SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 1999, or

For the transition period from                                  to                                

Commission file number 1-6368

Ford Motor Credit Company

Delaware

One American Road, Dearborn, Michigan

48121

Registrant’s telephone number, including area code (313) 322-3000

Securities registered pursuant to Section 12(b) of the Act:

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   X          No        

     As of February 28, 2000, the registrant had outstanding 250,000 shares of Common Stock. No voting stock of the registrant is held by non-affiliates of the registrant.

     The registrant meets the condition set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this Form with the reduced disclosure format.

PART I

Item 1. Business

      The registrant, Ford Motor Credit Company, was incorporated in Delaware in 1959 and is an indirect wholly owned subsidiary of Ford Motor Company (“Ford”). As used herein “Ford Credit” refers to Ford Motor Credit Company and its subsidiaries unless the context otherwise requires.

      Ford Credit and its subsidiaries provide wholesale financing and capital loans to Ford Motor Company retail dealerships and associated non-Ford dealerships throughout the world, most of which are privately owned and financed, and purchase retail installment sale contracts and retail leases from them. Ford Credit also makes loans to vehicle leasing companies, the majority of which are affiliated with such dealerships. In addition, subsidiaries of Ford Credit provide these financing services in the United States, Europe, Canada, Australia, Indonesia and India to non-Ford dealerships. A substantial majority of all new vehicles financed by Ford Credit are manufactured by Ford and its affiliates. Ford Credit also provides retail financing for used vehicles built by Ford and other manufacturers. In addition to vehicle financing, Ford Credit makes loans to affiliates of Ford and finances certain receivables of Ford and its subsidiaries.

      In 1999 and 1998, United States operations, conducted in all 50 states and the District of Columbia, accounted for 74% and 75%, respectively, of Ford Credit’s total revenue. European operations, conducted by FCE Bank plc (formerly Ford Credit Europe plc) (“Ford Credit Europe”), accounted for 10% and 12%, respectively, of Ford Credit’s total revenue in these periods. The balance was in Canada, Brazil, Mexico, Australia, Argentina, Taiwan, Puerto Rico, New Zealand, Japan, Indonesia, Thailand, the Philippines and India. In addition, Ford Credit manages the vehicle financing operations of Ford in other foreign countries which are conducted through other subsidiaries of Ford.

      Outside the United States, Ford Credit Europe is Ford Credit’s largest operation. Ford Credit owns approximately 81% of the economic interest in Ford Credit Europe. The remainder is held by Ford Werke AG. Ford Credit Europe’s primary business is to support the sale of Ford vehicles in Europe through the Ford dealer network. A variety of retail, leasing and wholesale finance plans is provided in most countries in which it operates. Retail financing is provided by means of a number of title retention plans, including conditional sale and hire purchase agreements, and personal loans. Operating and finance leases are provided to individual, corporate and other institutional customers, covering individual vehicles and large and small fleets. Wholesale financing is provided to Ford dealers for the stocking of new and used vehicles. In addition, Ford Credit Europe provides loans to dealers for working capital and property acquisitions and for a variety of finance plans.

      Ford Credit also conducts insurance operations through The American Road Insurance Company (“American Road”) and its subsidiaries in the United States and Canada. American Road’s business primarily consists of extended service plan contracts for new and used vehicles manufactured by affiliated and nonaffiliated companies, primarily originating from Ford dealers, physical damage insurance covering vehicles and equipment financed at wholesale by Ford Credit, and the reinsurance of credit life and credit disability insurance for retail purchasers of vehicles and equipment.

      The business of Ford Credit is substantially dependent upon Ford Motor Company. See “Vehicle Financing” and “Borrowings and Other Sources of Funds” under the caption “Business of Ford Credit”. Also see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. 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. For additional information concerning Ford’s results of operations, see Ford Motor Company’s Annual Report on Form 10-K for the year ended December 31, 1999 filed with the Securities and Exchange Commission.

      The mailing address of Ford Credit’s executive offices is One American Road, Dearborn, Michigan 48121. The telephone number of such offices is (313) 322-3000.

SEGMENT INFORMATION

      Segment information called for by Item 1 is set forth in Note 17 of Notes to Financial Statements and is incorporated herein by reference.

BUSINESS OF FORD CREDIT

      Ford Credit accounts for its financing business in three categories — retail (which consists of vehicle installment sale financing and vehicle lease financing), wholesale and other. Total net finance receivables and net investment in operating leases outstanding in these three categories and geographic regions were as follows at the end of the years indicated:

      The shift in emphasis of retail marketing support from lease financing to special low-rate installment sale financing programs available exclusively through Ford Credit is reflected in Ford Credit’s 1999 year-end total net finance receivables and net investment in operating leases. The result is a significant increase in the financing of retail installment sale receivables and a reduction in the financing of operating lease receivables.

Vehicle Financing

      Retail.  Retail financing consists primarily of installment sale financing and retail lease financing of new and used vehicles and loans to vehicle leasing companies, most of which are affiliated with franchised Ford Motor Company dealerships. The number of installment sale and lease vehicles financed by Ford Credit in the categories and geographic regions shown below was as follows during the years indicated:

      The levels of Ford Credit’s retail financing volumes and outstanding finance receivables and net investment in operating leases are dependent on several factors, including new and used vehicle sales and leases, Ford Credit’s share of those vehicle sales and leases and the average cost of vehicles financed. See “Competition in Vehicle Financing”. In addition, receivables levels may vary depending on sales of receivables.

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      The shift in emphasis of marketing support from lease financing to special low-rate installment sale financing programs available exclusively through Ford Credit is reflected in Ford Credit’s 1999 year-end total contract volumes. The result is a significant increase in the financing of retail installment sale contracts and a reduction in the financing of operating lease contracts.

      Installment sale and retail lease financing consist principally of purchasing and servicing installment sale contracts and leases covering the sale or lease of new and used vehicles by vehicle dealers to retail customers. The amount paid by Ford Credit to the dealer for an installment sale contract or lease generally represents a negotiated amount agreed to between the dealer and the customer, less any trade-in or downpayment. In addition, a portion of the finance charge is paid or credited to the dealer. Ford Credit requires a retail purchaser or lessee to carry fire, theft and collision insurance on the vehicle. In addition, retail lessees are required to carry liability insurance.

      Installment sales contract terms range up to 72 months. In the U.S., the average repayment obligation for new vehicles covered by installment sale contracts purchased by Ford Credit in 1999 was $19,547. The corresponding average monthly payment was $454 and the average original term was 53 months.

      For retail leases, the monthly lease payment equals the amount paid to the dealer for the vehicle and lease (the “acquisition cost”) less the residual value of the vehicle established by Ford Credit, amortized over the lease term, plus the lease charge. The acquisition cost to Ford Credit of the vehicle, less the residual value, is depreciated on a straight line basis over the life of the lease. Residual value, the estimated value of the vehicle at lease end, is determined by Ford Credit after analyzing published residual values and Ford Credit’s own historical experience in the used vehicle market. In addition, joint marketing programs with Ford’s sales divisions can affect established residual values. At lease termination, Ford Credit either sells the vehicle to the dealer for the established residual value or sells the vehicle at auction for the market price.

      Retail lease terms range from 12 to 48 months. In the U.S., the average monthly payment of retail lease contracts purchased by Ford Credit in 1999 was $380 and the average original term was 31 months.

      Ford Credit extends financing to leasing companies and daily rental companies. Financing charges in connection with such lease financing either are fixed or floating based on short-term interest rates in effect at the time financing is extended. These rates may be supplemented by payments from Ford whenever the rate payable is less than the specified minimum rate agreed between Ford Credit and Ford.

      Wholesale.  Wholesale financing consists of loans, under approved lines of credit, to dealers to assist them in carrying inventories of new and used vehicles. Ford Credit generally finances 100% of the wholesale price. Vehicles are insured against fire, theft and other risks under policies issued to Ford Credit. Ford Credit’s United States car and truck wholesale receivables that liquidated were outstanding an average of about 58 days and 65 days in 1999 and 1998, respectively.

      The levels of Ford Credit’s wholesale financing volume and outstanding wholesale receivables are dependent on several factors, including sales by Ford to dealers, the level of dealer inventories, Ford Credit’s share of Ford’s sales to dealers, vehicle prices and sales of wholesale receivables.

      Competition In Vehicle Financing.  The vehicle financing business is highly competitive. Ford Credit’s principal competitors are banks, credit unions and leasing companies.

      Ford Credit financed the following percentages of new Ford cars and trucks sold or leased at retail and sold at wholesale in the United States and Europe during each of the years indicated:

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      The increase in the percentage of Ford Credit retail financing in the United States and Europe in 1999 compared with 1998 primarily reflects an increased level of Ford-sponsored special installment sale financing programs available exclusively through Ford Credit.

Other Financing Activities

      Ford Credit makes capital loans to vehicle dealers for facilities expansion and working capital and to enable them to purchase dealership real estate. Such loans totaled $3,395.1 million at December 31, 1999. From time to time, Ford Credit purchases accounts receivable of certain divisions and affiliates of Ford. At December 31, 1999, such receivables totaled $3,658.4 million.

Credit Loss Experience

      The following table sets forth information concerning Ford Credit’s credit loss experience with respect to the various categories and geographic regions of financing during the years indicated:

      The decrease in 1999 credit losses compared with 1998 reflects an improvement in portfolio credit quality. Improved portfolio credit quality reflects primarily the effects of Ford Credit’s special low-rate financing programs which attract higher creditworthy purchasers.

      Allowances for estimated credit losses are established as required based on historical experience. Other factors that affect collectibility also are evaluated and additional allowances may be provided. The provision for credit losses generally varies with changes in the amount of loss exposure and the absolute level of financing. Ford Credit’s retail loss experience is dependent upon the number of repossessions, the unpaid balance outstanding at the time of repossession, and the net resale value of repossessed vehicles. Wholesale losses generally reflect the financial condition of dealers. For additional information regarding credit losses, see Notes 1 and 6 of Notes to Financial Statements and see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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Security

      Ford Credit generally either holds security interests in or is the title owner of the vehicles which it finances or leases and generally is able to repossess a vehicle in the event of a default. The right to repossess under a security interest securing wholesale obligations generally is ineffectual, as a matter of law, against a retail buyer of a vehicle from a dealer. Under the wholesale installment sale plan, dealers are permitted to delay payment of up to 10% of a vehicle’s financed balance for up to 60 days after the dealer sells the vehicle. A portion of such delayed payments may, under certain circumstances, be unsecured. Obligations arising from lease financing extended to leasing companies are collateralized to the extent practicable by assignments of rentals under the related leases and, in almost all instances, by perfected liens on the vehicles.

Borrowings and Other Sources Of Funds

      Ford Credit relies heavily on its ability to raise substantial amounts of funds. These funds are obtained primarily by the issuance of term debt, the sale of commercial paper and, in the case of Ford Credit Europe, the issuance of certificates of deposit. Funds also are provided by retained earnings and sales of receivables. The level of funds can be affected by certain transactions with Ford, such as capital contributions, interest supplements and other support costs from Ford for vehicles financed and leased by Ford Credit under Ford-sponsored special financing and leasing programs, and dividend payments, and the timing of payments for the financing of dealers’ wholesale inventories and for income taxes. Ford Credit’s ability to obtain funds is affected by its debt ratings, which are closely related to the outlook for, and financial condition of, Ford, and the nature and availability of support facilities. The long-term senior debt of Ford, Ford Credit and Ford Credit Europe are rated “A1” and “A+” and the commercial paper of Ford Credit and Ford Credit Europe are rated “Prime-1” and “A-1” by Moody’s Investors Service and Standard & Poor’s Ratings Group, respectively. For additional information regarding Ford Credit’s association with Ford, see “Certain Transactions with Ford and Affiliates.”

      Ford Credit’s outstanding debt at the end of each of the years indicated was as follows:

(b) Short-term borrowing agreements with bank trust departments.

(c)	Includes $718 million, $989 million, $831 million, $2,478 million and $176 million with affiliated companies at December 31, 1999, December 31, 1998, December 31, 1997, December 31, 1996 and December 31, 1995, respectively.
(d)	Includes $3,457 million, $2,878 million, $3,547 million, $4,237 million and $1,174 million with affiliated companies at December  31, 1999, December 31, 1998, December 31, 1997, December 31, 1996 and December 31, 1995, respectively.
(e)	Excludes support of Ford Credit’s asset-backed commercial paper program.

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      Outstanding commercial paper totaled $43.1 billion (including $1 billion owed to Ford) at December 31, 1999, down $3.1 billion from a year earlier. In 1999, long-term debt placements were $34.1 billion compared with maturities and early redemptions of $12.3 billion. Long-term debt placements in 1998 were $18.2 billion. In 1999, Ford Credit also received $9.9 billion from sales of receivables compared with $8.0 billion in 1998.

      Support facilities represent additional sources of funds, if required. At December 31, 1999, Ford Credit had approximately $18.3 billion of contractually committed facilities. In addition, approximately $7.7 billion of Ford lines of credit may be used by Ford Credit at Ford’s option. These credit lines have various maturity dates through June 30, 2004 and may be used, at Ford Credit’s option, by any of its direct or indirect majority-owned subsidiaries. Any such borrowings will be guaranteed by Ford Credit. Banks also provide $1.4 billion of contractually committed liquidity facilities to support Ford Credit’s asset backed commercial paper program.

      Additionally, at December 31, 1999, there was approximately $4.6 billion of contractually committed facilities available for Ford Credit Europe’s use. In addition, $615 million of Ford credit lines may be used by Ford Credit Europe at Ford’s option. The lines have various maturity dates through June 30, 2004 and may be used, at Ford Credit Europe’s option, by any of its direct or indirect majority-owned subsidiaries. Any such borrowing will be guaranteed by Ford Credit Europe.

FORD CREDIT EMPLOYEE RELATIONS

      At December 31, 1999, Ford Credit and its subsidiaries had 17,470 employees. All such employees are salaried, and none is represented by a union. Ford Credit considers its employee relations to be satisfactory.

FORD CREDIT GOVERNMENTAL REGULATIONS

      Certain aspects of Ford Credit’s U.S. financing operations are regulated in the various jurisdictions in which it operates. Many jurisdictions require licenses to conduct financing of retail sale and lease transactions. Interest rates, particularly those with respect to consumer financing, generally are limited by law. In periods of high interest rates, these rate limitations can have a substantial adverse effect on operations in certain jurisdictions if Ford Credit is unable to pass on its increased costs of funds to customers.

      During the past several years, legislative, judicial, and administrative authorities have evidenced a growing concern for the protection of consumers, especially in connection with consumer financing transactions. As a result, significant changes have been made in the methods by which Ford Credit and others in the financing industry are required to conduct business. Many additional proposals have been made which if adopted would require further changes. None of the changes to date has had a substantial adverse effect on the operations of Ford Credit.

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CERTAIN TRANSACTIONS WITH FORD AND AFFILIATES

      For information concerning transactions between Ford Credit and Ford or affiliates, see Note 13 of Notes to Financial Statements, “Business of Ford Credit — Other Financing Activities”, “Business of Ford Credit — Borrowings and Other Sources of Funds” and Item 6 — “Selected Financial Data — Selected Income Statement Data.” The profit maintenance agreement referred to in the first paragraph of Note 13 of Notes to Financial Statements, under which Ford has agreed to maintain the income of Ford Credit at certain minimum levels, expires at the end of 2001. In addition, Ford Credit has agreed to maintain a minimum control interest in Ford Credit Europe and has agreed to maintain Ford Credit Europe’s net worth at a minimum level.

BUSINESS OF FORD

      Ford Motor Company was incorporated in Delaware in 1919. Ford acquired the business of a Michigan company, also known as Ford Motor Company, incorporated in 1903 to produce and sell automobiles designed and engineered by Henry Ford. Ford is the world’s largest producer of trucks and the second-largest producer of cars and trucks combined. Ford and its subsidiaries also engage in other businesses, including manufacturing automotive components and systems and financing and renting vehicles and equipment.

Overview

      Ford’s business is divided into two business sectors, and it manages these sectors as four primary operating segments. These business sectors and operating segments are described below.

Automotive Sector

      Ford sells cars and trucks and automotive components and systems throughout the world. In 1999 Ford sold 7.2 million vehicles throughout the world. Ford’s automotive vehicle brands include Ford, Mercury, Lincoln, Volvo, Jaguar, Aston Martin and TH!NK. In addition, Ford owns 33.4% of Mazda Motor Corporation (“Mazda”). Ford completed the purchase of AB Volvo’s worldwide passenger car business (“Volvo Car”) on March 31, 1999. As a result, Ford’s 1999 results and financial condition include Volvo Car’s results and financial condition since the date of the acquisition.

      The worldwide automotive industry, Ford included, is affected significantly by a number of factors over which it has little control, including general economic conditions. In the United States, the automotive industry is a highly-competitive, cyclical business that has a wide variety of product offerings. The number of cars and trucks sold to retail buyers (commonly referred to as “industry demand”) can vary substantially from year to year. In any year, industry demand depends largely on general economic conditions, the cost of purchasing and operating cars and trucks and the availability and cost of credit and fuel. Industry demand also reflects the fact that cars and trucks are durable items that people can wait to replace.

      The automotive industry outside of the United States consists of many producers, with no single dominant producer. Certain manufacturers, however, account for the major percentage of total sales within particular countries, especially their countries of origin. Most of the factors that affect the United States automotive industry and its sales volumes and profitability are equally relevant outside the United States.

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      The worldwide automotive industry also is affected significantly by a substantial amount of costly government regulation. In the United States and Europe, for example, government regulation has arisen primarily out of concern for the environment, for greater vehicle safety and for improved fuel economy. Many governments also regulate local content and/or impose import requirements as a means of creating jobs, protecting domestic producers or influencing their balance of payments.

      Ford’s unit sales vary with the level of total industry demand and its share of that industry demand. Ford’s share is influenced by how its products compare with those offered by other manufacturers based on many factors, including design, driveability, price, quality, reliability, safety and utility. Ford’s share also is affected by its timing of new model introductions and manufacturing capacity limitations. Ford’s ability to satisfy changing consumer preferences with respect to type or size of vehicle and its design and performance characteristics can impact its sales and earnings significantly.

      The profitability of vehicle sales is affected by many factors, including the following:

	•	unit sales volume
	•	the mix of vehicles and options sold
	•	the margin of profit on each vehicle sold
	•	the level of “incentives” (price discounts) and other marketing costs
	•	the costs for customer warranty claims and other customer satisfaction actions
	•	the costs for government-mandated safety, emission and fuel economy technology and equipment
	•	the ability to manage costs
	•	the ability to recover cost increases through higher prices

      Further, because the automotive industry is capital intensive, it operates with a relatively high percentage of fixed costs, which can result in large changes in earnings from relatively small changes in unit volume.

      Following is a discussion of the automotive industry in the principal markets where Ford competes, as well as a discussion of its Visteon operating segment, its Automotive Consumer Services Group and its ConsumerConnect e-commerce initiatives and strategy:

United States

      Sales Data. The following table shows U.S. industry retail deliveries of cars and trucks for the years indicated:

      Ford classifies cars by small, middle, large and luxury segments and trucks by compact pickup, compact bus/van/utility, full-size pickup, full-size bus/van/utility and medium/heavy segments. The large and luxury car segments and the compact bus/van/utility, full-size pickup and full-size bus/van/utility truck segments include the industry’s most profitable vehicle lines. The term “bus” as used in this discussion refers to vans designed to carry passengers. The following tables show the proportion of United States retail car and truck

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      As shown in the tables above, since 1995 there has been a steady shift from cars to trucks for both industry sales and Ford sales.

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      Market Share Data. The following tables show changes in car and truck United States market shares of the six leading vehicle manufacturers for the years indicated:

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      The decline in United States market share for Ford is primarily the result of capacity constraints on several key products due to strong demand in that market.

      Marketing Incentives and Fleet Sales. Automotive manufacturers that sell vehicles in the United States frequently give purchasers price discounts or other marketing incentives. These incentives are the result of competition from new product offerings by manufacturers and the desire to maintain production levels and market shares. Manufacturers provide these incentives to both retail and fleet customers (fleet customers include daily rental companies, commercial fleet customers, leasing companies and governments). Marketing incentives generally are higher during periods of economic downturns, when excess capacity in the industry tends to increase.

      Ford’s marketing costs in the United States as a percentage of gross sales revenue were as follows for the following three years: 10.6% (1999), 10.4% (1998) and 8.7% (1997). These “marketing costs” include primarily (i) marketing incentives on vehicles, such as retail rebates and costs for special financing and lease programs, (ii) reserves for costs and/or losses associated with its required repurchase of certain vehicles sold to daily rental companies and (iii) costs for advertising and sales promotions for vehicles. The increase in marketing costs over the last several years is a result of intense competition in the United States market.

      Fleet sales generally are less profitable than retail sales, and sales to daily rental companies generally are less profitable than sales to other fleet purchasers. The mix between sales to daily rental companies and other fleet customers has been about evenly split in recent years. The table below shows Ford’s fleet sales in the United States, and the amount of those sales as a percentage of its total United States car and truck sales, for the last five years.

      Warranty Coverage. Ford presently provides warranty coverage for defects in factory-supplied materials and workmanship on all vehicles (other than medium trucks) Ford sells in the United States. This warranty coverage for Ford/ Mercury vehicles extends for 36 months or 36,000 miles (whichever occurs first) and covers components of the vehicle, other than tires which are warranted by the tire manufacturers. The United States warranty coverage for luxury vehicles (Lincoln, Jaguar, and Volvo) extends for 48 months or 50,000 miles (whichever occurs first). In general, different warranty coverage is provided on medium/heavy trucks and on vehicles sold outside the United States. In addition, as discussed below under “Governmental Standards — Mobile Source Emissions Control”, the Federal Clean Air Act requires warranty coverage for a “useful life” of 10 years or 100,000 miles (whichever occurs first) for emissions equipment on most light duty vehicles sold in the United States. As a result of these warranties and the increased concern for customer satisfaction, costs for warranty repairs, emissions equipment repairs and customer satisfaction actions (“warranty costs”) can be substantial. Estimated warranty costs for each vehicle sold by Ford are accrued at the time of sale. Such accruals, however, are subject to adjustment from time to time depending on actual experience.

Europe

      Outside of the United States, Europe is Ford’s largest market for the sale of cars and trucks. The automotive industry in Europe is intensely competitive. Over the past year, 60 new or freshened vehicles were introduced in the European market by various manufacturers. For the past 13 years, the top six manufacturers have each achieved a car market share in about the 10% to 18% range. (Manufacturers’ shares, however, vary considerably by country.) This competitive environment is expected to intensify further as a result of import restrictions on vehicles assembled in Japan having been removed in total on December 31, 1999, and as Japanese manufacturers, which together had a European car market share of 12% for 1999, increase their production capacity in Europe. Ford estimates that in 1999 the European automotive industry had excess

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      In 1999, vehicle manufacturers sold approximately 17 million cars and trucks in Europe, up 6% from 1998 levels. Ford’s combined car and truck market share in Europe in 1999 was 10.6%, up 4/10 of one percentage point from 1998.

      Britain and Germany are Ford’s most important markets within Europe, although the Southern European countries are becoming increasingly significant. Any adverse change in the British or German market has a significant effect on its total automotive profits. For 1999 compared with 1998, total industry sales were down 2.3% in Britain and up 1.8% in Germany.

      For purposes of the figures shown in this section for 1999 and prior years, Ford has considered Europe to consist of the following 15 markets: Britain, Germany, France, Italy, Spain, Austria, Belgium, Ireland, Netherlands, Portugal, Switzerland, Finland, Sweden, Denmark, and Norway. Beginning January 1, 2000 and going forward, Ford will include the following four additional markets as part of the European market: Czech Republic, Greece, Hungary, and Poland.

Other Markets

      Mexico and Canada. Mexico and Canada also are important markets for Ford. In 1999, industry sales of new cars and trucks in Mexico were approximately 690,000 units, up 4% from 1998 levels. In Canada, industry sales of new cars and trucks in 1999 were approximately 1.5 million units, up 7% from 1998 levels. Ford’s combined car and truck market share in these markets in 1999 was 16.5% (Mexico) and 19% (Canada).

      South America. Brazil and Argentina are Ford’s principal markets in South America. The economic environment in those countries has been volatile in recent years, leading to large variations in industry sales. Results have also been influenced by the devaluation of the Brazilian currency and government actions to reduce inflation and public deficits. Industry sales in 1999 were 1.3 million units in Brazil, down about 19% from 1998, and approximately 380,000 units in Argentina, down 16% from 1998. The devaluation of the Brazilian Real and continued weak economic conditions will adversely affect industry sales in 2000. Ford’s combined car and truck market share in these markets in 1999 was 9.7% (Brazil) and 15.3% (Argentina).

      Asia Pacific. In the Asia Pacific region, Australia, Taiwan and Japan are Ford’s principal markets. Industry volumes in 1999 in this region were as follows: approximately 787,000 units in Australia (down 3% from 1998), approximately 424,000 units in Taiwan (down 11% from 1998) and approximately 5.9 million units in Japan (unchanged from 1998). In 1999, Ford’s combined car and truck market share in Australia was 16.1%. In Taiwan, Ford had a combined car and truck market share in 1999 of 12.6%. Ford’s combined car and truck market share in Japan has been less than 1% in recent years. Ford owns a 33.4% interest in Mazda Motor Corporation (“Mazda”) and accounts for Mazda on an equity basis. Mazda’s market share in Japan has been 5-6% in recent years. Ford’s principal competition in the Asia Pacific region has been the Japanese manufacturers. Ford anticipates that the continuing relaxation of import restrictions (including duty reductions) in Australia and Taiwan will intensify competition in those markets.

      Ford opened a new assembly plant in India in 1999, launching an all-new small car (the IKON) designed specifically for that market. Ford expects India to become one of its most important markets in Asia in the future.

      Africa. Ford has operated in the South African market as a 45% owner in the South African Motor Corporation (Pty.) Limited (“SAMCOR”). In January 2000, Ford and its principal partner, Anglo American Corporation of South Africa Limited, announced that Ford will purchase Anglo’s 45% interest in SAMCOR; 35% will be purchased during 2000 and the remaining 10% will be purchased in approximately two years. Ford has also agreed to purchase during 2000, the 10% interest in SAMCOR that is currently owned by the SAMCOR Employee Trust. Each of these purchases is subject to receiving prior regulatory approval.

      SAMCOR assembles and distributes Ford, Mazda, and Mitsubishi vehicles in South Africa, and is also expected to begin assembling and distributing Volvo vehicles. In addition, SAMCOR distributes Jaguar

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Industry Consolidation and Global Competition

      The worldwide automotive industry is trending toward further consolidation, such as the DaimlerChrysler merger, Ford’s acquisition of Volvo Car and the recently announced alliance between General Motors and Fiat. Such consolidation could be good for the industry to the extent it reduces excess capacity. Consolidation could also result in there being fewer but stronger competitors in the industry. Ford believes that it is well-positioned and does not need to participate in the consolidation trend to compete globally. However, as with its purchase of Volvo Car, Ford considers opportunities with other manufacturers when it believes it would be beneficial to its business. Presently, its major competitors on a global basis are DaimlerChrysler, General Motors, Honda, Toyota and Volkswagen.

Visteon Automotive Systems

      Visteon is an enterprise of Ford and consists of certain subsidiaries and divisions of Ford. Visteon is a global provider of integrated systems and components to automotive manufacturers and other automotive suppliers. Visteon ranks as the third-largest automotive supplier in the world based on revenues of $19.4 billion for 1999. Visteon operates in three business segments:

	•	Comfort, Communication & Safety, composed of climate control systems and interior/exterior systems product groups. The climate control systems product group produces fluid transport, air handling, heat exchange and compressor products. The interior/exterior product group produces cockpit, instrument panel, interior trim and seats, lighting and bumper products.
	•	Dynamics & Energy Conversion, composed of energy transformation systems and chassis systems product groups. The energy transformation systems product group produces energy management, distributed power generation, electrical conversion, and fuel storage and delivery products. The chassis systems product group produces axle and driveline, steering and chassis component products.
	•	Glass, which produces vehicle glass for Ford and aftermarket customers, and also produces architectural glass.

      Currently, most of Visteon’s business is with Ford. In 1999 Visteon’s mix of business was 88% Ford and 12% non-Ford. In addition, in 1999 most of Visteon’s business was in North America (81%). Visteon’s goal, however, is to continue to obtain new business from companies other than Ford and to further expand its business beyond North America. In 1999, 38% of Visteon’s new business was from non-Ford customers and 39% was from outside North America.

      Below are some financial highlights for Visteon (in millions):

      Ford previously announced that one of its financial milestones for the year 2000 is for Visteon to achieve independence. Ford has taken a major step toward achieving greater independence for Visteon by starting the process of changing Visteon from an enterprise of Ford into a separate legal entity that will be a wholly-owned subsidiary of Ford.

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Automotive Consumer Services Group

      Automotive Consumer Services Group is a global automotive service organization within Ford that includes Ford Customer Service Division and an all-makes channel consisting of several leading automotive service brands.

      Ford Customer Service Division supports consumers of Ford vehicles through a network of franchised dealers. This is the principal source of vehicle service and customer support for Ford Motor Company vehicle owners, traditionally recognized by the Quality Care™ brand.

      In the all-makes channel, vehicle owners for all automotive brands can access services in areas of maintenance and light repair, collision repair, extended service business and recycling. Ford’s all-makes channel of companies includes: Kwik-Fit (maintenance and light repair in Europe), Pit Stop (maintenance and light repair in Europe), Speedy (maintenance and light repair in Europe), Master Service (maintenance and light repair in Mexico), B-quik (maintenance and light repair in Thailand), Collision Team of America (collision repair in the U.S.), Howard Basford (collision repair in the U.K.), and Automobile Protection Corporation (extended service business selling all-makes policies through dealers in the U.S.). The characteristics of the all-makes channel align closely with the Group’s core dealer business and expand the customer base to consumers previously outside the Ford network of service providers.

      Automotive Consumer Services Group conducts business in 38 countries and serves consumers through over 13,000 dealer outlets and over 2,000 all-makes outlets.

ConsumerConnect

      Ford believes it is one of the leading automotive companies in electronic commerce and has created a number of joint ventures with leading Internet and software companies that touch every aspect of its business. The most significant of these to date was announced on February 25, 2000, when Ford, General Motors and DaimlerChrysler announced plans to merge the two existing business-to-business Internet-based supplier exchanges into a single global portal, creating the world’s largest virtual marketplace. This new venture will be open to all auto manufacturers, their suppliers and dealers, and eventually could be expanded to include other industries. Oracle Corporation and Commerce One, Inc. were announced as the technology partners in this venture.

      This announcement followed a number of others in which Ford established joint ventures or partnerships with leaders like Microsoft, Trilogy, Yahoo! and others to disseminate to consumers information about Ford’s car and truck brands, improve the purchase experience by reducing complexity and providing a more satisfying experience, attract target customers and build consumer loyalty through alliances with sites like iVillage and bolt.com and to improve Ford’s customer service centers through its joint venture with Teletech Holdings, Inc. These and other initiatives are part of a cohesive, deliberate strategy to transform Ford into a consumer company and an automotive leader in e-commerce.

Financial Services Sector

Ford Motor Credit Company

      For information regarding the business of Ford Credit, see “Business of Ford Credit.”

The Hertz Corporation

      Hertz and its affiliates and independent licensees operate what Hertz believes is the largest car rental business in the world based upon revenues. Hertz also operate one of the largest industrial and construction equipment rental businesses in North America based upon revenues. Hertz and its affiliates, associates and independent licensees, do the following:

	•	rent and lease cars and trucks
	•	rent industrial and construction equipment

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	•	sell its used cars and equipment
	•	provide third-party claim management services
	•	provide telecommunications services

These businesses are operated from approximately 6,500 locations throughout the United States and in approximately 140 foreign countries and jurisdictions. In April 1997, Hertz completed an initial public offering of common stock representing a 19.1% economic interest in Hertz.

      Below are some financial highlights for Hertz (in millions):

Governmental Standards

      A number of governmental standards and regulations relating to safety, corporate average fuel economy (“CAFE”), emissions control, noise control, damageability and theft prevention are applicable to new motor vehicles, engines, and equipment manufactured for sale in the United States, Europe and elsewhere. In addition, manufacturing and assembly facilities in the United States, Europe and elsewhere are subject to stringent standards regulating air emissions, water discharges and the handling and disposal of hazardous substances. Such facilities in the United States also are subject to a comprehensive federal-state permit program relating to air emissions.

      Mobile Source Emissions Control — U.S. Requirements.   The Federal Clean Air Act imposes stringent limits on the amount of regulated pollutants that lawfully may be emitted by new motor vehicles and engines produced for sale in the United States. Currently, most light duty vehicles sold in the United States must comply with these standards for 10 years or 100,000 miles, whichever first occurs. The U.S. Environmental Protection Agency (“EPA”) recently has promulgated post-2004 model year standards that are more stringent than the default standards contained in the Clean Air Act. These new regulations will require most light duty trucks to meet the same emissions standards as passenger cars by the 2007 model year. The stringency of the new standards may impact Ford’s ability to produce and offer a broad range of products with the characteristics and functionality that customers demand. The new standards also are likely to limit severely the use of diesel technology. In October, 1999, EPA also proposed new post-2004 emission standards for “heavy-duty” trucks (8,500-14,000 lbs. gross vehicle weight). These proposed standards are likely to pose technical challenges and may affect the competitive position of full-line vehicle manufacturers such as Ford.

      Pursuant to the Clean Air Act, California has received a waiver from the EPA to establish its own unique emissions control standards. New vehicles and engines sold in California must be certified by the California Air Resources Board (“CARB”). CARB’s emissions requirements (the “California program”) for model years 1994 through 2003 require manufacturers to meet a non-methane organic gases fleet average requirement that is significantly more stringent than that prescribed by the Clean Air Act for the corresponding periods of time. The California program initially required that a specified percentage of each manufacturer’s vehicles produced for sale in California, beginning at 2% in 1998 and increasing to 10% in 2003, must be zero-emission vehicles (“ZEVs”), which produce no emissions of regulated pollutants. In 1996, CARB eliminated the ZEV mandate for the 1998-2002 model years; however, the 10% mandate remains in effect for the 2003 model year. Around the same time, vehicle manufacturers voluntarily entered into agreements with CARB that would essentially: (i) provide air quality benefits for California by certifying vehicles nationwide to standards comparable to the California low emission vehicle standards beginning with the 2001 model year, (ii) continue research and development of ZEV technology, and (iii) provide specific numbers of advanced technology battery vehicles through demonstration programs in California.

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      Electric vehicles are the only presently known type of zero-emission vehicles. However, despite intensive research activities, technologies have not been identified that would allow manufacturers to produce an electric vehicle that either meets most customers’ expectations or is commercially viable. Compliance with the ZEV mandate may require manufacturers to curtail the sale of non-electric vehicles or to offer substantial discounts on electric vehicles, selling them well below cost, while increasing the price on non-electric vehicles. The California program and ZEV mandates present significant technological challenges to manufacturers and compliance may require costly actions that would have a substantial adverse effect on Ford’s sales volume and profits.

      In late 1998, CARB adopted stringent new vehicle emissions standards that must be phased in beginning in the 2004 model year. These new standards treat most light duty trucks the same as passenger cars and require both types of vehicles to meet new stringent emissions requirements. It is also expected that these new standards will essentially eliminate the use of diesel technology. CARB’s new standards present a difficult engineering and technological challenge, and may impact Ford’s ability to produce and offer a broad range of products with the characteristics and functionality that customers demand.

      The Clean Air Act also permits other states which do not meet national ambient air quality standards to adopt the California program no later than two years before the affected model year. New York, Massachusetts, Vermont, and Maine have adopted the California program (NY and MA effective in the 1998 model year; VT effective in the 2000 model year; and ME effective in the 2001 model year). Only NY and MA have adopted California’s ZEV mandates (VT’s law provides for possible future adoption of a ZEV mandate after certain findings have been made). Maryland and New Jersey have laws requiring adoption of the California program and ZEV mandates after certain conditions have been met. There are major problems with transferring California standards to the Northeast, including the following: 1) many dealers sell vehicles in neighboring (non-California program) states, creating confusion over which emissions warranty applies; 2) the driving range of present ZEVs is greatly diminished (by more than 50 percent) in cold weather; and 3) the Northeast states have refused to adopt the California reformulated gasoline requirement, which may impair the ability of vehicles to meet California’s “in-use” standards.

      As noted previously, California eliminated its ZEV mandate for the 1998-2002 model years. New York refused to eliminate its 1998-2002 ZEV requirement despite the Clean Air Act requirement of identicality with California standards. In August 1998, as a result of a legal challenge from the automotive industry, New York’s pre-2003 model year ZEV requirements were declared invalid by the U.S. Court of Appeals for the Second Circuit. Massachusetts has attempted to adopt a ZEV mandate mirroring the voluntary agreements in California between auto manufacturers and CARB. A federal district court invalidated these regulations, but Massachusetts has appealed the decision to the U.S. Court of Appeals for the First Circuit. In September 1999, responding to a referral by the Court, EPA expressed its view that the California agreements do constitute “standards” which could be adopted as regulations by Massachusetts. This issue is still in litigation.

      The automotive industry has entered into a National Low Emissions Vehicle (NLEV) program, which the EPA promulgated as a rule and which has been agreed to by all manufacturers and all states except Maine, Massachusetts, New York and Vermont. This NLEV program requires manufacturers to sell low emission vehicles in the participating northeastern states beginning with the 1999 model year, and throughout the remainder of the country beginning with the 2001 model year.

      Under the Clean Air Act, the EPA and CARB can require manufacturers to recall and repair non-conforming vehicles. The EPA, through its testing of production vehicles, also can halt the shipment of non-conforming vehicles. Ford may be required to recall, or may voluntarily recall, vehicles for such purposes in the future. The costs of related repairs or inspections associated with such recalls can be substantial.

      The Clean Air Act generally prohibits the introduction of new fuel additives unless a waiver is granted by the EPA. In 1995, the EPA was ordered by a federal court to grant such a waiver to Ethyl Corporation for the additive MMT. Ford and other manufacturers are concerned that the widespread use of MMT may impair the performance of current and future emissions systems and onboard diagnostics systems.

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      European Requirements. European Union (“EU”) directives and related legislation limit the amount of regulated pollutants that may be emitted by new motor vehicles and engines sold in the EU. In 1998, the EU adopted a new directive on emissions from passenger cars and light commercial trucks. More stringent emissions standards will apply to new car certifications beginning January 1, 2000 and to new car registrations beginning January 1, 2001 (“Stage III Standards”). A second level of even more stringent emission standards will apply to new car certifications beginning January 1, 2005 and to new car registrations beginning January 1, 2006 (“Stage lV Standards”). The comparable light commercial truck Stage III Standards and Stage IV Standards would come into effect one year later than the passenger car requirements. The directive includes a framework that permits EU member states to introduce fiscal incentives to promote early compliance with the Stage III and Stage IV Standards. The directive also introduces on-board diagnostic requirements, more stringent evaporative emission requirements, and in-service compliance testing and recall provisions for emissions-related defects that occur in the first five years or 80,000 kilometers of vehicle life (extended to 100,000 kilometers in 2005). The Stage IV Standards for diesel engines are not yet technically feasible and may impact Ford’s ability to produce and offer a broad range of products with the characteristics and functionality that customers want. A related EU directive was adopted at the same time which establishes standards for cleaner fuels beginning in 2000 and even cleaner fuels in 2005. The EU is setting up a program to assess the need for further changes to vehicle emission and fuel standards after 2005.

      Certain European countries are conducting in-use emissions testing to ascertain compliance of motor vehicles with applicable emissions standards. These actions could lead to recalls of vehicles; the future costs of related inspection or repairs could be substantial.

      Motor Vehicle Safety — The National Traffic and Motor Vehicle Safety Act of 1966 (the “Safety Act”) regulates motor vehicles and motor vehicle equipment in two primary ways. First, the Safety Act prohibits the sale in the United States of any new vehicle or equipment that does not conform to applicable motor vehicle safety standards established by the National Highway Traffic Safety Administration (the “Safety Administration”). Meeting or exceeding many safety standards is costly because the standards tend to conflict with the need to reduce vehicle weight in order to meet emissions and fuel economy standards. Second, the Safety Act requires that defects related to motor vehicle safety be remedied through safety recall campaigns. There were pending before the Safety Administration 28 investigations relating to alleged safety defects in Ford vehicles as of February 20, 2000. A manufacturer also is obligated to recall vehicles if it determines that they do not comply with a safety standard. Should Ford or the Safety Administration determine that either a safety defect or a noncompliance exists with respect to certain of Ford’s vehicles, the costs of such recall campaigns could be substantial.

      In November 1999, the Safety Administration published a supplemental notice of a proposed advanced air bag rule. This proposed rule, which, among other things, requires a 30 mph, fixed barrier crash test utilizing an unbelted adult-sized male dummy, could significantly affect the design and testing of new vehicles. While Ford supports efforts to further improve air bag systems, and is working with suppliers to introduce new designs, it has concerns about the proposed rule. These concerns include a dramatic increase in the number of required tests, complex and vague requirements, the potential need to incorporate unproven technology, and a potential increase in safety risks. Ford is moving to install advanced air bag restraint systems in its vehicles, but the proposed rule could interfere with these plans. If certain aspects of the rule were to become effective, it could significantly increase Ford’s costs, especially if it requires Ford to change its present advanced air bag design programs. Ford outlined its concerns in a December 1999 response to the Safety Administration’s proposal. Several other companies and organizations including the National Transportation Safety Board, the Insurance Institute for Highway Safety and other automobile manufacturers share many of the same concerns and have also expressed their concerns with the government. The Safety Administration is expected to publish a final rule later this year.

      The Safety Administration is investigating the feasibility of a test to measure the propensity of a vehicle to roll. It is unlikely that an objective and meaningful stability test can be developed. Nonetheless, the Safety Administration has announced its intention to issue a final rule to require manufacturers to label vehicles based on their performance on the yet-to-be-determined stability test. Such a label could impact customer satisfaction and the sales of Ford products.

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      Canada, the European Union, individual member countries within the EU and other countries in Europe, South America and the Asia Pacific markets also have safety standards applicable to motor vehicles and are likely to adopt additional or more stringent standards in the future.

      Motor Vehicle Fuel Economy — U.S. Requirements. Under 49 U.S.C. Chapter 329, vehicles must meet minimum CAFE (Corporate Average Fuel Economy) standards set by the Safety Administration. A manufacturer is subject to potentially substantial civil penalties if it fails to meet the CAFE standard in any model year, after taking into account all available credits for the preceding three model years and expected credits for the three succeeding model years.

      The law established a passenger car CAFE standard of 27.5 mpg for 1985 and later model years, which the Safety Administration believes it has the authority to amend to a level it determines to be the maximum feasible level. The Safety Administration has established a 20.7 mpg CAFE standard applicable to light trucks.

      Ford expects to be able to comply with the foregoing CAFE standards, in some cases using credits from prior or succeeding years. In October 1999, its filed a plan to meet the 1998 and 1999 light truck standards and the 1999 domestic passenger car standards using credits to be generated in future years. In general, a continued increase in demand for larger vehicles, coupled with a decline in demand for small and middle-size vehicles could jeopardize Ford’s long-term ability to maintain compliance with CAFE standards.

      It is anticipated that efforts may be made to raise the CAFE standard because of concerns for carbon dioxide (“CO₂ ”) emissions, energy security or other reasons. President Clinton’s Climate Change Action Plan (“CCAP”) sets a goal to improve new vehicle fuel efficiency in an amount equivalent to at least 2% per year over a 10 to 15 year period. In addition, international concerns over global warming due to the emission of “greenhouse gasses” have given rise to strong pressures to increase fuel economy. During the December 1997 meeting of the parties to the United Nations Climate Change Convention in Kyoto, Japan, the United States agreed to reduce greenhouse gas emissions by 7% below their 1990 levels during the 2008-2012 period (the “Kyoto Protocol”). The Kyoto Protocol is not yet binding in the United States, pending ratification by the Senate. In addition, a petition has been filed with the Environmental Protection Agency requesting that the Agency regulate CO₂ emissions from motor vehicles under the Clean Air Act. EPA is expected to seek public comment on this petition in the near future.

      If the CCAP or Kyoto Protocol goals are partially or fully implemented through increases in the CAFE standard, if significant increases in car or light truck CAFE standards for subsequent model years otherwise are imposed, or if EPA attempts to regulate CO₂ from motor vehicles, Ford might find it necessary to take various costly actions that could have substantial adverse effects on its sales volume and profits. For example, Ford might have to curtail production of larger family-size and luxury cars and full-size light trucks, restrict offerings of engines and popular options, and increase market support programs for its most fuel-efficient cars and light trucks.

      Foreign Requirements. The EU is also a party to the Kyoto Protocol and has agreed to reduce greenhouse gas emissions by 8% below their 1990 levels during the 2008-2012 period. In December 1997, the European Council of Environment Ministers (the “Environment Council”) reaffirmed its goal to reduce average CO₂ emissions from new cars to 120 grams per kilometer by 2010 (at the latest) and invited European motor vehicle manufacturers to negotiate further with the European Commission on a satisfactory voluntary environmental agreement to help achieve this goal. In October 1998, the EU agreed to support an environmental agreement with the European Automotive Manufacturers Association (of which Ford is a member) on CO₂ emission reductions from new passenger cars (the “Agreement”). The Agreement establishes an emission target of 140 grams of CO₂ per kilometer for the average of new cars sold in the EU by the Association’s members in 2008. In addition, the Agreement provides that certain Association members (including Ford) will introduce models emitting no more than 120 grams of CO₂ per kilometer in 2000, and establishes an estimated target range of 165-170 grams of CO₂ per kilometer for the average of new cars sold in 2003. Also in 2003, the Association will review the potential for additional CO₂ reductions, with a view to moving further toward the EU’s objective of 120 grams of CO₂ per kilometer by 2012. The Agreement assumes (among other things) that no negative measures will be implemented against diesel-fueled cars and

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      The Environment Council requested the European Commission to review in 2003 the EU’s progress toward reaching the 120 gram target by 2010, and to implement annual monitoring of the average CO₂ emissions from new passenger cars and progress toward achievement of the objectives for 2000 and 2003.

      In November 1999, the European Parliament published a Directive on the availability of consumer information about the fuel economy and CO₂ emissions of new passenger cars. Although the Directive includes certain minimum EU requirements on the information to be made available, individual Member States would be able to set national requirements for (i) labels to be displayed on passenger cars at their point of sale, (ii) government published guides listing information on all passenger cars available for sale in the specific EU country, and (iii) posters to be displayed in dealerships ranking the fuel economy, CO₂ emissions, and estimated fuel costs of passenger cars available for sale there. Member States have until January, 2001 to implement this Directive.

      In 1995, members of the German Automobile Manufacturers Association (including Ford Werke AG) made a voluntary pledge to reduce by 2005 the average fuel economy of new cars sold in Germany by 25% from 1990 levels, to make regular reports on fuel consumption, and to increase industry research and development efforts toward this end. The German Automobile Manufacturers Association has reported that the industry is on track to meet the pledge.

      Other European countries are considering other initiatives for reducing CO₂ emissions from motor vehicles. Taken together such proposals could have substantial adverse effects on our sales volumes and profits in Europe.

      Japan has adopted automobile fuel consumption goals that manufacturers must attempt to achieve by the 2000 model year. The consumption levels apply only to gasoline-powered vehicles, vary by vehicle weight, and range from 5.8 km/l to 19.2 km/l

      U.S. Stationary Source Air Pollution Control — The Clean Air Act limits various emissions into the atmosphere from stationary sources as well as mobile sources, and allows states to adopt even more stringent standards. The Act imposes comprehensive permit requirements for manufacturing facilities in addition to those required by various states. Regulations continue to be promulgated under the Act, and the costs to comply with the Act could be substantial. In addition, the enormous complexity and time-consuming nature of the comprehensive permit program provided for by the Act may reduce operational flexibility and may interfere with future competitive upgrading of Ford’s U.S. production facilities.

      U.S. Water Pollution Control — Pursuant to the Federal Water Pollution Control Act (the “Clean Water Act”), Ford is required to obtain permits for its manufacturing facilities that regulate the facilities’ discharge of wastewater into public waters and municipal sewerage systems. The EPA also requires management standards and, in some cases, permits for the discharge of storm water. The standards under the Clean Water Act are established by the EPA and by the state where a facility is located. Many states have requirements that go beyond those established under the Clean Water Act.

      The EPA also adopted regulations, pursuant to the Great Lakes Critical Programs Act of 1990, that require more restrictive standards for discharges into waters that impact the Great Lakes. These regulations may require the addition of costly control equipment.

      U.S. Hazardous Substance and Waste Control — Pursuant to the Federal Resource Conservation and Recovery Act, the EPA has issued regulations establishing certain procedures and standards for persons who generate, transport, treat, store, or dispose of hazardous wastes and requiring corrective action for prior releases. States may adopt even more extensive requirements. The Federal Comprehensive Environmental Response, Compensation, and Liability Act requires notification regarding certain releases into the environment, and creates potential liability for remediation costs and for damage to natural resources at sites where waste was taken for treatment or disposal. A number of states have enacted separate laws of this type. In addition, under the Federal Toxic Substances Control Act (“TSCA”), the EPA evaluates environmental and

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      European Stationary Source Environmental Control — The European Union and individual member countries impose requirements on waste and hazardous wastes, incineration, packaging, landfill, soil pollution, integrated pollution control, air emissions standards, import/export and use of dangerous substances, air and water quality standards, noise, environmental management systems, energy efficiency, emissions reporting, and planning and permitting. Additional or more stringent requirements (including tax measures and civil liability schemes for cleaning polluted sites) are likely to be adopted in the future. The cost of complying with these standards could be substantial.

      End of Life Vehicle Proposal — The European Commission has published a draft proposal to introduce an obligation for motor vehicle manufacturers to take back end-of-life vehicles on a cost-free basis beginning in late 2001 for certain vehicles with full cost free take back of all vehicles in 2006, to impose requirements on the proportion of the vehicle that may be disposed of in landfills and the proportion that must be reused or recycled beginning in 2006, and to ban the use of certain substances in vehicles beginning in 2005. Such proposal could, if adopted, impose a substantial cost on manufacturers.

      The German Automobile Association (including Ford Werke AG) and the German Automobile Importers Association made a voluntary pledge to establish a nationwide infrastructure network to take back passenger cars that are at least 12 years old (and meet certain other requirements) on a cost-free basis to their owners.

      Pollution Control Costs — During the period 2000 through 2004, Ford expects to spend approximately $348 million on its North American and European facilities to comply with air and water pollution and hazardous waste control standards which now are in effect or are scheduled to come into effect. Of this total, Ford estimates spending approximately $74 million in 2000 and $73 million in 2001.

      Worldwide Regulatory Compatibility — Ford’s efforts to develop new markets and increase imports are impeded by incompatible automotive safety, environmental and other product regulatory standards. At present, differing standards either restrict the vehicles Ford can export to serve new markets or increase the cost and complexity to do so.

Employment Data

      The average number of people Ford employed by geographic area was as follows for the years indicated:

      In 1999, the average number of people Ford employed increased 6.4 percent. The increase was due to a number of acquisitions during 1999, notably Volvo Car, which increased employment levels by approximately 20,000. Most of Ford’s employees work in its Automotive and Visteon operations.

      Substantially all of the hourly employees in Ford’s Automotive and Visteon operations in the United States are represented by unions and covered by collective bargaining agreements. Approximately 99% of these unionized hourly employees in Ford’s Automotive segment (as well as many of those in its Visteon segment) are represented by the United Automobile Workers (the “UAW”). Approximately 3% of Ford’s salaried employees are represented by unions. Most hourly employees and many non-management salaried employees of Ford’s subsidiaries outside the United States also are represented by unions.

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      Ford entered into a new collective bargaining agreement with the UAW that will expire on September 14, 2003. Ford also entered into a new collective bargaining agreement with the Canadian Automobile Workers (“CAW”) that will expire on September 21, 2002.

      All local CAW contracts are settled, but Ford’s management at several of its plants in the United States continue to negotiate to resolve local issues with the UAW. In addition, Ford is or will be negotiating new collective bargaining agreements with labor unions in Europe. A work stoppage could occur as a result of these negotiations, which, if protracted, could substantially adversely affect Ford’s profits.

      As part of the new UAW agreement, Ford also agreed that in connection with any spin-off, sale or other transfer of its Visteon operations: (1) all of Ford employees who are represented by the UAW and who work at a Visteon facility on the date of such spin-off, sale or transfer will remain Ford employees indefinitely and will continue to be covered under its master agreement with the UAW; (2) Visteon will continue to use the services of such employees after any such spin-off, sale or transfer and will accept other UAW represented employees of Ford who are contractually entitled to fill open positions at Visteon facilities; (3) Visteon will agree to adopt a collective bargaining agreement for hourly employees hired by it after any such spin-off, sale or transfer that is an “exact mirror” of the current master agreement between Ford and the UAW and the next two immediately succeeding master agreements between Ford and the UAW; and (4) Visteon will be required to provide any UAW-represented employees hired by it during the terms of the three master agreements mentioned above, for the duration of such employee’s employment with, and retirement from, Visteon, with wages, benefits and other terms and conditions of employment that are the “exact mirror” of the UAW-Ford Master Agreement.

      In recent years Ford has not had significant work stoppages at its facilities, but they have occurred in some of its suppliers’ facilities. Any protracted work stoppages in the future, whether in Ford facilities or those of certain suppliers, could substantially adversely affect its results of operations.

Legal Proceedings

      Various legal actions, governmental investigations and proceedings and claims are pending or may be instituted or asserted in the future against Ford and its subsidiaries, including those arising out of the following: alleged defects in its products; governmental regulations covering safety, emissions and fuel economy; financial services; employment-related matters; dealer, supplier and other contractual relationships; intellectual property rights; product warranties; and environmental matters. Some of the pending legal actions are, or purport to be, class actions. Some of the foregoing matters involve or may involve compensatory, punitive or antitrust or other multiplied damage claims in very large amounts, or demands for recall campaigns, environmental remediation programs, sanctions or other relief which, if granted, would require very large expenditures. Included among the foregoing matters are the following:

Product Liability Matters

      Occupant Restraint Systems. Ford is a defendant in various actions for damages arising out of automobile accidents where the plaintiffs claim that their injuries resulted from (or were aggravated by) alleged defects in the occupant restraint systems in vehicle lines of various model years. For those cases in which damages have been specified, the damages specified by the plaintiffs, including both actual and punitive damages, aggregated approximately $855 million at December 31, 1999.

      Bronco II. Ford is a defendant in various personal injury lawsuits involving the alleged propensity of Bronco II utility vehicles to roll over. For those cases in which damages have been specified, the damages specified by the plaintiffs, including both actual and punitive damages, aggregated approximately $4.1 billion at December 31, 1999.

      In most of the actions described in the two paragraphs above, no dollar amount of damages is specified or the specific amount referred to is only the jurisdictional minimum. It has been Ford’s experience that in cases that allege a specific amount of damages in excess of the jurisdictional minimum, such amounts, on average, bear little relation to the actual amounts of damages, if any, paid by Ford in resolving such cases. Any

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      Asbestos. Ford is a defendant in various actions for injuries claimed to have resulted from alleged contact with certain Ford parts and other products containing asbestos. The plaintiffs in these actions seek damages, including both actual and punitive damages, of approximately $2 billion at December 31, 1999. (In some of these actions, the plaintiffs have not specified a dollar amount of damages or the specific amount referred to is only the jurisdictional minimum.) As distinguished from most lawsuits against Ford, in most of these asbestos-related cases, Ford is but one of many defendants, and many of its co-defendants have substantial resources.

Environmental Matters

      General. Ford has received notices under various federal and state environmental laws that it (along with others) may be a potentially responsible party for the costs associated with remediating numerous hazardous substance storage, recycling or disposal sites in many states and, in some instances, for natural resource damages. Ford also may have been a generator of hazardous substances at a number of other sites. The amount of any such costs or damages for which it may be held responsible could be substantial. The contingent losses that Ford expects to incur in connection with many of these sites have been accrued and those losses are reflected in Ford’s financial statements in accordance with generally accepted accounting principles. However, for many sites, the remediation costs and other damages for which Ford ultimately may be responsible are not reasonably estimable because of uncertainties with respect to factors such as Ford’s connection to the site or to materials there, the involvement of other potentially responsible parties, the application of laws and other standards or regulations, site conditions, and the nature and scope of investigations, studies and remediation to be undertaken (including the technologies to be required and the extent, duration and success of remediation). As a result, Ford is unable to determine or reasonably estimate the amount of costs or other damages for which it is potentially responsible in connection with these sites, although that total could be substantial.

      MFA Grand Jury Matter. The U.S. Department of Justice (“DOJ”), the U.S. Environmental Protection Agency (“EPA”) and the Federal Bureau of Investigation (“FBI”) are investigating the circumstances surrounding Ford’s past use of an engine control strategy that improved fuel economy, but had the side effect of increasing nitrogen oxide emissions. The investigation findings are being presented to a federal grand jury in Detroit, which will decide whether to issue a criminal indictment against Ford or Ford employees. The engine control strategy (Managed Fuel Air, or “MFA”) was used on 1997 model year Econoline vans (about 60,000 vehicles). In an earlier civil investigation, Ford entered into a consent decree with DOJ and EPA and agreed to pay $8 million in fines and special projects, in addition to recalling the Econoline vans. Ford also settled similar issues with the California Air Resources Board (“CARB”). Ford has met with attorneys and investigators from the government and is cooperating in the investigation.

      Waste Disposal. The United States Environmental Protection Agency (“EPA”) has initiated a civil enforcement action against Ford as a result of Ford Venezuela’s shipment of industrial wastes from its Valencia Assembly Plant in Venezuela for disposal in Texas. Ford also has received a subpoena and been notified that it is the subject of a grand jury investigation based on the same facts. Ford Venezuela shipped the industrial waste to the U.S. for disposal under the more stringent U.S. disposal requirements because of the unavailability of adequate disposal facilities in Venezuela and to ensure proper disposal of the waste. Although Ford believes that the subject waste is properly classified as non-hazardous under U.S. environmental laws, the EPA contends that even if the wastes do not exhibit any hazardous characteristics, they nevertheless may be the product of a process that is automatically deemed hazardous under applicable regulations. If Ford is determined to have violated EPA regulations regarding the disposal of hazardous wastes, Ford could be required to pay substantial fines which could exceed $100,000. It is impossible at this point in the proceedings to determine what amount, if any, Ford may be required to pay.

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      On-Board Diagnostics Investigation. CARB and EPA have notified Ford that the system for monitoring fuel vapor leaks on about 6 million 1997-98 model year vehicles is inadequate and was not described fully in Ford’s certification application. CARB and the EPA have requested that Ford implement a recall to reprogram the monitor. The agencies also seek civil penalties, which are likely to be substantial.

      Ohio Assembly Plant. In September 1999, the EPA filed a complaint against Ford alleging violations of the Resource Conservation and Recovery Act (“RCRA”) at Ford’s Ohio Assembly Plant. The violations are related to Ford’s storage of hazardous waste and the absence of a leak monitoring program for paint equipment. EPA has proposed a civil penalty of $303,745. Ford could be required to implement monitoring programs at all U.S. plants at an initial cost of $700,000 and $350,000 each year thereafter.

      Rawsonville Plant. The Michigan Department of Environmental Quality (“MDEQ”) alleges that Ford failed to obtain a permit modification in connection with a raw material change at the Rawsonville Plant. MDEQ proposed a $204,000 fine and installation of additional pollution control equipment. The Plant recently installed the pollution control equipment, and final settlement discussions between Ford and MDEQ are in progress.

      Michigan Truck, Dearborn and Wayne Assembly Plants. Ford received notices of violation (“NOVs”) from the EPA, the MDEQ and Wayne County, Michigan, alleging regulatory violations related to volatile organic compound emissions at the Michigan Truck, Dearborn and Wayne Assembly Plants. The NOVs included allegations that the plants violated permit limitations at certain plant processes (total emissions remained well below allowable levels) and that production was increased at Michigan Truck in violation of its permit (notwithstanding written approval from the State permitting agency authorizing the production increase). In settlement of this matter, a Judicial Consent Decree is expected to be entered in the United States District Court, Eastern District of Michigan, during the first quarter of 2000. The settlement includes a $1.1 million payment divided equally between the three agencies and a supplemental environmental project involving the installation of a waterborne primer system at the new Dearborn Assembly Plant paint shop (representing an incremental investment of $10 million).

Class Actions

      Paint Class Actions. There are two purported class actions pending against Ford in Texas and Illinois alleging claims for fraud, breach of warranty, and violations of consumer protection statutes. The Texas case purports to assert claims on behalf of Texas residents who have experienced paint peeling in certain 1984 through 1992 Ford vehicles. The Illinois case purports to assert claims on behalf of residents of all states except Louisiana and Texas who have experienced paint peeling on most 1988 through 1997 Ford vehicles. Plaintiffs in both cases contend that their paint is defective and susceptible to peeling because Ford did not use spray primer between the high-build electrocoat (“HBEC”) and the color coat. The lack of spray primer allegedly causes the adhesion of the color coat to the HBEC to deteriorate after extended exposure to ultraviolet radiation from sunlight. Plaintiffs in both cases seek unspecified compensatory damages (in an amount to cover the cost of repainting their vehicles and to compensate for alleged diminution in value), punitive damages, attorneys’ fees and interest.

      In the Texas case, Sheldon, the trial court certified a class of Texas owners who experienced paint peeling because of the alleged defect. The order certifying the class is presently on appeal to the Texas Supreme Court. The Illinois case, Phillips, was just recently filed. Ford intends to pursue aggressively summary dismissal and oppose class certification.

      Ignition Switch Class Action. This litigation involves allegations that Ford concealed a defect in ignition switches in most 1983 through 1993 model vehicles that could cause short circuits, resulting in smoke and fire damage. At one time, more than a dozen class actions were pending, but now there is only one, Snodgrass, a purported nationwide class action pending in federal court in New Jersey. In that case, Plaintiffs seek damages allegedly caused by ignition switch fires. The trial court has already denied one motion for class certification. A renewed motion for class certification is pending.

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      TFI Module Class Actions. There are six class actions pending in state courts in Alabama, California, Illinois, Maryland, Tennessee and Washington, alleging defects in thick film ignition modules in more than 22 million vehicles manufactured by Ford between 1983 and 1995. With minor variations based upon state law and differences in the scope of the classes alleged, all of the cases involve the same legal claims and theories. The Howard case in California, presently in trial, is the lead case; proceedings in the other five cases are stayed.

      The Howard plaintiffs assert two claims for relief: violations of the California Consumer Legal Remedies Act (“CLRA”), and violations of the California Unfair Competition Law (“UCL”). Both claims are based upon the allegation that Ford intentionally concealed a safety defect in the subject vehicles. The alleged defect is that distributor mounted TFI modules are inordinately prone to failure because they are exposed to excessive heat. Plaintiffs contend that TFI failure causes stalling at highway speeds and that stalling at highway speeds poses an unreasonable risk to motor vehicle safety. They further contend that Ford knew about the alleged defect and concealed it by withholding documents from NHTSA during investigations into stalling, secretly settling personal injury lawsuits in which TFI failure was at issue, falsely advertising its vehicles as safe, conducting an owner notification campaign on certain vehicles rather than a safety recall, and failing to report TFI warranty claims and failures to the EPA. Under the CLRA, Plaintiffs seek a $1,000 statutory penalty per class member plus punitive damages. Under the UCL, plaintiffs seek a recall or “disgorgement” of the amount Ford saved by not conducting a recall. If plaintiffs are successful on all of their claims, an adverse judgment in California could be as high as $3-4 billion.

      A jury trial on the CLRA claims in Howard began in May 1999 and ended in November 1999 with a deadlocked jury and a mistrial; the CLRA claims will be retried, probably in 2000. Before the second trial, however, the trial judge will decide, probably in the second or third quarter of 2000, whether to order a recall or “disgorgement” under the UCL.

      Ford/ Citibank Visa Class Action. Following the June 1997 announcement of the termination of the Ford/ Citibank credit card rebate program, five purported nationwide class actions and one purported statewide class action were filed against Ford; Citibank is also a defendant in some of these actions. The actions allege damages in an amount up to $3,500 for each cardholder who obtained a Ford/ Citibank credit card in reliance on the rebate program and who is precluded from accumulating discounts toward the purchase or lease of new Ford vehicles after December 1997 as a result of the termination of the rebate program. Plaintiffs contend that defendants deceptively breached their contract by unilaterally terminating the program, that defendants have been unjustly enriched as a result of the interest charges and fees collected from cardholders, and further, that defendants conspired to deprive plaintiffs of the benefits of their credit card agreement. Plaintiffs seek compensatory damages, or alternatively, reinstatement of the rebate program, and punitive damages, costs, expenses and attorneys’ fees. The five purported nationwide class actions were filed in state courts in Alabama, Illinois, New York, Oregon and Washington, and the purported statewide class action was filed in a California state court. The Alabama court has conditionally certified a class consisting of Alabama residents. Ford removed all of the cases to federal court, which consolidated and transferred the cases to federal court in Washington for pretrial proceedings. In October 1999, the federal court dismissed the consolidated proceedings for lack of jurisdiction and sent each action back to the state court in which it originated. Ford has appealed this ruling.

      Flat Glass Class Actions. Ford is a defendant in 15 purported class actions brought on behalf of purchasers of flat glass (and one individual suit brought by Allstate Insurance Company) alleging that Ford and other manufacturers fixed prices and allocated markets in violation of federal and state antitrust laws. Twelve of the class actions are nationwide in scope and pending in federal court and the other three class actions are statewide in scope and are pending in state courts. The other defendants include Pilkington, Libbey-Owens Ford, AFG Industries, PPG Industries, Asahi Glass, and Guardian Industries. A number of similar purported class actions are pending in various courts in which Ford is not currently named as a defendant. A total of 28 federal cases have been consolidated in a federal court in Pennsylvania for pretrial proceedings. Ford and PPG Industries are the only remaining defendants in the consolidated class actions, as a result of a settlement among plaintiffs and the other defendants.

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      In November 1999, the trial judge granted plaintiffs’ motion for class certification and certified two subclasses: (1) all individuals and entities who, between August 1, 1995 and December 31, 1995, purchased flat glass products in the U.S. from defendants, and (2) all individuals and entities who, between August 1, 1991 and December 31, 1995, purchased fabricated automotive replacement glass for domestic makes of cars in the U.S. from defendants. In January 2000, the Third Circuit Court of Appeals denied Ford’s request that it review this ruling. The parties will now begin pretrial discovery. In the actions against Ford, the plaintiffs seek economic and treble damages.

      Lease Residual Class Action. In January 1998 in connection with a case pending in Illinois state court, Ford and Ford Credit were served with a summons and intervention counterclaim complaint relating to Ford Credit’s leasing practices (Higginbotham v. Ford Credit). The counterclaim plaintiff, Carla Higginbotham, is a member of a class that has been conditionally certified for settlement purposes in Shore v. Ford Credit. In the Shore case, Ford Credit commenced an action for deficiency against Virginia Shore, a Ford Credit lessee. Shore counterclaimed for purported violations of the Truth-in-Leasing Act (alleging that certain lease charges were excessive) and the Truth-in-Lending Act (alleging that the lease lacked clarity). Shore purported to represent a class of all similarly situated lessees. Ford was not a party to the Shore case. Higginbotham objected to the proposed settlement of the Shore case, intervened as a named defendant, filed separate counterclaims against Ford Credit, and joined Ford as an additional counterclaim defendant. Higginbotham asserts claims against Ford Credit for violations of the Consumer Leasing Act, declaratory judgment concerning the enforceability of early termination provisions in Ford Credit’s leases, and fraud. She also asserts a claim against Ford Credit and Ford for conspiracy to violate the Truth-in-Lending Act. The Higginbotham counterclaims allege that Ford Credit inflates the residual values of its leased vehicles, which results in lower monthly lease payments but higher termination fees for lessees who exercise their right of early termination. Higginbotham claims that the early termination fees were not adequately disclosed on the lease form and that the fees are excessive and illegal because of the allegedly inflated residual values. She also alleged that Ford dictated the residual values to Ford Credit and thereby participated in an unlawful conspiracy. This case was stayed pending the approval/ rejection of the settlement in Shore.

      In November 1998, the court issued a ruling that rejected the proposed settlement in Shore. During the third quarter of 1999, however, Ford Credit reached individual settlements with the Shore plaintiffs. The Illinois court in Higginbotham found that the lease end residual value of Ms. Higginbotham’s vehicle was properly valued and, as a result, Ms. Higginbotham was an inadequate representative for the class. Subsequently, Ms. Higginbotham voluntarily dismissed her intervention counterclaim without prejudice in the Illinois state court and has reactivated her initial suit in the Florida federal court, pursuing substantially similar claims on behalf of herself and others similarly situated. Consequently, the Higginbotham case is proceeding in Florida and Ford Credit is in the process of responding to discovery requests.

      Lease Agreement Disclosure Class Action. Twenty-one purported class action lawsuits have been filed in various courts against Ford Credit and, in all but three cases, Primus Automotive Financial Services, Inc., a subsidiary of Ford Credit. The lawsuits, each of which purports to be brought on behalf of a statewide class, allege that Ford Credit and Primus leasing contracts improperly failed to disclose acquisition and administrative fees that are included in the amount of a customer’s monthly lease payment. Plaintiffs seek compensatory damages in the amount of all such undisclosed fees, an injunction prohibiting the companies from continuing the practice of not disclosing such fees, attorneys’ fees, interest, costs and in some cases, punitive damages. Ford Credit has filed motions to dismiss in every one of these suits and was successful in getting all but one case dismissed. Plaintiffs in certain of these cases have appealed their dismissal. One case remains pending in Kentucky where Ford Credit lost its motion to dismiss. Ford Credit expects to file a motion for summary judgment in that case.

      Retail Lessee Insurance Coverage Class Action. On May 24, 1999, Michigan Mutual Insurance Company was served with a purported class action complaint in federal court in Florida alleging that the Ford Commercial, General Liability and Business Automobile Insurance Policy, and the Personal Auto Supplement to that policy, provides uninsured/underinsured motorist coverage and medical payments coverage to retail lessees of Ford vehicles (e.g., to Red Carpet lessees). Ford is required to defend and indemnify Michigan Mutual. The complaint rests on an untenable interpretation of the Michigan Mutual policy, which

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      3.8 Liter Engine Transmissions Class Actions. There are four purported nationwide class actions pending against Ford alleging that the transmissions of 3.8 liter engines in 1995 Windstar minivans are defective, and that Ford sold the vehicles despite knowledge of the defect. One of the cases also alleges a defect in the transmissions of 3.8 liter engines in 1990-95 Taurus/ Sables and 1990-94 Lincoln Continentals. One of these cases has been pending in California state court since 1998. Motions to dismiss that complaint are pending. If the motions are denied, class certification motions could be decided during late 2000. The other three cases were filed in state courts in early 2000 (two in Illinois and one in Pennsylvania), and may be removed to federal court. The complaints assert various theories, including breach of warranty and violation of state consumer protection laws, and seek various forms of relief, including compensatory damages in an amount to cover the cost of repairing or replacing the vehicles, plus punitive damages, interest and attorneys’ fees. No specific amounts are sought, except that one of the Illinois complaints seeks compensatory damages in excess of $50,000 per class member. Some of the complaints also seek an order requiring Ford to recall the vehicles.

      Seat Back Class Action. Four purported statewide class actions have been filed in state courts in Maryland, New Hampshire, New Jersey and New York against Ford, General Motors Corporation and DaimlerChrysler AG alleging that seat backs with single recliner mechanisms are defective. Plaintiffs in each of these suits allege that seats installed in “class vehicles” are defective because they have a single recliner mechanism (the device that fixes the angle of the seat back) on the outboard side and no equivalent device on the inboard side. The absence of a similar mechanism on the inboard side, combined with other flaws (such as “inadequate bracing”) allegedly makes the seats unreasonably dangerous because the seat backs are unstable and susceptible to rearward collapse in the event of a rear-end collision. The purported class in each state consists of all persons who own a class vehicle (defined as various 1993-1998 model lines for each manufacturer) and specifically excludes all persons who have suffered personal injury as a result of the rearward collapse of a seat. Plaintiffs allege causes of action for negligence, strict liability, implied warranty, fraud, and civil conspiracy. Plaintiffs also allege violations of the consumer protection statutes in the various states. For each of the eight counts alleged, Plaintiffs seek “compensatory damages measured by the cost of correcting the Defect, not to exceed $5,000 for each class vehicle.” Ford has filed motions to dismiss each of the cases.

      On December 15, 1999, the trial judge in New Hampshire granted Ford’s motion to dismiss because Plaintiffs had suffered no injury. However, on January 7, 2000, the trial judge in the New Jersey case denied Ford’s motion to dismiss. Ford is seeking interlocutory review and, if necessary, it will file a motion for summary judgment after preliminary discovery. The motions to dismiss filed in Maryland and New York are still pending.

      Head Gasket Class Actions. In December, 1999, a purported nationwide class action was filed in Illinois state court on behalf of owners and lessees of 1994-1995 vehicles with 3.8 liter engines who have paid for repairs resulting from head gasket failure. Ford removed the case to federal court. The federal court dismissed the complaint for technical reasons and granted Plaintiffs leave to refile by March 1, 2000. Plaintiffs filed a motion for reconsideration, which the trial court is treating as a motion to remand to state court. That motion is pending.

      Coolant leakage from head gaskets was the subject of a Technical Service Bulletin in April 1998, an Owner Notification Program (“ONP”) that extended warranty coverage on 1994-1995 vehicles with a 3.8 liter engine to 5 years or 60,000 miles, and a recent ONP that further extended coverage to 7 years or 100,000 miles. Plaintiffs allege that Ford’s sale of the vehicles constituted violations of the Illinois and

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      A second purported nationwide class action alleging defective head gaskets was filed in federal court in Ohio on February 22, 2000. The complaint includes allegations similar to those asserted in the Illinois case, and also alleges similar problems with 4.2 liter engines and certain 1996-1997 vehicles.

      Late Charges Class Actions. There are two class actions, one in California (Cumberland v. Ford Credit) and the other in Oklahoma (Crim v. Ford Credit), in which the plaintiffs are contending that Ford Motor Credit Company is engaged in unfair business practices by assessing late charges on lease accounts that bear no reasonable relation to its actual costs. In Cumberland the plaintiff has brought a purported nationwide class action filed in the Superior Court of San Francisco. Plaintiffs are seeking restitution, punitive damages and injunctive relief. Basically, the claim is that the late charge of 7 1/2% or $50, whichever is less, is excessive. There has been extensive discovery and the court has granted nationwide class certification. In Crim, the plaintiff has made similar allegations. After granting a statewide class, the court granted Ford Credit’s motion for summary judgment because it found that the plaintiff had voluntarily made the late payments and was therefore precluded from bringing this action. Ford Credit has completed an extensive study of the costs incurred by it on delinquent accounts and is confident that it can justify the late charge fee.

      Wartime Labor. Ford and Ford Germany are among hundreds of defendants in numerous class action lawsuits brought on behalf of millions of foreign workers forced by the Nazi government to work for industry during WWII as a result of German labor shortages. In September 1999, a New Jersey federal court dismissed one of the class action lawsuits against Ford and Ford Germany, ruling that such issues must be resolved by governments, not the courts. That lawsuit is on appeal, along with an appeal of the dismissal of another lawsuit not involving Ford. Three other lawsuits are pending against Ford in federal courts in New York and California. Ford is seeking the dismissal of those actions. In December 1999, German and U.S. negotiators announced the formation of a $5.2 billion humanitarian fund that is expected to shield companies from further lawsuits. Ford is evaluating the appropriateness of participating in the fund as a means of resolving the matter.

Other Matters

      Konrad Patent Litigation. A patent infringement suit naming Ford as a defendant has been filed in the U.S. District Court for the Eastern District of Texas by an individual, Allan Konrad, who holds three patents allegedly covering intranet/ internet use. Mr. Konrad also owns a fourth patent application allegedly covering e-commerce. Thirty-eight other companies, including General Motors and DaimlerChrysler are codefendants in this litigation. Ford procures all products and services related to this infringement allegation from suppliers and believes that it is entitled to be indemnified by these suppliers for any loss that may result from this litigation.

      The technology covered in the Konrad patents relates to computer system configuration and a method of using that configuration. More specifically, a local host (personal workstation), remote host (server), a network connecting the local host to the remote host, and various computer service functionalities are claimed to be covered by these patents. Technology of this type is widely used by Ford and continued use is required.

      OFCCP Proceeding. In April 1997, the Department of Labor issued an administrative enforcement proceeding challenging Ford’s compliance with obligations imposed by Executive Order 11246, which prohibits employment discrimination and requires affirmative action by government contractors and subcontractors. The Office of Federal Contract Compliance Programs (“OFCCP”) claims that Ford’s Kentucky Truck Plant used a hiring process in 1993 for entry-level hourly laborer positions that discriminated against female applicants. OFCCP sought an order awarding back pay to the “affected class of women,” a job offer to each of these persons, and retroactive seniority for each person. A settlement was reached with OFCCP in February 2000. The settlement addressed all compliance investigations that had been pending, including the

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      Red Carpet Lease Terminations. The Florida Attorney General issued a subpoena asking for all Ford Credit Red Carpet Lease (“RCL”) early termination accounts going back to 1991. The Florida Attorney General has been investigating leasing practices at the dealership level for years. The Attorney General is representing a consortium of 37 states. The investigation focuses on whether Ford Credit RCL customers who want to terminate leases early and purchase the leased vehicle have been misled by the dealers’ alleged improper failure to itemize: (i) the cost to terminating the lease, and (ii) the vehicle purchase price. They claim that because Ford Credit requires the customer to early terminate with the originating dealer, Ford is conspiring with its dealer to mislead the customer. Ford believes that Ford Credit’s business practices are fair under applicable law, and is attempting to negotiate a resolution of the matter. There have been numerous and extensive meetings with most of the Attorneys General involved in the 37 state consortium. Ford is confident that an amicable resolution of this matter will be reached.

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SELECTED FINANCIAL DATA AND OTHER DATA OF FORD MOTOR COMPANY

Item 6.  Selected Financial Data

      The following tables set forth selected financial data and other data concerning Ford for each of the last eleven years (dollar amounts in millions, except per share amounts):

Summary of Operations				1999				1998				1997				1996				1995				1994				1993				1992				1991				1990
Automotive Sector
Sales				$	136,973			$	119,083			$	122,935			$	118,023			$	110,496			$	107,137			$	91,568			$	84,407			$	72,051			$	81,844
Operating income/(loss)					8,379				6,685				6,946				2,516				3,281				5,826				1,432				(1,775	)			(3,769	)			316
Income/(loss) before income taxes and cumulative effects of changes in accounting principles					8,447				6,958				7,082				2,571				3,166				5,997				1,291				(1,952	)			(4,052	)			275
Income/(loss) before cumulative effects of changes in accounting principles					5,721				4,752				4,714				1,655				2,056				3,913				1,008				(1,534	)			(3,186	)			99
Net income/(loss)					5,721				4,752				4,714				1,655				2,056				3,913				1,008				(8,628	)			(3,186	)			99
Financial Services Sector Revenues				$	25,585			$	25,333			$	30,692			$	28,968			$	26,641			$	21,302			$	16,953			$	15,725			$	16,235			$	15,806
Income before income taxes and cumulative effects of changes in accounting principles					2,579				18,438				3,857				4,222				3,539				2,792				2,712				1,825				1,465				1,220
Income before cumulative effects of changes in accounting principles  (a),(b),(c)					1,516				17,319				2,206				2,791				2,083				1,395				1,521				1,032				928				761
Net income					1,516				17,319				2,206				2,791				2,083				1,395				1,521				1,243				928				761
Total Company
Income/ (loss) before income taxes and cumulative effects of changes in accounting principles				$	11,026			$	25,396			$	10,939			$	6,793			$	6,705			$	8,789			$	4,003			$	(127	)		$	(2,587	)		$	1,495
Provision/(credit) for income taxes					3,670				3,176				3,741				2,166				2,379				3,329				1,350				295				(395	)			530
Minority interests in net income of subsidiaries					119				149				278				181				187				152				124				80				66				105
Income/(loss) before cumulative effects of changes in accounting principles  (a),(b),(c)					7,237				22,071				6,920				4,446				4,139				5,308				2,529				(502	)			(2,258	)			860
Cumulative effects of changes in accounting principles					—				—				—				—				—				—				—				(6,883	)			—				—
Net income/(loss)				$	7,237			$	22,071			$	6,920			$	4,446			$	4,139			$	5,308			$	2,529			$	(7,385	)		$	(2,258	)		$	860
Total Company Data Per Share of Common and Class B Stock  (d)
Income/(loss) before cumulative effects of changes in accounting principles				$	5.99			$	18.17			$	5.75			$	3.73			$	3.58			$	4.97			$	2.27			$	(0.73	)		$	(2.40	)		$	0.93
Income/(loss)
	Basic				5.99				18.17				5.75				3.73				3.58				4.97				2.27				(7.81	)			(2.40	)			0.93
	Diluted				5.86				17.76				5.62				3.64				3.33				4.44				2.10				(7.81	)			(2.40	)			0.92
Cash dividends					1.88				1.72				1.645				1.47				1.23				0.91				0.80				0.80				0.98				1.50
Common stock price range (NYSE)
	High				67 7/8				61 7/16				33 3/8				24 47/64				21 53/64				23 1/4				21 61/64				16 15/64				12 17/32				16 5/16
	Low				46 1/4				28 15/32				19 59/64				18 3/32				16 7/16				17 11/64				14 9/32				9 7/32				7 49/64				8 19/64
Average number of shares of Common and Class B stock outstanding (in millions)					1,210				1,211				1,195				1,179				1,071				1,010				986				972				952				926
Total Company Balance Sheet Data at Year-End
Assets
	Automotive Sector			$	105,181			$	88,744			$	85,079			$	79,658			$	72,772			$	68,639			$	61,737			$	57,170			$	52,397			$	50,824
	Financial Services Sector				171,048				148,801				194,018				183,209				170,511				150,983				137,201				123,375				122,032				122,839
		Total assets		$	276,229			$	237,545			$	279,097			$	262,867			$	243,283			$	219,622			$	198,938			$	180,545			$	174,429			$	173,663