Ford's Series B preferred stock.
<PAGE>
-2-
Ford's reported 1997 earnings were $6,920 million ($5.62 per share). Comparable
1997 operating results were $5,988 million ($4.86 per share). This excludes
Ford's share of earnings of The Associates, which were $832 million ($0.68 per
share), and a net gain of $100 million ($0.08 per share) for one-time actions.
FOURTH QUARTER 1998
Ford reported earnings of $1,043 million ($0.84 per share) in the fourth quarter
of 1998. Excluding one-time charges, Ford earned $1,674 million ($1.35 per
share) -- Ford's eleventh consecutive quarter of year-over-year operating
improvement. Net income for the fourth quarter of 1997, excluding The
Associates, was $1,572 million ($1.27 per share).
AUTOMOTIVE OPERATIONS
Reported full-year 1998 earnings from automotive operations were $4,752 million.
Excluding one-time charges, earnings were $5,377 million, up $494 million.
Ford's reported automotive after-tax return on sales (ROS) was 4 percent in
1998. Excluding one-time charges, ROS was 4.6 percent, up 0.6 points.
For the full-year, total costs were down $2.2 billion at constant volume and
mix. This exceeded Ford's full-year milestone, which was to lower total costs by
$1 billion.
Reported net income from automotive operations in the fourth quarter of 1998 was
$820 million. Excluding one-time charges, earnings were $1,445 million, up
$104 million. Reported ROS was 2.6 percent in the fourth quarter of 1998.
Excluding one-time charges, ROS was 4.5 percent, up 0.3 points.
North America: Reported full-year 1998 automotive earnings in North America were
$4,612 million. Excluding one-time charges of $363 million, earnings were
$4,975 million, up $416 million. Reported full-year ROS was 5.3 percent. Ford's
full-year 1998 milestone was to earn a 5 percent ROS in North America. Excluding
charges, ROS was 5.8 percent, up 0.6 points.
The earnings improvement for the full year was driven by improved quality, lower
costs and favorable product mix, offset partially by higher marketing costs and
the fourth quarter charges.
<PAGE>
-3-
Reported fourth quarter 1998 automotive earnings in North America were
$1,047 million. Excluding one-time charges, earnings were $1,410 million, up
$57 million. Reported ROS in North America was 4.5 percent. Excluding charges,
ROS was 6.0 percent, up 0.1 points.
"In 1998, Ford posted its best retail sales in the United States in 20 years,
and all-time U.S. sales records at Ford Division and Jaguar," Nasser said. "Our
outlook for 1999 is for another strong U.S. market. We expect industry volumes
will range between 15 million and 15.5 million units, the sixth year in a row of
industry volumes greater than 15 million units."
Europe: Reported full-year earnings for Europe in 1998 were $193 million.
Excluding charges of $137 million, earnings were $330 million, up $13 million.
Ford's 1998 full-year milestone was to be profitable. Ford's 1999 full-year
milestone for Europe is to grow earnings.
Ford reported a loss of $74 million in the fourth quarter of 1998. Excluding
charges, Ford earned $63 million, down $95 million from a year ago. The decline
in fourth quarter earnings reflects lower volumes, lower export sales and launch
costs for the Ford Focus, offset partially by cost reductions.
"We are determined to improve our results in Europe by continuing to lower our
costs, improve our quality and grow the business with new vehicles such as the
Ford Focus," said Nasser. "The Focus, which is now in production, has received
numerous accolades for its styling, packaging, value and driving dynamics, and
was named European Car of the Year."
South America: Reported full-year 1998 results in South America were a loss of
$226 million. Excluding charges of $81 million, full-year automotive results
were a loss of $145 million, down $185 million. Ford disclosed in the third
quarter that it did not expect to achieve its milestone of breaking even in
South America in 1998 as a result of significantly lower volumes. In Brazil,
Ford's largest market in the region, industry volumes in 1998 were down about
20 percent from 1997.
In the fourth quarter of 1998, Ford reported a loss of $151 million in South
America. Excluding charges, Ford lost $70 million, up $1 million from the prior
year.
<PAGE>
-4-
"Economic and market conditions in Brazil continue to be difficult," Nasser
said. "For 1999, we have established a milestone of improving our operating
results in South America, but we are not expecting to be profitable there."
Visteon: The earnings of Visteon Automotive Systems, Ford's automotive
components enterprise, are included in the company's automotive results. In
1998, Visteon reported earnings of $712 million, up $194 million, or 37 percent,
from 1997. In the fourth quarter of 1998, Visteon earned $132 million, compared
with $48 million a year ago. Visteon's milestone for 1999 is to grow its
earnings and obtain $2 billion in new business.
FORD CREDIT
Reported earnings in 1998 were $1,084 million, up $53 million or 5 percent,
which was below the 1998 milestone of achieving 10 percent earnings growth.
Excluding charges of $6 million, earnings were $1,090 million, up $59 million.
The increase in full-year earnings reflects improved credit loss performance,
lower taxes and higher financing volumes, offset partially by higher
depreciation expense on leased vehicles.
In the fourth quarter of 1998, Ford Credit reported earnings of $234 million,
up 7 percent. Excluding charges, earnings were $240 million, up $22 million
or 10 percent.
"We believe Ford Credit can improve on the earnings momentum it showed in the
fourth quarter and achieve its 1999 full-year milestone of 10 percent earnings
growth," Nasser said.
HERTZ
The Hertz Corporation [NYSE: HRZ] reported its fifth consecutive year of record
earnings and seventh consecutive year of increased earnings. Net income was
$277 million in 1998, up 37 percent, compared with earnings of $202 million in
1997. Ford's share of Hertz' 1998 earnings was $224 million.
In the fourth quarter of 1998, Hertz earned a record $48 million, up 37 percent
compared with earnings of $35 million in the same period a year ago. Ford's
share of Hertz' fourth quarter 1998 earnings was $39 million. The Hertz
1999 full-year milestone is for the company to deliver record earnings.
# # #
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
HIGHLIGHTS
----------
Fourth Quarter Full Year
---------------------------- ---------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Worldwide vehicle unit sales of
cars and trucks (in thousands)
- - North America 1,197 1,118 4,370 4,432
- - Outside North America 617 673 2.453 2,515
----- ----- ----- -----
Total 1,814 1,791 6,823 6,947
===== ===== ===== =====
Sales and revenues (in millions)
- - Automotive $32,204 $31,897 $119,083 $122,935
- - Financial Services 5,699 8,055 25,333 30,692
------- ------- -------- --------
Total $37,903 $39,952 $144,416 $153,627
======= ======= ======== ========
Net income (in millions)
- - Automotive $ 820 $ 1,341 $ 4,752 $ 4,714
- - Financial Services (excl. The Associates) 223 231 1,187 1,374
--------- ------- -------- --------
Subtotal 1,043 1,572 5,939 6,088
- - The Associates - 224 177 832
- - Gain on spin-off of The Associates - - 15,955 -
------- ------- -------- --------
Total $ 1,043 $ 1,796 $ 22,071 $ 6,920
======= ======= ======== ========
Capital expenditures (in millions)
- - Automotive $ 2,445 $ 2,389 $ 8,113 $ 8,142
- - Financial Services 106 162 504 575
------- ------- -------- --------
Total $ 2,551 $ 2,551 $ 8,617 $ 8,717
======= ======= ======== ========
Automotive capital expenditures as a
percentage of sales 7.6% 7.5% 6.8% 6.6%
Stockholders' equity at December 31
- - Total (in millions) $23,409 $30,734 $ 23,409 $ 30,734
- - After-tax return on Common and
Class B stockholders' equity 17.8% 24.1% 25.4% 24.4%
Automotive net cash at December 31
(in millions)
- - Cash and marketable securities $23,805 $20,835 $ 23,805 $ 20,835
- - Debt 9,834 8,176 9,834 8,176
------- ------- -------- --------
Automotive net cash $13,971 $12,659 $ 13,971 $ 12,659
======= ======= ======== ========
After-tax return on sales
- - North American Automotive 4.5% 5.9% 5.3% 5.1%
- - Total Automotive 2.6% 4.2% 4.0% 3.9%
Shares of Common and Class B Stock
(in millions)
- - Average number outstanding 1,210 1,201 1,211 1,195
- - Number outstanding at December 31 1,209 1,202 1,209 1,202
Common Stock price (per share)
(adjusted to reflect The Associates
spin-off)
- - High $59-7/8 $33-9/16 $61-7/16 $33 9/16
- - Low 38-13/16 27 23/32 28-15/32 20 3/64
AMOUNTS PER SHARE OF COMMON AND
CLASS B STOCK AFTER PREFERRED
STOCK DIVIDENDS
Income assuming dilution
- - Automotive $ 0.66 $ 1.08 $ 3.76 $ 3.82
- - Financial Services (excl. The Associates) 0.18 0.19 0.96 1.12
------- ------- ------- --------
Subtotal 0.84 1.27 4.72 4.94
- - The Associates - 0.18 0.14 0.68
- - Gain on spin-off of The Associates - - 12.90 -
------- ------- ------- --------
Total $ 0.84 $ 1.45 $ 17.76 $ 5.62
======= ======= ======= ========
Cash dividends $ 0.46 $ 0.42 $ 1.72 $ 1.645
</TABLE>
FS-1
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
VEHICLE UNIT SALES
------------------
For the Periods Ended December 31, 1998 and 1997
(in thousands)
Fourth Quarter Full Year
------------------------ --------------------------
1998 1997 1998 1997
-------- -------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
North America
United States
Cars 428 409 1,563 1,614
Trucks 654 578 2,425 2,402
----- ----- ----- -----
Total United States 1,082 987 3,988 4,016
Canada 87 91 279 319
Mexico 28 40 103 97
----- ----- ----- -----
Total North America 1,197 1,118 4,370 4,432
Europe
Britain 102 124 498 466
Germany 143 137 444 460
Italy 56 70 205 248
France 54 41 171 153
Spain 46 43 155 155
Other 95 91 377 318
----- ----- ----- -----
Total Europe 496 506 1,850 1,800
Other international
Brazil 34 49 178 214
Australia 35 31 133 132
Argentina 16 35 97 147
Taiwan 12 17 77 79
Japan 5 10 25 40
Other 19 25 93 103
----- ----- ----- -----
Total other international 121 167 603 715
----- ----- ----- -----
Total worldwide vehicle unit sales 1,814 1,791 6,823 6,947
===== ===== ===== =====
</TABLE>
Vehicle unit sales are reported worldwide on a "where sold" basis and include
sales of all Ford-badged units, as well as units manufactured by Ford and sold
to other manufacturers.
Prior periods restated to correct reported unit sales.
FS-2
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
For the Years Ended December 31, 1998, 1997 and 1996
(in millions, except amounts per share)
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
AUTOMOTIVE
Sales $119,083 $122,935 $118,023
Costs and expenses
Costs of sales 104,782 108,907 108,882
Selling, administrative and other expenses 7,616 7,082 6,625
-------- -------- --------
Total costs and expenses 112,398 115,989 115,507
Operating income 6,685 6,946 2,516
Interest income 1,331 1,116 841
Interest expense 829 788 695
-------- -------- --------
Net interest income 502 328 146
Equity in net loss of affiliated companies (38) (88) (6)
Net expense from transactions with
Financial Services (191) (104) (85)
--------- -------- --------
Income before income taxes - Automotive 6,958 7,082 2,571
FINANCIAL SERVICES
Revenues 25,333 30,692 28,968
Costs and expenses
Interest expense 8,036 9,712 9,704
Depreciation 8,589 7,645 6,875
Operating and other expenses 4,618 6,621 6,217
Provision for credit and insurance losses 1,798 3,230 2,564
Asset write-downs and dispositions - - 121
-------- -------- --------
Total costs and expenses 23,041 27,208 25,481
Net revenue from transactions with Automotive 191 104 85
Gain on spin-off of The Associates 15,955 - -
Gain on sale of Common Stock of a subsidiary - 269 650
-------- -------- --------
Income before income taxes - Financial Services 18,438 3,857 4,222
-------- -------- --------
TOTAL COMPANY
Income before income taxes 25,396 10,939 6,793
Provision for income taxes 3,176 3,741 2,166
-------- -------- --------
Income before minority interests 22,220 7,198 4,627
Minority interests in net income of subsidiaries 149 278 181
-------- -------- --------
Net income $ 22,071 $ 6,920 $ 4,446
======== ======== ========
Income attributable to Common and Class B Stock
after preferred stock dividends $ 21,964 $ 6,866 $ 4,381
Average number of shares of Common and Class B
Stock outstanding 1,211 1,195 1,179
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
Basic income $ 18.17 $ 5.75 $ 3.73
Diluted income $ 17.76 $ 5.62 $ 3.64
Cash dividends $ 1.72 $ 1.645 $ 1.47
</TABLE>
FS-3
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
--------------------------
(in millions)
December 31, December 31,
1998 1997
-------------- --------------
<S> <C> <C>
ASSETS
Automotive
Cash and cash equivalents $ 3,685 $ 6,316
Marketable securities 20,120 14,519
-------- --------
Total cash and marketable securities 23,805 20,835
Receivables 2,604 3,097
Inventories 5,656 5,468
Deferred income taxes 3,239 3,249
Other current assets 3,405 3,782
Net current receivable from Financial Services 0 416
-------- --------
Total current assets 38,709 36,847
Equity in net assets of affiliated companies 2,401 1,951
Net property 37,320 34,594
Deferred income taxes 3,175 3,712
Other assets 7,139 7,975
-------- --------
Total Automotive assets 88,744 85,079
Financial Services
Cash and cash equivalents 1,151 1,618
Investments in securities 968 2,207
Net receivables and lease investments 132,567 175,417
Other assets 13,227 14,776
Net receivable from Automotive 888 0
-------- --------
Total Financial Services assets 148,801 194,018
-------- --------
Total assets $237,545 $279,097
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive
Trade payables $ 13,368 $ 11,997
Other payables 2,755 2,557
Accrued liabilities 17,432 16,250
Income taxes payable 1,404 1,358
Debt payable within one year 1,121 1,129
Net current payable to Financial Services 70 0
-------- --------
Total current liabilities 36,150 33,291
Long-term debt 8,713 7,047
Other liabilities 29,626 28,899
Deferred income taxes 751 1,210
Net payable to Financial Services 818 0
-------- --------
Total Automotive liabilities 76,058 70,447
Financial Services
Payables 3,555 4,539
Debt 122,324 160,071
Deferred income taxes 5,488 4,347
Other liabilities and deferred income 6,034 7,865
Net payable to Automotive 0 416
-------- --------
Total Financial Services liabilities 137,401 177,238
Company-obligated mandatorily redeemable preferred securities of a subsidiary
trust holding solely junior subordinated debentures of the Company 677 678
Stockholders' equity
Capital stock
Preferred Stock, par value $1.00 per share (aggregate liquidation preference
of $177 million and $637 million) * *
Common Stock, par value $1.00 per share (1,151 and 1,132 million shares issued) 1,151 1,132
Class B Stock, par value $1.00 per share (71 million shares issued) 71 71
Capital in excess of par value of stock 5,283 5,564
Accumulated other comprehensive income (1,670) (1,228)
ESOP loan and treasury stock (1,085) (39)
Earnings retained for use in business 19,659 25,234
-------- --------
Total stockholders' equity 23,409 30,734
-------- --------
Total liabilities and stockholders' equity $237,545 $279,097
======== ========
- - - - -
*Less than $500,000
</TABLE>
FS-4
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
For the Years Ended December 31, 1998, 1997 and 1996
(in millions)
1998 1997 1996
---------------------------- ---------------------------- ----------------------------
Financial Financial Financial
Automotive Services Automotive Services Automotive Services
-------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents at January 1 $ 6,316 $ 1,618 $ 3,578 $ 3,689 $ 5,750 $ 2,690
Cash flows from operating activities 9,622 13,478 13,984 13,650 6,576 12,681
Cash flows from investing activities
Capital expenditures (8,113) (504) (8,142) (8,209) (442)
Purchase of leased assets (110) - (332) - (195) -
Acquisitions of other companies 0 (344) 0 (40) 0 (166)
Acquisitions of receivables and lease
investments - (78,863) - (117,895) - (109,087)
Collections of receivables and lease
investments - 49,303 - 86,842 - 82,398
Net acquisitions of daily rental vehicles - (1,790) - (958) - (1,759)
Net proceeds from USL Capital asset sales - - - - - 1,157
Purchases of securities (758) (2,102) (43) (3,067) (6) (8,020)
Sales and maturities of securities 590 2,271 13 3,520 7 9,863
Proceeds from sales of receivables and
lease investments - 8,413 5,197 - 2,867
Net investing activity with
Financial Services 642 - 258 - 416 -
Other (468) (463) (285) (569) (586) (45)
------- -------- ------- --------- ------- ---------
Net cash used in investing activities (8,217) (24,079) (8,531) (27,545) (8,573) (23,234)
Cash flows from financing activities
Cash dividends (5,348) - (2,020) - (1,800) -
Issuance of Common Stock 157 - 310 - 192 -
Issuance of Common Stock of a subsidiary - - - 453 - 1,897
Purchase of Ford Treasury Stock (669) - (15) - - -
Preferred stock - Series B repurchase, -
Series A redemption (420) - - - - -
Changes in short-term debt 497 7,475 (430) 6,210 151 3,474
Proceeds from issuance of other debt 2,403 21,776 1,100 22,923 1,688 22,342
Principal payments on other debt (1,434) (16,797) (668) (18,215) (1,031) (14,428)
Net financing activity with Automotive - (642) - (258) - (416)
Spin-off of The Associates cash - (508) - - - -
Other (472) (12) 16 (206) 37 (528)
------- -------- ------- --------- ------- ---------
Net cash (used in)/provided by
financing activities (5,286) 11,292 (1,707) 10,907 (763) 12,341
Effect of exchange rate changes on cash (54) 146 (119) 28 (85) (116)
Net transactions with Automotive/
Financial Services 1,304 (1,304) (889) 889 673 (673)
------- ---------- ------- --------- ------- ---------
Net (decrease)/increase in cash and
cash equivalents (2,631) (467) 2,738 (2,071) (2,172) 999
------- -------- ------- --------- ------- ---------
Cash and cash equivalents at December 31 $ 3,685 $ 1,151 $ 6,316 $ 1,618 $ 3,578 $ 3,689
======= ======== ======= ========= ======= =========
</TABLE>
PAGE>
EXHIBIT 99.3
On January 28, 1999 Ford Motor Company issued the following statement regarding
its plans to acquire the passenger car business of AB Volvo:
[FORD LOGO] | NEWS RELEASE
|
FOR IMMEDIATE RELEASE
Contact: John W. Spelich Mats Edenborg
Ford Motor Company AB Volvo
313-322-1524 +46-31-591126 or +46-708-591126
FORD REACHES AGREEMENT TO BUY VOLVO'S
WORLDWIDE PASSENGER VEHICLE BUSINESS
DEARBORN, Mich., January 28, 1999 -- Ford Motor Company [NYSE: F] has reached an
agreement with AB Volvo to buy its worldwide passenger vehicle business, Volvo
Cars, for a price of $6.45 billion.
"Our 21st century vision is to become the world's leading consumer company that
provides automotive products and services," said Ford Chairman William Clay
Ford, Jr. "The addition of Volvo is a meaningful step toward achieving this
vision."
"Volvo is a premium automotive brand with unique appeal that represents a good
opportunity to profitably extend our lineup and grow the Ford business
worldwide," said Jacques Nasser, Ford president and chief executive officer.
"Volvo is a perfect complement to the Ford family of brands worldwide. Volvo has
a world-class reputation for safety, quality, durability and environmental
responsibility - all of which are attributes that are increasingly important to
our customers, and fit with our 21st century vision for Ford Motor Company."
<PAGE>
-2-
"The proposed sale of Volvo Cars to Ford will have very important benefits to
the parties concerned," said Leif Johansson, president of AB Volvo and chief
executive officer of the Volvo Group. "Volvo Cars' future prospects will, by
being an important part of one of the world's largest and most profitable
automotive groups, improve considerably."
Nasser said that Ford is pleased to be able to expand its technology and
research capabilities through this transaction, as well as expand its operations
in Sweden. "Ford has been operating in Sweden since 1924, and today we sell
passenger and commercial vehicles through a network of 87 dealers there. We have
been serving our Swedish customers for 75 years," Nasser said. "We are not just
in Sweden, we are part of Sweden. And, through our new relationship with Volvo,
we plan to be part of the fabric of the country for many years to come."
Ford will take ownership of all of Volvo Cars' facilities worldwide, including
three major assembly plants and two powertrain plants in Europe and Volvo's
passenger vehicle product development center in Gothenburg, Sweden. Ford will
have the right to use the Volvo brand for passenger vehicles including cars,
minivans, sport utility vehicles and light trucks on a perpetual basis. Volvo
has the right to use the Volvo brand for commercial vehicles and its
non-automotive-related products.
<PAGE>
-3-
"By adding Volvo as our seventh global automotive brand, we expect to generate
increased revenue and profitability while broadening the choices that we at Ford
provide our customers, and strengthening our image," Nasser said. "Volvo Cars
has a strong demographic and regional appeal that fits well with other Ford
products. In addition, Volvo's fine global distribution network will give us
added flexibility to grow our other brands."
This transaction is subject to regulatory and Volvo shareholder approval.
"The agreed price represents full and fair value to the Volvo shareholders and
excellent long-term value to the Ford shareholders," said Ford. "We expect
increased annual earnings through a combination of expanded product lineup,
volume growth, global economies of scale in engineering resources and
purchasing, and platform and manufacturing synergies."
Ford Motor Company is the world's second largest automaker. Its automotive
brands include Aston Martin, Ford, Jaguar, Lincoln, Mazda and Mercury. Its
automotive-related services include Ford Credit, Quality Care, Hertz and Visteon
Automotive Systems.
# # #
<PAGE>
SLIDE 1 OF 13
[FORD LOGO]
[VOLVO LOGO]
FORD REACHES AGREEMENT TO BUY
VOLVO'S CAR BUSINESS
<PAGE>
SLIDE 2 OF 13
OVERVIEW OF FORD MOTOR COMPANY
- - WORLD'S MOST PROFITABLE AUTOMAKER WITH STRONG FINANCIAL RESOURCES
- - WORLD'S LARGEST TRUCK MANUFACTURER AND SECOND LARGEST CAR & TRUCK
MANUFACTURER
- - MANUFACTURING, VEHICLE ASSEMBLY, OR SALES OPERATIONS IN MORE THAN 30
COUNTRIES
- - WORLDWIDE VEHICLE SALES OF 6.8 MILLION UNITS THROUGH A NETWORK OF 15,800
DEALERS IN OVER 200 COUNTRIES
- - DIVERSE, GLOBAL TEAM OF 364,000 EMPLOYEES
- - ANNUAL SALES OF $144 BILLION -- RANKS FORD 2ND ON FORTUNE 500 LIST OF
LARGEST COMPANIES
<PAGE>
SLIDE 3 OF 13
FORD MOTOR COMPANY INCLUDES SIX
GREAT AUTOMOTIVE BRANDS . . .
[MERCURY LOGO] [FORD LOGO] [LINCOLN LOGO]
[JAGUAR LOGO] [ASTON MARTIN LOGO]
[MAZDA LOGO]
<PAGE>
SLIDE 4 OF 13
AND FOUR GREAT
AUTOMOTIVE-RELATED BRANDS
[VISTEON LOGO] [FORD CREDIT LOGO]
[QUALITYCARE LOGO] [HERTZ LOGO]
<PAGE>
SLIDE 5 OF 13
[FORD LOGO] 21ST CENTURY VISION
"WORLD'S LEADING CONSUMER COMPANY FOR
AUTOMOTIVE PRODUCTS & SERVICES"
SOURCES OF COMPETITIVE ADVANTAGE:
- - STRONG GLOBAL BRANDS
- - SUPERIOR CUSTOMER SATISFACTION & LOYALTY
- - BEST TOTAL VALUE TO CONSUMERS
- - NIMBLE ORGANIZATION WITH LEADERS AT ALL LEVELS
- - RESPONSIBLE IN CORPORATE CITIZENSHIP
<PAGE>
SLIDE 6 OF 13
WHY IS VOLVO IMPORTANT TO FORD?
- - PREMIUM BRAND WITH UNIQUE APPEAL
- - INCREMENTAL GROWTH OPPORTUNITY
- - ECONOMIES OF SCALE
- - GIVES FORD LEADING PORTFOLIO OF LUXURY BRANDS
VOLVO IS A UNIQUE, PREMIUM BRAND THAT PROVIDES FORD AN
OPPORTUNITY FOR PROFITABLE GROWTH & ECONOMIES OF SCALE,
& STRENGTHENS FORD'S PORTFOLIO
<PAGE>
SLIDE 7 OF 13
FORD PLANS FOR VOLVO
- - NURTURE VOLVO'S STRONG BRAND
- - VALUE VOLVO'S SWEDISH HERITAGE, MANAGEMENT & EMPLOYEES
- - CONTINUE STRONG R & D FUNCTION IN SWEDEN
- - EXTEND PRODUCT RANGE & GROW VOLUME
- - LEVERAGE FORD ECONOMIES OF SCALE & DISTRIBUTION SYSTEM
<PAGE>
SLIDE 8 OF 13
FORD & VOLVO COMBINED AUTOMOTIVE DATA
<TABLE>
<CAPTION>
FORD
VOLVO CAR FORD WITH VOLVO
--------- ---- ----------
FINANCIAL RESULTS (1997) (1998)
- -----------------
<S> <C> <C> <C>
REVENUE (BILS.) $13 $144 $ 157
NET INCOME (BILS.) $0.4 $5.9 $6.3
RETURN ON SALES 3.2% 4.0% 3.9%
OPERATING FACTORS
- -----------------
EMPLOYEES (000) 28 364 392
UNIT VOLUME (000) 386 6,823 7,209
WW MARKET SHARE 0.7% 13.0% 13.7%
</TABLE>
<PAGE>
SLIDE 9 OF 13
VOLVO SALES COMPLEMENT FORD
VOLVO
[PIE CHART]
<TABLE>
<CAPTION>
NORTH
AMERICA ROW EUROPE
<S> <C> <C> <C>
400,000 UNITS 25% 15% 60%
</TABLE>
FORD
[PIE CHART]
<TABLE>
<CAPTION>
NORTH
AMERICA ROW EUROPE
<S> <C> <C> <C>
6,800,000 UNITS 64% 9% 27%
</TABLE>
<PAGE>
SLIDE 10 OF 13
VOLVO BRAND FITS WELL UNDER FORD'S UMBRELLA
& GIVES FORD A LEADING LUXURY PORTFOLIO
FORD MOTOR COMPANY
INGENIOUS . . . CARING
SERVICES VEHICLES
[MERCURY LOGO]
INNOVATIVE
INDIVIDUALISTIC
EXPRESSIVE
[MAZDA LOGO]
STYLISH
SPIRITED
INSIGHTFUL
[FORD LOGO]
GENUINE
PROGRESSIVE
SMART
[LINCOLN LOGO]
AMERICAN
LUXURY
[VOLVO LOGO]
THOUGHTFUL
SUBSTANTIAL
UNDERSTATED
[JAGUAR LOGO]
ELEGANT
SENSUOUS
ORIGINAL W/
REFINED
POWER
[ASTON MARTIN LOGO]
THE MOST
EXCLUSIVE
CLUB
[FORD CREDIT LOGO]
SERVICE
VALUE
TRUST
[RED CARPET LEASE LOGO]
LOYALTY;
FLEXIBILITY
[QUALITYCARE LOGO]
RELIABLE;
CONVENIENT
SERVICE
[HERTZ LOGO]
SUPERIOR GLOBAL SERVICE
SPEED & CONVENIENCE
COMPETITIVE PRICES
<PAGE>
SLIDE 11 OF 13
VOLVO BUYERS ARE CLEARLY DIFFERENT
FROM JAGUAR & LINCOLN
FEMALE BUYERS
[BAR GRAPH]
<TABLE>
<CAPTION>
VOLVO JAGUAR LINCOLN
<S> <C> <C>
51% 31% 26%
</TABLE>
AGE GROUP CONCENTRATION
[BAR GRAPH]
<TABLE>
<CAPTION>
VOLVO JAGUAR LINCOLN
<S> <C> <C> <C>
21-33 YRS. 14% 3% 1%
34-53 YRS. 56% 38% 16%
54 & UP YRS. 30% 59% 83%
</TABLE>
SOURCE: 1998 NEW VEHICLE CUSTOMER SURVEY - U.S. CAR DATA
<PAGE>
SLIDE 12 OF 13
GROWING OUR LUXURY PORTFOLIO
[BAR GRAPH]
<TABLE>
<S> <C>
1998 250,000
2000 750,000
POTENTIAL 1 MILLION
</TABLE>
<PAGE>
SLIDE 13 OF 13
SUMMARY
- - FORD IS A STRONG & WELL RESPECTED GLOBAL COMPANY
- - VOLVO FITS WELL IN THE FORD FAMILY & GIVES FORD A LEADING LUXURY PORTFOLIO
- - FORD PLANS TO GROW VOLVO WHILE ENHANCING ITS PREMIUM BRAND POSITION
- - FORD VALUES VOLVO'S RICH HERITAGE, MANAGEMENT & PEOPLE
VOLVO ACQUISITION PROVIDES EXCELLENT FIT WITH FORD
& OPPORTUNITY FOR GROWTH, WHILE
MAINTAINING VOLVO'S PREMIUM BRAND & RICH HERITAGE
