-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, PmWsgf8yjVtTKYwbJjxQWu/13yLr+PkjePh3iJVYPVjRRpc8Z1s8OcKIJcvoCXOx YQYP9u9e+YirDFfjTU2AEQ== 0000950124-95-000729.txt : 19950615 0000950124-95-000729.hdr.sgml : 19950615 ACCESSION NUMBER: 0000950124-95-000729 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950316 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORD MOTOR CO CENTRAL INDEX KEY: 0000037996 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 380549190 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03950 FILM NUMBER: 95521319 BUSINESS ADDRESS: STREET 1: THE AMERICAN RD CITY: DEARBORN STATE: MI ZIP: 48121 BUSINESS PHONE: 3133232260 10-K 1 FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-K (Mark One) X Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Fee Required) For the fiscal year ended December 31, 1994 OR ___ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee Required) For the transition period from ______________________ to ____________________ Commission file number 1-3950 FORD MOTOR COMPANY (Exact name of registrant as specified in its charter) Delaware 38-0549190 (State of incorporation) (I.R.S. Employer Identification No.) The American Road, Dearborn, Michigan 48121 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 313-322-3000 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Name of each exchange on Title of each class which registered (a) - --------------------------------------------- ---------------------------- Common Stock, par value $1.00 per share New York Stock Exchange Pacific Coast Stock Exchange Depositary Shares, each representing New York Stock Exchange 1/1,000 of a share of Series A Cumulative Convertible Preferred Stock, as described below Depositary Shares, each representing New York Stock Exchange 1/2,000 of a share of Series B Cumulative Preferred Stock, as described below _____________ (a) In addition, shares of Common Stock of the Registrant are listed on the Tokyo Stock Exchange in Japan and on certain stock exchanges in the United Kingdom and Continental Europe. [COVER PAGE 1 OF 2 PAGES] 2 SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Series A Cumulative Convertible Preferred Stock, par value $1.00 per share, with an annual dividend rate of $4,200 per share and a liquidation preference of $50,000 per share. Series B Cumulative Preferred Stock, par value $1.00 per share, with an annual dividend rate of $4,125 per share and a liquidation preference of $50,000 per share. 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______ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of February 1, 1995, the Registrant had outstanding 953,486,149 shares of Common Stock and 70,852,076 shares of Class B Stock. Based on the New York Stock Exchange Composite Transaction closing price of the Common Stock on that date ($25 1/8 a share), the aggregate market value of such Common Stock was $23,956,339,493.63. Although there is no quoted market for the Registrant's Class B Stock, shares of Class B Stock may be converted at any time into an equal number of shares of Common Stock for the purpose of effecting the sale or other disposition of such shares of Common Stock. The shares of Common Stock and Class B Stock outstanding at February 1, 1995 included shares owned by persons who may be deemed to be "affiliates" of the Registrant. The Registrant does not believe, however, that any such person should be considered to be an affiliate. For information concerning ownership of outstanding Common Stock and Class B Stock, see the Proxy Statement for the Registrant's Annual Meeting of Stockholders to be held on May 11, 1995 (the "Proxy Statement"), which is incorporated by reference under various Items of this Report. Documents Incorporated by Reference* Document Where Incorporated 1. Proxy Statement. Part III (Items 10, 11, 12 and 13) __________________________ * As stated under various Items of this Report, only certain specified portions of such document are incorporated by reference herein. [COVER PAGE 2 OF 2 PAGES] 3 PART I Item 1. Business Ford Motor Company (referred to herein as "Ford", the "Company" or the "Registrant") was incorporated in Delaware in 1919 and acquired the business of a Michigan company, also known as Ford Motor Company, incorporated in 1903 to produce automobiles designed and engineered by Henry Ford. Ford is the second-largest producer of cars and trucks in the world, and ranks among the largest providers of financial services in the United States. General The Company's two principal business segments are Automotive and Financial Services. The activities of the Automotive segment consist of the design, manufacture, assembly and sale of cars and trucks and related parts and accessories. Substantially all of Ford's automotive products are marketed through retail dealerships, most of which are privately owned and financed. The Financial Services segment is comprised of the following direct subsidiaries, the activities of which include financing operations, vehicle and equipment leasing and insurance operations: Ford Motor Credit Company ("Ford Credit"), Ford Credit Europe plc ("Ford Credit Europe"), Ford Holdings, Inc. ("Ford Holdings"), The Hertz Corporation ("Hertz") and Granite Management Corporation (formerly First Nationwide Financial Corporation) ("Granite"). Ford Holdings is a holding company that owns primarily Associates First Capital Corporation ("The Associates"), USL Capital Corporation (formerly United States Leasing International, Inc.) ("USL Capital") and The American Road Insurance Company ("American Road"). In addition, there are a number of international affiliates not listed above that are consolidated in the total Financial Services results, but are managed by either Ford Credit (which manages Ford Credit Europe, as well as other international affiliates), The Associates or USL Capital. See Note 18 of Notes to Financial Statements and Item 6. "Selected Financial Data" for information relating to revenue, operating income or loss and assets attributable to Ford's industry segments. Also see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" for information with respect to revenue, net income and other matters. Automotive Operations The worldwide automotive industry is affected significantly by a number of factors over which the industry has little control, including general economic conditions. In the United States, the automotive industry is a highly-competitive, cyclical business characterized by a wide variety of product offerings. The level of industry demand (retail deliveries of cars and trucks) can vary substantially from year to year and, in any year, is dependent to a large extent on general economic conditions, the cost of purchasing and operating cars and trucks and the availability and cost of credit and of fuel, and reflects the fact that cars and trucks are durable items, the replacement of which can be postponed. 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 respective countries of origin. Most of the factors that affect the U.S. automotive industry and its sales volumes and profitability are equally relevant outside the United States. 4 Item 1. Business (Continued) The worldwide automotive industry also is affected significantly by a substantial amount of 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. Unit sales of Ford vehicles vary with the level of total industry demand and Ford's share of industry sales. Ford's share is influenced by the quality, price, design, driveability, safety, reliability, economy and utility of its products compared with those offered by other manufacturers, as well as by the timing of new model introductions and 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 affect Ford's sales and earnings significantly. The profitability of vehicle sales is affected by many factors, including unit sales volume, the mix of vehicles and options 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 control costs and 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 with relatively small changes in unit volume. Ford has operations in over 30 countries and sells vehicles in over 200 markets. These businesses frequently have foreign currency exposures when they buy, sell, and finance in currencies other than their local currencies. Ford's primary foreign currency exposures, in terms of revenue and income, are in the German Mark, Japanese Yen, Italian Lira and French Franc. The effect of changes in exchange rates on income depends largely on the relationship between revenues and costs incurred in the local currency versus other currencies. Historically, the effect of changes in exchange rates on Ford's earnings generally has been small relative to other factors that also affect earnings (such as unit sales). United States Sales Data. The following table shows U.S. industry demand for the years indicated:
U.S. Industry Retail Deliveries (millions of units) ------------------------------------ Years Ended December 31 ------------------------------------ 1994 1993 1992 1991 1990 ---- ---- ----- ---- ---- Cars........................................ 9.0 8.5 8.2 8.2 9.3 Trucks...................................... 6.4 5.7 4.9 4.3 4.8 ---- ---- ---- ---- ---- Total....................................... 15.4 14.2 13.1 12.5 14.1 ==== ==== ==== ==== ====
-2- 5 Item 1. Business (Continued) Ford classifies cars by small, middle, large and luxury segments and trucks by compact pickup, compact van/utility, full-size pickup, full-size van/utility and medium/heavy segments. The large and luxury car segments and the compact van/utility, full-size pickup and full-size van/utility truck segments include the industry's most profitable vehicle lines. The following tables show the proportion of retail car and truck sales by segment for the industry (including Japanese and other foreign-based manufacturers) and Ford for the years indicated:
U.S. Industry Car Sales by Segment ------------------------------------------ Years Ended December 31 ------------------------------------------ 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- Small........................... 31.5% 28.8% 29.3% 29.0% 28.9% Middle.......................... 48.9 52.1 51.7 51.4 51.8 Large........................... 8.2 8.5 9.2 9.6 9.1 Luxury.......................... 11.4 10.6 9.8 10.0 10.2 ----- ----- ----- ----- ----- Total U.S. Industry Car Sales... 100.0% 100.0% 100.0% 100.0% 100.0% ===== ===== ===== ===== =====
Ford Car Sales by Segment in U.S. ------------------------------------------ Years Ended December 31 ------------------------------------------ 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- Small........................... 35.0% 29.0% 26.6% 31.2% 31.1% Middle.......................... 45.3 51.7 53.4 47.3 44.8 Large........................... 10.3 9.9 10.5 10.1 11.2 Luxury.......................... 9.4 9.4 9.5 11.4 12.9 ----- ----- ----- ----- ----- Total Ford U.S. Car Sales....... 100.0% 100.0% 100.0% 100.0% 100.0% ===== ===== ===== ===== =====
As shown in the first table above, the percentages of industry sales in the various car segments have remained relatively stable since 1990. As shown in the second table above, Ford's proportion of sales in 1994 has increased in the small segment and decreased in the middle segment, reflecting lower sales of Tempo and Topaz models, which were discontinued in 1994.
U.S. Industry Truck Sales by Segment ------------------------------------------ Years Ended December 31 ------------------------------------------ 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- Compact pickup.................. 18.5% 18.9% 20.8% 22.4% 22.9% Compact van/utility............. 40.4 41.1 40.1 38.8 34.7 Full-Size pickup................ 26.3 24.8 24.2 25.1 26.0 Full-Size van/utility........... 9.9 10.6 10.6 9.4 11.4 Medium/Heavy.................... 4.9 4.6 4.3 4.3 5.0 ----- ----- ----- ----- ----- Total U.S. Industry Truck Sales. 100.0% 100.0% 100.0% 100.0% 100.0% ===== ===== ===== ===== =====
Ford Truck Sales by Segment in U.S. ------------------------------------------ Years Ended December 31 ------------------------------------------ 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- Compact pickup.................. 17.8% 19.7% 17.0% 18.5% 19.8% Compact van/utility............. 33.5 32.6 33.5 31.5 25.3 Full-Size pickup................ 33.4 32.6 33.6 35.8 36.8 Full-Size van/utility........... 12.5 12.4 13.1 11.7 14.9 Medium/Heavy.................... 2.8 2.7 2.8 2.5 3.2 ----- ----- ----- ----- ----- Total Ford U.S. Truck Sales..... 100.0% 100.0% 100.0% 100.0% 100.0% ===== ===== ===== ===== =====
As shown in the tables above, for both the industry and Ford, the compact van/utility segment has grown significantly since 1990, while the full-size segments (pickups and van/utility) have declined slightly as a percentage of total truck sales. -3- 6 Item 1. Business (Continued) Market Share Data. The following tables show changes in car and truck market shares of United States and foreign-based manufacturers for the years indicated:
U.S. Car Market Shares* -------------------------------------- Years Ended December 31 -------------------------------------- 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- U.S. Manufacturers (Including Imports) Ford................................. 21.8% 22.3% 21.8% 20.1% 21.1% General Motors....................... 34.0 34.1 34.6 35.6 35.6 Chrysler............................. 9.0 9.8 8.3 8.6 9.2 ----- ----- ----- ----- ----- Total U.S. Manufacturers........... 64.8 66.2 64.7 64.3 65.9 Foreign-Based Manufacturers** Japanese............................. 29.6 29.1 30.1 30.2 27.9 All Other............................ 5.6 4.7 5.2 5.5 6.2 ----- ----- ----- ----- ----- Total Foreign-Based Manufacturer.. 35.2 33.8 35.3 35.7 34.1 ----- ----- ----- ----- ----- Total U.S. Car Retail Deliveries.. 100.0% 100.0% 100.0% 100.0% 100.0% ===== ===== ===== ===== =====
U.S. Truck Market Shares* -------------------------------------- Years Ended December 31 -------------------------------------- 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- U.S. Manufacturers (Including Imports) Ford................................. 30.1% 30.5% 29.7% 28.9% 29.3% General Motors....................... 30.9 31.4 32.2 32.9 34.3 Chrysler............................. 21.7 21.4 21.1 18.5 17.3 Navistar International............... 1.3 1.3 1.3 1.4 1.5 All Other............................ 1.8 1.6 1.4 1.3 1.4 ----- ----- ----- ----- ----- Total U.S. Manufacturers........... 85.8 86.2 85.7 83.0 83.8 Foreign-Based Manufacturers** Japanese............................. 13.5 13.2 13.8 16.5 15.6 All Other............................ 0.7 0.6 0.5 0.5 0.6 ----- ----- ----- ----- ----- Total Foreign-Based Manufacturers.. 14.2 13.8 14.3 17.0 16.2 ----- ----- ----- ----- ----- Total U.S. Truck Retail Deliveries. 100.0% 100.0% 100.0% 100.0% 100.0% ===== ===== ===== ===== =====
U.S. Combined Car and Truck Market Shares* ------------------------------------------ Years Ended December 31 ------------------------------------------ 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- U.S. Manufacturers (Including Imports) Ford................................. 25.2% 25.5% 24.7% 23.2% 23.9% General Motors....................... 32.7 33.1 33.7 34.6 35.2 Chrysler............................. 14.3 14.4 13.1 12.0 12.0 Navistar International............... 0.5 0.5 0.5 0.5 0.5 All Other............................ 0.8 0.7 0.5 0.5 0.5 ----- ----- ----- ----- ----- Total U.S. Manufacturers........... 73.5 74.2 72.5 70.8 72.1 Foreign-Based Manufacturers** Japanese............................. 22.9 22.8 24.0 25.5 23.7 All Other............................ 3.6 3.0 3.5 3.7 4.2 ----- ----- ----- ----- ----- Total Foreign-Based Manufacturers.. 26.5 25.8 27.5 29.2 27.9 ----- ----- ----- ----- ----- Total U.S. Car and Truck Retail Deliveries........................ 100.0% 100.0% 100.0% 100.0% 100.0% - -------------------- ===== ===== ===== ===== =====
* All U.S. retail sales data are based on publicly available information from the American Automobile Manufacturers Association, the media and trade publications. ** Share data include cars and trucks assembled and sold in the U.S. by Japanese-based manufacturers selling through their own dealers as well as vehicles imported by them into the U.S. "All Other" includes primarily companies based in various European countries and in Korea and Taiwan. -4- 7 Item 1. Business (Continued) Japanese Competition. The market share of Ford and other domestic manufacturers in the U.S. is affected by sales from Japanese manufacturers. As shown in the table above, the share of the U.S. combined car and truck industry held by the Japanese manufacturers increased from 23.7% in 1990 to 25.5% in 1991, but declined to 22.9% in 1994, reflecting in part the effects of the strengthening of the Japanese yen on the prices of vehicles produced by the Japanese manufacturers. In the 1980s and continuing in the 1990s, Japanese manufacturers added assembly capacity in North America (frequently referred to as "transplants") in response to a variety of factors, including export restraints, the significant growth of Japanese car sales in the U.S. and international trade considerations. In response to the strengthening of the Japanese yen to the U.S. dollar, Japanese manufacturers are continuing to add production capacity (particularly in the profitable truck segments) in the United States. Production in the U.S. by Japanese transplants reached about 2.4 million units in 1994 and is expected to increase gradually over the next several years. Marketing Incentives and Fleet Sales. As a result of intense competition from new product offerings (from both domestic and foreign manufacturers) and the desire to maintain economic production levels, automotive manufacturers that sell vehicles in the U.S. have provided marketing incentives (price discounts) to retail and fleet customers (i.e., daily rental companies, commercial fleets, leasing companies and governments). Marketing incentives are particularly prevalent during periods of economic downturns, when excess capacity in the industry tends to exist. Ford's U.S. and Canada marketing costs as a percentage of gross sales revenue for each of 1994, 1993 and 1992 were: 8.5%, 9.9% and 10.9%, respectively. During the 1983-1988 period, such costs as a percentage of sales revenue were in the 4% to 7% range. In 1991, marketing costs peaked at 14% of gross revenues. "Marketing costs" include (i) marketing incentives such as retail rebates and special financing rates, (ii) reserves for residual guaranties on retail vehicle leases; (iii) reserves for costs and/or losses associated with obligatory repurchases of certain vehicles sold to daily rental companies and (iv) costs for advertising and sales promotions. Sales by Ford to fleet customers were as follows for the years indicated:
Ford Fleet Sales --------------------------------------------- Years Ended December 31 --------------------------------------------- 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- Units Sold..................... 924,000 881,000 882,000 782,000 821,000 Percent of Ford's Total Car and Truck Sales.... 24% 25% 28% 27% 24%
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 sales has been about evenly split in recent years. Warranty Coverages. In recent years, due to competitive pressures, vehicle manufacturers have both expanded the coverages and extended the terms of warranties on vehicles sold in the U.S. Ford presently provides warranty coverage on most vehicles sold by it in the U.S that extends for 36 months or 36,000 miles (whichever occurs first) and covers nearly all components of the vehicle. Different warranty coverages are provided on vehicles sold outside the U.S. In addition, as discussed below under "Governmental Standards - Mobile Source Emissions Control", the Federal Clean Air Act requires a useful -5- 8 Item 1. Business (Continued) life of 10 years or 100,000 miles (whichever occurs first) for emissions equipment on vehicles sold in the U.S. As a result of these coverages 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 Europe is the largest market for the sale of Ford cars and trucks outside the United States. The automotive industry in Europe is intensely competitive; for the past 12 years, the top six manufacturers have each achieved a car market share in about the 10% to 16% range. (Manufacturers' shares, however, vary considerably by country.) This competitive environment is expected to intensify further as Japanese manufacturers, which together had a European car market share of 11% for 1994, increase their production capacity in Europe and import restrictions on Japanese built-up vehicles gradually are removed in total by December 31, 1999. In 1994, European car industry sales were 11.8 million cars, up 6% from 1993 levels. Truck sales were 1.4 million units, up 6% from 1993 levels. Ford's European car share for 1994 was 11.8%, compared with 11.5% for 1993, and its European truck share for 1994 was 14.7%, compared with 14.6% for 1993. For Ford, Great Britain and Germany are the 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 total automotive profits. For 1994 compared with 1993, total industry sales were up 8% in Great Britain and unchanged in Germany. Other Foreign Markets Mexico and Canada. Mexico and Canada also are important markets for Ford. Generally, industry conditions in Canada closely follow conditions in the U.S. market. In 1994, industry sales of cars and trucks in Canada were up 5% from 1993 levels, slightly less than the increase of 8% in the U.S. over the same period. Mexico has been a growing market. In 1994, industry sales were up 2% to 619,000 units. However, substantial devaluation of the Mexican peso in late 1994 created a high level of uncertainty regarding economic activity in Mexico. Although the long-term outlook remains positive, industry volume is expected to be down substantially in 1995. Ongoing financial effects of the devaluation on Ford are expected to be unfavorable; the magnitude of these will be dependent in large part upon overall economic conditions and the extent to which the Mexican government permits price increases. The North American Free Trade Agreement ("NAFTA") became effective January 1, 1994. NAFTA unites Canada, Mexico and the United States into the world's largest trading region by phasing out regulations which restricted trade between Mexico and the U.S. and Canada. The Company believes that NAFTA will benefit the economies of the three countries and the North American automobile industry in particular. In 1994, Ford had 28,448 export sales to Mexico, compared with none in 1993. South America. Brazil, Argentina and Venezuela are the principal markets for Ford in South America. The economic environment in those countries has been volatile in recent years, leading to large variations in profitability. Results also have been influenced by government actions to reduce inflation and public deficits, and improve the balance of payments. In 1994, Ford's profitability in the region improved -6- 9 Item 1. Business (Continued) compared with 1993, primarily reflecting strong results in Brazil and Argentina. Autolatina (Ford's joint venture with Volkswagen AG in Brazil and Argentina) remained the market leader in Brazil. Industry sales in Brazil and Argentina were at record levels in 1994. In Brazil, the economic plan implemented in late 1993 has had a stabilizing effect on the Brazilian economy and has reduced inflation, but the ongoing success of the plan remains uncertain. In addition, duties on vehicles imported into Brazil have declined progressively from 85% in 1990 to 32% in 1995. As a result, imports have been and are expected to continue to gain a progressively larger share of the car market in Brazil. Ford and Volkswagen have agreed on a separation process leading toward dissolution of Autolatina in Brazil and Argentina by year-end 1995. See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" for more information concerning this plan for dissolution. Ford's future results in the region largely will be dependent on the political and economic environments in Brazil and Argentina, which historically have been unpredictable. Asia-Pacific. In the Asia-Pacific region, Australia, Taiwan and Japan are the principal markets for Ford products. In 1994, Ford was the car market share leader in Australia with a 22.9% car market share and a 20.3% combined car and truck market share. In Taiwan (where sales of built-up vehicles manufactured in Japan are prohibited), Ford had a combined car and truck market share in 1994 of 16.3%. Ford's principal competition in the Asia-Pacific region has been the Japanese manufacturers. It is anticipated that the continuing relaxation of import restrictions (including duty reductions) in Australia and Taiwan will intensify competition in those markets. Ford believes that the Asia-Pacific region offers many important opportunities for the future. Ford believes that China is strategically important to Ford's long-term success in the Asia-Pacific region. Ford China Operations was established in 1994 to coordinate all of Ford's activities in China. In 1994, Ford invested in automotive component manufacturing joint ventures in China (automotive interior trim, automotive glass and automotive electronic/audio components) and purchased a 6.5% equity interest in Mahindra and Mahindra Limited, an automotive and tractor manufacturer in India. Ford is continuing to investigate additional automotive component manufacturing and vehicle assembly opportunities in those markets as well as others. In addition, Ford is expanding the number of right-hand-drive vehicles it will offer in Japan, including the Probe, Explorer and Taurus models. Ford's relationship with Mazda Motor Corporation, in which it has held a 25% ownership interest since 1979, has been a key element of Ford's presence in the Asia-Pacific region. Recent management appointments by Mazda of Ford-nominated executives have been made to improve coordination of business and product plans in the Asia-Pacific region. Africa. In late 1994, Ford re-entered the South African market by acquiring a 45% equity interest in South African Motor Corporation (Pty.) Limited ("SAMCOR"). SAMCOR is an assembler of Ford and other manufacturers' vehicles in South Africa. -7- 10 Item 1. Business (Continued) Financial Services Operations Ford Motor Credit Company Ford Credit is a wholly owned subsidiary of Ford. It provides wholesale financing and capital loans to franchised Ford dealers and other dealers associated with such franchisees and purchases 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 dealers. In addition, a wholly owned subsidiary of Ford Credit provides these financing services in the U.S. to other vehicle dealers. More than 80% of all new vehicles financed by Ford Credit are manufactured by Ford or its affiliates. In addition to vehicle financing, Ford Credit makes loans to affiliates of Ford, finances certain receivables of Ford and its subsidiaries and offers diversified financing services which are managed by USL Capital, a wholly owned subsidiary of Ford Holdings. Ford Credit also manages the activities of a number of international credit affiliates of Ford and the insurance business of American Road, a wholly owned subsidiary of Ford Holdings. 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 during each of the past five years:
Years ended December 31 ------------------------------------- 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- Retail*................. 36.6% 38.5% 37.7% 35.2% 31.4% Wholesale............... 81.5 81.4 77.6 74.9 71.0
_________________________ * As a percentage of total sales and leases, including cash sales. Ford Credit's finance receivables and investments in operating leases were as follows at the dates indicated (in millions):
December 31, -------------------------- 1994 1993 --------- --------- Finance receivables Retail $40,567 $38,609 Wholesale 15,253 11,699 Diversified 2,738 2,626 Other 4,264 3,681 ------- ------- Total finance receivables 62,822 56,615 Loan origination costs, net 156 125 Unearned income (5,371) (5,263) Allowance for credit losses (660) (718) ------- ------- Finance receivables, net $56,947 $50,759 ======= ======= Investments in operating leases $24,853 $15,773 Accumulated depreciation (4,603) (2,974) Allowance for credit losses (256) (198) ------- ------- Investments in operating leases, net $19,994 $12,601 ======= =======
-8- 11 Item 1. Business (Continued) Installments on finance receivables, including interest, past-due 60 days or more and the aggregate receivable balances related to such past-due installments were as follows at the dates indicated (in millions):
December 31, 1994 December 31, 1993 ----------------------- ----------------------- Installments Balances Installments Balances ------------ -------- ------------ -------- Retail $27 $183 $10 $ 98 Diversified 5 8 13 56 Other 1 7 24 95 --- ---- --- ---- Total $33 $198 $47 $249 === ==== === ====
The following table sets forth information concerning Ford Credit's credit loss experience with respect to the various categories of financing during the years indicated (dollar amounts in millions):
Years Ended or at December 31, ------------------------------ 1994 1993 1992 ------ ------ ------ Net losses Retail* $221 $213 $298 Wholesale 1 (4) 15 Diversified 2 14 23 Other 5 5 6 ---- ---- ---- Total $229 $228 $342 ==== ==== ==== Net losses as a percentage of average receivables Retail* 0.38% 0.46% 0.75% Total finance receivables* 0.30 0.35 0.60 Provision for credit losses $247 $270 $418 Allowance for credit losses 916 916 916 Allowance as a percent of net receivables* 1.18% 1.42% 1.66%
_______________________ *Includes investments in operating leases. An analysis of Ford Credit's allowance for credit losses on finance receivables and operating leases is as follows for the years indicated (in millions):
1994 1993 1992 ------ ------ ------ Beginning balance $ 916 $ 916 $ 825 Additions 247 270 418 Deductions Losses 378 392 476 Recoveries (149) (164) (134) ----- ----- ----- Net losses 229 228 342 Other changes, including reclassifications and amounts related to finance receivables sold 18 42 (15) ----- ----- ----- Net deductions 247 270 327 ----- ----- ----- Ending balance $ 916 $ 916 $ 916 ===== ===== =====
-9- 12 Item 1. Business (Continued) Ford Credit relies heavily on its ability to raise substantial amounts of funds. These funds are obtained primarily by sales of commercial paper and issuance of term debt. 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 and dividend payments, interest supplements and other support from Ford for vehicles financed by Ford Credit under Ford-sponsored special financing or leasing programs, 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 financial condition of and the outlook for Ford, and the nature and availability of support facilities, such as revolving credit and receivables sales agreements. The long-term senior debt of Ford and Ford Credit is rated "a1" and "A+" and Ford Credit's commercial paper is rated "Prime-1" and "A-1" by Moody's Investors Service, Inc. and Standard & Poor's Ratings Group, respectively. Ford and Ford Credit have a profit maintenance agreement which provides for payments by Ford to the extent required to maintain Ford Credit's earnings at specified minimum levels. No payments were required under the agreement during the period 1988 through 1994. Ford Credit Europe plc In 1993, most of the European credit operations of Ford, which generally had been organized as subsidiaries of the respective automotive affiliates of Ford throughout Europe, were consolidated into a single company, Ford Credit Europe. Ford Credit Europe, which was originally incorporated in 1963 in England as a private limited company, is wholly owned by Ford and certain of its subsidiaries. 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. The business of Ford Credit Europe is substantially dependent upon Ford's automotive operations in Europe. Ford Credit Europe issues commercial paper, certificates of deposits and term debt to fund its credit operations. One of the purposes of the consolidation described above is to facilitate Ford Credit Europe's access to public debt markets. Ford Credit Europe's ability to obtain funds in these markets is affected by its credit ratings, which are closely related to the financial condition of and outlook for Ford. Ford Credit Europe's finance receivables and investments in operating leases were as follows at the dates indicated (in millions):
December 31, -------------------------- 1994 1993 --------- --------- Finance receivables Retail $ 9,356 $ 7,143 Wholesale 4,615 3,724 Other 234 100 ------- ------- Total finance receivables 14,205 10,967 Loan origination costs, net 85 63 Unearned income (1,159) (955) Allowance for credit losses (162) ( 89) ------- ------- Finance receivables, net $12,969 $ 9,986 ======= ======= Investments in operating leases $ 1,010 $ 818 Accumulated depreciation (231) (212) Allowance for credit losses (7) (1) ------- ------- Investments in operating leases, net $ 772 $ 605 ======= =======
-10- 13 Item 1. Business (Continued) An analysis of Ford Credit Europe's allowance for credit losses in finance receivables and operating leases is as follows for the years indicated (in millions):
1994 1993 1992 ------ ------ ------ Beginning balance $ 90 $123 $145 Additions 50 46 62 Net losses (66) (72) (51) Other changes 95 (7) (33) ---- ---- ---- Ending balance $169 $ 90 $123 ==== ==== ====
Ford Holdings, Inc. Ford Holdings was incorporated on September 1, 1989 for the principal purpose of acquiring, owning and managing certain assets of Ford. All the outstanding common stock of Ford Holdings, representing 75% of the combined voting power of all classes of capital stock, is owned, directly or indirectly, by Ford. The balance of the capital stock, consisting of preferred stock, is held by persons other than Ford and accounts for the remaining 25% of the total voting power. Ford Holdings' primary activities consist of consumer and commercial financing operations, insurance underwriting and equipment leasing through its wholly owned subsidiaries, The Associates, American Road and USL Capital. Associates First Capital Corporation The Associates conducts its operations primarily through its principal operating subsidiary, Associates Corporation of North America. The Associates' primary business activities are consumer finance, commercial finance and insurance underwriting. The consumer finance operation is engaged in making and investing in residential real estate-secured loans to individuals, making secured and unsecured installment loans to individuals, purchasing consumer retail installment obligations, investing in credit card receivables, financing manufactured housing purchases and providing other consumer financial services. The commercial finance operation is principally engaged in financing sales of transportation and industrial equipment and leasing, and providing other financial services, including automobile club and relocation services. The insurance operation is engaged in underwriting credit life, credit accident and health, property, casualty and accidental death and dismemberment insurance, principally for customers of the finance operations of The Associates. The Associates' finance receivables were as follows at the dates indicated (in millions):
December 31, ------------------------- 1994 1993 --------- --------- Consumer finance Residential real estate-secured receivables $12,003 $10,626 Direct installment and credit card receivables 7,200 6,060 Manufactured housing and other installment receivables 4,864 3,810 ------- ------- Total consumer finance receivables 24,067 20,496 Commercial finance Heavy-duty truck receivables 5,001 4,334 Other industrial equipment receivables 5,877 4,743 ------- ------- Total commercial finance receivables 10,878 9,077 ------- ------- Gross receivables 34,945 29,573 Unearned finance income (3,769) (3,208) ------- ------- Net finance receivables $31,176 $26,365 ======= ======= Allowance for losses on finance receivables $ 944 $ 809
-11- 14 Item 1. Business (Continued) Credit loss experience, net of recoveries, of The Associates' finance business was as follows for the years indicated (dollar amounts in millions):
Years Ended or at December 31, ------------------------------ 1994 1993 1992 ------ ------ ------ NET CREDIT LOSSES Consumer finance Amount $ 456 $ 372 $ 383 % of average net receivables 2.33% 2.19% 2.64% % of receivables liquidated 3.09 3.41 4.57 Commercial finance Amount $ 8 $ 22 $ 42 % of average net receivables .09% .30% .64% % of receivables liquidated .08 .26 .61 Total net credit losses Amount $ 464 $ 394 $ 425 % of average net receivables 1.62% 1.61% 2.02% % of receivables liquidated 1.84 2.03 2.80 ALLOWANCE FOR LOSSES Balance at end of period $ 944 $ 809 $ 699 % of net receivables 3.03% 3.07% 3.06%
The following table shows total gross balances contractually delinquent sixty days and more by type of business at the dates indicated (dollar amounts in millions):
Consumer Finance Commercial Finance Total ------------------- -------------------- ------------------- Balances Delinquent Balances Delinquent Balances Delinquent 60 Days and More 60 Days and More 60 Days and More ------------------- -------------------- ------------------- Gross % of Gross % of Gross % of Amount Outstandings Amount Outstandings Amount Outstandings ------ ------------ ------ ------------ ------ ------------ At December 31, 1994 $443 1.84% $31 .28% $474 1.36% 1993 363 1.77 48 .53 411 1.39
An analysis of The Associates' allowance for losses on finance receivables is as follows for the years indicated (in millions):
1994 1993 1992 ------ ------ ------ Beginning balance $809 $699 $591 Additions 577 477 513 Recoveries 101 88 72 Losses (565) (482) (497) Other adjustments, primarily reserves of acquired businesses 22 27 20 ---- ---- ---- Ending balance $944 $809 $699 ==== ==== ====
USL Capital Corporation USL Capital, a diversified commercial leasing and financing organization, originally incorporated in 1956, was acquired by Ford in 1987 and was transferred to Ford Holdings in 1989. The primary operations of USL Capital include the leasing, financing, and management of office, manufacturing and other general-purpose business equipment; commercial fleets of automobiles, vans, and trucks; large-balance transportation equipment (principally commercial aircraft, rail, and marine equipment); industrial and energy facilities; and essential-use equipment for state and local governments. It also provides intermediate-term, first-mortgage loans on commercial properties and invests in corporate preferred stock and senior and subordinated debt instruments. Certain of these financing transactions are carried on the books of Ford affiliates. -12- 15 Item 1. Business (Continued) The following table sets forth certain information regarding USL Capital's earning assets, credit losses, and delinquent accounts at the dates indicated (dollar amounts in millions):
December 31, -------------------------------- 1994 1993 1992 -------- -------- -------- Total earning assets Investments in finance leases - net $2,435 $2,364 $2,075 Investments in operating leases - net 712 695 558 Investments in leveraged leases - net 266 191 4 Notes receivable 825 721 502 Investments in securities 700 563 329 Inventory held for sale or lease 87 55 97 Investments in associated companies 18 18 20 ------ ------ ------ Total $5,043 $4,607 $3,585 ====== ====== ====== Allowance for doubtful accounts Beginning balance $ 55 $ 40 $ 30 Additions 8 25 19 Deductions (5) (10) (9) ------ ------ ------ Ending balance $ 58 $ 55 $ 40 ====== ====== ====== Allowance for doubtful accounts as a percent of earning assets 1.2% 1.2% 1.1% Total balance over 90 days past due at year end $ 37 $ 44 $ 49 Percent of earning assets 0.7% 1.0% 1.4%
The American Road Insurance Company American Road was incorporated as a wholly owned subsidiary of Ford Credit in 1959 and was transferred to Ford Holdings in 1989. The operations of American Road consist primarily of underwriting floor plan insurance related to substantially all new vehicle inventories of dealers financed at wholesale by Ford Credit in the United States and Canada, credit life and disability insurance in connection with retail vehicle financing, and insurance related to retail contracts sold by automobile dealers to cover vehicle repairs. In addition, Ford Life Insurance Company ("Ford Life"), a wholly owned subsidiary of American Road, offers deferred annuities which are sold primarily through banks and brokerage firms. The obligations of Ford Life, including annuities, are guaranteed by American Road. In addition, American Road has agreed to maintain Ford Life's surplus and capital at levels necessary to meet applicable insurance regulations. The following table summarizes the revenues and net income of American Road (in millions):
Premiums Investment Annuities and Net Earned Income Other Income Total Income ------ ------ ------------ ----- ------ 1994 $376 $ 41 $159 $576 $ 58(a) 1993 465 141 130 736 79 1992 519 175 42 736 63(b) 1991 706 211 2 919 126 1990 764 149 4 917 103 _____________
(a) Includes an increase of $26 million for nonrecurring recovery of income taxes in 1994 from prior years. (b) Includes an increase of $16 million resulting from the cumulative effect of adopting new accounting rules on income taxes. -13- 16 Item 1. Business (Continued) The detail of premiums earned by American Road was as follows (in millions):
1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- Extended service contracts $148 $211 $217 $318 $355 Physical damage 119 139 176 227 228 Credit life and disability 109 115 126 161 181 ---- ---- ---- ---- ---- Total $376 $465 $519 $706 $764 ==== ==== ==== ==== ====
The Hertz Corporation On March 8, 1994, Ford purchased from Commerzbank Aktiengellschaft, a German bank, additional shares of common stock of Hertz aggregating 5% of the total outstanding voting stock, thereby bringing Ford's ownership of the total voting stock of Hertz to 54% from 49%. On April 29, 1994, Ford acquired 20% of Hertz' common stock from Park Ridge Limited Partnership, and Hertz redeemed the common stock (26%) and preferred stock of Hertz owned by AB Volvo for $145 million. These transactions resulted in Hertz becoming a wholly owned subsidiary of Ford. In addition, a $150 million subordinated promissory note of Hertz held by Ford Credit was exchanged for $150 million of preferred stock of Hertz. Because the Company was a principal shareholder of Hertz prior to these transactions, there was no significant change in the relationship between Ford and Hertz. Prior to these transactions, Hertz had been accounted for on an equity basis as part of the Automotive segment. Hertz' operating results, assets, liabilities and cash flows were consolidated as part of the Financial Services segment effective March 31, 1994. Hertz was incorporated in 1967 and is a successor to corporations which were engaged in the automobile and truck leasing and rental business since 1924. Hertz' affiliates, independent licensees and associates are engaged principally in the business of renting automobiles and renting and leasing trucks, without drivers, in the U.S. and in over 150 foreign countries. Collectively, they operate what Hertz believes is the largest rent-a-car business in the world and one of the largest one-way truck rental businesses in the U.S. In addition, through its wholly owned subsidiary, Hertz Equipment Rental Corporation, Hertz operates what it believes to be the largest business in the U.S. involving the rental, lease and sale of construction and materials handling equipment. Other activities of Hertz include the sale of its used vehicles, the leasing of automobiles, and providing claim management and telecommunications services in the U.S. Revenue earning equipment is used in the rental of vehicles and construction equipment and the leasing of vehicles under closed-end leases where the disposition of the vehicles upon termination of the lease is for the account of Hertz. The cost and accumulated depreciation of revenue earning equipment were as follows for the nine months ended December 31, 1994 (in millions):
Revenue Earning Equipment ---------------------------------------- Accumulated Cost Depreciation Net Book Value --------- ------------ -------------- Balance, March 31, 1994 $ 4,211 $ 441 $ 3,770 Additions 5,002 554 4,448 Retirements and other (4,402) (444) (3,958) ------- ----- ------- Balance, December 31, 1994 $ 4,811 $ 551 $ 4,260 ======= ===== =======
-14- 17 Item 1. Business (Continued) Granite Management Corporation Granite, a savings and loan holding company organized in Delaware in 1959, was acquired by Ford in December 1985. It is a wholly owned subsidiary of Ford. Until September 30, 1994, the principal asset of Granite was the capital stock of First Nationwide Bank, A Federal Savings Bank, since known as Granite Savings Bank (the "Bank"). On September 30, 1994, substantially all of the assets of the Bank were sold to, and substantially all of the liabilities of the Bank were assumed by, First Madison Bank, FSB ("First Madison"). The stated sale price for the Bank was $1.1 billion, slightly higher than tangible net book value at December 31, 1993. In total, Ford retained, through Granite, approximately $1.2 billion of commercial real estate and other assets as of the closing date. These retained assets generally are of lower quality than those included in the sale. In addition, for the three-year period ending in November 1996, First Madison has the option of requiring Granite to repurchase up to $500 million of the assets included in the sale that become nonperforming. This repurchase obligation is guaranteed by Ford. The sale of the Bank resulted in an after-tax charge of $440 million against Ford's 1994 first quarter earnings, reflecting the nonrecovery of goodwill and reserves for estimated losses on the assets retained and to be repurchased by Granite. These assets will be liquidated over time as market conditions permit. Historically, Granite (including the Bank) has not had a significant effect on Ford's operating results. 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 -- United States Requirements. As amended in November 1990, the Federal Clean Air Act (the "Clean Air Act" or the "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. In addition, the Act requires that emissions equipment for vehicles sold in the U.S. have a minimum "useful life" during which compliance with the applicable standards must be achieved. Passenger cars, for example, must comply for 10 years or 100,000 miles, whichever first occurs. The Act prohibits, among other things, the sale in or importation into the United States of any new motor vehicle or engine which is not covered by a certificate of conformity issued by the United States Environmental Protection Agency (the "EPA"). The Act also may require production of certain new cars and trucks capable of operating on fuels other than gasoline or diesel fuel ("alternative fuels") under a pilot test program to be conducted in California beginning in the 1996 model year. Under this pilot program, each manufacturer will be required -15- 18 Item 1. Business (Continued) to sell its pro rata share of 150,000 alternate fuel vehicles in each of the 1996, 1997 and 1998 model years and its pro rata share of 300,000 alternate fuel vehicles in each model year thereafter. The Act also authorizes certain states to establish programs to encourage the purchase of such vehicles. Motor vehicle emissions standards even more stringent than those presently in effect will become effective as early as the 2004 model year, unless the EPA determines that such standards are not necessary, technologically feasible or cost-effective. The Act authorizes California to establish unique emissions control standards that, in the aggregate, are at least as stringent as the federal standards if it secures the requisite waiver of federal preemption from the EPA. The Health and Safety Code of the State of California prohibits, among other things, the sale to an ultimate purchaser who is a resident of or doing business in California of a new motor vehicle or engine which is intended for use or registration in that state which has not been certified by the California Air Resources Board (the "CARB"). The CARB received a waiver from the EPA for a series of passenger car and light truck emissions standards (the "low emission vehicle", or "LEV", standards), effective beginning between the 1994 and 2003 model years, that are significantly more stringent than those prescribed by the Act for the corresponding periods of time. These California standards are intended to promote the development of various classes of low emission vehicles. California also requires 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. 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 customer expectations or is commercially viable. Such vehicles likely will run on lead-acid batteries with a limited range (well under 100 miles per recharge in optimal conditions), have a long recharge time (up to 8 hours), lack substantial infrastructure support (home and public facilities for recharging) and have a significant cost premium over conventional vehicles. To comply with the mandate, manufacturers may have to offer substantial discounts on electric vehicles, selling them well below cost, or increase the price or curtail the sale of nonelectric vehicles. As part of its State Implementation Plan ("SIP"), California is considering more stringent standards for medium duty trucks. Adoption of such standards could require Ford to accelerate implementation of costly and unproven technology and incur additional recall and warranty expenses or preclude the sale in California of some medium duty trucks. Further action by California on SIP provisions could similarly impact light duty vehicles and heavy trucks. The California emissions standards 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. The Act also permits other states which do not meet national ambient air quality standards to adopt new motor vehicle emissions standards identical to those adopted by California, if such states lawfully adopt such standards two years before commencement of the affected model year. A group of twelve northeastern states and the District of Columbia, the Ozone Transport Commission (the "OTC"), organized under provisions of the Act, petitioned the EPA to require California LEV standards in that region. There are major problems with transferring California standards to the Northeast -- many dealers sell vehicles -16- 19 Item 1. Business (Continued) in neighboring states and the range of present ZEVs is greatly diminished (by more than 50 percent) in cold weather. Also, the Northeast states have refused to adopt the California reformulated (i.e., cleaner burning) gasoline requirement -- the absence of which makes the task of meeting standards even more difficult. California LEV standards (including the ZEV requirements) already have been adopted in New York and Massachusetts. To mitigate these problems, the automobile industry proposed to voluntarily meet emissions standards nationwide that are more stringent than those required by the Act. The proposal was based on using technology developed to meet the California LEV standards, but adjusting for the absence of the California reformulated gasoline and ZEV requirements. While there was a general receptivity to the industry's proposal, some of the states are insisting on either a ZEV mandate or a guarantee that "advanced technology" vehicles will be sold in their states. In December 1994, the EPA granted the OTC petition to impose California LEV standards, while at the same time urging states and manufacturers to agree on a national approach which the EPA described as "environmentally superior" to the California standards. The states will have until February 1996 to decide between the two approaches. Under the Act, if the EPA determines that a substantial number of any class or category of vehicles, although properly maintained and used, do not conform to applicable emissions standards, a manufacturer may be required to recall and remedy such nonconformity at its expense. Further, if the EPA determines through testing of production vehicles that emission control performance requirements are not met, it can halt shipment of motor vehicles of the configuration tested. California has similar, and in some respects greater, authority to order manufacturers to recall vehicles. Ford has been required, and may in the future be required, to recall vehicles for such purposes from time to time. The costs of related repairs or inspections associated with such recalls can be substantial. European Requirements. The European Union has established standards which, in many cases, require motor vehicle emissions control equipment similar to that used in the U.S. These standards are of generally equivalent stringency to 1983 model year U.S. standards for gasoline-powered vehicles and 1987 model year standards for diesel-powered vehicles. New more stringent vehicle emissions standards were established by the European Union in March 1994. These new standards apply to new vehicle homologations beginning January 1, 1996 and to new vehicle registrations beginning January 1, 1997 and are of generally equivalent numerical stringency to 1994 model year U.S. standards. The European Commission also is examining proposals for more stringent emissions standards and enforcement procedures (the "Stage III Directive"). It is proposed that the Stage III Directive would become effective beginning in 2000 for new vehicle homologations and 2001 for new vehicle registrations. European Union member countries are permitted to provide "green" incentives for the purchase of vehicles that comply with the new standards before their effective date. Certain other European countries also have established, and may in the future establish, unique automotive emissions standards. Certain European countries, including member countries of the European Union, are conducting in-use emissions testing to ascertain compliance of motor vehicles with applicable emissions standards. These actions could lead to recalls of vehicles and the future costs of related repairs or inspections could be substantial. -17- 20 Item 1. Business (Continued) Motor Vehicle Safety -- Under the National Traffic and Motor Vehicle Safety Act of 1966, as amended (the "Safety Act"), the National Highway Traffic Safety Administration (the "Safety Administration") is required to establish appropriate federal motor vehicle safety standards that are practicable, meet the need for motor vehicle safety and are stated in objective terms. The Safety Act prohibits the sale in the United States of any new motor vehicle or item of motor vehicle equipment that does not conform to applicable federal motor vehicle safety standards. Compliance with many safety standards is costly because doing so tends to conflict with the need to reduce vehicle weight in order to meet stringent emissions and fuel economy standards. The Safety Administration also is required to make a determination on the basis of its investigation whether motor vehicles or equipment contain defects related to motor vehicle safety or fail to comply with applicable safety standards and, generally, to require the manufacturer to remedy any such condition at its own expense. The same obligation is imposed on a manufacturer which learns that motor vehicles manufactured by it contain a defect which the manufacturer decides in good faith is related to motor vehicle safety. There currently are pending before the Safety Administration a number of major investigations relating to alleged safety defects or alleged noncompliance with applicable safety standards in vehicles built, imported or sold by Ford. The cost of recall programs to remedy safety defects or noncompliance, should any be determined to exist as a result of certain of such investigations, could be substantial. Canada, the European Union, individual member countries within the European Union and other countries in Europe, Latin 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. The cost of complying with these standards, as well as the cost of any recall programs to remedy safety defects or noncompliance, could be substantial. Motor Vehicle Fuel Economy -- Passenger cars and trucks rated at less than 8,500 pounds gross vehicle weight are required by regulations issued by the Safety Administration pursuant to the Motor Vehicle Information and Cost Savings Act (the "Cost Savings Act") to meet separate minimum CAFE standards. Failure to meet the CAFE standard in any model year, after taking into account all available credits, is deemed to be unlawful conduct and would subject a manufacturer to the imposition of a civil penalty equivalent to $5 for each one-tenth of a mile per gallon ("mpg") under the applicable standard multiplied by the number of vehicles in the class (i.e., domestic cars, domestic trucks, imported cars or imported trucks) produced in that model year. Each such class of vehicle may earn credits either as a result of exceeding the standard in one or more of the preceding three model years ("carryforward credits") or pursuant to a plan, approved by the Safety Administration, under which a manufacturer expects to exceed the standard in one or more of the three succeeding model years ("carryback credits") but credits earned by a class may not be applied to any other class of vehicles. The Cost Savings Act established a passenger car CAFE standard of 27.5 mpg for the 1985 and later model years, which the Safety Administration asserts it has the authority to amend to a level it determines to be the "maximum feasible" level (considering the following factors: technological feasibility, economic practicality, the effect of other federal motor vehicle standards on fuel economy, and the need of the nation to conserve energy). Pursuant to the Cost Savings Act, the Safety Administration has established CAFE standards applicable to light trucks (under 8,500 lbs. GVW) for the following model years (on a combined two-wheel drive/four-wheel drive basis): 1995 - 20.6 mpg, 1996 - - 20.7 mpg and 1997 - 20.7 mpg. -18- 21 Item 1. Business (Continued) Although Ford expects to be able to comply with the foregoing CAFE standards, there are factors that could jeopardize its ability to comply. These factors include the possibility of changes in market conditions, including a shift in demand for larger vehicles and a decline in demand for small and middle-size vehicles; or conversely, a shortage of reasonably priced gasoline resulting in a decreased demand for more profitable vehicles and a corresponding increase in demand for relatively less profitable vehicles. It is anticipated that efforts may be made to raise the CAFE standard because of concerns for 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, using a combination of regulatory and nonregulatory measures. The Safety Administration is considering significant increases in the truck CAFE standard for the 1988 - 2006 model years that could be as high as 28 mpg by the 2006 model year. If the CCAP goals are partially or fully implemented through increases in the CAFE standard, or if significant increases in car or light truck CAFE standards for subsequent model years otherwise are imposed, Ford would find it necessary to take various costly actions that would have substantial adverse effects on its sales volume and profits. For example, Ford could find it necessary to curtail or eliminate production of larger family-size and luxury passenger cars and full-size light trucks, restrict offerings of engines and popular options, and continue or increase market support programs for its most fuel-efficient passenger cars and light trucks. The European Union and its member countries also are examining measures to reduce C02 emissions, some of which may affect the automotive industry. These may include proposals: to limit CO2 exhaust emissions for vehicles to 120g/km by 2005 (which translates into fuel economy requirements of approximately 5L/100 km for gasoline engines and 4.5L/100 km for diesel engines); to improve fuel economy for vehicles by as much as 15% over the 1995-2005 period and/or by as much as 25% in one or more markets over the 1990-2005 period; and for member countries to increase fuel taxes. Some of these proposals, if adopted, would result in Ford having to take costly actions that could have substantial adverse effects on its sales volume and profits. The U.S. Energy Tax Act of 1978, as amended, imposes a federal excise tax on automobiles which do not achieve prescribed fuel economy levels. Additional legislative proposals could be introduced that, if enacted, would increase excise taxes or create economic disincentives to purchase any except the least fuel consuming vehicles. Because of the uncertainties and variables inherent in testing for fuel economy and the uncertain effect on fuel economy of other government requirements, it is not possible to predict the amount of excise tax, if any, which may be incurred. Stationary Source Air Pollution Control -- Pursuant to the Clean Air Act the states are required to amend their implementation plans to require more stringent limitations on the quantity of pollutants which may be emitted into the atmosphere, and other controls, to achieve national ambient air quality standards established by the EPA. In addition, the Act requires reduced emissions of substances that are classified as hazardous or that contribute to acid deposition, imposes comprehensive permit requirements for manufacturing facilities in addition to those required by various states, and expands federal authority to impose severe penalties and criminal sanctions. The Act requires the EPA and the states to adopt regulations, and allows states to adopt standards more stringent than those required by the Act. The costs to comply with these provisions of the Act cannot presently be quantified but could be substantial. In addition, the enormous complexity and time-consuming nature of the comprehensive federal-state permit program provided for by the Act may reduce operational flexibility and may delay or prevent future competitive upgrading of Ford's production facilities in the United States. -19- 22 Item 1. Business (Continued) Water Pollution Control -- Pursuant to the Federal Clean Water Act (the "Clean Water Act"), Ford has been issued National Pollutant Discharge Elimination System permits which establish certain pollution control standards for its manufacturing facilities that discharge wastewater into public waters. Ford, among many other companies, also is required to comply with certain standards and obtain permits relating to discharges into 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. These various requirements may necessitate the addition of costly control equipment. The EPA recently issued proposed regulations, pursuant to the Great Lakes Critical Programs Act of 1990, that would require more restrictive standards for discharges into waters that impact the Great Lakes. Ford and many others have expressed opposition to these proposed regulations which, if adopted, could require the addition of costly control equipment. Hazardous Waste Control -- Pursuant to the Federal Resource Conservation and Recovery Act ("RCRA"), the EPA has issued regulations establishing certain procedures and standards for persons who generate, transport, treat, store, or dispose of hazardous wastes. These regulations also require permits for treatment, storage, and disposal facilities and corrective action for prior releases at sites where permits are issued. The EPA has delegated permit authority to states with programs equivalent to RCRA, and states may adopt even more extensive requirements. The Federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (the "Superfund Act"), requires disclosure of certain releases from Ford facilities into the environment, creates potential liability for remediation costs at sites where Ford waste was disposed and for damage to natural resources resulting from a release, and provides for citizens' suits for failure to comply with final requirements of orders or regulations. A number of states have enacted separate state laws of this type. In addition, under the Federal Toxic Substances Control Act ("TSCA"), the EPA evaluates environmental and health effects of existing chemicals and new substances. Pursuant to TSCA, the EPA has banned production of polychlorinated biphenyls and regulates their use in transformers, capacitors and other equipment that may be located at Ford's facilities. European Stationary Source Environmental Control -- The European Union (now including Finland, Sweden and Austria) by Directives and Regulations, and individual member countries by legislation and regulations, 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. Climate Change Convention -- In response to the requirements of the United Nations Climate Change Convention held in Brazil in 1992, national governments are examining ways to reduce potential global warming risks. These actions may restrict the use of certain chemicals that are used as refrigerants (in vehicles and buildings) and cleaning solvents, such as R-134a. -20- 23 Item 1. Business (Continued) 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. Also, vehicle safety is a priority with customers in North America, Europe and key Asia-Pacific markets and better global understanding of real-world accidents and injuries is a competitive necessity. The "traditional" and developed automotive markets have developed their own bodies of regulation. In Europe, two sets of vehicle regulations exist: 1) European Union directives, which must be accepted by the member countries; and 2) United Nations Economic Commission for Europe (ECE) regulations, which may be accepted by the member countries. Although European Union directives and ECE regulations generally are aligned, some variations exist in the manner in which they are interpreted and enforced by each member country. The United States and Canada use a substantially different regulatory system, and Japan and Australia use a hybrid of the ECE system. The ECE regulations are generally recognized outside the above markets. Countries in the process of defining motor vehicle regulations, such as China, India, Malaysia and Russia, are adopting ECE (versus U.S.) regulations. As a result, U.S.-built vehicles have to be modified for these markets. The U.S. and Europe have shown limited willingness to accept each other's regulations, and negotiations for acceptance of U.S. regulations as being functionally equivalent to the ECE standards in emerging markets have had limited success. Pollution Control Costs -- During the period 1995 through 1999, Ford expects that approximately $800 million will be spent 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 that approximately $170 million will be spent in 1995 and $220 million will be spent in 1996. Employment Data In 1994, Ford's worldwide average employment increased to 337,778 from 321,925 in 1993. The increase in average employment for 1994 resulted primarily from the inclusion of Hertz as a consolidated subsidiary beginning April 1, 1994. Worldwide payrolls were $15.8 billion in 1994, an increase of $2.1 billion from 1993. Average employment by geographic area in 1994 compared with 1993 levels was as follows:
1994 1993 ------- ------- United States 180,460 166,593 Canada 16,840 15,747 Europe 102,738 99,527 Latin-America 24,605 27,321 Asia Pacific 13,135 12,737 ------- ------- Total 337,778 321,925 ======= =======
-21- 24 Item 1. Business (Continued) For further information regarding employment statistics of Ford, see Item 6. "Selected Financial Data". For information concerning employee retirement benefits, see Note 8 of Notes to Financial Statements. Substantially all hourly employees of Ford in the United States are included in collective bargaining units represented by unions. Approximately 99% of these unionized hourly employees are represented by the United Automobile Workers (the "UAW"). Approximately 3% of salaried employees are represented by unions. Most hourly employees and many nonmanagement salaried employees of subsidiaries outside the United States also are represented by unions. Affiliates of Ford also are parties to collective bargaining agreements in Britain, Spain, Germany and France. Collective bargaining agreements between Ford and the UAW and between Ford of Canada and the Canadian Automobile Workers were entered into in 1993 and are scheduled to expire in September 1996. Research and Development Ford and certain of its subsidiaries have staffs of professional employees whose activities are directed primarily to the improvement of the performance (including fuel efficiency), safety and comfort of the products of those companies and to the development of new products, and also have staffs of scientists engaged in basic research. Extensive engineering, research and design facilities are maintained for these purposes. Principal among them are the engineering, research and design centers of Ford at Dearborn, Michigan; of Ford Motor Company, Limited at Dunton, England; and of Ford Werke A.G. at Merkenich, Germany. In 1994, 1993 and 1992, $5.2 billion, $5.0 billion and $4.3 billion, respectively, were charged to income of Ford and its consolidated subsidiaries for Ford-sponsored research and development activities relating to the development of new products and services and the improvement of existing products and services. In addition, $38 million, $55 million and $46 million were charged to income in 1994, 1993 and 1992, respectively, for customer-sponsored research and development activities. Item 2. Properties Ford's United States manufacturing and assembly facilities, substantially all of which are owned by Ford and its subsidiaries, are situated in various sections of the country and include assembly plants, engine plants, casting plants, metal stamping plants, electronic components plants, transmission and axle plants, glass plants and industrial equipment plants. A major portion of the distribution centers, warehouses and sales offices is owned by Ford, with the remainder being leased. In addition, Ford's foreign subsidiaries maintain and operate manufacturing plants, assembly facilities, parts distribution centers and engineering centers outside the United States, substantially all of which are owned by such subsidiaries. The furniture, equipment and other physical property owned by Ford's Financial Services operations are not significant in relation to their total assets. -22- 25 Item 3. Legal Proceedings Various legal actions, governmental investigations and proceedings and claims are pending or may be instituted or asserted in the future against the Company and its subsidiaries, including those arising out of alleged defects in the Company's products, governmental regulations relating to safety, emissions and fuel economy, financial services, employment-related matters, intellectual property rights, product warranties and environmental matters. Certain 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 treble 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. See Item 1, "Business--Governmental Standards". Included among the foregoing matters are the following: Product Matters -- Ford is a defendant in various actions for damages arising out of automobile accidents where plaintiffs claim that the injuries resulted from (or were aggravated by) alleged defects in the occupant restraint systems in vehicle lines of various model years. The damages specified by the plaintiffs in these actions, including both actual and punitive damages, aggregated approximately $1 billion at December 31, 1994. Ford is a defendant in various actions involving the alleged propensity of Bronco II utility vehicles to roll over. The damages specified in these actions, including both actual and punitive damages, aggregated approximately $911 million at December 31, 1994. In some of the actions described in the foregoing paragraphs no dollar amount of damages is specified or the specific amount referred to is only the jurisdictional minimum. In addition to the pending actions, accidents have occurred and claims have arisen which also may result in lawsuits in which such a defect may be alleged. 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. Damages specified by plaintiffs in complaints in these actions, including both actual and punitive damages, aggregated approximately $214 million at December 31, 1994. (In some of these actions no dollar amount of damages is specified 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 these co-defendants have substantial resources. Environmental Matters -- Ford has received a notice from a government environmental enforcement agency concerning a matter which potentially involves monetary sanctions exceeding $100,000. The agency believes a Ford facility may have violated regulations relating to the management of certain of the facility's wastes. Ford has received notices under RCRA, the Superfund Act and applicable state 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 Ford may be held responsible could be substantial. Contingent losses expected to be incurred by Ford in connection with many of these sites have been accrued and are reflected in Ford's financial statements in accordance with generally accepted accounting principles. However, for many other of these sites the remediation costs and other damages for which Ford ultimately may be responsible are not reasonably estimable because of the uncertainties -23- 26 Item 3. Legal Proceedings (Continued) 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 it could be substantial. Other Matters -- A number of claims have been made or may be asserted in the future against Ford alleging infringement of patents held by others. Ford believes that it has valid defenses with respect to the claims that have been asserted. If some of such claims should lead to litigation, however, and if the claimant were to prevail, Ford could be required to pay substantial damages. In 1992, Ford was sued in federal court in Nevada by an individual patent owner seeking damages and an injunction for alleged infringement of four U.S. patents characterized by the individual as covering machine vision inspection technologies, including bar code reading. Ford filed a declaratory judgment action in the same court to have those patents and several other patents directed to machine vision and laser uses declared invalid, unenforceable and not infringed. The individual counterclaimed, alleging infringement of the patents added by Ford and several additional patents. If the patent holder were to prevail, Ford could be required to pay substantial damages of an as yet indeterminate amount and could become subject to an injunction preventing future uses of any process or product found to be covered by a valid patent. Currently pending against Ford are three purported class action lawsuits that allege defects in the paint processes used with respect to certain vehicles manufactured by Ford. One lawsuit, pending in Texas state court, is limited to Texas purchasers who allegedly experienced paint chipping or peeling. The other two lawsuits (one pending in federal court in Louisiana, and one pending in federal court in Alabama) are nationwide in scope and also allege defects claimed to result in paint chipping and peeling. All three lawsuits appear to be focusing on vehicles painted with high-build electrocoat systems and seek unspecified compensatory and punitive damages and unspecified injunctive relief. Cumulatively, the three lawsuits apparently cover certain F-Series/Bronco, Ranger/Bronco II and Mustang vehicles for several model years beginning in 1984. If the plaintiffs were to prevail in these lawsuits, Ford could be required to pay substantial damages. Ford has been served with various private purported class action lawsuits seeking economic damages (including damages for diminution in value and rescission of purchase agreements) on behalf of Bronco II vehicle owners relating to the alleged propensity of such vehicles to roll over. The purported classes include all Bronco II owners in the United States. Each lawsuit expressly excludes personal injury claimants, whose claims are discussed above. Several of the lawsuits seek recovery of unspecified punitive damages. In addition, several of the lawsuits seek an order requiring the Company to recall and retrofit these vehicles. A settlement has been reached in each of these matters, subject to final court approval. The Federal Trade Commission and the Department of Justice have advised Ford that they are investigating the retail vehicle financing credit practices of Ford and Ford Credit for compliance with the Equal Credit Opportunity Act and Regulation B thereunder. Item 4. Submission of Matters to a Vote of Security Holders Not required. -24- 27 Item 4A. Executive Officers of the Registrant The executive officers of the Registrant and their respective positions and ages at March 25, 1995 are shown in the table below:
Present Position with the Registrant Name Position Held Since Age ---- -------- ---------- --- Alex Trotman Chairman of the Board November 1993 61 (1)(2) of Directors, President and Chief Executive Officer Director Louis R. Ross Vice Chairman and Chief January 1993 63 (2) Technical Officer Director W. Wayne Booker Executive Vice President-- October 1992 60 International Automotive Operations Edward E. Hagenlocker Executive Vice President May 1994 55 (President, Ford Automotive Operations) Peter J. Pestillo Executive Vice President-- January 1993 57 Corporate Relations Kenneth Whipple Executive Vice President March 1988 60 (President, Ford Financial Services Group) John M. Devine Group Vice President and October 1994 50 Chief Financial Officer Jacques A. Nasser Group Vice President-- May 1994 47 Product Development William E. Odom Group Vice President--Ford December 1993 59 and Chairman of the Board of Directors and Chief Executive Officer, Ford Motor Credit Company
-25- 28 Item 4A. Executive Officers of the Registrant (Continued)
Present Position with the Registrant Name Position Held Since Age ---- -------- ---------- --- Robert L. Rewey Group Vice President-- December 1993 56 Marketing and Sales Operations Robert H. Transou Group Vice President-- May 1994 55 Manufacturing Albert Caspers Vice President--Ford and May 1994 62 Chairman of the Board of Directors, Ford of Europe Incorporated Kenneth R. Dabrowski Vice President-- Commercial May 1994 51 Truck Vehicle Center James D. Donaldson Vice President--Large Front May 1994 52 Wheel Drive Vehicle Center Norman F. Ehlers Vice President--Facilities, May 1994 57 Materials and Services Purchasing James E. Englehart Vice President--Light Truck May 1994 58 Vehicle Center Edsel B. Ford II Vice President--Ford and December 1993 46 (2) President and Chief Operating Officer, Ford Motor Credit Company Director Ronald E. Goldsberry Vice President--General February 1994 52 Manager, Ford Customer Service Division Elliott S. Hall Vice President--Washington July 1987 56 Affairs John A. Hall Vice President--Employee November 1993 57 Relations
-26- 29 Item 4A. Executive Officers of the Registrant (Continued)
Present Position with the Registrant Name Position Held Since Age ---- -------- ---------- --- John T. Huston Vice President--Powertrain May 1994 52 Operations Kenneth K. Kohrs Vice President--Real Wheel May 1994 56 Drive Car Vehicle Center Malcolm S. Macdonald Treasurer January 1995 55 Frank E. Macher Vice President--General Manager, May 1994 54 Automotive Components Division Keith C. Magee Vice President--General February 1994 48 Manager, Lincoln-Mercury Division John W. Martin, Jr Vice President--General April 1989 58 Counsel Carlos E. Mazzorin Vice President--Production May 1994 53 Purchasing David N. McCammon Vice President--Finance October 1987 60 W. Dale McKeehan Vice President--Vehicle May 1994 57 Operations John P. McTague Vice President--Technical March 1990 56 Affairs John A. Oldfield Vice President--Ford and February 1994 58 Chairman, Aston Martin Lagonda Limited Richard Parry-Jones Vice President--Small/Medium May 1994 43 Vehicle Center Helen O. Petrauskas Vice President--Environmental March 1983 50 and Safety Engineering Murray L. Reichenstein Vice President--Controller January 1991 57
-27- 30 Item 4A. Executive Officers of the Registrant (Continued)
Present Position with the Registrant Name Position Held Since Age ---- -------- ---------- --- Neil W. Ressler Vice President--Advanced May 1994 55 Vehicle Technology John M. Rintamaki Secretary July 1993 53 Ross H. Roberts Vice President--General May 1991 57 Manager, Ford Division Robert P. Sparvero Vice President January 1995 54 David W. Scott Vice President--Communications December 1994 54 Charles W. Szuluk Vice President--Process May 1994 52 Leadership John J. Telnack Vice President--Design August 1993 57 Thomas J. Wagner Vice President--Customer February 1994 56 Communication and Satisfaction Dennis W. Wilkie Vice President--Business December 1994 52 Development Office
__________________ (1) Also Chairman of the Organization Review and Nominating Committee of the Board of Directors. (2) Also a member of the Finance Committee of the Board of Directors. Some of the officers listed above also are members of one or more additional committees of the Registrant that are not committees of the Board of Directors. General Notes: All of the above officers have been employed by the Registrant or its subsidiaries in one or more executive capacities during the past five years. Under the By-Laws of the Registrant the executive officers are elected by the Board of Directors at the Annual Meeting of the Board of Directors held for this purpose, each to hold office until his or her successor shall have been chosen and shall have qualified or as otherwise provided in the By-Laws. -28- 31 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters The Common Stock of Ford presently is listed on the New York and Pacific Coast Stock Exchanges in the United States; the Tokyo Stock Exchange in Japan; and on certain stock exchanges in Belgium, France, Germany, Switzerland and the United Kingdom. Ford is considering, however, the withdrawal of its Common Stock from listing and registration on certain of these foreign stock exchanges. The high and low sales prices for Ford Common Stock and the dividends paid per share of Common and Class B Stock for each full quarterly period in the years indicated were as follows (in each case, adjusted to reflect a 2-for-1 stock split in the form of a 100% stock dividend on Ford's Common and Class B Stock effective June 6, 1994):
1994 1993 ---------------------------------- ---------------------------------- First Second Third Fourth First Second Third Fourth Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter ------- ------- ------- ------- ------- ------- ------- ------- Common Stock price per share* High $35 1/16 $31 1/8 $32 3/4 $30 $26 3/4 $28 1/4 $28 7/8 $33 1/16 Low 28 1/2 26 3/4 26 1/8 25 5/8 21 1/2 24 7/8 24 3/16 27 3/8 Dividends per share of Common and Class B Stock $0.20 $0.225 $0.225 $0.26 $0.20 $0.20 $0.20 $0.20
___________________________ *Prices reflect New York Stock Exchange Composite Transactions As of February 1, 1995, stockholders of record of Ford included 260,260 holders of Common Stock and 109 holders of Class B Stock. -29- 32 Item 6. Selected Financial Data The following tables set forth selected financial data and other data concerning Ford for each of the last ten years (dollar amounts in millions except per share amounts):
SUMMARY OF OPERATIONS 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- AUTOMOTIVE Sales $107,137 $91,568 $84,407 $72,051 $81,844 $82,879 $82,193 $71,797 $62,868 $52,915 Operating income/(loss) 5,826 1,432 (1,775) (3,769) 316 4,252 6,612 6,256 4,142 2,902 Income/(Loss) before income taxes and cumulative effects of changes in accounting principles 5,997 1,291 (1,952) (4,052) 275 5,155 7,312 6,499 4,300 3,154 Income/(Loss) before cumulative effects of changes in accounting principles (1) 3,824 940 (1,534) (3,186) 99 3,175 4,609 3,767 2,512 2,012 Net income/(loss) 3,824 940 (8,628) (3,186) 99 3,175 4,609 3,767 2,512 2,012 FINANCIAL SERVICES Revenues $21,302 $16,953 $15,725 $16,235 $15,806 $13,267 $10,253 $ 8,096 $ 6,826 $ 4,700 Income before income taxes and cumulative effects of changes in accounting principles 2,792 2,712 1,825 1,465 1,221 874 1,031 1,385 1,321 861 Income before cumulative effects of changes in accounting principles 1,484 1,589 1,032 928 761 660 691 858 773 504 Net income 1,484 1,589 1,243 928 761 660 691 858 773 504 TOTAL COMPANY Income/(Loss) before income taxes and cumulative effects of changes in accounting principles $ 8,789 $ 4,003 $ (127) $(2,587) $ 1,495 $ 6,030 $ 8,343 $ 7,885 $ 5,620 $ 4,015 Provision/(Credit) for income taxes 3,329 1,350 295 (395) 530 2,112 2,999 3,226 2,324 1,487 Minority interests 152 124 80 66 105 82 44 34 12 13 Income/(Loss) before cumulative effects of changes in accounting principles (1) $5,308 $ 2,529 $ (502) $(2,258) $ 860 $ 3,835 $ 5,300 $ 4,625 $ 3,285 $ 2,515 Cumulative effects of changes in accounting principles - - (6,883) - - - - - - - Net income/(loss) 5,308 2,529 (7,385) (2,258) 860 3,835 5,300 4,625 3,285 2,515 TOTAL COMPANY DATA PER SHARE OF COMMON AND CLASS B STOCK (2) Income/(Loss) before cumulative effects of changes in accounting principles $ 4.97 $ 2.27 $ (0.73) $ (2.40) $ 0.93 $ 4.11 $ 5.48 $ 4.53 $ 3.08 $ 2.27 Income/(Loss) Assuming no dilution 4.97 2.27 (7.81) (2.40) 0.93 4.11 5.48 4.53 3.08 2.27 Assuming full dilution 4.44 2.10 (7.81) (2.40) 0.92 4.06 5.40 4.46 3.03 2.20 Cash dividends 0.91 0.80 0.80 0.98 1.50 1.50 1.15 0.79 0.56 0.40 Common stock price range (NYSE) . High 35 1/16 33 1/16 24 1/2 18 7/8 24 5/8 28 3/8 27 1/2 28 1/4 15 7/8 9 7/8 . Low 25 5/8 21 1/2 13 7/8 11 3/4 12 1/2 20 3/4 19 1/8 14 1/4 9 6 3/4 Average number of shares of Common and Class B stock outstanding (in millions) 1,010 986 972 952 926 934 968 1,022 1,066 1,108
- ------------------------ (1) 1989 includes an after-tax loss of $424 million from the sale of Rouge Steel Company. (2) Share data have been adjusted to reflect stock dividends and stock splits. -30- 33 Item 6. Selected Financial Data (Continued)
SUMMARY OF OPERATIONS, CONT. 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- TOTAL COMPANY BALANCE SHEET DATA AT YEAR END Assets Automotive $ 68,371 $ 61,737 $ 57,170 $ 52,397 $ 50,824 $ 45,819 $ 43,128 $ 39,734 $ 34,021 $ 29,297 Financial Services 150,983 137,201 123,375 122,032 122,839 115,074 100,239 76,260 59,211 45,797 Total Assets $219,354 $198,938 $180,545 $174,429 $173,663 $160,893 $143,367 $115,994 $ 93,232 $ 75,094 Long-term debt Automotive $ 7,103 $ 7,084 $ 7,068 $ 6,539 $ 4,553 $ 1,137 $ 1,336 $ 2,058 $ 2,467 $ 2,459 Financial Services 58,104 47,900 42,369 43,680 40,779 37,784 30,777 26,009 19,128 13,753 Stockholders' equity (3) 21,659 15,574 14,753 22,690 23,238 22,728 21,529 18,493 14,860 12,269 TOTAL COMPANY FACILITY AND TOOLING DATA Capital expenditures for facilities (excluding special tools) $ 5,236 $ 4,339 $ 3,613 $ 3,611 $ 4,702 $ 4,412 $ 3,148 $ 2,415 $ 2,179 $ 2,385 Depreciation 7,207 5,456 4,658 3,956 3,185 2,720 2,458 2,107 1,859 1,559 Expenditures for special tools 3,310 2,475 2,177 2,236 2,556 2,354 1,634 1,343 1,285 1,417 Amortization of special tools 2,129 2,012 2,097 1,822 1,695 1,509 1,335 1,353 1,293 948 TOTAL COMPANY EMPLOYEE DATA - WORLDWIDE Payroll $ 15,785 $ 13,750 $ 13,754 $ 12,850 $ 14,014 $ 13,327 $ 13,010 $ 11,670 $ 11,290 $ 10,175 Total labor costs 22,896 20,065 19,850 17,998 18,962 18,152 18,108 16,567 15,610 14,033 Average number of employees 337,778 321,925 325,333 331,977 369,547 366,641 358,939 350,320 382,274 369,314 TOTAL COMPANY EMPLOYEE DATA - U.S. OPERATIONS Payroll $ 10,396 $ 8,888 $ 8,015 $ 7,389 $ 8,309 $ 8,650 $ 8,473 $ 7,762 $ 7,704 $ 7,213 Average number of employees 180,460 166,593 158,377 156,079 180,104 188,286 185,540 180,838 181,476 172,165 Average hourly labor costs (4) Earnings $ 21.81 $ 20.94 $ 19.92 $ 19.10 $ 18.44 $ 17.77 $ 17.39 $ 16.50 $ 16.12 $ 15.70 Benefits 19.12 18.12 19.24 17.97 14.12 13.21 13.07 12.38 11.01 10.75 Total hourly labor costs $ 40.93 $ 39.06 $ 39.16 $ 37.07 $ 32.56 $ 30.98 $ 30.46 $ 28.88 $ 27.13 $ 26.45
- ----------------- (3) The cumulative effects of changes in accounting principles reduced equity by $6,883 million in 1992. (4) Per hour worked (in dollars). Excludes data for subsidiary companies. -31- 34 Item 6. Selected Financial Data (Continued)
SUMMARY OF VEHICLE SALES (5) (UNITS IN THOUSANDS) 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- NORTH AMERICA (6) CARS United States 2,077 1,950 1,841 1,605 1,847 2,186 2,377 2,171 2,094 1,941 Canada 124 130 128 154 143 189 204 198 194 195 Mexico 49 51 67 55 51 47 32 17 21 36 TOTAL CARS 2,250 2,131 2,036 1,814 2,041 2,422 2,613 2,386 2,309 2,172 TRUCKS United States 2,199 1,874 1,520 1,260 1,420 1,523 1,541 1,481 1,404 1,260 Canada 156 126 108 104 114 138 145 151 127 120 Mexico 42 39 59 57 37 40 31 18 23 34 TOTAL TRUCKS 2,397 2,039 1,687 1,421 1,571 1,701 1,717 1,650 1,554 1,414 TOTAL NORTH AMERICA 4,647 4,170 3,723 3,235 3,612 4,123 4,330 4,036 3,863 3,586 OUTSIDE NORTH AMERICA Germany 938 831 924 969 980 1,023 1,008 900 862 770 Britain 463 422 473 482 481 516 507 484 438 422 Spain 302 211 311 341 335 310 282 276 268 266 Australia 130 127 120 109 157 159 136 134 143 177 Taiwan 86 114 114 103 104 100 80 59 35 24 Japan 34 53 67 96 108 91 62 51 44 39 Other Countries (7) 39 37 35 20 19 15 39 120 268 268 TOTAL OUTSIDE NORTH AMERICA 1,992 1,795 2,044 2,120 2,184 2,214 2,114 2,024 2,058 1,966 TOTAL WORLDWIDE - CARS AND TRUCKS 6,639 5,965 5,767 5,355 5,796 6,337 6,444 6,060 5,921 5,552 TOTAL WORLDWIDE - TRACTORS (8) 0 0 0 13 68 72 77 64 68 84 TOTAL WORLDWIDE FACTORY SALES 6,639 5,965 5,767 5,368 5,864 6,409 6,521 6,124 5,989 5,636
- ------------------------ (5) Includes units manufactured by other companies and sold by Ford. (6) Factory sales are shown by source of manufacture, except within North America. In North America, U.S. sales include exports from Canada, Mexico and Australia, Canadian sales include exports from the U.S. and Mexico and Mexican sales include exports from the U.S. and Canada (7) Unit sales for Brazil and Argentina are included through June 30, 1987. Excludes units sold by Autolatina, a joint venture in Brazil and Argentina in which Ford holds a 49% interest. (8) Ford's tractor operation, Ford New Holland, was sold on May 6, 1991. -32- 35 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW The Company's worldwide net income in 1994 was a record $5,308 million, or $4.97 per share of Common and Class B Stock, compared with earnings of $2,529 million, or $2.27 per share in 1993. Fully diluted earnings per share were $4.44, compared with $2.10 a year ago. Sales and revenues totaled $128.4 billion in 1994, up 18% from 1993. Factory unit sales of cars and trucks were 6,639,000, up 674,000 or 11%. On June 6, 1994, a 2-for-1 stock split in the form of a 100% stock dividend on the Company's outstanding Common and Class B Stock became effective. Earnings per share for prior periods have been restated to reflect the stock split. The Company's financial results in 1994 showed substantial improvement compared with 1993. Improvements in U.S. Automotive operations included the favorable effects of higher industry volume and improved margins. Automotive operations outside the U.S. also improved. The improvement reflected primarily higher unit volume, lower manufacturing costs, and improved margins in Europe. Earnings from Financial Services operations were down $105 million compared with 1993, which was more than explained by a $440 million write-off for the disposition of First Nationwide Bank, discussed below. The write-off was offset largely by substantially improved earnings at the other operations. The Company continued to strengthen its competitive position through cost reduction programs and the development of new products. In 1994, capital spending for new products and facilities was up $1.7 billion from 1993. Automotive debt at the end of 1994 was $7.3 billion, down $0.7 billion from year-end 1993. Cash and marketable securities for the Company's Automotive segment totaled $12.1 billion, up $2.3 billion from year-end 1993. In 1994, the Company announced a reorganization of its Automotive operations, called "Ford 2000." Ford 2000 is a fundamental change intended to provide customers with a wider array of vehicles in more markets, assure full competitiveness in vehicle design, quality and value, and substantially reduce the cost of operating Ford's automotive business. The new structure reduces duplication of effort and facilitates best practices around the world by merging Ford's North American Automotive Operations, European Automotive Operations, and Automotive Components Group into a single organization, Ford Automotive Operations. The new organization became effective on January 1, 1995. Fourth Quarter of 1994 In the fourth quarter of 1994, the Company's worldwide net income was $1,569 million or $1.47 per share of Common and Class B Stock, compared with $719 million, or $0.65 per share in the fourth quarter of 1993. Worldwide Automotive operations earned $1,085 million in the fourth quarter of 1994, compared with $297 million a year ago. U.S. Automotive operations earned $720 million in the fourth quarter of 1994, compared with $669 million a year ago. The improved results for U.S. Automotive operations reflected higher industry volume. Automotive operations outside the U.S. earned $365 million, compared with a loss of $372 million a year ago. The improvement for Automotive operations outside the U.S. reflected higher unit volumes and lower manufacturing costs in Europe, improved operating results and nonrecurrence of restructuring charges at Jaguar and Ford of Australia, and a one-time gain of $110 million from the recent devaluation of the Mexican peso. Ford's European Automotive operations (excluding Jaguar) earned $11 million in the fourth quarter compared with a loss of $143 million in 1993. -33- 36 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Financial Services earned a record $484 million in the fourth quarter of 1994, compared with $422 million a year ago. The consolidated financial statements on pages FS-1 through FS-30 should be read as an integral part of this review. RESULTS OF OPERATIONS: 1994 COMPARED WITH 1993 Automotive Operations Net income from Ford's worldwide Automotive operations was $3,824 million in 1994 on sales of $107.1 billion, compared with $940 million in 1993 on sales of $91.6 billion. In the U.S., Ford's Automotive operations earned $3,040 million on sales of $73 billion, compared with $1,482 million in 1993 on sales of $61.6 billion. Higher vehicle production, reflecting increased industry sales, accounted for most of the improvement. Improved margins, reflecting mainly favorable material costs, manufacturing efficiencies, and lower marketing costs, were offset partially by higher costs for new products and related facilities. Results in 1993 included the one-time favorable effect of tax legislation ($171 million) for the restatement of U.S. deferred tax balances, and the gain on the sale of Ford's North American automotive seating and seat trim business ($73 million). The U.S. economy continued to grow at a modest rate in 1994, helping to maintain interest rates and inflation at comparatively low levels. Full-year U.S. car and truck industry volumes increased from 14.2 million units in 1993 to 15.4 million units in 1994. Over 70% of the increase in industry sales was attributable to trucks (including minivans, compact utility vehicles, full-size pickups, and compact pickups). Ford's share of the U.S. car market was 21.6%, down half of a point from 1993, reflecting lower shares for Tempo and Topaz, which were discontinued in 1994. The Company's U.S. truck share was 30.1%, down 4/10 of a point from 1993, reflecting capacity constraints on Explorer. Outside the U.S., Ford's Automotive operations earned $784 million in 1994 on sales of $34.1 billion, compared with a loss of $542 million in 1993 on sales of $30 billion. The improvement reflected primarily higher unit volumes, lower manufacturing costs, and improved margins in Europe. Ford's European Automotive operations (excluding Jaguar) earned $388 million, compared with a loss of $407 million in 1993. Results outside the U.S. in 1993 included restructuring charges at Jaguar ($174 million) and at Ford of Australia ($57 million), offset partially by the favorable one-time effect of a reduction in German tax rates ($59 million). Car and truck industry sales in Europe were 13.2 million units in 1994, compared with 12.6 million units in 1993. Ford's European car market share was 11.8% in 1994, up 3/10 of a point from 1993. Ford's European truck share improved 2/10 of a point to 14.8%. Ford and Volkswagen AG have agreed on a separation process leading toward dissolution of their Autolatina joint venture in Brazil and Argentina by year-end 1995. Since it was formed in 1987, the joint venture has been a successful and profitable participant in these volatile markets. Recent industry volume growth in Brazil and Argentina, however, has resulted in somewhat lower Autolatina market shares -- primarily because of capacity limitations and increased competitive action. It is not known at this time what effect, if any, the dissolution of Autolatina will have on Ford's future earnings. Historically, earnings in Brazil and Argentina have represented a significant portion of Ford's Automotive earnings outside the U.S. and Europe. -34- 37 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Financial Services Operations The Company's Financial Services operations earned $1,484 million in 1994, down $105 million from 1993. The decline was more than explained by the charge to net income of $440 million in 1994 related to the disposition of First Nationwide Bank. This charge, however, was offset largely by record earnings at Ford Credit, The Associates, USL Capital, and the consolidation of results for Hertz. Results in 1993 included an unfavorable one-time effect of $31 million from tax legislation in the U.S. Ford Credit's consolidated net income was a record $1,313 million in 1994, up $119 million from 1993. Ford Credit's financing operations earned a record $1,080 million in 1994, up $84 million from 1993. The improvements reflected primarily higher levels of earning assets, the one-time effect of the gain on sale of an interest in Manheim Auctions, Inc. (an auto auction company), the nonrecurrence of the one-time tax adjustment in 1993 for increased U.S. tax rates, and improved cost performance; partial offsets included lower net interest margins and lower gains from the sale of receivables. Ford Credit results also include $233 million from equity in the net income of affiliated companies, primarily Ford Holdings. Ford Holdings is a holding company that owns primarily The Associates, American Road, and USL Capital. Depreciation costs increased as a result of continued growth in operating leases; the related lease revenues more than offset the increased depreciation. The international operations managed by Ford Credit earned $241 million in 1994, up $42 million from 1993, reflecting primarily higher levels of earning assets and lower credit losses. The Associates earned a record $548 million in the U.S. in 1994, up $78 million from 1993. The increase reflected higher levels of earning assets and improved net interest margins. The international operations managed by The Associates earned $76 million in 1994, up $38 million from 1993, reflecting primarily higher levels of earning assets. USL Capital earned a record $109 million in 1994, up $32 million from 1993. The increase reflected higher earning assets, lower operating costs, and the nonrecurrence of the one-time tax adjustment in 1993 for increased U.S. tax rates. American Road earned $58 million in 1994, compared with $79 million in 1993. The decrease reflected primarily reduced investment income from capital gains. In April 1994, Hertz became a wholly-owned subsidiary of Ford. In 1994, Financial Services net income included $92 million for Hertz. In 1993, Automotive net income included $26 million for Hertz (reflecting Ford's prior equity interest). On September 30, 1994, substantially all of the assets of First Nationwide Bank, since known as Granite Savings Bank (the "Bank"), were sold to, and substantially all of the Bank's liabilities were assumed by, First Madison Bank, FSB ("First Madison"). The Bank is a wholly-owned subsidiary of Granite Management Corporation (formerly First Nationwide Financial Corporation) ("Granite"), which in turn is a wholly-owned subsidiary of Ford. In 1994, Granite incurred a loss of $484 million including a charge of $440 million related to the disposition of the Bank, reflecting the nonrecovery of goodwill and reserves for estimated losses on assets not included in the sale. Granite incurred a loss of $55 million in 1993. HISTORICAL REFERENCE: 1993 COMPARED WITH 1992 The Company's worldwide net income in 1993 was $2,529 million, or $2.27 per share of Common and Class B Stock, compared with a loss of $7,385 million, or $7.81 per share in 1992. Sales and revenues totaled $108.5 billion in 1993, up 8% from 1992. Factory unit sales of cars and trucks were 5,964,000, up 200,000 or 3%. -35- 38 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) In 1992, Ford adopted new accounting standards for postretirement benefits (principally retiree health care) and income taxes that resulted in a one-time charge to net income in 1992 for prior years of $6,883 million. Excluding the one-time effects of these accounting changes, the Company incurred a net loss of $502 million or $0.73 per share in 1992. The Company's financial results in 1993 showed substantial improvement compared with 1992. Improvements in U.S. Automotive operations included the favorable effects of higher industry volume, higher share, and improved margins. Automotive operations outside the U.S. also improved despite lower industry volumes in Europe. Earnings from Financial Services operations were a record and increased 54% compared with 1992. Automotive Operations Net income from Ford's worldwide Automotive operations was $940 million in 1993 on sales of $91.6 billion. In 1992, worldwide Automotive operations incurred a loss of $1,534 million (excluding the accounting changes) on sales of $84.4 billion. In the U.S., Ford's Automotive operations earned $1,482 million on sales of $61.6 billion, compared with a loss of $405 million in 1992 on sales of $51.9 billion. Higher vehicle production, reflecting higher industry sales and a higher Ford market share, accounted for most of the improvement. Improved margins, reflecting mainly favorable material costs, manufacturing efficiencies, and lower marketing costs, were offset partially by higher costs for new products and related facilities. Results in 1993 included the one-time favorable effect of tax legislation ($171 million) for the restatement of U.S. deferred tax balances for the Federal income tax rate increase from 34% to 35% and the gain on the sale of Ford's North American automotive seating and seat trim business ($73 million). Full-year U.S. car and truck industry volumes increased from 13.1 million units in 1992 to 14.2 million units in 1993. Over 70% of the increase in industry sales was attributable to trucks (including minivans, compact utility vehicles, full-size pickups, and compact pickups). Ford's share of the U.S. car market was 22.3%, up half of a point from 1992. The Company's U.S. truck share was 30.5%, up 8/10 of a point from 1992. Outside the U.S., Ford's Automotive operations lost $542 million in 1993 on sales of $30 billion, compared with a loss of $1,129 million in 1992 on sales of $32.5 billion. Results improved despite a weak economy in Europe that resulted in the lowest level of industry sales in eight years. Savings from cost reduction actions in Europe and improved results in Latin America, reflecting primarily higher industry volume in Brazil, more than offset the effects of lower volume in Europe. The loss in 1993 included restructuring charges at Jaguar ($174 million) and at Ford of Australia ($57 million), offset partially by the favorable one-time effect of a reduction in German tax rates ($59 million). Losses in 1992 included a one-time restructuring charge of $334 million for planned reductions in employment levels in the Company's European Automotive operations. Ford's European Automotive operations (excluding Jaguar) lost $407 million, compared with a loss of $647 million in 1992. The improvement reflected nonrecurrence of the one-time restructuring charge ($334 million) in the fourth quarter of 1992, primarily for planned reductions in employment levels. Lower vehicle production, reflecting lower industry sales (down 16%), higher costs for new products, and the unfavorable effect of fluctuations in foreign currency exchange rates were partially offset by manufacturing efficiencies and other cost improvements. -36- 39 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Car and truck industry sales in Europe were 12.6 million units in 1993, compared with 15 million units in 1992. Ford's European car market share was 11.7% in 1993, up 2/10 of a point from 1992. Ford's European truck share improved 9/10 of a point to 12.6%. Financial Services Operations The Company's Financial Services operations earned a record $1,589 million in 1993, up $557 million from 1992. Higher volume, reduced interest rates, lower operating costs and credit losses contributed to record earnings at Financial Services operations, including Ford Credit, The Associates, and USL Capital. Results in 1993 included an unfavorable one-time effect of $31 million from tax legislation in the U.S. Results in 1992 of $1,032 million excluded a favorable effect of $211 million associated with one-time accounting changes, mainly for income taxes, but include organizational restructuring charges relating to European Financial Services operations ($85 million). Ford Credit's consolidated net income was a record $1,194 million in 1993, up $302 million from 1992. Ford Credit's financing operations earned a record $996 million in 1993, up $259 million from 1992. Operating improvements resulted primarily from higher levels of earning assets, lower credit losses and higher gains on the sales of receivables, offset partially by the unfavorable effect of tax legislation in the U.S. and lower net interest margins. Ford Credit results also include $198 million from equity in the net income of affiliated companies, primarily Ford Holdings. The international operations managed by Ford Credit earned $199 million in 1993, up $11 million from 1992, primarily reflecting improved net interest margins and lower credit losses offset partially by the unfavorable effect of exchange rates. The Associates earned a record $470 million in the U.S. in 1993, up $77 million from 1992. The improvement was more than explained by improved credit losses and higher levels of earning assets. The international operations managed by The Associates earned $38 million in 1993, the same as in 1992. USL Capital earned a record $77 million in 1993, up $17 million from 1992. The improvement resulted primarily from higher earning assets and continued operating cost reductions. American Road earned $79 million in 1993, compared with $47 million in 1992. The increase resulted primarily from improved underwriting experience in extended service plan and floor plan products. Granite incurred a loss of $55 million in 1993, compared with a loss of $81 million in 1992. The improvement resulted primarily from reduced borrowing costs, continued improvements in operating costs, a lower adjustment in 1993 to the carrying value of derivative securities and the gain on sale of certain branches. These factors were partially offset by lower levels of earning assets, lower yields from the reinvestment of FDIC proceeds, and a reduction in income tax benefits. LIQUIDITY AND CAPITAL RESOURCES Automotive Operations Cash and marketable securities of the Company's Automotive operations were $12.1 billion at December 31, 1994, up $2.3 billion from December 31, 1993. The Company paid $1.2 billion in cash dividends on its capital stock and contributed $1.7 billion to its U.S. pension plans and $300 million to its non-U.S. plans during 1994. -37- 40 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Automotive capital expenditures were $8.3 billion in 1994, up $1.6 billion from 1993. During the next several years, the pace of spending for product change at Ford is expected to be at similar or higher levels. At December 31, 1994, Automotive debt totaled $7.3 billion, which was 25% of total capitalization (stockholders' equity and Automotive debt), compared with $8 billion, or 34% of total capitalization, at year-end 1993. At December 31, 1994, Ford (parent company only) had long-term contractually committed credit agreements in the U.S. under which $5.9 billion is available from various banks at least through June 30, 1999. The entire $5.9 billion may be used, at Ford's option, by either Ford or Ford Credit. As of December 31, 1994, these facilities were unused. Outside the U.S., Ford has additional long-term contractually committed credit-line facilities of approximately $2.5 billion. These facilities are available in varying amounts from 1995 through 1999; less than 1% was used at December 31, 1994. Financial Services Operations The Financial Services operations rely heavily on their ability to raise substantial amounts of funds in capital markets in addition to collections on loans and retained earnings. The levels of funds for certain Financial Services operations are affected by certain transactions with Ford, such as capital contributions, dividend payments and the timing of payments for income taxes. Their ability to obtain funds also is affected by their debt ratings which, for certain operations, are closely related to the financial condition and outlook for Ford and the nature and availability of support facilities, such as revolving credit and receivables sales agreements. Ford Credit's outstanding commercial paper totaled $33.2 billion at December 31, 1994. Support facilities represent additional sources of funds, if required. At December 31, 1994, Ford Credit had approximately $21.1 billion of contractually committed facilities for use in the U.S., 76% of which are available through June 30, 1999. These facilities included $18.2 billion of revolving credit agreements with banks (which included $5.9 billion of Ford bank lines that may be used either by Ford or Ford Credit at Ford's option) and $2.9 billion of agreements to sell retail automotive receivables. At December 31, 1994, all of the U.S. facilities were unused. At December 31, 1994, international subsidiaries and other credit operations managed by Ford Credit had $8.1 billion of contractually committed support facilities available outside the U.S. At December 31, 1994, approximately 12% of these facilities were in use. At December 31, 1994, Ford Holdings had outstanding debt of $1.9 billion, all of which was long term. All of the Ford Holdings debt held by nonaffiliated persons is guaranteed by Ford. Ford Holdings had no contractually committed lines of credit at December 31, 1994. In 1994, Ford Holdings sold 2,000 shares of its Series D Cumulative Preferred Stock having an aggregate liquidation preference of $200 million, and sold 2,150 shares of its Flexible Rate Auction Preferred Stock, Series L, M, and N, having an aggregate liquidation preference of $215 million. -38- 41 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) At December 31, 1994, The Associates had contractually committed lines of credit with banks of $3.8 billion, with various maturities ranging from January 4, 1995 to December 31, 1995, none of which were utilized at December 31, 1994. Also, at December 31, 1994, The Associates had $4.4 billion of contractually committed revolving credit facilities with banks, with maturity dates ranging from February 1, 1995 through January 1, 2000, and $1 billion of contractually committed receivables sale facilities, $500 million of which are available through April 30, 1995 and $500 million of which are available through April 15, 1997; none of these facilities were in use at December 31, 1994. At December 31, 1994, foreign operations managed by The Associates had approximately $260 million of contractually committed support facilities available outside the U.S., of which about 20% were in use at December 31, 1994. At December 31, 1994, USL Capital had $1.5 billion of contractually committed credit facilities, 69% of which are available through September 1999. These facilities included $120 million of contractually committed receivables sale facilities, of which 100% were in use at December 31, 1994. At December 31, 1994, foreign operations managed by USL Capital had approximately $30 million of contractually committed support facilities available outside the U.S., of which about 84% were in use at December 31, 1994. American Road's principal sources of funds are insurance premiums, annuity deposits and investment income. American Road had no debt or credit lines at December 31, 1994. At December 31, 1994, Hertz had $2 billion of contractually committed credit facilities in the U.S., none of which were utilized at December 31, 1994. These facilities included $750 million and $1 billion of agreements with banks, which mature June 30, 1995 and June 30, 1999, respectively, and a $250 million revolving credit facility with Ford. At December 31, 1994, Hertz' foreign operations had approximately $488 million of contractually committed support facilities available outside the U.S., of which about 75% were in use at December 31, 1994. ACCOUNTING CHANGES The Emerging Issues Task Force (the "EITF") of the Financial Accounting Standards Board is considering an accounting issue that, depending on its outcome, could result in a significant one-time effect on Ford's reported financial results, but not its cash flow. The issue concerns timing of revenue recognition where a manufacturer sells a product to a dealer who in turn enters into an operating lease for the product with a retail customer, and the lease and title to the product are then sold by the dealer to the manufacturer (or a finance subsidiary of the manufacturer). Ford recognizes revenue upon the sale of vehicles to dealers, including vehicles that ultimately are leased under Ford Credit's retail leasing program. If the EITF decides that later timing of revenue recognition is required, Ford likely would be required to defer a substantial amount of revenue and income from these transactions, but without any impact on cash flow. -39- 42 Item 8. Financial Statements and Supplementary Data The Financial Statements and Notes to Financial Statements of the Registrant and the Report of Independent Accountants that are filed as part of this Report are listed under Item 14. "Exhibits, Financial Statement Schedules, and Reports on Form 8-K" and are set forth on pages FS-1 through FS-31 immediately following the signature pages of this Report. Selected quarterly financial data of Ford and its consolidated subsidiaries for 1993 and 1994 are set forth in Note 19 of Notes to Financial Statements. Item 9. Disagreements With Accountants on Accounting and Financial Disclosure Not required. PART III Item 10. Directors and Executive Officers of the Registrant The information called for by Item 10 is incorporated by reference from the information under the caption "Election of Directors" in the Proxy Statement, except that the information called for by Item 10 with respect to executive officers of the Registrant appears as Item 4A under Part I of this Report. Item 11. Executive Compensation The information called for by Item 11 is incorporated by reference from the information under the captions "Compensation of Directors", "Compensation and Option Committee Report on Executive Compensation", and "Compensation of Executive Officers" in the Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management The information called for by Item 12 is incorporated by reference from the information on page 1 of, and under the caption "Election of Directors" in, the Proxy Statement. Item 13. Certain Relationships and Related Transactions The information called for by Item 13 is incorporated by reference from the information under the caption "Certain Relationships and Related Transactions" in the Proxy Statement. -40- 43 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. Financial Statements - Ford Motor Company and Subsidiaries Consolidated Statement of Income, for the years ended December 31, 1994, 1993 and 1992. Consolidated Balance Sheet, December 31, 1994 and 1993. Consolidated Statement of Cash Flows, for the years ended December 31, 1994, 1993 and 1992. Consolidated Statement of Stockholders' Equity, for the years ended December 31, 1994, 1993 and 1992. Notes to Financial Statements Report of Independent Accountants The Financial Statements, the Notes to Financial Statements and the Report of Independent Accountants listed above are filed as part of this Report and are set forth on pages FS-1 through FS-31 immediately following the signatures pages of this Report. (a) 2. Financial Statement Schedules Designation Description - ----------- ----------- Supplemental Schedule Condensed Financial Information of Subsidiary The Financial Statement Schedule listed above is filed as part of this Report and is set forth on page FSS-1 immediately following page FS-31. The schedules not filed are omitted because the information required to be contained therein is disclosed elsewhere in the Financial Statements or the amounts involved are not sufficient to require submission. (a) 3. Exhibits
Designation Description Method of Filing - ----------- ----------- ---------------- Exhibit 3-A Restated Certificate of Incorporation, Filed as Exhibit 4.1 to the Registrant's of the Registrant dated June 6, 1994. Registration Statement No. 33-55171.* Exhibit 3-B By-Laws of the Registrant as Filed as Exhibit 3-B to the Registrant's amended through December 9, 1993. Annual Report on Form 10-K for the year ended December 31, 1993.*
-41- 44 Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (Continued)
Designation Description Method of Filing - ----------- ----------- ---------------- Exhibit 4-A Form of Deposit Agreement dated as of Filed as Exhibit 4-E to the Registrant's November 20, 1991 among Ford Motor Registration Statement No. 33-43085.* Company, Manufacturers Hanover Trust Company, as Depositary, and the holders from time to time of Depositary Shares, each representing 1/1,000 of a share of the Registrant's Series A Cumulative Convertible Preferred Stock. Exhibit 4-B Form of Deposit Agreement dated as of Filed as Exhibit 4-E to the Registrant's October 29, 1992 among Ford Motor Registration Statement No. 33-53092.* Company, Chemical Bank, as Depositary, and the holders from time to time of Depositary Shares, each representing 1/2,000 of a share of the Registrant's Series B Cumulative Preferred Stock. Exhibit 10-A Amended and Restated Agreement dated Filed as Exhibit 10-A to the Registrant's as of July 1, 1993 between the Annual Report on Form 10-K for the year Registrant and Ford Credit. ended December 31, 1993.* Exhibit 10-B 1985 Stock Option Plan of the Registrant.** Filed as Exhibit 10-D to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1985.* Exhibit 10-B-1 Amendment dated as of March 8, 1990 Filed as Exhibit 10-C-1 to the Registrant's to 1985 Stock Option Plan.** Annual Report on Form 10-K for the year ended December 31, 1989.* Exhibit 10-C Ford Motor Company Supplemental Filed as Exhibit 10-H to the Registrant's Compensation Plan as amended through Annual Report on Form 10-K for the year May 8, 1986.** ended December 31, 1986.* Exhibit 10-C-1 Amendment to Ford Motor Company Filed as Exhibit 10-F-1 to the Registrant's Supplemental Compensation Plan, dated Annual Report on Form 10-K for the year May 12, 1988.** ended December 31,1988.* Exhibit 10-C-2 Amendment to Ford Motor Company Filed as Exhibit 10-D-2 to the Registrant's Supplemental Compensation Plan, dated Annual Report on Form 10-K for the year July 8, 1992** ended December 31, 1992.* Exhibit 10-D Ford Motor Company Executive Separation Filed with this Report. Allowance Plan as amended through December 9, 1993 for separations on or after January 1, 1981.**
-42- 45 Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (Continued)
Designation Description Method of Filing - ----------- ----------- ---------------- Exhibit 10-E Description of Company practices regarding Filed as Exhibit 10-I to the Registrant's club memberships for executives.** Annual Report on Form 10-K for the year ended December 31, 1981.* Exhibit 10-F Description of Company practices regarding Filed as Exhibit 10-J to the Registrant's travel expenses of spouses of certain Annual Report on Form 10-K for the year executives.** ended December 31, 1980.* Exhibit 10-G Ford Motor Company Deferred Compensation Filed as Exhibit 10-L to the Registrant's Plan for Non-Employee Directors, adopted Annual Report on Form 10-K for the year January 13, 1983.** ended December 31, 1982.* Exhibit 10-G-1 Deferred Compensation Plan for Non- Filed as Exhibit 10-H-1 to the Registrant's Employee Directors, as amended on Registrant's Annual Report on Form 10-K July 11, 1991.** for the year ended December 31, 1991.* Exhibit 10-H Ford Motor Company Benefit Equalization Filed with this Report. Plan, as amended as of January 1, 1989.** Exhibit 10-I Description of Financial Counseling Filed as Exhibit 10-N to the Registrant's Services provided to certain executives.** Annual Report on Form 10-K for the year ended December 31, 1983.* Exhibit 10-J 1986 Long-Term Incentive Plan of the Filed as Exhibit 10-Q to the Registrant's Registrant.** Annual Report on Form 10-K for the year ended December 31, 1985.* Exhibit 10-J-1 Amendment dated as of June 1, 1990 to Filed as Exhibit 10-N-1 to the Registrant's 1986 Long-Term Incentive Plan of the Annual Report on Form 10-K for the year Registrant.** ended December 31, 1990.* Exhibit 10-K Supplemental Executive Retirement Plan, Filed with this Report. as restated and incorporating amendments through December 9, 1993.** Exhibit 10-L Ford Motor Company Restricted Stock Filed as Exhibit 10-P to the Registrant's Plan for Non-Employee Directors adopted Annual Report on Form 10-K for the year by the Board of Directors on November 10, ended December 31, 1988.* 1988, and approved by the stockholders at the 1989 Annual Meeting.** Exhibit 10-M 1990 Long-Term Incentive Plan, amended Filed as Exhibit 10-R to the Registrant's as of June 1, 1990.** Annual Report on Form 10-K for the year ended December 31, 1990.*
-43- 46 Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (Continued)
Designation Description Method of Filing - ----------- ----------- ---------------- Exhibit 10-M-1 Amendment to 1990 Long-Term Incentive Filed as Exhibit 10-P-1 to the Registrant's Plan, effective as of October 1, 1990.** Annual Report on Form 10-K for the year ended December 31, 1991.* Exhibit 10-N Description of Matching Gift Program for Filed as Exhibit 10-Q to the Registrant's Non-Employee Directors.** Annual Report on Form 10-K for the year ended December 31, 1991.* Exhibit 10-O Non-Employee Directors Life Insurance Filed with this Report. and Optional Retirement Plan (as (amended as of January 1, 1993).** Exhibit 10-P Description of Non-Employee Directors Filed as Exhibit 10-S to the Registrant's Accidental Death, Dismemberment and Annual Report on Form 10-K for the year Permanent Total Disablement Indemnity.** ended December 31, 1992.* Exhibit 10-Q Agreement dated December 10, 1992 Filed as Exhibit 10-T to the Registrant's between William C. Ford and the Annual Report on Form 10-K for the year Registrant.** ended December 31, 1992.* Exhibit 10-R Support Agreement dated as of October 1, Filed as Exhibit 10-T to the Registrant's 1993 between the Registrant and Ford Annual Report on Form 10-K for the year Credit Europe. ended December 31, 1993.* Exhibit 10-S Description of Select Retirement Plan Filed as Exhibit 10 to the Registrant's adopted on June 9, 1994.** Quarterly Report on Form 10-Q for the quarter ended June 30, 1994.* Exhibit 11 Computation of Primary and Fully Diluted Filed with this Report. Earnings a Share. Exhibit 12 Computation of Ratio of Earnings to Filed with this Report. Combined Fixed Charges and Preferred Stock Dividends. Exhibit 21 List of Subsidiaries of the Registrant Filed with this Report. as of December 31, 1994. Exhibit 23 Consent of Independent Certified Public Filed with this Report. Accountants. Exhibit 24 Powers of Attorney. Filed with this Report. - --------------------------
* Incorporated by reference as an exhibit hereto ** Management contract or compensatory plan or arrangement -44- 47 Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (Continued) Instruments defining the rights of holders of certain issues of long-term debt of the Registrant and of certain consolidated subsidiaries and of any unconsolidated subsidiary, for which financial statements are required to be filed with this Report, have not been filed as exhibits to this Report because the authorized principal amount of any one of such issues does not exceed 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant agrees to furnish a copy of each of such instruments to the Commission upon request. (b) Reports on Form 8-K During the quarter ended December 31, 1994, the Registrant filed the following Current Reports on Form 8-K: 1. Current Report on Form 8-K dated October 26, 1994 that included information regarding the consolidated results of operations and financial condition of the Registrant and its subsidiaries for the three and nine-month periods ended or at September 30, 1994. 2. Current Report on Form 8-K dated November 18, 1994 that included information regarding foreign currency and interest rate exposures of the Registrant. 3. Current Report on Form 8-K dated December 1, 1994 that included information regarding an agreement between the Registrant and Volkswagen AG to dissolve their Autolatina joint venture in Brazil and Argentina. -45- 48 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FORD MOTOR COMPANY By: Murray L. Reichenstein* ----------------------- (Murray L. Reichenstein) Vice President--Controller (principal accounting officer) Date: March 15, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
Signature Title Date --------- ----- ---- Director and Chairman of the Board of Directors, President and Chief Executive Officer Alex Trotman* (principal executive officer) March 15, 1995 - -------------------------------- (Alex Trotman) Colby H. Chandler* Director March 15, 1995 - -------------------------------- (Colby H. Chandler) Michael D. Dingman* Director March 15, 1995 - -------------------------------- (Michael D. Dingman) Director, Vice President-Ford and President and Chief Operating Officer, Ford Edsel B. Ford II* Motor Credit Company March 15, 1995 - -------------------------------- (Edsel B. Ford II)
-46- 49
Signature Title Date --------- ----- ---- William Clay Ford* Director March 15, 1995 - -------------------------------- (William Clay Ford) Director and Chairman of the William Clay Ford, Jr.* Finance Committee March 15, 1995 - -------------------------------- (William Clay Ford, Jr.) Roberto C. Goizueta* Director March 15, 1995 - -------------------------------- (Roberto C. Goizueta) Irvine O. Hockaday, Jr.* Director March 15, 1995 - -------------------------------- (Irvine O. Hockaday, Jr.) Marie-Josee Kravis* Director March 15, 1995 - -------------------------------- (Marie-Josee Kravis) Drew Lewis* Director March 15, 1995 - -------------------------------- (Drew Lewis) Ellen R. Marram* Director March 15, 1995 - -------------------------------- (Ellen R. Marram) Kenneth H. Olsen* Director March 15, 1995 - -------------------------------- (Kenneth H. Olsen)
-47- 50
Signature Title Date --------- ----- ---- Carl E. Reichardt* Director March 15, 1995 - ------------------------------ (Carl E. Reichardt) Director and Vice Chairman Louis R. Ross* and Chief Technical Officer March 15, 1995 - ------------------------------ (Louis R. Ross) Clifton R. Wharton, Jr.* Director March 15, 1995 - ------------------------------ (Clifton R. Wharton, Jr.) John M. Devine* Group Vice President and - ------------------------------ Chief Financial Officer (John M. Devine) (principal financial officer) March 15, 1995 *By:/s/ John M. Rintamaki --------------------- (John M. Rintamaki) Attorney-in-Fact
-48- 51 Ford Motor Company and Subsidiaries HIGHLIGHTS
Fourth Quarter Full Year ------------------------- ------------------------- 1994 1993 1994 1993 -------- -------- -------- -------- Worldwide factory sales of cars and trucks (in thousands) - - United States 1,062 941 4,276 3,824 - - Outside United States 584 512 2,363 2,141 ----- ----- ----- ----- Total 1,646 1,453 6,639 5,965 ===== ===== ===== ===== Sales and revenues (in millions) - - Automotive $27,766 $23,511 $107,137 $ 91,568 - - Financial Services 5,877 4,330 21,302 16,953 ------- ------- -------- -------- Total $33,643 $27,841 $128,439 $108,521 ======= ======= ======== ======== Net income (in millions) - - Automotive $ 1,085 $ 297 $ 3,824 $ 940 - - Financial Services 484 422 1,484* 1,589 ------- ------- -------- -------- Total $ 1,569 $ 719 $ 5,308 $ 2,529 ======= ======= ======== ======== Capital expenditures (in millions) - - Automotive $ 2,404 $ 1,985 $ 8,310 $ 6,714 - - Financial Services 65 32 236 100 ------- ------- -------- -------- Total $ 2,469 $ 2,017 $ 8,546 $ 6,814 ======= ======= ======== ======== Stockholders' equity at December 31 - - Total (in millions) $21,659 $15,574 $ 21,659 $ 15,574 - - After-tax return on Common and Class B stockholders' equity 34.5% 21.1% 33.6% 18.6% Automotive cash, cash equivalents, and marketable securities at December 31 (in millions) $12,083 $ 9,752 $ 12,083 $ 9,752 Automotive debt at December 31 (in millions) $ 7,258 $ 8,016 $ 7,258 $ 8,016 Automotive after-tax returns on sales 3.9% 1.3% 3.6% 1.1% Shares of Common and Class B Stock (in millions) - - Average number outstanding 1,020 996 1,010 986 - - Number outstanding at December 31 1,023 998 1,023 998 AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK AFTER PREFERRED STOCK DIVIDENDS Income - - Automotive $ 1.00 $ 0.23 $ 3.50 $ 0.66 - - Financial Services 0.47 0.42 1.47 1.61 ------- ------- -------- -------- Total $ 1.47 $ 0.65 $ 4.97 $ 2.27 ======= ======= ======== ======== Income assuming full dilution $ 1.31 $ 0.60 $ 4.44 $ 2.10 Cash dividends per share of Common and Class B Stock $ 0.26 $ 0.20 $ 0.91 $ 0.80
- - - - - - *Includes a loss of $440 million related to the disposition of Granite Savings Bank (formerly First Nationwide Bank) Share data have been restated to reflect the 2-for-1 stock split that became effective June 6, 1994. FS-1 52 Ford Motor Company and Subsidiaries VEHICLE FACTORY SALES For the Periods Ended December 31, 1994 and 1993 (in thousands)
Fourth Quarter Full Year -------------------------- -------------------------- 1994 1993 1994 1993 --------- --------- --------- --------- NORTH AMERICA Cars - U.S. 537 458 2,077 1,950 - Canada 33 35 124 130 - Mexico 15 12 49 51 ----- ----- ----- ----- Total cars 585 505 2,250 2,131 Trucks - U.S. 525 483 2,199 1,874 - Canada 42 42 156 126 - Mexico 12 10 42 39 ----- ----- ----- ----- Total trucks 579 535 2,397 2,039 ----- ----- ----- ----- Total North America 1,164 1,040 4,647 4,170 OUTSIDE NORTH AMERICA Germany 216 193 938 831 Britain 115 98 463 422 Spain 77 48 302 211 Australia 38 34 130 127 Taiwan 17 19 86 114 Japan 8 11 34 53 Other countries 11 10 39 37 ----- ----- ----- ----- Total outside North America 482 413 1,992 1,795 ----- ----- ----- ----- Total worldwide vehicle factory sales 1,646 1,453 6,639 5,965 ===== ===== ===== =====
Includes units manufactured by other companies and sold by Ford. Factory sales are shown by source of manufacture, except within North America. In North America, U.S. sales include exports from Canada, Mexico, and Australia. Canadian sales include exports from the U.S. and Mexico. Mexican sales include exports from the U.S. and Canada. FS-2 53 Ford Motor Company and Subsidiaries CONSOLIDATED STATEMENT OF INCOME For the Years Ended December 31, 1994, 1993 and 1992 (in millions)
1994 1993 1992 -------- -------- -------- AUTOMOTIVE SALES (NOTE 1) $107,137 $91,568 $84,407 COSTS AND EXPENSES (Note 1) Costs of sales 96,180 85,168 81,748 Selling, administrative, and other expenses 5,131 4,968 4,434 -------- ------- ------- Total costs and expenses 101,311 90,136 86,182 OPERATING INCOME/(LOSS) 5,826 1,432 (1,775) Interest income 665 563 653 Interest expense 721 807 860 -------- ------- ------- Net interest expense (56) (244) (207) Equity in net income of affiliated companies (Note 1) 271 127 15 Net (expense)/revenue from transactions with Financial Services (Note 18) (44) (24) 15 -------- ------- ------- INCOME/(LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES - AUTOMOTIVE 5,997 1,291 (1,952) FINANCIAL SERVICES REVENUES (Note 1) 21,302 16,953 15,725 COSTS AND EXPENSES (Note 1) Interest expense 7,023 6,482 7,056 Depreciation 4,910 3,064 2,089 Operating and other expenses 4,607 3,196 2,945 Provision for credit and insurance losses 1,539 1,523 1,795 Loss on disposition of Granite Savings Bank (formerly First Nationwide Bank) (Note 16) 475 - - -------- ------- ------- Total costs and expenses 18,554 14,265 13,885 Net revenue/(expense) from transactions with Automotive (Note 18) 44 24 (15) -------- ------- ------- INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES - FINANCIAL SERVICES 2,792 2,712 1,825 -------- ------- ------- TOTAL COMPANY INCOME/(LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES 8,789 4,003 (127) Provision for income taxes (Note 6) 3,329 1,350 295 -------- ------- ------- INCOME/(LOSS) BEFORE MINORITY INTERESTS AND CUMULATIVE EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES 5,460 2,653 (422) Minority interests in net income of subsidiaries 152 124 80 -------- ------- ------- Income/(loss) before cumulative effects of changes in accounting principles 5,308 2,529 (502) Cumulative effects of changes in accounting principles (Notes 6 and 8) - - (6,883) -------- ------- ------- NET INCOME/(LOSS) 5,308 2,529 (7,385) Preferred stock dividend requirements 287 288 209 -------- ------- ------- Income/(loss) attributable to Common and Class B Stock $ 5,021 $ 2,241 $(7,594) ======== ======= =======
FS-3 54 Ford Motor Company and Subsidiaries CONSOLIDATED STATEMENT OF INCOME For the Years Ended December 31, 1994, 1993, and 1992 (in millions)
1994 1993 1992 ------- ------- ------- Average number of shares of Common and Class B Stock outstanding 1,010 986 972 AMOUNTS PER SHARE OF COMMON STOCK AND CLASS B STOCK AFTER PREFERRED STOCK DIVIDENDS (Note 1) Income/(loss) before cumulative effects of changes in accounting principles $ 4.97 $ 2.27 $ (0.73) Cumulative effects of changes in accounting principles - - (7.08) ------- ------ ------- INCOME/(LOSS) $ 4.97 $ 2.27 $ (7.81) ======= ====== ======= INCOME/(LOSS) ASSUMING FULL DILUTION $ 4.44 $ 2.10 $ (7.81) CASH DIVIDENDS $ 0.91 $ 0.80 $ 0.80
The accompanying notes are part of the financial statements. Share data have been restated to reflect the 2-for-1 stock split that became effective June 6, 1994. FS-4 55 Ford Motor Company and Subsidiaries CONSOLIDATED BALANCE SHEET (in millions)
December 31, December 31, 1994 1993 ------------ ------------- ASSETS AUTOMOTIVE Cash and cash equivalents $ 4,481 $ 5,667 Marketable securities (Note 2) 7,602 4,085 -------- -------- Total cash, cash equivalents, and marketable securities 12,083 9,752 Receivables 2,548 2,302 Inventories (Note 4) 6,487 5,538 Deferred income taxes 3,062 2,830 Other current assets 2,006 1,226 Net current receivable from Financial Services (Note 18) 677 834 -------- -------- Total current assets 26,863 22,482 Equity in net assets of affiliated companies (Note 1) 3,554 3,002 Net property (Note 5) 27,048 23,059 Deferred income taxes 4,146 5,427 Other assets (Notes 1 and 8) 6,760 7,691 Net noncurrent receivable from Financial Services (Note 18) 0 76 -------- -------- Total Automotive assets 68,371 61,737 FINANCIAL SERVICES Cash and cash equivalents 1,739 2,555 Investments in securities (Note 2) 6,105 8,219 Net receivables and lease investments (Note 3) 130,356 119,535 Other assets (Note 1) 12,783 6,892 -------- -------- Total Financial Services assets 150,983 137,201 -------- -------- TOTAL ASSETS $219,354 $198,938 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY AUTOMOTIVE Trade payables $ 10,777 $ 8,769 Other payables 2,624 1,976 Accrued liabilities (Note 7) 11,599 10,815 Income taxes payable 316 160 Debt payable within one year (Note 9) 155 932 -------- -------- Total current liabilities 25,471 22,652 Long-term debt (Note 9) 7,103 7,084 Other liabilities (Note 7) 24,920 25,911 Deferred income taxes 948 1,089 -------- -------- Total Automotive liabilities 58,442 56,736 FINANCIAL SERVICES Payables 2,361 1,881 Debt (Note 9) 123,713 103,960 Deposit accounts - 10,549 Deferred income taxes 2,958 2,287 Other liabilities and deferred income 7,669 5,583 Net payable to Automotive (Note 18) 677 910 -------- -------- Total Financial Services liabilities 137,378 125,170 Preferred stockholders' equity in a subsidiary company (Note 1) 1,875 1,458 STOCKHOLDERS' EQUITY Capital stock (Notes 11 and 12) Preferred Stock, par value $1.00 per share (aggregate liquidation preference of $3.4 billion) * * Common Stock, par value $1.00 per share (952 and 464 million shares issued) 952 464 Class B Stock, par value $1.00 per share (71 and 35 million shares issued) 71 35 Capital in excess of par value of stock 5,273 5,082 Foreign currency translation adjustments and other (Note 1) 189 (678) Minimum pension liability adjustment - (400) Earnings retained for use in business 15,174 11,071 -------- -------- Total stockholders' equity 21,659 15,574 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $219,354 $198,938 - - - - - - ======== ======== *Less than $1 million The accompanying notes are part of the financial statements.
FS-5 56 Ford Motor Company and Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS For the Years Ended December 31, 1994, 1993, and 1992 (in millions)
1994 1993 1992 ---------------------- ---------------------- ---------------------- Financial Financial Financial Automotive Services Automotive Services Automotive Services ---------- --------- ---------- --------- ---------- --------- CASH AND CASH EQUIVALENTS AT JANUARY 1 $ 5,667 $ 2,555 $ 3,504 $ 3,182 $ 4,958 $ 3,175 Cash flows from operating activities (Note 17) 7,542 9,087 6,862 7,145 5,753 5,762 Cash flows from investing activities Capital expenditures (8,310) (236) (6,714) (100) (5,697) (93) Proceeds from sale and leaseback of fixed assets 0 - 884 - 263 - Acquisitions of other companies 0 (485) 0 (336) 0 (461) Proceeds from sales of subsidiaries 0 715 173 0 52 0 Acquisitions of receivables and lease investments - (202,407) - (163,858) - (134,619) Collections of receivables and lease investments - 172,694 - 142,844 - 123,144 Acquisitions of daily rental vehicles, net of disposals - (924) - - - - Purchases of securities (Note 17) (412) (10,688) (100,493) (13,741) (50,437) (12,877) Sales and maturities of securities (Note 17) 511 9,649 101,927 12,426 49,629 12,169 Proceeds from sales of receivables - 3,622 - 4,794 - 6,465 Loans originated net of principal payments - (207) - (1,466) - (938) Investing activity with Financial Services 355 - (117) - 709 - Other (331) (312) (69) 389 (492) 372 -------- -------- -------- -------- -------- -------- Net cash used in investing activities (8,187) (28,579) (4,409) (19,048) (5,973) (6,838) Cash flows from financing activities Cash dividends (1,205) - (1,086) - (977) - Sale of Preferred Stock 0 - 0 - 1,104 - Issuance of Common Stock 715 - 394 - 221 - Changes in short-term debt (795) 10,314 (66) 6,065 (426) 2,739 Proceeds from issuance of other debt 158 21,885 424 22,128 1,865 13,382 Principal payments on other debt (75) (14,088) (376) (13,791) (1,598) (13,122) Financing activity with Automotive - (355) - 117 - (709) Changes in customers' deposits, excluding interest credited - (422) - (3,861) - (3,418) Receipts from annuity contracts (Note 10) - 1,124 - 821 - 703 Redemption of Hertz common and preferred stock (Note 16) - (145) - - - - Issuance of subsidiary company preferred stock - 417 - 375 - 283 Other 31 13 (124) (76) 79 (10) -------- -------- -------- ------- -------- -------- Net cash (used in)/provided by financing activities (1,171) 18,743 (834) 11,778 268 (152) Effect of exchange rate changes on cash 397 166 17 25 (220) (47) Net transactions with Automotive/ Financial Services 233 (233) 527 (527) (1,282) 1,282 -------- -------- -------- -------- -------- -------- Net (decrease)/increase in cash and cash equivalents (1,186) (816) 2,163 (627) (1,454) 7 -------- -------- -------- -------- -------- -------- CASH AND CASH EQUIVALENTS AT DECEMBER 31 $ 4,481 $ 1,739 $ 5,667 $ 2,555 $ 3,504 $ 3,182 ======== ======== ======== ======== ======== ========
The accompanying notes are part of the financial statements. FS-6 57 Ford Motor Company and Subsidiaries CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY For the Years Ended December 31, 1994, 1993, and 1992 (in millions)
1994 1993 1992 -------- -------- -------- CAPITAL STOCK (NOTE 11) Common Stock - ------------ Balance at beginning of year $ 464 $ 454 $ 448 Stock split in form of a 100% stock dividend 469 - - Issued for employee benefit plans and other 19 10 6 ------- ------- ------- Balance at end of year 952 464 454 Class B Stock - ------------- Balance at beginning of year 35 35 35 Stock split in form of a 100% stock dividend 36 - - ------- ------- ------- Balance at end of year 71 35 35 Series A Preferred Stock * * * Series B Preferred Stock * * * CAPITAL IN EXCESS OF PAR VALUE OF STOCK Balance at beginning of year 5,082 4,698 3,379 Stock split in form of a 100% stock dividend (505) - - Issued for employee benefit plans and other 696 384 215 Sale of Series B Preferred Stock 0 0 1,104 ------- ------- ------- Balance at end of year 5,273 5,082 4,698 FOREIGN CURRENCY TRANSLATION ADJUSTMENTS AND OTHER (NOTE 1) Balance at beginning of year (1,078) (62) 838 Translation adjustments during year 800 (508) (975) Minimum pension liability adjustment 400 (400) - Other 67 (108) 75 ------- ------- ------- Balance at end of year 189 (1,078) (62) EARNINGS RETAINED FOR USE IN THE BUSINESS Balance at beginning of year 11,071 9,628 17,990 Net income/(loss) 5,308 2,529 (7,385) Cash dividends (1,205) (1,086) (977) ------- ------- ------- Balance at end of year 15,174 11,071 9,628 ------- ------- ------- Total stockholders' equity $21,659 $15,574 $14,753 ======= ======= =======
Series A Series B Common Class B Preferred Preferred SHARES OF CAPITAL STOCK Stock Stock Stock Stock ------ ------- --------- --------- Issued at December 31, 1991 448 35 0.046 0 Additions 1992 6 0 0 0.023 1993 10 0 0 0 1994 - Stock split in form of a 100% stock dividend 469 36 - - - Employee benefit plans and other 19 - - - ----- -- ----- ----- Net additions 504 36 0.046 0.023 ----- -- ----- ----- Issued at December 31, 1994 952 71 0.046 0.023 ===== == ===== ===== Authorized at December 31, 1994 3,000 265 -- In total: 30 -- - - - - - -
*The balances at the beginning and end of each period were less than $1 million The accompanying notes are part of the financial statements. FS-7 58 Ford Motor Company and Subsidiaries Notes to Financial Statements NOTE 1. Accounting Policies Principles of Consolidation The consolidated financial statements include all significant majority-owned subsidiaries and reflect the operating results, assets, liabilities and cash flows for two business segments: Automotive and Financial Services. The assets and liabilities of the Automotive segment are classified as current or noncurrent, and those of the Financial Services segment are unclassified. Affiliates that are 20% to 50% owned, principally Mazda Motor Corporation, Autolatina and AutoAlliance International Inc., and subsidiaries where control is expected to be temporary, principally investments in certain dealerships, are generally accounted for on an equity basis. For purposes of Notes to Financial Statements, "Ford" or "the company" means Ford Motor Company and its majority-owned consolidated subsidiaries unless the context requires otherwise. Revenue Recognition - Automotive Sales are recorded by the company when products are shipped to dealers. Provisions for approved sales incentive programs normally are recognized as sales reductions at the time of revenue recognition. Provisions for sales incentive programs approved subsequent to the time that related sales were recorded are recognized when the programs are approved. Revenue Recognition - Financial Services Revenue from finance receivables is recognized over the term of the receivable using the interest method. Certain loan origination costs are deferred and amortized over the term of the related receivable as a reduction in financing revenue. Revenue from operating leases is recognized as scheduled payments become due. Agreements between Automotive operations and certain Financial Services operations provide for interest supplements and other support costs to be paid by Automotive operations on certain financing and leasing transactions. Financial Services operations recognize this revenue in income over the period that the related receivables and leases are outstanding; interest supplements and other support costs are recorded as sales incentives by Automotive operations. Other Costs Advertising and sales promotion costs are expensed as incurred. Advertising costs were $1,977 million in 1994, $1,773 million in 1993 and $1,702 million in 1992. Anticipated costs related to product warranty are accrued at the time of sale. Research and development costs are expensed as incurred and were $5,214 million in 1994, $5,021 million in 1993 and $4,332 million in 1992. Income/(Loss) Per Share of Common and Class B Stock Income/(loss) per share of Common and Class B Stock is calculated by dividing the income/(loss) attributable to Common and Class B Stock by the average number of shares of Common Stock and Class B Stock outstanding during the applicable period. FS-8 59 NOTE 1. Accounting Policies (Cont'd) The company has outstanding securities, primarily Series A Preferred Stock, which could be converted to Common Stock. Other obligations, such as stock options, are considered to be common stock equivalents. The calculation of income/(loss) per share of Common and Class B Stock assuming full dilution takes into account the effect of these convertible securities and common stock equivalents when the effect is material and dilutive. Derivative Financial Instruments The company and many of its subsidiaries have entered into agreements to manage certain exposures to fluctuations in foreign exchange and interest rates. All derivative financial instruments are classified as "held for purposes other than trading"; company policy specifically prohibits the use of derivatives for speculative purposes. Ford has operations in many countries outside the U.S., and purchases and sales of finished vehicles and production parts, debt and other payables, subsidiary dividends, and investments in subsidiaries are frequently denominated in foreign currencies. Agreements to manage foreign exchange exposure include foreign currency forward contracts, currency swaps and, to a lesser extent, foreign currency options. Gains and losses on the various agreements are recognized in income during the period of the related transactions, included in the bases of the related transactions, or, in the case of hedges of net investments in foreign subsidiaries, recognized as an adjustment to the foreign currency translation component of stockholders' equity. Financial Services operations issue debt and other payables for which the maturity and interest rate structure differs from the invested assets to ensure continued access to capital markets and to minimize overall borrowing costs. Agreements to manage interest rate fluctuations include interest-rate swap agreements. The differential paid or received on interest-rate swap agreements is recognized as an adjustment to interest expense in the period. Foreign-Currency Translation Revenues, costs and expenses of foreign subsidiaries are translated to U.S. dollars at average-period exchange rates. The effect of changes in foreign exchange rates on revenues and costs was generally unfavorable in 1994. Assets and liabilities of foreign subsidiaries are translated to U.S. dollars at end-of-period exchange rates. The effects of this translation for most foreign subsidiaries and certain other foreign currency transactions are reported in a separate component of stockholders' equity. Translation gains and losses for foreign subsidiaries that are located in highly inflationary countries or conduct a major portion of their business with the company's U.S. operations are included in income. Also included in income are gains and losses arising from transactions denominated in a currency other than the functional currency of the subsidiary involved. The effect of changes in foreign exchange rates on assets and liabilities, as described above, increased net income by $376 million in 1994 and by $419 million in 1993 and decreased the net loss by $132 million in 1992. These amounts included net transaction and translation gains before taxes of $574 million in 1994, $988 million in 1993 and $557 million in 1992. A majority of these gains were offset by higher costs of sales that resulted from the use of historical exchange rates for inventories sold during the period in countries with high inflation rates. Goodwill Goodwill represents the excess of the purchase price over the fair value of the net assets of acquired companies and is amortized using the straight-line method principally over 40 years. Total goodwill included in Automotive and Financial Services other assets at December 31, 1994 was $2.4 billion and $3.3 billion, respectively. FS-9 60 NOTE 1. Accounting Policies (Cont'd) Goodwill (Cont'd) The company evaluates the carrying value of goodwill for potential impairment on an ongoing basis. Such evaluations compare operating income before amortization of goodwill to the amortization recorded for the operations to which the goodwill relates. The company also considers projected future operating results, trends and other circumstances in making such evaluations. Preferred Stockholders' Equity in a Subsidiary Company Preferred stockholders' equity in a subsidiary company refers to the outstanding preferred stock of Ford Holdings, Inc. ("Ford Holdings"), a subsidiary of Ford. All the outstanding common stock of Ford Holdings, representing 75% of the combined voting power of all classes of capital stock of Ford Holdings, is owned directly or indirectly by Ford. The balance of the capital stock, consisting of preferred stock, is owned by persons other than Ford and accounts for the remaining 25% of the combined voting power. NOTE 2. Marketable and Other Securities The company adopted Statement of Financial Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain Investments in Debt and Equity Securities," as of January 1, 1994. The cumulative effect of this change in accounting principle on the company's financial statements was not material. Trading securities are recorded at fair value, with unrealized gains and losses included in income. Available-for-sale securities are recorded at fair value, with unrealized gains and losses excluded from income and reported in a separate component of stockholders' equity net of tax. Held-to-maturity securities are recorded at amortized cost. Equity securities which do not have readily determinable fair values are recorded at cost. The bases of cost used in determining realized gains and losses are specific identification for Automotive operations and first-in, first-out for Financial Services operations. The fair value of most securities was estimated based on quoted market prices. For those securities for which there were no quoted market prices, the estimate of fair value was based on similar types of securities that are traded in the market. Expected maturities of debt securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty. Automotive Investments in securities at December 31, 1994 were as follows (in millions):
Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- ------ Trading securities $7,382 $3 $56 $7,329 Available-for-sale securities - ----------------------------- Debt securities issued by foreign governments 23 0 0 23 Corporate securities 231 0 1 230 ------ -- --- ------ Total available-for-sale securities 254 0 1 253 Held-to-maturity securities - --------------------------- Corporate securities 20 0 0 20 ------ -- --- ------ Total investments in securities $7,656 $3 $57 $7,602 ====== == === ======
FS-10 61 NOTE 2. Marketable and Other Securities (Cont'd) All debt securities classified as available-for-sale or held-to-maturity have contractual maturities of one year or less. For trading securities, the net unrealized loss included in income during 1994 was $53 million. Proceeds from sales of available-for-sale securities were $87 million in 1994; gross losses of $2 million were realized on those sales. Included in stockholders' equity at December 31, 1994 was $188 million that represented principally the company's equity interest in the unrealized gains on securities owned by certain unconsolidated subsidiaries. Other securities classified as cash equivalents were $3.4 billion and $3.3 billion at December 31, 1994 and 1993, respectively, and consisted primarily of debt securities issued by the U.S. government and agencies and short-term time deposits. Marketable securities at December 31, 1993 totaled $4.1 billion and were recorded at cost plus accrued interest, which approximated fair value. Financial Services Investments in securities at December 31, 1994 were as follows (in millions):
Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- ------ Trading securities $ 715 $ 6 $ 10 $ 711 Available-for-sale securities - ----------------------------- Debt securities issued by the U.S. government and agencies 692 1 38 655 Municipal securities 155 1 11 145 Debt securities issued by foreign governments 106 0 10 96 Corporate securities 1,929 3 152 1,780 Mortgage-backed securities 871 0 62 809 Other debt securities 22 0 0 22 Equity securities 172 34 6 200 ------ --- ---- ------ Total available-for-sale securities 3,947 39 279 3,707 Held-to-maturity securities - --------------------------- Debt securities issued by the U.S. government and agencies 10 0 0 10 Municipal securities 783 0 12 771 Corporate securities 570 4 27 547 ------ --- ---- ------ Total held-to-maturity securities 1,363 4 39 1,328 Total investments in securities with readily determinable fair value 6,025 $49 $328 $5,746 === ==== ====== Equity securities not practicable to fair value 324 ------ Total investments in securities $6,349 ======
FS-11 62 NOTE 2. Marketable and Other Securities (Cont'd) The amortized cost and fair value of investments in available-for-sale securities and held-to-maturity securities at December 31, 1994, by contractual maturity, were as follows (in millions):
Available-for-sale Held-to-maturity ---------------------- ----------------------- Amortized Amortized Cost Fair Value Cost Fair Value --------- ---------- ---------- ---------- Due in one year or less $ 113 $ 112 $ 59 $ 58 Due after one year through five years 755 728 184 184 Due after five years through ten years 637 596 782 768 Due after ten years 1,399 1,262 338 318 Mortgage-backed securities 871 809 - - Equity securities 172 200 - - ------ ------ ------ ------ Total $3,947 $3,707 $1,363 $1,328 ====== ====== ====== ======
For trading securities, the net unrealized loss included in income during 1994 was $4 million. Proceeds from sales of available-for-sale securities were $9.1 billion in 1994; gross gains of $24 million and gross losses of $56 million were realized on those sales. The net unrealized loss net of tax included in stockholders' equity was $155 million at December 31, 1994. Other securities classified as cash equivalents were $1.4 billion and $1.6 billion at December 31, 1994 and 1993, respectively, and consisted primarily of short-term time deposits and corporate securities. At December 31, 1993, investments in debt securities were recorded at amortized cost because of the ability to hold such securities until maturity and the intent to hold them for the foreseeable future. Marketable equity securities were recorded at fair value. Investments in debt securities at December 31, 1993 were as follows (in millions):
Gross Gross Book Unrealized Unrealized Value Gains Losses Fair Value --------- ---------- ---------- ---------- Debt securities issued by the U.S. government and agencies $ 974 $ 27 $ 1 $1,000 Municipal securities 126 3 0 129 Debt securities issued by foreign governments 88 4 1 91 Corporate securities 1,779 48 19 1,808 Mortgage-backed securities 2,588 39 82 2,545 Other debt securities 192 0 1 191 ------ ---- ---- ------ Total $5,747 $121 $104 $5,764 ====== ==== ==== ======
The book value and fair value of investments in debt securities at December 31, 1993, by contractual maturity, were as follows (in millions):
Book Value Fair Value ------- ---------- Due in one year or less $ 96 $ 96 Due after one year through five years 1,023 1,035 Due after five years through ten years 563 580 Due after ten years 1,477 1,508 Mortgage-backed securities 2,588 2,545 ------ ------ Total $5,747 $5,764 ====== ======
FS-12 63 NOTE 2. Marketable and Other Securities (Cont'd) Proceeds from sales of investments in debt securities were $11.2 billion in 1993 and $10.5 billion in 1992. In 1993, gross gains of $113 million and gross losses of $20 million were realized on those sales; gross gains of $142 million and gross losses of $86 million were realized in 1992. Other securities other than debt securities totaled $2,472 million at December 31, 1993. The estimated fair value in excess of book value of those securities which were practicable to value was $59 million at December 31, 1993. It was not practicable to calculate the fair value of certain securities totaling $660 million at December 31, 1993 because they represented preferred stocks of non-traded companies with whom the company does business and for which similar market-traded securities were not available for comparison. NOTE 3. Receivables Automotive Automotive receivables are generally short-term, and book value approximates fair value. Financial Services Included in net receivables and lease investments at December 31 were net finance receivables, investments in direct financing leases and investments in operating leases. The investments in direct financing and operating leases relate to the leasing of motor vehicles and various types of transportation and other equipment and facilities. Net finance receivables at December 31 were as follows (in millions):
1994 1993 --------- -------- Automotive $ 87,858 $ 58,738 Real estate, mainly residential 15,560 24,152 Other 6,237 24,968 -------- -------- Total finance receivables 109,655 107,858 Loan origination costs 194 124 Unearned income (9,656) (9,037) Allowance for credit losses (1,671) (2,017) Unearned insurance premiums and unpaid insurance claims related to finance receivables (90) (139) -------- -------- Net finance receivables $ 98,432 $ 96,789 ======== ======== Fair value $ 99,609 $ 98,505
Included in finance receivables was a total of $1.3 billion for 1994 and $1.5 billion for 1993 owed by three customers with the largest receivable balances. Other finance receivables consisted primarily of commercial and consumer loans, collateralized loans, credit card receivables, general corporate obligations and accrued interest. Also included in other finance receivables at December 31, 1994 and 1993 were $3.4 billion and $2.4 billion, respectively, of accounts receivable purchased by certain Financial Services operations from Automotive operations. Contractual maturities of automotive and other finance receivables are as follows (in millions): 1995 - $49,084; 1996 - $18,444; 1997 - $12,841; thereafter - $13,726. Experience indicates that a substantial portion of the portfolio generally is repaid before the contractual maturity dates. The fair value of most receivables was estimated by discounting future cash flows using an estimated discount rate which reflected the credit, interest rate and prepayment risks associated with similar types of instruments. For receivables with short maturities, the book value approximated fair value. Sales of finance receivables increased net income by $15 million in 1994, $60 million in 1993 and $7 million in 1992. FS-13 64 NOTE 3. Receivables (Cont'd) Investments in direct financing leases at December 31 were as follows (in millions):
1994 1993 -------- -------- Minimum lease rentals $ 8,321 $ 7,382 Estimated residual values 3,715 2,764 Lease origination costs 70 69 Unearned income (2,299) (2,010) Allowance for credit losses (185) (133) ------- ------- Net investments in direct financing leases $ 9,622 $ 8,072 ======= =======
Minimum direct financing lease rentals (including executory costs of $36 million) are contractually due as follows (in millions): 1995 - $2,736; 1996 - $1,998; 1997 - $1,282; 1998 - $740; thereafter - $1,601. Investments in operating leases at December 31 were as follows (in millions):
1994 1993 -------- -------- Vehicles and other equipment, at cost $28,050 $18,589 Lease origination costs 38 23 Accumulated depreciation (5,425) (3,736) Allowance for credit losses (361) (202) ------- ------- Net investments in operating leases $22,302 $14,674 ======= =======
Future minimum rentals on operating leases are contractually due as follows (in millions): 1995 - $4,533; 1996 - $1,807;1997 - $220; 1998 - $56; thereafter - $108. Depreciation expense on operating leases reflects primarily the straight-line method over the term of the leases and was as follows (in millions): 1994 - $4,231; 1993 - $2,984; 1992 - $2,000. Allowances for credit losses are established as required based on historical experience. Other factors that affect collectibility also are evaluated, and additional amounts may be provided. Finance receivables and lease investments are charged to the allowances for credit losses when an account is deemed to be uncollectible, taking into consideration the financial condition of the borrower, the value of the collateral, recourse to guarantors and other factors. Recoveries on finance receivables and lease investments previously charged off as uncollectible are credited to the allowances for credit losses. Changes in the allowances for credit losses were as follows (in millions):
1994 1993 1992 ------- ------- ------- Beginning balance $2,352 $2,257 $2,078 Additions 988 1,019 1,218 Net losses (826) (903) (993) Other changes (297) (21) (46) ------ ------ ------ Ending balance $2,217 $2,352 $2,257 ====== ====== ======
Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan", was issued in May 1993 and amended in October 1994 by Statement of Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures". The Standards require that impaired loans be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate. The company will adopt these standards as of January 1, 1995, and the effect is not expected to be material. FS-14 65 NOTE 4. Inventories - Automotive Inventories at December 31 were as follows (in millions):
1994 1993 ------ ------ Raw materials, work in process and supplies $3,192 $2,937 Finished products 3,295 2,601 ------ ------ Total inventories $6,487 $5,538 ====== ====== U.S. Inventories $2,917 $2,575
Inventories are stated at the lower of cost or market. The cost of most U.S. inventories is determined by the last-in, first-out ("LIFO") method. The cost of the remaining inventories is determined primarily by the first-in, first-out ("FIFO") method. If the FIFO method had been used instead of the LIFO method, inventories would have been higher by $1,383 million and $1,342 million at December 31, 1994 and 1993, respectively. NOTE 5. Net Property, Depreciation and Amortization - Automotive Net property at December 31 was as follows (in millions):
1994 1993 --------- --------- Land $ 359 $ 360 Buildings and land improvements 6,939 5,923 Machinery, equipment and other 33,551 29,655 Construction in progress 1,685 1,551 -------- -------- Total land, plant and equipment 42,534 37,489 Accumulated depreciation (22,738) (20,691) -------- -------- Net land, plant and equipment 19,796 16,798 Unamortized special tools 7,252 6,261 -------- -------- Net property $ 27,048 $ 23,059 ======== ========
Property, equipment, and special tools are stated at cost, less accumulated depreciation. Assets placed in service before January 1, 1993 are depreciated using an accelerated method that results in accumulated depreciation of approximately two-thirds of asset cost during the first half of the asset's estimated useful life. Assets placed in service after December 31, 1992 are depreciated using the straight-line method of depreciation. This change in accounting principle was made to reflect improvements in the design and flexibility of manufacturing machinery and equipment and improvements in maintenance practices. These improvements have resulted in more uniform productive capacities and maintenance costs over the useful life of an asset, and straight-line depreciation is preferable in these circumstances. Depreciation and amortization expenses were as follows (in millions):
1994 1993 1992 ------ ------ ------ Depreciation $2,297 $2,392 $2,569 Amortization 2,129 2,012 2,097 ------ ------ ------ Total $4,426 $4,404 $4,666 ====== ====== ======
On average, buildings and land improvements are depreciated based on a 30-year life; automotive machinery and equipment are depreciated based on a 14-year life. Special tools are amortized over periods of time representing the productive use of those tools. When plant and equipment are retired, the general policy is to charge the cost of those assets, reduced by net salvage proceeds, to accumulated depreciation. Maintenance, repairs and rearrangement costs are expensed as incurred and were $2,377 million in 1994, $1,934 million in 1993 and $1,872 million in 1992. Expenditures that increase the value or productive capacity of assets are capitalized. Preproduction costs related to new facilities are expensed as incurred. FS-15 66 NOTE 6. Income Taxes Income/(loss) before income taxes and cumulative effects of changes in accounting principles for U.S. and foreign operations, excluding equity in net income of affiliated companies, was as follows (in millions):
1994 1993 1992 ------ ------- -------- U.S. $6,944 $4,152 $ 889 Foreign 1,574 (276) (1,031) ------ ------ ------- Total income/(loss) before income taxes $8,518 $3,876 $ (142)* ====== ====== =======
- - - - - *Excludes cumulative effects of changes in accounting principles The provision for income taxes was as follows (in millions):
1994 1993 1992 ------ ------ ------ Currently payable/(refundable) U.S. federal $1,640 $1,259 $(122) Foreign 690 169 427 State and local 165 123 104 ------ ------ ----- Total currently payable 2,495 1,551 409 Deferred tax liability/(benefit) U.S. federal 827 (161) 434 Foreign (71) (106) (499) State and local 78 66 (49) ------ ------ ----- Total deferred 834 (201) (114) ------ ------ ----- Total provision $3,329 $1,350 $ 295* ====== ====== =====
- - - - - *Excludes cumulative effects of changes in accounting principles The provision includes estimated taxes payable on that portion of retained earnings of subsidiaries expected to be received by the company. No provision was made with respect to $3.3 billion of retained earnings at December 31, 1994 which have been invested by foreign subsidiaries. It is not practicable to estimate the amount of unrecognized deferred tax liability for the undistributed foreign earnings. A reconciliation of the provision for income taxes compared with the amounts at the U.S. statutory tax rate is shown below (in millions):
1994 1993 1992 ------ ------ ------ Tax provision/(credit) at U.S. statutory rate of 35% for 1994 and 1993 and 34% for 1992 $2,981 $1,357 $ (48) Effect of: Foreign taxes over U.S. tax rate 68 219 263 State and local income taxes 158 118 36 Rate adjustments on U.S. and foreign deferred taxes - (199) - Income not subject to tax or subject to tax at reduced rates (62) (70) (112) Other 184 (75) 156 ------ ------ ----- Provision for income taxes $3,329 $1,350 $ 295* ====== ====== ===== Effective Tax Rate 39.1% 34.8% -
- - - - - *Excludes cumulative effects of changes in accounting principles The company adopted Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes," as of January 1, 1992. The adoption of SFAS 109 changed the method of accounting for income taxes from the deferred method using Accounting Principles Board Opinion No. 11 ("APB 11") to an asset and liability approach. The cumulative effect of this change in accounting principle decreased the net loss in 1992 by $657 million. FS-16 67 NOTE 6. Income Taxes (Cont'd) Under SFAS 109, deferred income taxes reflect the estimated tax effect of temporary differences between assets and liabilities for financial reporting purposes and those amounts as measured by tax laws and regulations. The components of deferred income tax assets and liabilities at December 31 were as follows (in millions):
1994 1993 ------- ------- Deferred Tax Assets ------------------- Employee benefit plans $ 5,951 $ 5,839 Dealer and customer allowances and claims 3,375 3,243 Net operating loss carryforwards 1,152 1,378 Allowance for credit losses 821 858 Alternative minimum tax 318 129 Depreciation and amortization (excludes leasing transactions) 39 30 All other 1,198 1,093 Valuation allowances (159) (174) ------- ------- Total deferred tax assets 12,695 12,396 Deferred Tax Liabilities ------------------------ Leasing transactions 3,935 3,166 Depreciation and amortization (excludes leasing transactions) 2,804 2,574 Employee benefit plans 1,443 697 All other 1,336 1,157 ------- ------- Total deferred tax liabilities 9,518 7,594 ------- ------- Net deferred tax assets $ 3,177 $ 4,802 ======= =======
Net foreign operating loss carryforwards for tax purposes were $3.2 billion at December 31, 1994. A substantial portion of these losses has an indefinite carryforward period; the remaining losses have expiration dates beginning in 1996. For financial statement purposes, the tax benefit of operating losses is recognized as a deferred tax asset, subject to appropriate valuation allowances. The company evaluates the tax benefits of operating loss carryforwards on an ongoing basis. Such evaluations include a review of historical and consideration of projected future operating results, the eligible carryforward period and other circumstances. NOTE 7. Liabilities - Automotive Current Liabilities Included in accrued liabilities at December 31 were the following (in millions):
1994 1993 ------- ------- Dealer and customer allowances and claims $ 6,716 $ 6,645 Employee benefit plans 1,786 1,415 Postretirement benefits other than pensions 688 674 Salaries, wages, and employer taxes 598 594 Other 1,811 1,487 ------- ------- Total accrued liabilities $11,599 $10,815 ======= =======
Noncurrent Liabilities Included in other liabilities at December 31 were the following (in millions):
1994 1993 ------- ------- Postretirement benefits other than pensions $14,025 $13,288 Dealer and customer allowances and claims 6,044 5,170 Employee benefit plans 2,232 2,353 Unfunded pension obligation 362 2,873 Minority interests in net assets of subsidiaries 118 161 Other 2,139 2,066 ------- ------- Total other liabilities $24,920 $25,911 ======= =======
FS-17 68 NOTE 8. Employee Retirement Benefits Employee Retirement Plans The company has two principal retirement plans in the U.S. The Ford-UAW Retirement Plan covers hourly employees represented by the UAW, and the General Retirement Plan covers substantially all other employees of the company and several finance subsidiaries in the U.S. The hourly plan provides noncontributory benefits related to employee service. The salaried plan provides similar noncontributory benefits and contributory benefits related to pay and service. Other U.S. and non-U.S. subsidiaries have separate plans which generally provide similar types of benefits covering their employees. The company and its subsidiaries also have defined benefit plans applicable to certain executives which are not funded. The company's policy for funded plans is to contribute annually, at a minimum, amounts required by applicable law, regulations and union agreements. Plan assets consist principally of investments in stocks, government and other fixed income securities and real estate. The various plans generally are funded, except in Germany, where this has not been the custom, and as noted above; in those cases, an unfunded liability is recorded. In 1994, the company contributed $1.7 billion to its U.S. plans and $300 million to its non-U.S. plans. The company's pension expense, including Financial Services, was as follows (in millions):
1994 1993 1992 ------------------------ ------------------------ ------------------------ Non- Non- Non- U.S. Plans U.S. Plans U.S. Plans U.S. Plans U.S. Plans U.S. Plans ---------- ---------- ---------- ---------- ---------- ---------- Benefits attributed to employees' service $ 526 $ 236 $ 419 $ 181 $ 342 $ 213 Interest on projected benefit obligation 1,639 677 1,517 667 1,437 698 Return on assets: Actual (gain)/loss (74) 137 (2,264) (1,370) (1,465) (865) Deferred gain/(loss) (1,928) (759) 389 677 (204) 190 ------- ------- ------- ------ ------- ----- Recognized (gain) (2,002) (622) (1,875) (693) (1,669) (675) Net amortization and other 452 151 259 169 228 180 ------- ------- ------- ------ ------- ----- Net pension expense $ 615 $ 442 $ 320 $ 324 $ 338 $ 416 ======= ======= ======= ====== ======= =====
Pension expense increased in 1994 as a result of lower discount rates for both U.S. and non-U.S. plans, compared with 1993. In addition, amendments made in September 1993 to the Ford-UAW Retirement Plan and the General Retirement Plan provided benefit improvements that increased net U.S. expense in 1994. FS-18 69 NOTE 8. Employee Retirement Benefits (Cont'd) The status of these plans at December 31 was as follows (in millions):
1994 1993 ------------------------------ ------------------------------ Assets in Accum. Assets in Accum. Excess of Benefits Excess of Benefits Accum. in Excess Total Accum. in Excess Total Benefits of Assets Plans Benefits of Assets Plans --------- --------- -------- --------- --------- -------- U.S. Plans - ---------- Plan assets at fair value $23,264 $ 132 $23,396 $12,122 $10,779 $22,901 Actuarial present value of: Vested benefits $17,217 $ 404 $17,621 $ 8,708 $ 9,962 $18,670 Accumulated benefits 20,256 453 20,709 9,700 12,603 22,303 Projected benefits 21,404 541 21,945 10,896 12,767 23,663 Plan assets in excess of/(less than) projected benefits $ 1,860 $ (409) $ 1,451 $ 1,226 $(1,988) $ (762) Unamortized (net asset)/net transition obligation a/ (164) 12 (152) (760) 563 (197) Unamortized prior service cost b/ 2,134 86 2,220 538 2,053 2,591 Unamortized net (gains)/losses c/ (717) 56 (661) (159) 297 138 ------- ------- ------- ------- ------- ------- Prepaid pension asset/(liability) 3,113 (255) 2,858 845 925 1,770 Adjustment required to recognize minimum liability d/ - (77) (77) - (2,771) (2,771) ------- ------- ------- ------- ------- ------- Prepaid pension asset/(liability) recognized in the balance sheet $ 3,113 $ (332) $ 2,781 $ 845 $(1,846) $(1,001) ======= ======= ======= ======= ======= ======= Plan assets in excess of/(less than) accumulated benefits $ 3,008 $ (321) $ 2,687 $ 2,422 $(1,824) $ 598 Assumptions: Discount rate at year-end 8.25% 7.0% Average rate of increase in compensation 5.5 % 5.5% Long-term rate of return on assets 9.0 % 9.5% Non-U.S. Plans - -------------- Plan assets at fair value $ 7,018 $ 950 $ 7,968 $ 5,806 $ 1,815 $ 7,621 Actuarial present value of: Vested benefits $ 5,318 $ 2,895 $ 8,213 $ 4,538 $ 3,888 $ 8,426 Accumulated benefits 5,419 3,053 8,472 4,619 4,092 8,711 Projected benefits 6,321 3,240 9,561 5,333 4,484 9,817 Plan assets in excess of/(less than) projected benefits $ 697 $(2,290) $(1,593) $ 473 $(2,669) $(2,196) Unamortized (net asset)/net transition obligation a/ 32 241 273 (209) 461 252 Unamortized prior service cost b/ 227 248 475 267 232 499 Unamortized net (gains)/losses c/ (81) (25) (106) (88) 863 775 ------- ------- ------- ------- ------- ------- Prepaid pension asset/(liability) 875 (1,826) (951) 443 (1,113) (670) Adjustment required to recognize minimum liability d/ - (284) (284) - (1,164) (1,164) ------- ------- ------- ------- ------- ------- Prepaid pension asset/(liability) recognized in the balance sheet $ 875 $(2,110) $(1,235) $ 443 $(2,277) $(1,834) ======= ======= ======= ======= ======= ======= Plan assets in excess of/(less than) accumulated benefits $ 1,599 $(2,103) $ (504) $ 1,187 $(2,277) $(1,090) Assumptions: Discount rate at year-end 8.3% 7.2% Average rate of increase in compensation 5.2% 5.1% Long-term rate of return on assets 9.0% 9.5%
- - - - - - a/ The balance of the initial difference between assets and obligation deferred for recognition over a 15 year period. b/ The prior service effect of plan amendments deferred for recognition over remaining service. c/ The deferred gain or loss resulting from investments, other experience and changes in assumptions. d/ An adjustment to reflect the unfunded accumulated benefits -- at year-end 1994 this amount is offset by an intangible asset; at year-end 1993, the unfunded liability in excess of $3,250 million was recorded net of deferred taxes as a $400 million reduction in stockholders' equity. FS-19 70 NOTE 8. Employee Retirement Benefits (Cont'd) Postretirement Health Care and Life Insurance Benefits The company and certain of its subsidiaries sponsor unfunded plans to provide selected health care and life insurance benefits for retired employees. The company's U.S. and Canadian employees may become eligible for those benefits if they retire while working for the company; however, benefits and eligibility rules may be modified from time to time. The estimated cost for postretirement health care benefits is accrued over periods of employee service on an actuarially determined basis, in accordance with the requirements of Statement of Financial Accounting Standards No. 106 ("SFAS 106"), "Employers' Accounting for Postretirement Benefits Other Than Pensions". In adopting SFAS 106, the company elected to recognize immediately the prior-year unaccrued accumulated postretirement benefit obligation, resulting in an adverse effect on income of $7,540 million in the first quarter of 1992. The charge reflected an unaccrued retiree benefit obligation of $12 billion, offset partially by projected tax benefits of $4.5 billion. Net postretirement benefit expense, including Financial Services, was as follows (in millions):
1994 1993 1992 ------ ------ ------ Benefits attributed to employees' service $ 263 $ 240 $ 235 Interest on accumulated benefit obligation 1,088 1,207 1,129 Net amortization (32) - - ------ ------ ------ Net postretirement benefit expense $1,319 $1,447 $1,364 ====== ====== ====== Retiree benefit payments $ 639 $ 654 $ 641
The status of these plans at December 31 was as follows (in millions):
1994 1993 -------- -------- Accumulated postretirement benefit obligation: Retirees $ 6,720 $ 8,147 Active employees eligible to retire 2,282 2,725 Other active employees 4,266 5,984 ------- ------- Total accumulated obligation 13,268 16,856 Unamortized prior service cost a/ 321 387 Unamortized net gains/(losses) b/ 1,440 (2,880) ------- ------- Accrued liability $15,029 $14,363 ======= ======= Assumptions: Discount rate 8.75% 7.5% Present health care cost trend rate 5.9 % 9.7% Ultimate trend rate in ten years 5.5 % 5.5% Weighted-average trend rate 6.6 % 6.8%
- - - - - a/ The prior service effect of plan amendments deferred for recognition over remaining service to retirement eligibility. b/ The deferred gain or loss resulting from experience and changes in assumptions deferred for recognition over remaining service to retirement. Changing the assumed health care cost trend rates by one percentage point would change the aggregate service and interest cost components of net postretirement benefit expense for 1994 by $180 million and the accumulated postretirement benefit obligation at December 31, 1994 by $1.6 billion. FS-20 71 NOTE 9. Debt The fair value of debt was estimated based on quoted market prices or current rates for similar debt with the same remaining maturities. Automotive Debt at December 31 was as follows (in millions):
Weighted Average Interest Rate* Book Value ------------------- ------------------- Maturity 1994 1993 1994 1993 --------- -------- -------- -------- -------- Debt payable within one year ---------------------------- Short-term debt 10.0% 7.1% $ 112 $ 887 Long-term debt payable within one year 43 45 ------ ------ Total debt payable within one year 155 932 Long-term debt 1996-2043 9.0% 9.0% 7,103 7,084 ------ ------ Total debt $7,258 $8,016 ====== ====== Fair value $7,492 $9,044
- - - - - *Excludes the effect of interest-rate swap agreements Long-term debt at December 31, 1994 included maturities as follows (in millions): 1995 - $43 (included in current liabilities); 1996 - $932; 1997 - $599; 1998 - $1,210; 1999 - $350; thereafter - $4,012. Included in long-term debt at December 31, 1994 and 1993 were obligations of $6,567 million and $6,568 million, respectively, with fixed interest rates and $536 million and $516 million, respectively, with variable interest rates (generally based on LIBOR or other short-term rates). Obligations payable in foreign currencies at December 31, 1994 and 1993 were $994 million and $970 million, respectively. Agreements to manage exposures to fluctuations in interest rates, which include primarily interest-rate swap agreements and futures contracts, did not materially change the overall weighted-average rate on long-term debt and effectively decreased the obligations subject to variable interest rates to $465 million at December 31, 1994. Financial Services Debt at December 31 was as follows (in millions):
Weighted Average Interest Rate* Book Value ------------------- ------------------- Maturity 1994 1993 1994 1993 --------- -------- -------- -------- -------- Debt payable within one year ---------------------------- Unsecured short-term debt $ 2,990 $ 2,852 Commercial paper 51,008 37,793 Other short-term debt 2,301 3,111 -------- -------- Total short-term debt 5.9% 3.9% 56,299 43,756 Long-term debt payable within one year 9,310 12,304 -------- -------- Total debt payable within one year 65,609 56,060 Long-term debt -------------- Secured indebtedness 1996-2005 6.7% 8.0% 98 1,821 Unsecured senior indebtedness Notes and bank debt 1996-2048 7.1% 7.1% 54,248 41,471 Debentures 1996-2010 7.8% 9.4% 560 916 Unamortized (discount) (61) (55) -------- -------- Total unsecured senior indebtedness 54,747 42,332 Unsecured subordinated indebtedness Notes 1996-2021 9.2% 8.9% 3,159 3,634 Debentures 1996-2009 8.1% 8.1% 141 142 Unamortized (discount) (41) (29) -------- -------- Total unsecured subordinated indebtedness 3,259 3,747 -------- -------- Total long-term debt 58,104 47,900 -------- -------- Total debt $123,713 $103,960 ======== ======== Fair value $122,252 $107,233
- - - - - *Excludes the effect of interest-rate swap agreements FS-21 72 NOTE 9. Debt (Cont'd) Information concerning short-term borrowings (excluding long-term debt payable within one year) is as follows (in millions):
1994 1993 1992 -------- -------- -------- Average amount of short-term borrowings $50,106 $38,353 $33,993 Weighted-average short-term interest rates per annum (average year) 4.6% 3.8% 5.2% Average remaining term of commercial paper at December 31 27 days 29 days 29 days
Long-term debt at December 31, 1994 included maturities as follows (in millions): 1995 - $9,310; 1996 - $12,086; 1997 - $13,106; 1998 - $9,871; 1999 - - $9,883; thereafter - $13,158. Included in long-term debt at December 31, 1994 and 1993 were obligations of $45.9 billion and $40.7 billion, respectively, with fixed interest rates and $12.2 billion and $7.2 billion, respectively, with variable interest rates (generally based on LIBOR or other short-term rates). Obligations payable in foreign currencies at December 31, 1994 and 1993 were $12.2 billion and $12.9 billion, respectively. These obligations were issued primarily to fund foreign business operations. Agreements to manage exposures to fluctuations in interest rates include primarily interest-rate swap agreements. These agreements decreased the overall weighted-average rate on long-term debt to 7.1%, compared with 7.2% excluding these agreements, and effectively decreased the obligations subject to variable interest rates to $7.2 billion at December 31, 1994. The weighted-average interest rate on short-term debt decreased to 5.6%, compared with 5.9% excluding these agreements. Support Facilities At December 31, 1994, Ford (parent company only) had long-term contractually committed credit agreements in the U.S. under which $5.9 billion is available from various banks at least through June 30, 1999. The entire $5.9 billion may be used, at Ford's option, by either Ford or Ford Credit. These facilities were unused at December 31, 1994. Outside the U.S., Ford had additional long-term contractually committed credit-line agreements of $2.5 billion. These facilities are available in varying amounts from 1995 through 1999; $21 million were in use at December 31, 1994. At December 31, 1994, Financial Services had $33.8 billion of contractually committed support facilities (including the $5.9 billion of the Ford credit agreements) for use in the U.S.; less than 1% of these facilities, excluding the Ford credit agreements, were in use. An additional $8.9 billion of contractually committed support facilities were available outside the U.S. at December 31, 1994; $1.4 billion of these were in use. NOTE 10. Annuity Contracts - Financial Services The liability for annuity contracts, included in other liabilities, was $2,722 million at December 31, 1994 and $1,598 million at December 31, 1993, and reflected deposits received and interest credited, less related withdrawals. The weighted-average interest rate on annuity contracts outstanding at December 31, 1994 and 1993 was 6.3% and 6.2%, respectively. Interest rates offered are initially guaranteed for periods of either one or five years. Interest credited to annuity account balances is recognized as expense; surrender charges are recognized as a reduction of interest credited to annuitants. The fair value of annuity contracts at December 31, 1994 and 1993 approximated book value because the contractual interest rate due holders is reset annually for more than 97% of contracts outstanding. FS-22 73 NOTE 11. Capital Stock On April 14, 1994, the company's Board of Directors declared a 2-for-1 stock split in the form of a 100% stock dividend on the company's Common Stock and Class B Stock effective June 6, 1994. Share data have been restated to reflect the split, where appropriate. At December 31, 1994, all general voting power was vested in the holders of Common Stock and the holders of Class B Stock, voting together without regard to class. At that date, the holders of Common Stock were entitled to one vote per share and, in the aggregate, had 60% of the general voting power; the holders of Class B Stock were entitled to such number of votes per share as would give them, in the aggregate, the remaining 40% of the general voting power, as provided in the company's Certificate of Incorporation. The Certificate provides that all shares of Common Stock and Class B Stock share equally in dividends (other than dividends declared with respect to any outstanding Preferred Stock), except that any stock dividends are payable in shares of Common Stock to holders of that class and in Class B Stock to holders of that class. Upon liquidation, all shares of Common Stock and Class B Stock are entitled to share equally in the assets of the company available for distribution to the holders of such shares. Information concerning the Preferred Stock of the company is as follows:
Series A Preferred Stock Series B Preferred Stock -------------------------------------- -------------------------------------- Year issued 1991 1992 Shares issued 46,000 shares 22,800 shares Shares sold 46,000,000 Depositary Shares, each 45,600,000 Depositary Shares, each representing 1/1,000 of a share of representing 1/2,000 of a share of Series A Cumulative Convertible Series B Cumulative Preferred Stock Preferred Stock Dividends $4.20 per year per Depositary Share $2.0625 per year per Depositary Share Conversion Shares can be converted any time None into shares of Common Stock of the company at a rate equivalent to 3.2654 shares of Common Stock for each Depositary Share (equivalent to a conversion price of $15.3121 per share of Common Stock). Redemption Not redeemable prior to Not redeemable prior to December 7, 1997 December 1, 2002. On and after December 7, 1997, the On and after December 1, 2002, and stock is redeemable for cash at the upon satisfaction of certain company's option, in whole or in conditions, the stock is redeemable part, initially at an amount equi- for cash at the option of Ford, in valent to $51.68 per Depositary whole or in part, at a redemption Share and thereafter at prices price equivalent to $25 per Depositary declining to $50 per Depositary Share, plus an amount equal to the sum Share on and after December 1, 2001, of all accrued and unpaid dividends. plus, in each case, an amount equal to the sum of all accrued and unpaid dividends. Liquidation preference $50 per Depositary Share $25 per Depositary Share and shares outstanding $2.3 billion and 45,946 shares $1.1 billion and 22,800 shares at December 31, 1994 outstanding outstanding
The Series A and Series B Preferred Stock rank (and any other outstanding Preferred Stock of the company would rank) senior to the Common Stock and Class B Stock in respect of dividends and liquidation rights. FS-23 74 NOTE 12. Stock Options The company has stock options outstanding under the 1985 Stock Option Plan and the 1990 Long-term Incentive Plan. These plans were approved by the stockholders. Information concerning stock options, restated to reflect the 2-for-1 stock split, is as follows (shares in millions):
1994 1993 1992 ------ ------ ------ Option price of new grants a/ $29.06 $28.84 $18.50 and $28.63 Shares subject to option ------------------------ Outstanding at beginning of period 37.4 41.1 33.0 New grants 9.5 7.1 9.6 Exercised b/ (2.6) (6.7) (1.0) Surrendered upon exercise of stock appreciation rights (0.9) (3.9) (0.5) Terminated and expired (0.1) (0.2) * ----- ----- ------ Outstanding at end of period 43.3 c/ 37.4 41.1 Outstanding but not exercisable (21.3) (19.3) (19.5) ----- ----- ------ Exercisable at end of period 22.0 18.1 21.6 ===== ===== ====== Shares authorized for future grants (as of December 31)d/ 0 0 0
- - - - - * Less than 50,000 shares. a/ Fair market value of Common Stock at dates of grant. b/ At option prices ranging from $9.09 to $28.84 during 1994, $9.09 to $25.84 during 1993, from $3.52 to $15.34 during 1992. c/ Including 10.0 and 33.3 million shares under the 1985 and 1990 Plans, respectively, at option prices ranging from $9.09 to $29.06 per share. d/ In addition, up to 1% of the issued Common Stock as of December 31 of any year may be made available for stock options and other plan awards in the next succeeding calendar year. That limit may be increased up to 2% in any year, with a corresponding reduction in shares available for grants in future years. No further grants may be made under the 1985 Plan. Grants may be made under the 1990 Plan through April 2000. In general, options granted under the 1985 Plan and options granted to date under the 1990 Plan become exercisable 25% after one year from the date of grant, 50% after two years, 75% after three years and in full after four years. Options under both Plans expire after 10 years. Certain options outstanding under the plans were granted with an equal number of accompanying stock appreciation rights which may be exercised in lieu of the options. Under the Plans, a stock appreciation right entitles the holder to receive, without payment, the excess of the fair market value of the Common Stock on the date of exercise over the option price, either in Common Stock or cash or a combination. In addition, grants of Contingent Stock Rights were made with respect to 709,800 shares in 1994, 2,327,200 shares in 1993, and 1,264,800 shares in 1992 under the 1990 Long-Term Incentive Plan (not included in the table above). The number of shares ultimately awarded will depend on the extent to which the Performance Target specified in each Right is achieved, the individual performances of the recipients and other factors, as determined by the Compensation and Option Committee of the Board of Directors. FS-24 75 NOTE 13. Litigation and Claims Various legal actions, governmental investigations and proceedings and claims are pending or may be instituted or asserted in the future against the company and its subsidiaries, including those arising out of alleged defects in the company's products, governmental regulations relating to safety, emissions and fuel economy, financial services, intellectual property rights, product warranties and environmental matters. Certain 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 treble 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. Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not predictable with assurance. It is reasonably possible that some of the matters discussed in the foregoing paragraph could be decided unfavorably to the company or the subsidiary involved and could require the company or such subsidiary to pay damages or make other expenditures in amounts or a range of amounts that at December 31, 1994 cannot reasonably be estimated. Although the final resolution of any such matters could have a material effect on the company's consolidated financial results for a particular reporting period, the company believes that, based on its analysis, any resulting liability should not materially affect the company's consolidated financial position at December 31, 1994. NOTE 14. Commitments and Contingencies At December 31, 1994, the company had the following minimum rental commitments under non-cancelable operating leases (in millions): 1995 - $713; 1996 - $610; 1997 - $538; 1998 - $250; 1999 - $222; thereafter - $653. These amounts include rental commitments related to the sales and leasebacks of certain Automotive machinery and equipment. The company and certain of its subsidiaries have entered into agreements with various banks to introduce credit card programs that offer rebates which can be applied against the purchase or lease of Ford cars or trucks. The maximum amount of rebates available to qualified cardholders at December 31, 1994 and 1993 was $2.3 billion and $1.7 billion, respectively. The company has provided for the estimated net cost of these programs as a sales incentive based on the estimated number of participants who will ultimately purchase vehicles. Certain Financial Services subsidiaries make credit lines available to holders of their credit cards. At December 31, 1994 and 1993, the unused portion of available credit was approximately $10.3 billion and $9.9 billion, respectively, and is revocable under specified conditions. The fair value of unused credit lines and the potential risk of loss was not considered to be significant. FS-25 76 NOTE 15. Financial Instruments The company adopted Statement of Financial Accounting Standards No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments" as of December 31, 1994. Estimated fair value amounts have been determined using available market information and various valuation methods depending on the type of instrument. In evaluating the fair value information, considerable judgement is required to interpret the market data used to develop the estimates. The use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts. Balance Sheet Financial Instruments Information about specific valuation techniques and related fair value detail is provided throughout the footnotes. The table below provides book value and fair value amounts (in millions) and a cross reference to the applicable Note.
December 31, 1994 December 31, 1993 ----------------------- ----------------------- Book Fair Book Fair Fair Value Value Value Value Value Reference ---------- -------- ---------- -------- ---------- Automotive - ---------- Cash & cash equivalents $ 4,481 $ 4,481 $ 5,667 $ 5,667 Note 17 Marketable securities 7,602 7,602 4,085 4,085 Note 2 Receivables 2,548 2,548 2,302 2,302 Note 3 Debt 7,258 7,492 8,016 9,044 Note 9 Financial Services - ------------------ Cash & cash equivalents $ 1,739 $ 1,739 $ 2,555 $ 2,555 Note 17 Marketable securities 5,781 5,746 7,559 7,635 Note 2 Receivables 98,432 99,609 96,789 98,505 Note 3 Debt 123,713 122,252 103,960 107,223 Note 9 Annuity contracts* 2,722 2,722 1,598 1,598 Note 10
- - - - - - * Included in Financial Services other liabilities and deferred income on the balance sheet. Foreign Currency Instruments The fair value of foreign currency instruments generally was estimated using current market prices provided by outside quotation services. At December 31, 1994, the fair value of net receivable contracts was $298 million, and the fair value of net payable contracts was $108 million. At December 31, 1993, the fair value for all agreements was a net receivable of $149 million. At December 31, 1994, foreign currency instruments had a deferred gain of $220 million. In the unlikely event that a counterparty fails to meet the terms of a foreign currency agreement, the company's market risk is limited to the exchange rate differential. In the case of currency swaps, the company's market risk also may include an interest rate differential. At December 31, 1994 and 1993, the total amount of the company's foreign currency forward contracts (contracts purchased and sold) and currency swaps and options outstanding was $12.6 billion and $10.9 billion, respectively, maturing primarily through 1997. Interest-Rate Instruments The fair value of interest-rate instruments is the estimated amount the company would receive or pay to terminate the agreement. Fair value is calculated using information provided by outside quotation services, taking into account current interest rates and the current credit-worthiness of the swap parties. At December 31, 1994, the fair value of net receivable contracts was $458 million, and the fair value of net payable contracts was $602 million. At December 31, 1993, the fair value for all agreements was a net receivable of $512 million. In the unlikely event that a counterparty fails to meet the terms of an interest-rate agreement, the company's exposure is limited to the interest rate differential. At December 31, 1994 and 1993, the underlying principal amounts on which the company has interest-rate swap agreements outstanding aggregated $53.8 billion and $36.1 billion, respectively, maturing primarily through 1999. FS-26 77 NOTE 15. Financial Instruments (Cont'd) Other Instruments In addition, the company and its subsidiaries have entered into a variety of other financial agreements which contain potential risk of loss. These agreements include limited guarantees under sales of receivables agreements, financial guarantees, letters of credit, interest rate caps and floors, and government security repurchase agreements. Neither the amounts of these agreements nor the potential risk of loss was considered to be significant at December 31, 1994. Note 16. Significant Acquisitions and Dispositions of Subsidiaries Acquisition of the Hertz Corporation On March 8, 1994, Ford purchased from Commerzbank Aktiengesellschaft, a German bank, additional shares of common stock of Hertz aggregating 5% of the total outstanding voting stock, thereby bringing Ford's ownership of the total voting stock of Hertz to 54% from 49%. On April 29, 1994, Ford acquired 20% of Hertz' common stock from Park Ridge Limited Partnership, and Hertz redeemed the common stock (26%) and preferred stock of Hertz owned by AB Volvo for $145 million. These transactions resulted in Hertz becoming a wholly-owned subsidiary of Ford. In addition, a $150 million subordinated promissory note of Hertz held by Ford Credit was exchanged for $150 million of preferred stock of Hertz. Prior to these transactions, Hertz had been accounted for on an equity basis as part of the Automotive segment. Hertz' operating results, assets, liabilities and cash flows are now consolidated as part of the Financial Services segment. In 1994, Financial Services net income included $92 million for Hertz. In 1993, Automotive net income included $26 million for Hertz. Sale of First Nationwide Bank On September 30, 1994, substantially all of the assets of First Nationwide Bank, a Federal Savings Bank, since known as Granite Savings Bank (the "Bank"), were sold to, and substantially all of the Bank's liabilities were assumed by, First Madison Bank, FSB ("First Madison"). The Bank is a wholly-owned subsidiary of Granite Management Corporation (formerly First Nationwide Financial Corporation) ("Granite"), which in turn is a wholly-owned subsidiary of Ford. The company recognized in First Quarter 1994 earnings a pre-tax charge of $475 million ($440 million after taxes) related to the disposition of the Bank, reflecting the non-recovery of goodwill and reserves for estimated losses on assets to be retained or repurchased by Granite. These assets will be liquidated over time as market conditions permit. The tax effect of this transaction takes into account differences between the book and tax basis of certain assets for which deferred taxes were not required to be provided under SFAS No. 109, "Accounting for Income Taxes". The company's income statement includes the results of operations of Granite through March 31, 1994. The net assets of Granite at December 31, 1994 are included in the balance sheet under Financial Services - Other Assets. Historically, Granite (including the Bank) has not had a significant effect on Ford's operating results. FS-27 78 NOTE 17. Cash Flows The reconciliation of net income/(loss) to cash flows from operating activities is as follows (in millions):
1994 1993 1992 --------------------- --------------------- --------------------- Financial Financial Financial Automotive Services Automotive Services Automotive Services ---------- --------- ---------- --------- ---------- --------- Net income/(loss) $3,824 $1,484 $ 940 $1,589 $(8,628) $1,243 Adjustments to reconcile net income/(loss) to cash flows from operating activities: Cumulative effects of changes in accounting principles - - - - 7,094 (211) Depreciation and amortization 4,426 4,910 4,404 3,064 4,666 2,089 (Earnings)/losses of affiliated companies in excess of dividends remitted (171) (2) (21) (9) 16 51 Provision for credit and insurance losses - 1,539 - 1,523 - 1,795 Foreign currency adjustments (384) - (650) - (362) - Net purchases of trading securities (Note 2) (3,616) (41) - - - - Provision/(credit) for deferred income taxes 424 410 (796) 595 (447) 333 Changes in assets and liabilities: (Increase)/decrease in accounts receivable and other current assets (1,096) - 34 - 103 - (Increase)/decrease in inventory (894) - (275) - 380 - Increase in accounts payable and accrued and other liabilities 4,949 1,077 3,735 594 2,617 295 Other 80 (290) (509) (211) 314 167 ------ ------ ------ ------ ------- ------ Cash flows from operating activities $7,542 $9,087 $6,862 $7,145 $ 5,753 $5,762 ====== ====== ====== ====== ======= ======
The company considers all highly-liquid investments purchased with a maturity of three months or less to be cash equivalents. The book value of these investments approximates fair value because of the short maturity. Cash flows resulting from futures contracts, forward contracts and options that are accounted for as hedges of identifiable transactions are classified in the same category as the item being hedged. With the adoption of SFAS 115 in 1994, the purchases and sales of trading securities are included in cash flows from operating activities. The purchases and sales of available-for-sale and held-to-maturity securities are included in cash flows from investing activities. Cash paid for interest and income taxes was as follows (in millions):
1994 1993 1992 ------ ------ ------ Interest $7,718 $6,969 $8,255 Income taxes 2,042 1,522 31
NOTE 18. Segment Information The company operates in two principal business segments: Automotive and Financial Services. The Automotive segment consists of the design, manufacture, assembly and sale of cars, trucks and related parts and accessories. The Financial Services segment consists primarily of financing operations, insurance operations, and vehicle and equipment leasing operations. Intersegment transactions represent principally transactions occurring in the ordinary course of business, borrowings and related transactions between entities in the Financial Services and Automotive segments, and interest and other support under special vehicle financing programs. These arrangements are reflected in the respective business segments. Intercompany sales among geographic areas consist primarily of vehicles, parts and components manufactured by the company and various subsidiaries and sold to different entities within the consolidated group. Transfer prices for these transactions are established by agreement between the affected entities. FS-28 79 NOTE 18. Segment Information (Cont'd) Financial information segregated by major geographic area is as follows (in millions): Automotive
1994 1993 1992 --------- --------- --------- Sales to unaffiliated customers United States $ 73,008 $ 61,559 $ 51,918 Europe* 21,784 18,507 21,579 All other 12,345 11,502 10,910 -------- -------- -------- Total $107,137 $ 91,568 $ 84,407 ======== ======== ======== Intercompany sales among geographic areas United States $ 11,206 $ 8,721 $ 6,978 Europe* 1,709 1,690 1,717 All other 11,811 9,791 10,120 -------- -------- -------- Total $ 24,726 $ 20,202 $ 18,815 ======== ======== ======== Total sales United States $ 84,214 $ 70,280 $ 58,896 Europe* 23,493 20,197 23,296 All other 24,156 21,293 21,030 Elimination of intercompany sales (24,726) (20,202) (18,815) -------- -------- -------- Total $107,137 $ 91,568 $ 84,407 ======== ======== ======== Operating income/(loss) United States $ 4,190 $ 1,677 $ (582) Europe* 935 (402) (924) All other 701 157 (269) -------- -------- -------- Total $ 5,826 $ 1,432 $ (1,775) ======== ======== ======== Net income/(loss) before cumulative effects of changes in accounting principles United States $ 3,040 $ 1,482 $ (405) Europe* 388 (407) (647) All other 396 (135) (482) -------- -------- -------- Total $ 3,824 $ 940 $ (1,534) ======== ======== ======== Assets at December 31 United States $ 45,554 $ 39,666 $ 34,334 Europe* 13,514 13,452 13,414 All other 20,231 18,248 17,534 Net receivables from Financial Services 677 910 1,437 Elimination of intercompany receivables (11,605) (10,539) (9,549) -------- -------- -------- Total $ 68,371 $ 61,737 $ 57,170 ======== ======== ======== Capital expenditures (facilities, machinery and equipment and tooling) United States $ 5,428 $ 4,289 $ 3,018 Europe* 1,236 1,376 1,857 All other 1,646 1,049 822 -------- -------- -------- Total $ 8,310 $ 6,714 $ 5,697 ======== ======== ========
- - - - - - *Excludes Jaguar Financial Services
1994 1993 1992 --------- --------- --------- Revenues United States $ 17,356 $ 14,102 $ 12,514 Europe 2,336 1,673 2,051 All other 1,610 1,178 1,160 -------- -------- -------- Total $ 21,302 $ 16,953 $ 15,725 ======== ======== ======== Income before income taxes and cumulative effects of changes in accounting principles** United States $ 2,185 $ 2,311 $ 1,452 Europe 419 285 266 All other 188 116 107 -------- -------- -------- Total $ 2,792 $ 2,712 $ 1,825 ======== ======== ========
- - - - - - ** Financial Services activities do not report operating income; income before income taxes is representative of operating income. FS-29 80 NOTE 18. Segment Information (Cont'd) Financial Services (Cont'd)
1994 1993 1992 --------- --------- --------- Net income before cumulative effects of changes in accounting principles United States $ 1,119 $ 1,340 $ 919 Europe 277 187 68 All other 88 62 45 -------- -------- -------- Total $ 1,484 $ 1,589 $ 1,032 ======== ======== ======== Assets at December 31 United States $124,118 $117,290 $104,749 Europe 16,507 12,132 11,512 All other 10,358 7,779 7,114 -------- -------- -------- Total $150,983 $137,201 $123,375 ======== ======== ========
Note 19. Summary Quarterly Financial Data (Unaudited) (in millions except amounts per share)
1994 1993 ------------------------------------- ------------------------------------- First Second Third Fourth First Second Third Fourth Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter ------- ------- ------- ------- ------- ------- ------- ------- Automotive Sales $26,070 $28,375 $24,926 $27,766 $22,686 $25,264 $20,107 $23,511 Operating income/(loss) 1,559 1,966 989 1,312 505 787 (242) 382 Financial Services Revenues 4,332 5,397 5,696 5,877 4,077 4,155 4,391 4,330 Income before income taxes 196 911 896 789 670 654 732 656 Total Company Net income $ 904a/ $ 1,711 $ 1,124 $ 1,569 $ 572 $ 775 $ 463b/ $ 719c/ Preferred stock dividend requirements 72 72 72 71 72 72 72 72 ------- ------- ------- ------- ------- ------- ------- ------- Income attributable to Common and Class B Stock $ 832 $ 1,639 $ 1,052 $ 1,498 $ 500 $ 703 $ 391 $ 647 ======= ======= ======= ======= ======= ======= ======= ======= AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK AFTER PREFERRED STOCK DIVIDENDSd/ Income $ 0.83 $ 1.63 $ 1.04 $ 1.47 $ 0.51 $ 0.72 $ 0.40 $ 0.65 ======= ======= ======= ======= ======= ======= ======= ======= Income assuming full dilution $ 0.75 $ 1.44 $ 0.93 $ 1.31 $ 0.48 $ 0.65 $ 0.38 $ 0.60 Dividends $ 0.20 $ 0.225 $ 0.225 $ 0.26 $ 0.20 $ 0.20 $ 0.20 $ 0.20
- - - - - - a/ Includes a loss of $440 million related to the disposition of Granite Savings Bank (formerly First Nationwide Bank) b/ Includes a one-time tax reduction of $140 million to reflect revaluation of U.S. deferred tax balances, offset partially by restructuring charges at Jaguar ($65 million). c/ Includes restructuring charges at Jaguar ($109 million) and Ford of Australia ($57 million), partially offset by the favorable one-time effect of a reduction in German tax rates ($59 million) and a gain on the sale of part of Ford's North American automotive seating and seat trim business ($73 million). d/ The sum of the per-share amounts in 1994 and 1993 is different than the amounts reported for the full year because of the effect that sales of the company's stock had on average shares for those periods. Share data have been restated to reflect the 2-for-1 stock split that became effective June 6, 1994. FS-30 81 [COOPERS & LYBRAND LETTERHEAD] REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders Ford Motor Company We have audited the consolidated financial statements and the supplemental schedule of condensed financial information of selected subsidiaries of Ford Motor Company and Subsidiaries listed in Items 14(a)1 and 14(a)2 of this Form 10-K. These financial statements and the supplemental schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and supplemental schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ford Motor Company and Subsidiaries at December 31, 1994 and 1993 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. In addition, in our opinion, the supplemental schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information presented therein. As discussed in Notes 6 and 8 to the consolidated financial statements, the Company changed its methods of accounting for postretirement benefits other than pensions and income taxes in 1992. COOPERS & LYBRAND, L.L.P. COOPERS & LYBRAND, L.L.P. 400 Renaissance Center Detroit, Michigan 48243 313-446-7100 January 27, 1995 FS-31 82 Supplemental Schedule Ford Motor Company CONDENSED FINANCIAL INFORMATION OF SUBSIDIARY (in millions)
December 31, December 31, Ford Capital B.V. 1994 1993 - ----------------- ------------ ------------ Current assets $1,048 $ 919 Noncurrent assets 4,845 5,205 ------ ------ Total assets $5,893 $6,124 ====== ====== Current liabilities $ 486 $ 434 Noncurrent liabilities 4,909 5,245 Minority's interest in net assets of subsidiaries 12 7 Stockholder's equity 486 438 ------ ------ Total liabilities and stockholder's equity $5,893 $6,124 ====== ====== 1994 1993 1992 ------------ ------------ ------------ Sales and other revenue $2,355 $1,935 $2,141 Operating income/(loss) 164 2 (30) Income/(loss) before income taxes and cumulative effects of changes in accounting principles 123 18 (33) Net income/(loss) 97 14 (19)
Ford Capital B.V., a wholly-owned subsidiary of Ford Motor Company, was established on February 2, 1990 primarily for the purpose of raising funds through the issuance of commercial paper and debt securities. Under a reorganization in December 1990, Ford Motor Company contributed all of its shares of the capital stock of Ford Nederland B.V., Ford Motor Company (Belgium) B.V. and Ford Motor Company A/S (Denmark) to Ford Capital B.V. This reorganization of entities under common control has been accounted for at historical cost in a manner similar to a pooling-of-interests combination from January 1, 1990 forward. Substantially all of the assets of Ford Capital B.V. represent receivables from Ford Motor Company or its consolidated subsidiaries. FSS-1 83 EXHIBIT INDEX
Designation Description Method of Filing - ----------- ----------- ---------------- Exhibit 3-A Restated Certificate of Incorporation, Filed as Exhibit 4.1 to the Registrant's of the Registrant dated June 6, 1994. Registration Statement No. 33-55171.* Exhibit 3-B By-Laws of the Registrant as Filed as Exhibit 3-B to the Registrant's amended through December 9, 1993. Annual Report on Form 10-K for the year ended December 31, 1993.* Exhibit 4-A Form of Deposit Agreement dated as of Filed as Exhibit 4-E to the Registrant's November 20, 1991 among Ford Motor Registration Statement No. 33-43085.* Company, Manufacturers Hanover Trust Company, as Depositary, and the holders from time to time of Depositary Shares, each representing 1/1,000 of a share of the Registrant's Series A Cumulative Convertible Preferred Stock. Exhibit 4-B Form of Deposit Agreement dated as of Filed as Exhibit 4-E to the Registrant's October 29, 1992 among Ford Motor Registration Statement No. 33-53092.* Company, Chemical Bank, as Depositary, and the holders from time to time of Depositary Shares, each representing 1/2,000 of a share of the Registrant's Series B Cumulative Preferred Stock. Exhibit 10-A Amended and Restated Agreement dated Filed as Exhibit 10-A to the Registrant's as of July 1, 1993 between the Annual Report on Form 10-K for the year Registrant and Ford Credit. ended December 31, 1993.* Exhibit 10-B 1985 Stock Option Plan of the Registrant.** Filed as Exhibit 10-D to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1985.* Exhibit 10-B-1 Amendment dated as of March 8, 1990 Filed as Exhibit 10-C-1 to the Registrant's to 1985 Stock Option Plan.** Annual Report on Form 10-K for the year ended December 31, 1989.* Exhibit 10-C Ford Motor Company Supplemental Filed as Exhibit 10-H to the Registrant's Compensation Plan as amended through Annual Report on Form 10-K for the year May 8, 1986.** ended December 31, 1986.*
84 EXHIBIT INDEX (continued)
Designation Description Method of Filing - ----------- ----------- ---------------- Exhibit 10-C-1 Amendment to Ford Motor Company Filed as Exhibit 10-F-1 to the Registrant's Supplemental Compensation Plan, dated Annual Report on Form 10-K for the year May 12, 1988.** ended December 31,1988.* Exhibit 10-C-2 Amendment to Ford Motor Company Filed as Exhibit 10-D-2 to the Registrant's Supplemental Compensation Plan, dated Annual Report on Form 10-K for the year July 8, 1992** ended December 31, 1992.* Exhibit 10-D Ford Motor Company Executive Separation Filed with this Report. Allowance Plan as amended through December 9, 1993 for separations on or after January 1, 1981.** Exhibit 10-E Description of Company practices regarding Filed as Exhibit 10-I to the Registrant's club memberships for executives.** Annual Report on Form 10-K for the year ended December 31, 1981.* Exhibit 10-F Description of Company practices regarding Filed as Exhibit 10-J to the Registrant's travel expenses of spouses of certain Annual Report on Form 10-K for the year executives.** ended December 31, 1980.* Exhibit 10-G Ford Motor Company Deferred Compensation Filed as Exhibit 10-L to the Registrant's Plan for Non-Employee Directors, adopted Annual Report on Form 10-K for the year January 13, 1983.** ended December 31, 1982.* Exhibit 10-G-1 Deferred Compensation Plan for Non- Filed as Exhibit 10-H-1 to the Registrant's Employee Directors, as amended on Registrant's Annual Report on Form 10-K July 11, 1991.** for the year ended December 31, 1991.* Exhibit 10-H Ford Motor Company Benefit Equalization Filed with this Report. Plan, as amended as of January 1, 1989.** Exhibit 10-I Description of Financial Counseling Filed as Exhibit 10-N to the Registrant's Services provided to certain executives.** Annual Report on Form 10-K for the year ended December 31, 1983.* Exhibit 10-J 1986 Long-Term Incentive Plan of the Filed as Exhibit 10-Q to the Registrant's Registrant.** Annual Report on Form 10-K for the year ended December 31, 1985.*
-2- 85 EXHIBIT INDEX (continued)
Designation Description Method of Filing - ----------- ----------- ---------------- Exhibit 10-J-1 Amendment dated as of June 1, 1990 to Filed as Exhibit 10-N-1 to the Registrant's 1986 Long-Term Incentive Plan of the Annual Report on Form 10-K for the year Registrant.** ended December 31, 1990.* Exhibit 10-K Supplemental Executive Retirement Plan, Filed with this Report. as restated and incorporating amendments through December 9, 1993.** Exhibit 10-L Ford Motor Company Restricted Stock Filed as Exhibit 10-P to the Registrant's Plan for Non-Employee Directors adopted Annual Report on Form 10-K for the year by the Board of Directors on November 10, ended December 31, 1988.* 1988, and approved by the stockholders at the 1989 Annual Meeting.** Exhibit 10-M 1990 Long-Term Incentive Plan, amended Filed as Exhibit 10-R to the Registrant's as of June 1, 1990.** Annual Report on Form 10-K for the year ended December 31, 1990.* Exhibit 10-M-1 Amendment to 1990 Long-Term Incentive Filed as Exhibit 10-P-1 to the Registrant's Plan, effective as of October 1, 1990.** Annual Report on Form 10-K for the year ended December 31, 1991.* Exhibit 10-N Description of Matching Gift Program for Filed as Exhibit 10-Q to the Registrant's Non-Employee Directors.** Annual Report on Form 10-K for the year ended December 31, 1991.* Exhibit 10-O Non-Employee Directors Life Insurance Filed with this Report. and Optional Retirement Plan (as (amended as of January 1, 1993).** Exhibit 10-P Description of Non-Employee Directors Filed as Exhibit 10-S to the Registrant's Accidental Death, Dismemberment and Annual Report on Form 10-K for the year Permanent Total Disablement Indemnity.** ended December 31, 1992.* Exhibit 10-Q Agreement dated December 10, 1992 Filed as Exhibit 10-T to the Registrant's between William C. Ford and the Annual Report on Form 10-K for the year Registrant.** ended December 31, 1992.* Exhibit 10-R Support Agreement dated as of October 1, Filed as Exhibit 10-T to the Registrant's 1993 between the Registrant and Ford Annual Report on Form 10-K for the year Credit Europe. ended December 31, 1993.*
-3- 86 EXHIBIT INDEX (continued)
Designation Description Method of Filing - ----------- ----------- ---------------- Exhibit 10-S Description of Select Retirement Plan Filed as Exhibit 10 to the Registrant's adopted on June 9, 1994.** Quarterly Report on Form 10-Q for the quarter ended June 30, 1994.* Exhibit 11 Computation of Primary and Fully Diluted Filed with this Report. Earnings a Share. Exhibit 12 Computation of Ratio of Earnings to Filed with this Report. Combined Fixed Charges and Preferred Stock Dividends. Exhibit 21 List of Subsidiaries of the Registrant Filed with this Report. as of December 31, 1994. Exhibit 23 Consent of Independent Certified Public Filed with this Report. Accountants. Exhibit 24 Powers of Attorney. Filed with this Report.
__________________________ * Incorporated by reference as an exhibit hereto ** Management contract or compensatory plan or arrangement -4- EX-10.D 2 EXHIBIT 10.D 1 Exhibit 10-D FORD MOTOR COMPANY EXECUTIVE SEPARATION ALLOWANCE PLAN (As amended through December 9, 1993 for Separations on or after January 1, 1981) Section 1. INTRODUCTORY. This Plan has been established for the purpose of providing Executive Roll Employees with an Executive Separation Allowance in the event of their separation from employment with the Company under certain circumstances. The Plan is an expression of the Company's present policy with respect to separation allowances for Executive Roll Employees who meet the eligibility requirements set forth below; it is not a part of any contract of employment and no employee or other person shall have any legal or other right to any Executive Separation Allowance. The Company reserves the right to terminate, amend or modify the Plan, in whole or in part, at any time without notice. Section 2. ELIGIBILITY. Each Executive Roll Employee who is being separated from employment with the approval of the Company and who (1) has at least five years' service on the Executive Roll; (2) has at least ten years of contributory membership under the General Retirement Plan; (3) is at least 55 years of age; and (4) has applied for early retirement at the employee's option shall be eligible to receive an Executive Separation Allowance as provided herein. The Eligible Surviving Spouse of an Executive Roll Employee who (i) has not separated from employment with the Company, (ii) meets the eligibility conditions set forth in subsections (1) through (3) of this Section 2, and (iii) dies on or after January 1, 1981 shall be eligible to receive the Executive Separation Allowance that the Eligible Surviving Spouse of a deceased employee would have been eligible to receive if such employee had separated from employment with the approval of the Company and retired on the date of the employee's death. The eligibility conditions set forth in subsections (1) and (2) of Section 2 may be waived by the Chairman of the Board or the President except in the case of an Executive Roll Employee who has not separated from employment with the Company. Section 3. CALCULATION OF AMOUNT. A. BASE MONTHLY SALARY. For purposes of the Plan, the "Base Monthly Salary" of an Executive Roll Employee shall be the highest monthly base salary rate of such employee during the employee's 12 months of service immediately preceding separation from employment with the Company. It shall not include supplemental compensation or any other kind of extra or additional compensation. 2 - 2 - B. AMOUNT OF EXECUTIVE SEPARATION ALLOWANCE. Subject to any limitation in other provisions of the Plan, the gross monthly amount of the Executive Separation Allowance of an Eligible Executive Roll Employee under Section 2 above shall be such employee's Base Monthly Salary multiplied by a percentage, not to exceed 60%, equal to the sum of (i) 15%, (ii) five tenths of one percent (.5%) for each month (or fraction thereof) that such employee's age at separation exceeds 55, not to exceed thirty percent (30%), and (iii) one percent (1%) for each year of such employee's service in excess of 15, prorated for fractions of a year. The gross amount for any month shall be reduced by any payments paid or payable for such month to the Eligible Executive Roll Employee, the employee's surviving spouse, contingent annuitant, or other beneficiary under the General Retirement Plan or any other private retirement plan, other than the Supplemental Executive Retirement Plan, to which the Company or its subsidiaries shall have contributed. Section 4. PAYMENTS. Executive Separation Allowance payments, in the net amount determined in accordance with Section 3B above, shall be made monthly. Payments to an Eligible Executive Roll Employee shall cease at the end of the month in which such employee attains age 65 or dies, whichever occurs first. In the event of death of an Eligible Executive Roll Employee prior to such employee attaining age 65, or in the event of death on or after January 1, 1981 of an Executive Roll Employee whose Eligible Surviving Spouse meets the eligibility conditions set forth in Section 2 for payments hereunder, payments shall be made to such employee's Eligible Surviving Spouse, if any, until the death of such spouse or, if earlier, until the end of the month in which the Executive Roll Employee would have attained age 65. Anything herein contained to the contrary notwithstanding, the right of any Eligible Executive Roll Employee to receive an installment of Executive Separation Allowance hereunder for any month shall accrue only if, during the entire period from the date of such employee's separation to the end of such month, such employee shall have earned out such installment by refraining from engaging in any activity that is directly or indirectly in competition with any activity of the Company or any Subsidiary or Affiliate thereof. In the event of an Eligible Executive Roll Employee's nonfulfillment of the condition set forth in the immediately preceding paragraph, no further installment shall be paid to such employee; provided, however, that the nonfulfillment of such condition may at any time (whether before, at the time of or subsequent to termination of the employee's employment) be waived in the following manner: (1) with respect to any such employee who at any time shall have been a member of the Board of Directors, a Vice President, the Treasurer, the Controller or the Secretary of the Company, such waiver may be granted by the Compensation and Option Committee upon its determination that in its sole judgment there shall have not been and will not be any substantial adverse effect upon the Company or any Subsidiary or Affiliate thereof by reason of the nonfulfillment of such condition; and 3 - 3 - (2) with respect to any other such employee, such waiver may be granted by the Supplemental Compensation Award Committee (or any committee appointed by it for the purpose) upon its determination that in its sole judgment there shall not have been and will not be any such substantial adverse effect. Anything herein contained to the contrary notwithstanding, Executive Separation Allowance payments shall not be paid to or with respect to any person as to whom it has been determined that such person at any time (whether before or subsequent to termination of the employee's employment) acted in a manner inimical to the best interests of the Company. Any such determination shall be made by (i) the Compensation and Option Committee with respect to any Executive Roll Employee who at any time shall have been a member of the Board of Directors, an Executive Vice President, a Vice President, the Treasurer, the Controller or the Secretary of the Company, and (ii) the Supplemental Compensation Award Committee with respect to any other Executive Roll Employee, and shall apply to any amounts payable after the date of the applicable Committee's action hereunder, regardless of whether the person has commenced receiving Executive Separation Allowance. Conduct which constitutes engaging in an activity that is directly or indirectly in competition with any activity of the Company or any Subsidiary or Affiliate thereof shall be governed by the four immediately preceding paragraphs of this Section 4 and shall not be subject to any determination under this paragraph. Any Executive Separation Allowance payments resumed after reemployment with the Company under Section 6A or employment with a Subsidiary of the Company under Section 6B shall be paid on the basis of the percentage of Base Monthly Salary applicable at the time of the initial determination under Section 3B. Section 5. DEDUCTIONS. The Company may deduct from any payment of Executive Separation Allowance to an Eligible Executive Roll Employee or such employee's Eligible Surviving Spouse all amounts owing to it by such employee for any reason, and all taxes required by law or government regulation to be deducted or withheld. Section 6A. PERSON REEMPLOYED BY THE COMPANY. In the event an employee who shall have been separated from employment with the Company under circumstances that would make the employee eligible to receive an Executive Separation Allowance shall be reemployed by the Company before the employee shall have received payment of the full amount of the employee's Executive Separation Allowance, no further allowance shall be paid during such period of reemployment. Section 6B. PERSON EMPLOYED BY A SUBSIDIARY. In the event an employee who shall have been separated from employment with the Company under circumstances that would make the employee eligible to receive an Executive Separation Allowance shall be employed by a Subsidiary of the Company before the employee shall have received payment of the full amount of the employee's Executive Separation Allowance, no further allowance shall be paid during such period of employment. 4 - 4 - Section 7. DEFINITIONS. As used in the Plan, the following terms shall have the following meanings, respectively: "AFFILIATE" shall mean, as applied with respect to any person or legal entity specified, a person or legal entity that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, the person or legal entity specified. "COMPANY" shall mean Ford Motor Company and such of the subsidiaries of Ford Motor Company as, with the consent of Ford Motor Company, shall have adopted this Plan. "ELIGIBLE EXECUTIVE ROLL EMPLOYEE" shall mean an Executive Roll Employee who meets the eligibility criteria set forth in Section 2. "ELIGIBLE SURVIVING SPOUSE" shall mean a spouse to whom an Executive Roll Employee has been married at least one year at the date of the employee's death. "EXECUTIVE ROLL EMPLOYEE" shall mean an employee of the Company (excluding a Company employee who is an employee of Jaguar Cars, a division of the Company) who is assigned to the Executive Roll, as such term is defined in the Employee Relations Administration Manual as from time to time constituted. "SERVICE" shall mean an eligible employee's years of service (including fractions of years) used in determining eligibility for an early retirement benefit under the Ford Motor Company General Retirement Plan. "SUBSIDIARY" shall mean, as applied with respect to any person or legal entity specified, a person or legal entity a majority of the voting stock of which is owned or controlled, directly or indirectly, by the person or legal entity specified. Section 8. ADMINISTRATION AND INTERPRETATION. Except as the committees specified in Section 4 and the Chairman of the Board and the President are authorized to administer the Plan in certain respects, the Vice-President - Employee Relations shall have full power and authority on behalf of the Company to administer and interpret the Plan. All decisions with respect to the administration and interpretation of the Plan shall be final and shall be binding upon all persons. EX-10.H 3 EXHIBIT 10.H 1 Exhibit 10-H FORD MOTOR COMPANY BENEFIT EQUALIZATION PLAN (as amended as of January 1, 1989) SECTION 1. PURPOSE. The purpose of this Plan is to preserve certain benefits of employees under the Company's tax qualified General Retirement Plan and Savings and Stock Investment Plan for Salaried Employees by providing appropriate Equalization Benefits under this Plan in place of benefits which cannot be provided under such tax qualified plans because of limitations imposed by Section 415 and Section 401(a)(17) of the Internal Revenue Code. SECTION 2. DEFINITIONS. As used in this Plan, the following terms shall have the following meanings, respectively: 2.01 "BEP SALARY REDUCTIONS" shall mean that portion of salary at the basic salary rate which would have been credited to an employee's account before January 1, 1985 pursuant to a salary reduction agreement under paragraph V-2 of the SSIP but which by reason of Section 415 of the Code, exceeds salary reduction contributions that can be made by the Company on an employee's behalf under the Tax-Efficient Savings Program of the SSIP. 2.02 "COMPANY" shall mean Ford Motor Company. 2.03 "COMMITTEE" shall mean the committee authorized to administer and interpret the Plan as provided in Section 6. 2.04 The term "CONTRIBUTORY SERVICE" shall have the meaning given that term in the GRP. "DISTRIBUTION", "ACCOUNT" and "CURRENT MARKET VALUE" as used in Section 3.02 of this Plan shall have the meanings given those terms as used in the SSIP. 2.05 "ERISA " shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. 2.06 "GENERAL RETIREMENT PLAN" OR "GRP" shall mean the Ford Motor Company General Retirement Plan for Salaried and Certain Other Employees, as amended from time to time. 2.07 "INTERNAL REVENUE CODE" OR "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time. 2.08 "LIMITATIONS" shall mean the limitations on benefits and/or contributions imposed on qualified plans by Section 415 and Section 401(a)(17) of the Code. 2.09 "PBGC" shall mean the Pension Benefit Guaranty Corporation. 2 - 2 - 2.10 "SAVINGS AND STOCK INVESTMENT PLAN" OR "SSIP" shall mean the Ford Motor Company Savings and Stock Investment Plan for Salaried Employees, as amended from time to time. SECTION 3. EQUALIZATION OF BENEFITS. 3.01 GRP EQUALIZATION BENEFITS. (a) A Periodic GRP Equalization Benefit shall be provided for and associated with each payment of a GRP benefit that is subject to the Limitations. (b) The Periodic GRP Equalization Benefit shall be equal in amount to the difference between the GRP benefit and the corresponding benefit that would be payable under the GRP without regard to the Limitations. In determining the amount of the Periodic GRP Equalization Benefit, the member's salary shall be the member's salary (as that term is defined in the GRP) plus BEP Salary Reductions for periods before January 1, 1985 which are credited under this Plan pursuant to Section 3.02(a)(ii)(C) below, but the member shall not make contributions hereunder based on such BEP Salary Reductions. The Periodic GRP Equalization Benefit shall be paid by the Company to the person receiving payment of the corresponding GRP benefit and, as nearly as practicable, at the same time. (c) As an alternative to the GRP Periodic Equalization Benefit, the Company and an employee eligible for the Periodic GRP Equalization Benefit under this Section 3.01 may agree on payment of the actuarial equivalent in a lump sum of such Periodic GRP Equalization Benefit, subject to the following conditions and such other conditions as may be determined by the Vice President-Finance and Treasurer, the Vice President-General Counsel and the Vice President-Employee Relations: (i) The actuarial equivalent shall be determined on the basis of the interest rates and mortality tables, which would be used by the PBGC for determining the present value of liability for pensioners' benefits in the case of a terminated retirement plan under Title IV of ERISA and which are in effect in the month prior to the month when the employee's GRP benefit begins. (ii) The agreement must be entered into (A) prior to the year in which the employee's retirement occurs and (B) not later than six months before the actual retirement date; provided, however, that the requirement contained in Subsection (B) immediately above shall not apply to such an agreement entered into in 1984 by the Company and an eligible employee who retires before July 1, 1985. (iii) The agreement once entered is irrevocable. (iv) Evidence of good health at the time of the agreement will be required. 3 -3- Payment under such lump sum agreement shall be made by the Company as soon as practicable after payment of the GRP benefit begins. 3.02 SAVINGS AND STOCK INVESTMENT PLAN EQUALIZATION BENEFITS. (a) PRE-1985 SUBACCOUNT. The provisions of this Subsection 3.02(a) shall apply in determining that part of an eligible employee's SSIP Equalization Benefit subaccount based on periods of service until December 31, 1984. (i) For an employee who made the election regarding payroll deductions provided in this Subsection, or who elected to have credited under this Plan BEP Salary Reductions, a SSIP Equalization Benefit shall be provided with respect to any class or classes of the SSIP before January 1, 1985 with respect to which Company or employee contributions were subject to the Limitations. (ii) If at any time during a plan year ending before January 1, 1985 it appeared that contributions by or on behalf of an employee (including any related Company matching contributions) to the SSIP would be subject to the Limitations, such an employee may have elected to have the Company retain in its general funds and have credited for purposes of computing a member's subaccount of the SSIP Equalization Benefit under this Section 3.02(a): (A) by payroll deduction authorization under this Plan that portion of the amount the employee had elected to contribute as employee regular savings contributions to the SSIP for such pay period (by a payroll deduction authorization in effect for such pay period under paragraph IV of the SSIP) which, when added to all other actual and projected Annual Additions as defined under paragraph XXXI of the SSIP during such plan year, exceeded the Limitations. (B) that portion of regular savings and related earnings which have been returned to the employee pursuant to the provisions of paragraph XXXI of the SSIP, and (C) the employee's BEP Salary Reductions. (iii) There has been established for each eligible employee a subaccount for periods of participation under this Section 3.02(a) under the SSIP Equalization Benefit Account. This subaccount shall be equal to the amounts retained by the Company pursuant to Section 3.02(a)(ii) of this Plan adjusted on the basis of investment performance and the member's election as to investment of funds under paragraph VIII and transfer of the value of employee and Company contributions under paragraph IX of the SSIP as though contributions and credits to the member's account hereunder had been so invested less any withdrawals pursuant to Section 3.02(a)(iv) of this Plan; provided, however, that an election by a Company officer of investment in Company common stock shall not apply under this Plan with 4 -4- respect to contributions pursuant to Section 3.02(a)(ii) of this Plan (other than related Company matching contributions) which were made or credited hereunder by or on behalf of such Company officer; and the officer will be required to make any other investment election permitted under paragraph VIII of the SSIP with respect to such amounts. (iv) An employee may not withdraw any amounts in excess of the member's regular savings contributions under this Plan and may not borrow against the subaccount of the member's SSIP Equalization Benefit. (v) The SSIP Equalization Benefit under this Section 3.02(a) shall be equal to the amount at the time of distribution credited to the employee's subaccount of the SSIP Benefit Equalization Account as determined under Section 3.02(a)(iii) above. (b) POST-1984 SUBACCOUNT. The provisions of this Subsection 3.02(b) shall apply in determining an eligible employee's SSIP Equalization Benefit subaccount based on periods of service beginning January 1, 1985. (i) If at any time during a plan year beginning on or after January 1, 1985 contributions by or on behalf of an employee and related Company matching contributions to the SSIP are subject to the Limitations there shall be credited for purposes of computing a member's SSIP Equalization Benefit under this Section 3.02(b) an amount equal to the Company matching contributions which would have been made under the SSIP based upon the employee's SSIP elections except that such Company matching contributions cannot be made because of the Limitations. (ii) There shall be established for each eligible employee a subaccount for periods of participation under this Section 3.02(b) under the SSIP Equalization Benefit Account. This subaccount shall be equal to the amounts credited by the Company pursuant to Section 3.02(b)(i) of this Plan adjusted on the basis of investment performance and any election by the member to transfer the value of matured Company matching contributions under paragraph IX of the SSIP, as though credits to the member's account hereunder had been so invested. (iii) An employee may not withdraw any amounts credited under this Section 3.02(b) and may not borrow against this subaccount of the member's SSIP Equalization Benefit. (iv) The SSIP Equalization Benefit under this Section 3.02(b) shall be equal to the amount at the time of distribution credited to the employee's subaccount of the SSIP Benefit Equalization Account as determined under Section 3.02(b)(ii) above. 5 -5- (c) PAYMENT OF SSIP EQUALIZATION BENEFIT. The SSIP Equalization Benefit shall be paid in cash by the Company to the employee, or if the employee is deceased, to the employee's beneficiary under the SSIP, and shall be made as soon as practicable after death, retirement or other termination of employment. SECTION 4. EQUALIZATION BENEFITS NOT FUNDED. The Company's obligations under this Plan shall not be funded and Equalization Benefits under this Plan shall be payable only out of the general funds of the Company. SECTION 5. AMENDMENT, TERMINATION, ETC. The Board of Directors of the Company shall have the right at any time to amend, modify, discontinue or terminate this Plan in whole or in part; provided, however, that no such action shall deprive any person of an Equalization Benefit under this Plan in respect of any GRP benefit or any SSIP benefit to which the member's rights shall have become vested (under the vesting provisions of the applicable Plans, without regard to any provisions limiting benefits or contributions) prior to the date of such action by the Board of Directors. SECTION 6. ADMINISTRATION AND INTERPRETATION OF THE PLAN. Full authority to administer and interpret this Plan shall be vested in the Compensation and Option Committee of the Board of Directors of the Company. The Committee is authorized from time to time to establish such rules and regulations as it may deem appropriate for the proper administration of the Plan, and to make such determinations under, and such interpretations of, and to take such steps in connection with, the Plan as it may deem necessary or advisable. Each determination, interpretation, or other action by the Committee shall be in its sole discretion and shall be final, binding and conclusive for all purposes and upon all persons. References to Articles, Sections or paragraphs of the Code or of the GRP or of the SSIP shall be applicable to any corresponding provision of the Code or of the applicable plans containing essentially the same Limitations, in the event that the applicable Code or plan provisions shall be renumbered. EX-10.K 4 EXHIBIT 10.K 1 Exhibit 10-K SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN As applicable to retirements of Eligible Executives on or after January 1, 19921/ SECTION 1. INTRODUCTION. On January 1, 1985, the Company established this Plan for the purpose of providing Eligible Executives with a monthly Supplemental Benefit for their lifetime in the event of their retirement from employment with the Company under certain circumstances. The Plan also provides for the award of Conditional Annuities to selected Eligible Executives under certain circumstances. SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall have the following meanings, respectively: 2.01 "AFFILIATE" shall mean, as applied with respect to any person or legal entity specified, a person or legal entity that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, the person or legal entity specified. 2.02 "COMMITTEE" shall mean the Compensation and Option Committee of Ford Motor Company. 2.03 "COMPANY" shall mean Ford Motor Company, Ford Motor Credit Company, and such of the subsidiaries of the Company as, with the consent of the Company, shall have adopted the Plan. 2.04 "CREDITED SERVICE" shall mean without duplication the years and any fractional year of credited service at retirement, not exceeding one year for any calendar year, of the Eligible Executive under all the Retirement Plans. 2.05 "DESIGNATED BENEFICIARY" shall mean the beneficiary or beneficiaries designated by an Eligible Executive or Eligible Retired Executive in a writing filed with the Company (subject to such limitations as to the classes and number of beneficiaries and contingent beneficiaries and such other limitations as the Committee may prescribe) to receive, in the event of the death of the Eligible Executive or Eligible Retired Executive, the Death Benefits provided in Section 4.04. An Eligible Executive or Eligible Retired Executive shall be deemed to have designated as beneficiary or beneficiaries under the Plan the person or persons who receive such Eligible Executive's or Eligible Retired Executive's life insurance proceeds under the Company-paid Basic Life Insurance Plan unless such Eligible Executive or Eligible Retired Executive shall have assigned such life insurance in which event the Death Benefits shall be paid to such assignee; provided, however, that if the Eligible Executive or Eligible Retired Executive shall have filed with the Company a written designation of a different beneficiary or beneficiaries under the Plan, such beneficiary form shall control. An Eligible Executive or Eligible Retired Executive may from time to time revoke or change any such designation of beneficiary and any designation of beneficiary under the Plan shall be controlling over any testamentary or other disposition; provided, however, that if the Committee shall be in doubt __________________________________ 1/See Appendix A for provisions applicable to retirements of Eligible Executives on or after January 1, 1985 and prior to January 1, 1992 or retirements of Eligible Executives from certain former Company Affiliates. 2 -2- as to the right of any such beneficiary to receive any payment under the Plan, the same may be paid to the legal representatives of the Eligible Executive or Eligible Retired Executive, in which case the Company, the Committee and the members thereof shall not be under any further liability to anyone. 2.06 "ELIGIBLE EXECUTIVE" shall mean a person who is the Chairman of the Board, the Vice Chairman, the President, an Executive Vice President or a Vice President of the Company (excluding any such person who is an employee of a foreign Affiliate of the Company) or a Company employee in Salary Grade 13 or its equivalent or above (excluding a Company employee who is an employee of Jaguar Cars, a division of the Company). 2.07 "ELIGIBLE RETIRED EXECUTIVE" shall mean (a) with respect to Supplemental Benefits, an Eligible Executive who (1) shall retire directly from Company employment (i) on normal or disability retirement or (ii) with the approval of the Company at or after age 55 on early retirement; (2) will receive a normal, disability or early retirement benefit under one or more Retirement Plans; (3) has at least ten years of Credited Service without duplication under all Retirement Plans; and (4) has at least five continuous years of Eligibility Service immediately preceding retirement (unless the eligibility condition set forth in this subparagraph (4) is waived by the Chairman of the Board or the President). (b) with respect to Conditional Annuity awards, an Eligible Executive (other than an Eligible Executive in Salary Grades 13 through 19 or its equivalent) who shall retire directly from Company employment, (i) on normal or disability retirement or (ii) with the approval of the Company at or after age 55 on early retirement. 2.08 "ELIGIBILITY SERVICE" shall mean Company service while an Eligible Executive. 2.09 "FERCO" shall mean Ford Electronics and Refrigeration Corporation. 2.10 "FERCO RETIREMENT PLAN" means the Salaried Retirement Plan of FERCO as it may be amended. 2.11 "FINAL FIVE YEAR AVERAGE BASE SALARY" means the average of the final five year-end Monthly Base Salaries immediately preceding retirement of the Eligible Retired Executive. 2.12 "FINAL THREE YEAR AVERAGE BASE SALARY" means the average of the final three year-end Monthly Base Salaries immediately preceding retirement or death of the Eligible Retired Executive. 3 -3- 2.13 "GENERAL RETIREMENT PLAN" means the Ford Motor Company General Retirement Plan as it may be amended. 2.14 "MONTHLY BASE SALARY" of an Eligible Executive means the monthly base salary paid to such person while an Eligible Executive on December 31, prior to giving effect to any salary reduction agreement pursuant to an employee benefit plan, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, to which Section 125 or Section 402(a)(8) of the Internal Revenue Code of 1986, as amended, applies. It does not include supplemental compensation or any other kind of extra or additional compensation. 2.15 "PLAN" means the Supplemental Executive Retirement Plan of Ford Motor Company, as amended. 2.16 "RETIREMENT PLANS" includes the General Retirement Plan and the FERCO Retirement Plan. 2.17 "SUBSIDIARY" shall mean, as applied with respect to any person or legal entity specified, a person or legal entity a majority of the voting stock of which is owned or controlled, directly or indirectly, by the person or legal entity specified. 2.18 "SUPPLEMENTAL COMPENSATION PLAN" shall mean the Supplemental Compensation Plan of Ford Motor Company. SECTION 3. SUPPLEMENTAL BENEFITS. 3.01 ELIGIBILITY. An Eligible Retired Executive shall be eligible to receive a Supplemental Benefit as provided herein. 3.02 AMOUNT OF SUPPLEMENTAL BENEFIT. (a) Subject to any reductions pursuant to Subsection (b) below and to any limitations and reductions pursuant to other provisions of the Plan, the monthly Supplemental Benefit shall be an amount equal to the Eligible Executive's Final Five Year Average Base Salary multiplied by the Eligible Executive's years of Credited Service at retirement, and further multiplied by the Applicable Percentage based on the Eligible Executive's position or salary grade immediately preceding retirement, as follows:
STATUS AT RETIREMENT APPLICABLE PERCENTAGE -------------------- --------------------- Chairman, Vice Chairman, President .90% Executive Vice President .80% Vice President .70% Non-Vice Presidents Salary Grade 19, 20, 21 .60% Salary Grade 18, 17, 16 .40% Salary Grade 15, 14, 13 .20%
4 -4- (b) For an Eligible Retired Executive who shall retire before age 62 the monthly Supplemental Benefit payable hereunder shall equal the amount calculated in accordance with the immediately preceding Subsection (a) reduced by 5/18 of 1% multiplied by the number of months from the later of the date the Supplemental Benefit commences or age 55 in the case of earlier receipt by reason of disability retirement to the first day of the month after the Eligible Retired Executive would attain age 62. 3.03 PAYMENTS. Subject to the earning-out conditions set forth in Section 5, Supplemental Benefits, in the amount determined under Section 3.02, shall be payable out of the Company's general funds monthly beginning on the first day of the month when the Eligible Retired Executive's retirement benefit under any Retirement Plan or under the Company's Executive Separation Allowance Plan begins. Payments to an Eligible Retired Executive hereunder shall cease at the end of the month in which the Eligible Retired Executive dies. SECTION 4. CONDITIONAL ANNUITIES. 4.01 ELIGIBILITY. The Committee may, in its discretion, award to an Eligible Executive (other than an Eligible Executive in Salary Grades 13 through 19) additional retirement income in the form of a Conditional Annuity. 4.02 AMOUNT OF CONDITIONAL ANNUITY. (a) In determining the amount of any Conditional Annuity to be awarded to an Eligible Executive for any year, the Committee shall consider the Company's profit performance and the amount of supplemental compensation that is awarded to such Eligible Executive for such year. Awards shall be made only for years in which the Committee has decided, for reasons other than individual or corporate performance or termination of employment, to award supplemental compensation to an Eligible Executive in an amount which is less than would have been awarded if the historical relationship to awards to other executives had been followed. (b) The aggregate annual amount payable under the Conditional Annuities awarded to any Eligible Executive shall not exceed an amount equal to the Applicable Percentage of the average of such Eligible Executive's Final Three Year Average Base Salary, determined in accordance with the following table:
APPLICABLE PERCENTAGE ------------------------------------------- NUMBER OF YEARS FOR CHAIRMAN, ALL OTHER WHICH A CONDITIONAL VICE CHAIRMAN ELIGIBLE ANNUITY IS AWARDED AND PRESIDENT EXECUTIVES ------------------- ------------- ---------- 1 30% 20% 2 35 25 3 40 30 4 45 35 5 or more 50 40
The percentage shall be reduced pro rata to the extent that service at retirement is less than 30 years. 5 -5- 4.03 PAYMENTS. (a) Subject to the earning-out conditions set forth in Section 5, Conditional Annuities, in the amount determined under Section 4.02, shall be payable out of the Company's general funds monthly beginning on the first day of the month when the Eligible Retired Executive's retirement benefit under any Retirement Plan or under the Company's Executive Separation Allowance Plan begins. Except as provided in Section 4.04, payments with respect to an Eligible Retired Executive hereunder shall cease at the end of the month in which such Eligible Retired Executive dies. (b) For an Eligible Executive who retires before age 65, the monthly payment under any Conditional Annuity awarded to such Eligible Executive shall equal the actuarial equivalent (based on factors determined by the Company's independent consulting actuary) of the monthly amount payable for retirement at age 65. 4.04 DEATH BENEFITS. Upon death before retirement but at or after age 55, the Eligible Executive's Designated Beneficiary shall be paid a lump sum equal to 30 times (representing 30 months) the aggregate monthly amount payable under such Eligible Executive's Conditional Annuities if the Eligible Executive had been age 55 at death, increased by one-third of one month for each full month by which such Eligible Executive's age at death shall exceed age 55. If death occurs within 120 months following retirement, the monthly payments under the Conditional Annuity shall be continued to the Designated Beneficiary for the remaining balance of the 120 month period following retirement. SECTION 5. EARNING OUT CONDITIONS. Anything herein contained to the contrary notwithstanding, the right of any Eligible Retired Executive to receive Supplemental Benefit or Conditional Annuity payments hereunder for any month shall accrue only if, during the entire period from the date of retirement to the end of such month, the Eligible Retired Executive shall have earned out such payment by refraining from engaging in any activity that is directly or indirectly in competition with any activity of the Company or any Subsidiary or Affiliate thereof. In the event of an Eligible Retired Executive's nonfulfillment of the condition set forth in the immediately preceding paragraph, no further payment shall be made to the Eligible Retired Executive or the Designated Beneficiary; provided, however, that the nonfulfillment of such condition may at any time (whether before, at the time of or subsequent to termination of employment) be waived in the following manner: (1) with respect to any such Eligible Retired Executive who at any time shall have been a member of the Board of Directors, an Executive Vice President, a Vice President, the Treasurer, the Controller or the Secretary of the Company, such waiver may be granted by the Committee upon its determination that in its sole judgment there shall not have been and will not be any substantial adverse effect upon the Company or any Subsidiary or Affiliate thereof by reason of the nonfulfillment of such condition; and (2) with respect to any other such Eligible Retired Executive, such waiver may be granted by the Supplemental Compensation Award Committee of Ford Motor Company (or any committee appointed by it for the purpose) upon its determination that in its sole judgment there shall not have been and will not be any such substantial adverse effect. 6 -6- Anything herein contained to the contrary notwithstanding, Supplemental Benefit and Conditional Annuity payments shall not be paid to or with respect to any person as to whom it has been determined that such person at any time (whether before or subsequent to termination of employment) acted in a manner inimical to the best interests of the Company. Any such determination shall be made by (i) the Committee with respect to any Eligible Retired Executive who at any time shall have been a member of the Board of Directors, an Executive Vice President, a Vice President, the Treasurer, the Controller or the Secretary of the Company, and (ii) the Supplemental Compensation Award Committee of Ford Motor Company (or any committee appointed by it for the purpose) with respect to any other Eligible Retired Executive, and shall apply to any amounts payable after the date of the applicable committee's action hereunder, regardless of whether the Eligible Retired Executive has commenced receiving Supplemental Benefits hereunder. Conduct which constitutes engaging in an activity that is directly or indirectly in competition with any activity of the Company or any Subsidiary or Affiliate thereof shall be governed by the two immediately preceding paragraphs of this Section 5 and shall not be subject to any determination under this paragraph. SECTION 6. GENERAL PROVISIONS. 6.01 ADMINISTRATION AND INTERPRETATION. An otherwise Eligible Executive's early retirement under the Plan is subject to approval by the Executive Personnel Committee. Except as otherwise provided in the preceding sentence and except as the committees specified in Sections 4 and 5 are authorized to administer the Plan in certain respects, the Vice President-Employee Relations and the Vice President-Finance and Treasurer shall have full power and authority on behalf of the Company to administer and interpret the Plan. All decisions with respect to the administration and interpretation of the Plan shall be final and shall be binding upon all persons. 6.02 DEDUCTIONS. The Company may deduct from any payment of Supplemental Benefits and/or Conditional Annuity awards to an Eligible Retired Executive all amounts owing to it by such Eligible Retired Executive for any reason, and all taxes required by law or government regulation to be deducted or withheld. 6.03 NO CONTRACT OF EMPLOYMENT. The Plan is an expression of the Company's present policy with respect to Company executives who meet the eligibility requirements set forth herein; it is not a part of any contract of employment. No Eligible Executive, Designated Beneficiary or other person shall have any legal or other right to any Supplemental Benefit or Conditional Annuity. 6.04 GOVERNING LAW. Except as otherwise provided under federal law, the Plan and all rights thereunder shall be governed, construed and administered in accordance with the laws of the State of Michigan. 6.05 AMENDMENT OR TERMINATION. The Company reserves the right to modify or amend, in whole or in part, or to terminate this Plan, at any time without notice. 7 APPENDIX A Applicable to retirements of Eligible Executives on or after January 1, 1985 but prior to January 1, 1992, or retirements of Eligible Executives from certain former Company Affiliates. SECTION 1. DEFINITIONS. The terms used in this Appendix shall have the same meaning as those in the Supplemental Executive Retirement Plan, except as follows: 1.01 "CONTRIBUTORY SERVICE" shall mean without duplication the years and any fractional year of contributory service at retirement, not exceeding one year for any calendar year, of the Eligible Executive under all Retirement Plans. 1.02 "ELIGIBLE EXECUTIVE" shall mean a person who is the Chairman of the Board, the Vice Chairman, the President, an Executive Vice President or a Vice President of the Company (excluding any such person who is an employee of a foreign Affiliate of the Company) or a Company employee in Salary Grade 13 or its equivalent or above (Salary Grade 20 or its equivalent or above for Company employees prior to January 1, 1989). SECTION 2. SUPPLEMENTAL BENEFITS. 2.01 ELIGIBILITY. An Eligible Retired Executive shall be eligible to receive a Supplemental Benefit as provided herein. 2.02 AMOUNT OF SUPPLEMENTAL BENEFIT. (a) Subject to any reductions pursuant to Subsection (b) below and to any limitations and reductions pursuant to other provisions of the Plan, the monthly Supplemental Benefit shall be an amount determined as follows: (1) For those participants who were Eligible Executives on or after January 1, 1989 and retired prior to January 1, 1992, an amount equal to the Eligible Executive's Final Five Year Average Base Salary multiplied by the Eligible Executive's years of Contributory Service at retirement, and further multiplied by the Applicable Percentage based on the Eligible Executive's position or salary grade immediately preceding retirement and on when the Contributory Service occurred, as follows:
STATUS AT RETIREMENT APPLICABLE PERCENTAGE - -------------------- --------------------- Contributory Contributory Service Service before 1/1/89 from 1/1/89 ------------- ----------- Chairman, Vice Chairman, President .60% .90% Executive Vice President .50% .80% Vice Presidents Salary Grade 23 .40% .70% Salary Grade 22 .40% .70% Salary Grade 21 .40% .70% Salary Grade 20 .40% .70% Non-Vice Presidents Salary Grade 21 .30% .60% Salary Grade 20 .30% .60% Salary Grade 19 .30% .60% Salary Grade 18, 17, 16 .20% .40% Salary Grade 15, 14, 13 .10% .20%
8 -2- (2) For those participants who were Eligible Executives prior to January 1, 1989 and who retired prior to January 1, 1992, the greater of (A) or (B): (A) the Eligible Executive's Final Five Year Average Base Salary multiplied by the Eligible Executive's Credited Service, and further multiplied by the Applicable Percentage based on the Eligible Executive's position or salary grade immediately preceding retirement, as follows:
STATUS AT RETIREMENT APPLICABLE PERCENTAGE -------------------- --------------------- Chairman, Vice Chairman, President .50% Executive Vice President .40% Vice President Salary Grade 23 .35% Salary Grade 22 .30% Salary Grade 21 .25% Salary Grade 20 .20% Non-Vice Presidents Salary Grade 21 .25% Salary Grade 20 .20%
(B) the Eligible Executive's Final Five Year Average Base Salary multiplied by the Eligible Executive's Contributory Service, and further multiplied by the Applicable Percentage set forth in Section (a)(1) above based on the Eligible Executive's position or salary grade immediately preceding retirement and on when the Contributory Service occurred. (b) For an Eligible Retired Executive who shall retire before age 62 the monthly Supplemental Benefit payable hereunder shall equal the amount calculated in accordance with the immediately preceding Subsection (a) reduced by 5/18 of 1% multiplied by the number of months from the later of the date the Supplemental Benefit commences or age 55 in the case of earlier receipt by reason of disability retirement to the first day of the month after the Eligible Retired Executive would attain age 62. SECTION 3. FORMER AFFILIATES AND FORMER EMPLOYEES. 3.01 FORD AEROSPACE CORPORATION. An employee of Ford Aerospace Corporation who was a Vice President of Ford Motor Company as of April 1, 1985 and retired May 1, 1985 shall be deemed to be an Eligible Executive under the Plan only for Supplemental Benefits and shall be eligible to receive such benefits under the Plan based on Credited Service under the Salaried Retirement Plan of Ford Aerospace Corporation. 3.02 FORD NEW HOLLAND, INC. The following shall be applicable to former employees of Ford Tractor Operations who were transferred to Ford New Holland (FNH) and who participated in the General Retirement Plan for service through December 31, 1989 ("FNH Employees"). 9 -3- (a) Retirement-Eligible FNH Employees as of January 1, 1989. A FNH Employee who was eligible to retire under the General Retirement Plan on or prior to January 1, 1989, and who was in a position equivalent to a Salary Grade 13 or above on December 31, 1989, and who retires directly from FNH shall be deemed to be an Eligible Executive under the Plan only for Supplemental Benefits and shall receive such benefits as are applicable under the terms of the Plan in effect at the date of retirement, if retired prior to January 1, 1992, or the terms of the Plan in effect on January 1, 1992, if retired on or after January 1, 1992; provided, however, that for purposes of calculating the Supplemental Benefit, the Plan shall use (i) the employee's position or salary grade at FNH as of December 31, 1989; (ii) the Final Five Year Average Base Salary immediately preceding retirement of the Eligible Executive from FNH; and (iii) the employee's Credited Service or Contributory Service, as applicable, as of December 31, 1989. (b) Non-Retirement Eligible Employees as of January 1, 1989. A FNH Employee who was not eligible to retire under the General Retirement Plan on or prior to January 1, 1989, and who was in a position equivalent to a Salary Grade 13 or above on December 31, 1989, and who retires directly from FNH shall be deemed to be an Eligible Executive under the Plan only for Supplemental Benefits and shall receive such benefits as are applicable under the terms of the Plan in effect as of January 1, 1989; provided, however, that for purposes of calculating the Supplemental Benefit, the Plan shall use (i) the employee's position or salary grade at FNH as of December 31, 1989; (ii) the Final Five Year Average Base Salary as of January 1, 1989; and (iii) the employee's Contributory Service as of December 31, 1989. 3.03 SALE OF FAVESA OPERATIONS TO LEAR SEARING CORPORATION. An Eligible Executive whose employment was transferred to Lear Seating Corporation by reason of the sale of a portion of Plastic and Trim Product Division's seat operations to Lear on November 1, 1993 and who was eligible to retire under the terms of the General Retirement Plan as of December 31, 1993, shall retain eligibility to receive a Supplemental Benefit, and shall receive such benefits as are applicable under the terms of the Plan in effect as of December 31, 1993; provided, however that for purposes of calculating the Supplemental Benefit, the Plan shall use (i) the employee's position or salary grade with the Company as of December 31, 1993; (ii) the Final Five Year Average Base Salary as of December 31, 1993; and (iii) the employee's Credited Service as of December 31, 1993. SECTION 4. GENERAL. Except as otherwise provided in this Appendix A, the terms of the Plan applicable to retirements of Eligible Executives on or after January 1, 1992 shall be applicable to the retirements of Eligible Executives on or after January 1, 1985 but prior to January 1, 1992. EX-10.O 5 EXHIBIT 10.O 1 Exhibit 10-O FORD MOTOR COMPANY DIRECTORS LIFE INSURANCE AND OPTIONAL RETIREMENT PLAN (as amended as of January 1, 1993) SECTION 1. INTRODUCTION. This Plan has been established for the purpose of providing Eligible Directors, and Eligible Retired Directors, as herein defined, with life insurance and optional retirement benefits under certain circumstances. The Plan is an expression of the Company's present policy with respect to those Company directors and retired directors who meet the eligibility requirements set forth below; it is not a part of any contract of employment and no director or other person shall have any legal or other right to any benefit under the Plan. The Company reserves the right to terminate, amend or modify the Plan, in whole or in part, at any time without notice. SECTION 2. DEFINITIONS. As used in this Plan: a. "BOARD OF DIRECTORS" shall mean the Board of Directors of the Company. b. "COMPANY" shall mean Ford Motor Company. c. "DIRECTOR SERVICE" shall mean years of service as a member of the Board of Directors, not exceeding one year in any calendar year. d. "EFFECTIVE DATE" means November 1, 1985. e. "ELIGIBLE DIRECTOR" shall mean a member of the Board of Directors on or after the Effective Date who is not a Company employee and has not retired from Company employment on or after December 1, 1977. f. "ELIGIBLE RETIRED DIRECTOR" shall mean a Retirement Eligible Director who shall have retired from the Board of Directors. g. "NORMAL RETIREMENT AGE" shall mean the date of the annual stockholders meeting of the Company immediately following the Retirement Eligible Director's attainment of age 70. "NORMAL RETIREMENT DATE" shall mean the first day of the first calendar month coincident with or next following such Retirement Eligible Director's Normal Retirement Age. h. "PLAN YEAR" shall mean a calendar year. i. "RETIREMENT ELIGIBLE DIRECTOR" shall mean an Eligible Director who has completed at least five years of Director Service and has attained age 55. 2 -2- SECTION 3. BENEFIT. (a) LIFE INSURANCE. Except as otherwise provided in Section 3(b) immediately below, an Eligible Director or Eligible Retired Director shall be entitled to life insurance in the amount of $200,000. (b) OPTIONAL DEATH AND RETIREMENT BENEFITS. A Retirement Eligible Director meeting the eligibility requirements set forth in Section 3(b)(1) or (2) below may elect optional death and retirement benefits described in Section 3(b)(3) below in lieu of the life insurance described in Section 3(a) immediately above, as follows: (1) NORMAL RETIREMENT DATE. A Retirement Eligible Director whose Normal Retirement Date occurs after the Effective Date may elect the optional death and retirement benefit described in Section 3(b)(3) below. The election must be made before December 31 of the Plan Year immediately preceding the Plan Year in which such director's Normal Retirement Date would occur. (2) RESIGNATION PRIOR TO NORMAL RETIREMENT DATE. A Retirement Eligible Director who resigns from the Board of Directors on or after January 1, 1993 and prior to such director's Normal Retirement Date may elect the optional death and retirement benefit described in Section 3(b)(3) below, with approval of the Board of Directors. The election must be made before December 31 of the Plan Year immediately preceding the Plan Year in which the resignation would become effective, unless the Board of Directors determines it is impracticable to do so. (3) BENEFIT. The optional death and retirement benefit shall be as follows: (i) life insurance in the amount of $100,000, plus (ii) a monthly benefit, payable to such director during such director's lifetime, in the amount of $1,250 per month, beginning, (A) with respect to a Retirement Eligible Director who has made the election in accordance with Section 3(b)(1) above, on such director's Normal Retirement Date; or (B) with respect to a Retirement Eligible Director who has made the election in accordance with Section 3(b)(2) above, on the first day of the calendar month coincident with or next succeeding such director's resignation date. (4) WAIVER OF CONVERSION RIGHTS. A Retirement Eligible Director who makes the election provided in this Section 3(b) must waive any right to the conversion of the reduction in the amount of the life insurance. (5) IRREVOCABLE ELECTION. The elections described in Sections 3(b)(1) and (2) above become irrevocable as follows: 3 - 3 - (i) with respect to a Retirement Eligible Director who has made the election in accordance with Section 3(b)(1) above, the election becomes irrevocable as of the end of the Plan Year prior to the Plan Year in which such director's Normal Retirement Date would occur; provided that if such director resigns from the Board of Directors or dies after making such election but before such director's Normal Retirement Date, the option provided in Section 3(b)(1) shall be cancelled and the life insurance described in Section 3(a) above shall be applicable; (ii) with respect to a Retirement Eligible Director who has made the election in accordance with Section 3(b)(2) above, the election becomes irrevocable as of the end of the Plan Year prior to the Plan Year in which such director's resignation becomes effective, unless the Board of Directors made a determination of impracticability, as provided in Section 3(b)(2), in which event the election becomes irrevocable as of the effective date of the resignation; provided that if such director dies after making such election but before such director's resignation becomes effective, the option provided in Section 3(b)(2) shall be cancelled and the life insurance described in Section 3(a) above shall be applicable. SECTION 4. PAYMENTS. The life insurance described in Section 3(a) or 3(b) (3)(i) shall be provided by the purchase from an insurance carrier of an insurance contract upon terms and conditions approved by the Executive Vice President and Chief Financial Officer or the Vice President-Finance and Treasurer or the designee of either such officer. The retirement benefits provided in Section 3(b) (3)(ii) shall be payable out of the Company's general funds beginning on the date described in Section 3(b)(3)(ii)(A) or (B), as applicable, and shall cease at the end of the month in which such Eligible Retired Director dies. SECTION 5. DESIGNATION OF BENEFICIARY. The death benefits payable under the life insurance described in Section 3(a) or 3(b) (3)(i) shall be paid to the Eligible Director's or Eligible Retired Director's designated beneficiary, as applicable, or if there is no such beneficiary shall be paid in accordance with the provisions of the life insurance contract. SECTION 6. ADMINISTRATION AND INTERPRETATION. The Vice-President - Employee Relations and the Vice President-Finance and Treasurer shall have full power and authority on behalf of the Company to administer and interpret the Plan. All decisions with respect to the administration and interpretation of the Plan shall be final and shall be binding upon all persons. SECTION 7. AMENDMENTS AND TERMINATION. The Board of Directors of the Company shall have the right at any time to amend, modify, discontinue or terminate this Plan in whole or in part; provided, however, that no such action shall deprive the beneficiary or estate of life insurance proceeds with respect to an Eligible Director or Eligible Retired Director who shall have died prior to the date of such action by the Board of Directors. EX-11 6 EXHIBIT 11 1 Exhibit 11 Ford Motor Company and Subsidiaries COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE IN ACCORDANCE WITH OPINION 15 OF THE ACCOUNTING PRINCIPLES BOARD
1994 1993 1992 ------------------------------ ----------------------------- ----------------------------- Income Income (Loss) Attributable Attributable Attributable Avg. Shares to Common Avg. Shares to Common Avg. Shares to Common of Common and Class B Stock of Common and Class B Stock of Common and Class B Stock and Class B ----------------- and Class B ----------------- and Class B ----------------- Stock Per Stock Per Stock Per Outstanding Total Share Outstanding Total Share Outstanding Total Share ----------- ----- ------- ----------- ----- ----- ----------- ------ ----- (Mils.) (Mils.) (Mils.) (Mils.) (Mils.) (Mils.) Preliminary Earnings Per Share Calculation 1,010 $5,021 $4.97 986 $2,241 $2.27 974 $(7,594) $(7.81) I. Primary Earnings Per Share -------------------------- . Assuming exercise of options 45 46 24 . Assuming purchase of shares with proceeds of options (27) (28) (14) . Uncommitted ESOP shares (5) - - . Assuming issuance of shares contingently issuable 2 2 2 ----- ----- --- Net Common Stock Equivalents 15 20 12 ----- ----- --- Primary Earnings Per Share Calculation 1,025 $5,021 $4.90a/ 1,006 $2,241 $2.23a/ 986 $(7,594) $(7.81)a/ ===== ====== ===== ===== ====== ===== === ======= ====== II. Fully Diluted Earnings Per Share -------------------------------- Primary Earnings Per Share Calculation 1,025 $5,021 $4.90a/ 1,006 $2,241 $2.23a/ 986 $(7,594) $(7.81)a/ . Assuming conversion of convertible preferred stock 150 193b/ 150 193b/ 150 193b/ . Reduction in shares assumed to be purchased with option proceedsc/ 0 4 2 - ----- ------ ----- ------ ----- ------- Fully Diluted Earnings Per Share Calculation 1,175 $5,214 $4.44 1,160 $2,434 $2.10 1,138 $(7,401) $(7.81)a/ ===== ====== ===== ===== ====== ===== ===== ======= ====== -
- - - - - - a/ The effect of common stock equivalents and/or other dilutive securities was anti-dilutive or not material in this period; therefore, the amount presented on the income statement is the Preliminary Earnings Per Share Calculation. b/ Reflects the elimination of preferred dividends upon conversion. c/ Incremental effect of dividing assumed option proceeds by the ending price, rather than the average price, of Common Stock for each period when the ending price exceeds the average price. Share data have been restated to reflect the 2-for-1 stock split that became effective June 6, 1994. EX-12 7 EXHIBIT 12 1 Exhibit 12 Ford Motor Company and Subsidiaries CALCULATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (in millions)
For the Years Ended December 31 ---------------------------------------------------------- 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- Earnings - -------- Income/(loss) before income taxes and cumulative effects of changes in accounting principles $ 8,789 $ 4,003 $ (127) $(2,587) $ 1,495 Equity in net (income)/loss of affiliates plus dividends from affiliates (182) (98) 26 69 171 Adjusted fixed charges a/ 8,122 7,648 8,113 9,360 9,690 ------- ------- ------- ------- ------- Earnings $16,729 $11,553 $ 8,012 $ 6,842 $11,356 ======= ======= ======= ======= ======= Combined Fixed Charges and Preferred Stock Dividends - -------------------------- Interest expense b/ $ 7,787 $ 7,351 $ 7,987 $ 9,326 $ 9,647 Interest portion of rental expense c/ 265 266 185 124 105 Preferred stock dividend requirements of majority-owned subsidiaries d/ 160 115 77 56 83 ------- ------- ------- ------- ------- Fixed charges 8,212 7,732 8,249 9,506 9,835 Ford preferred stock dividend requirements e/ 472 442 317 26 0 ------- ------- ------- ------- ------- Total combined fixed charges and preferred stock dividends $ 8,684 $ 8,174 $ 8,566 $ 9,532 $ 9,835 ======= ======= ======= ======= ======= Ratios - ------ Ratio of earnings to fixed charges 2.0 1.5 f/ g/ 1.2 Ratio of earnings to combined fixed charges and preferred stock dividends 1.9 1.4 h/ i/ 1.2
- - - - - - a/ Fixed charges, as shown below, adjusted to exclude the amount of interest capitalized during the period and preferred stock dividend requirements of majority-owned subsidiaries. b/ Includes interest, whether expensed or capitalized, and amortization of debt expense and discount or premium relating to any indebtedness. c/ One-third of all rental expense is deemed to be interest. d/ Preferred stock dividend requirements of Ford Holdings, Inc., increased to an amount representing the pre-tax earnings which would be required to cover such dividend requirements based on Ford's effective income tax rates for all periods except 1992. The U.S. statutory rate of 34% was used for 1992. e/ Preferred stock dividend requirements of Ford Motor Company, increased to an amount representing the pre-tax earnings which would be required to cover such dividend requirements based on Ford's effective income tax rates for all periods except 1992. The U.S. statutory rate of 34% was used for 1992. f/ Earnings inadequate to cover fixed charges by $237 million. g/ Earnings inadequate to cover fixed charges by $2,664 million. h/ Earnings inadequate to cover combined fixed charges and preferred stock dividends by $554 million. i/ Earnings inadequate to cover combined fixed charges and preferred stock dividends by $2,690 million. EX-21 8 EXHIBIT 21 1 Exhibit 21 Ford Motor Company SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 1994*
Jurisdiction of Organization --------------- Ford Capital B.V. The Netherlands Ford Credit Europe plc England Ford Bank AG Germany Ford Credit Entidad de Financiacion, S.A. Spain Ford Electronica Portuguesa, Ltd. Portugal Ford Electronics and Refrigeration Corporation Delaware, U.S.A. Ford Electronics Manufacturing Corporation Canada Ford Industria e Comercio Ltda. Brazil Ford Ensite International Inc. Canada Essex Manufacturing Canada Ford Lio Ho Motor Company Ltd. Taiwan FLH Marketing Services Ltd. Taiwan FLH Sales Limited Taiwan AIC Corporation Japan Ford Espana S.A. Spain Ford Export Services B.V. The Netherlands Ford France S.A. France Ford Holdings, Inc. Delaware, U.S.A. Associates First Capital Corporation Delaware, U.S.A. Associates Corporation of North America Delaware, U.S.A. Ford Leasing Development Company Delaware, U.S.A. Ford Motor Land Development Corporation Delaware, U.S.A. The American Road Insurance Company Michigan, U.S.A. Ford Life Insurance Company Michigan, U.S.A. USL Capital Corporation Delaware, U.S.A. Ford International Capital Corporation Delaware, U.S.A. Ford Investment Partnership Michigan, U.S.A. Ford Italiana S.p.A. Italy Ford Motor Company of Canada, Limited Canada Ford Motor Company of Australia Limited Australia Ford Motor Company of New Zealand Limited New Zealand Ford Motor Company Limited England ACONA B.V. The Netherlands Ford Motor Company, S.A. de C.V. Mexico Ford Motor Compania Comercial, S.A. de C.V. Mexico Ford Motor Credit Company Delaware, U.S.A. Ford Credit Australia Limited Australia Ford Credit Auto Receivables Corporation Delaware, U.S.A. Ford Credit Canada Limited Canada Ford New Holland Credit Company Delaware, U.S.A. Ford Motor de Venezuela, S.A. Venezuela Ford Werke AG Germany Ford Werke AG & Co. Leasing KG Germany Jaguar Limited England Transcon Insurance Limited Bermuda 522 Other U.S. Subsidiaries 315 Other Non-U.S. Subsidiaries
* Subsidiaries not shown by name in the above list, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. EX-23 9 EXHIBIT 23 1 [COOPERS & LYBRAND LETTERHEAD] EXHIBIT 23 Ford Motor Company The American Road Dearborn, Michigan CONSENT OF COOPERS & LYBRAND L.L.P. Re: Ford Motor Company Registration Statements Nos. 2-95018, 2-95020, 33-9722, 33-14951, 33-19036, 33-36043, 33-36061, 33-39402, 33-50087, 33-50194, 33-50238, 33-54304, 33-54344, 33-54348, 33-54275, 33-54283, 33-54735, 33-54737, 33-55847 and 33-56785 on Form S-8, and 2-42133, 33-32641, 33-40638, 33-43085, 33-45887, 33-55474 and 33-55171 on Form S-3 We consent to the incorporation by reference in the above Registration Statements of our report dated January 27, 1995 to the Board of Directors and Stockholders of Ford Motor Company which is included in this Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. COOPERS & LYBRAND L.L.P. 400 Renaissance Center Detroit, Michigan 48243 March 14, 1995 EX-24 10 EXHIBIT 24 1 Exhibit 24 FORD MOTOR COMPANY Certificate of Assistant Secretary The undersigned, T. J. DeZure, an Assistant Secretary of FORD MOTOR COMPANY, a Delaware corporation (the "Company"), DOES HEREBY CERTIFY that the following are true and correct excerpts from the minutes of a meeting of the Board of Directors of the Company duly called and held on March 9, 1995 and that the same are in full force and effect: RESOLVED, That preparation of an Annual Report of the Company on Form 10-K for the year ended December 31, 1994 (the "10-K Report"), including exhibits and other documents, to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended, be and hereby is in all respects authorized and approved; that the draft 10-K Report presented to this meeting be and hereby is approved in all respects; that the directors and appropriate officers of the Company, and each of them, be and hereby are authorized to sign and execute in their own behalf, or in the name and on behalf of the Company, or both, as the case may be, the 10-K Report, and any and all amendments thereto, with such changes therein as such directors and officers may deem necessary, appropriate or desirable, as conclusively evidenced by their execution thereof; and that the appropriate officers of the Company, and each of them, be and hereby are authorized to cause the 10-K Report and any such amendments, so executed, to be filed with the Commission. RESOLVED, That each officer and director who may be required to sign and execute the 10-K Report or any amendment thereto or document in connection therewith (whether in the name and on behalf of the Company, or as an officer or director of the Company, or otherwise), be and hereby is authorized to execute a power of attorney appointing John M. Devine, M. L. Reichenstein, J. W. Martin, Jr., J. M. Rintamaki and L. J. Ghilardi, and each of them, severally, his or her true and lawful attorney or attorneys to sign in his or her name, place and stead in any such capacity the 10-K Report and any and all amendments thereto and documents in connection therewith, and to file the same with the Commission, each of said attorneys to have power to act with or without the other, and to have full power and authority to do and perform in the name and on behalf of each of said officers and directors who shall have executed such power of attorney, every act whatsoever which such attorneys, or any of them, may deem necessary, appropriate or desirable to be done in connection therewith as fully and to all intents and purposes as such officers or directors might or could do in person. WITNESS my hand as of this 15th day of March, 1995. /s/T. J. DeZure --------------------- T. J. DeZure Assistant Secretary (SEAL) 2 POWER OF ATTORNEY WITH RESPECT TO ANNUAL REPORT OF FORD MOTOR COMPANY ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994 Each of the undersigned, a director or officer of FORD MOTOR COMPANY, appoints each of J. M. Devine, M. L. Reichenstein, J. W. Martin, Jr., J. M. Rintamaki and L. J. Ghilardi his or her true and lawful attorney and agent to do any and all acts and things and execute any and all instruments which the attorney and agent may deem necessary or advisable in order to enable FORD MOTOR COMPANY to comply with the Securities Exchange Act of 1934, and any requirements of the Securities and Exchange Commission, in connection with the Annual Report of FORD MOTOR COMPANY on Form 10-K for the year ended December 31, 1994 and any and all amendments thereto, as authorized at a meeting of the Board of Directors of FORD MOTOR COMPANY held on March 9, 1995, including, but not limited to, power and authority to sign his or her name (whether on behalf of FORD MOTOR COMPANY, or as a director or officer of FORD MOTOR COMPANY, or by attesting the seal of FORD MOTOR COMPANY, or otherwise) to such instruments and to such Annual Report and any amendments thereto, and to file them with the Securities and Exchange Commission. The undersigned ratifies and confirms all that any of the attorneys and agents shall do or cause to be done by virtue hereof. Any one of the attorneys and agents shall have, and may exercise, all the powers conferred by this instrument. Each of the undersigned has signed his or her name as of the 9th day of March, 1995. /s/Alex Trotman /s/Colby H. Chandler - ---------------------------- ---------------------------------- (Alex Trotman) (Colby H. Chandler) /s/Michael D. Dingman /s/Edsel B. Ford II - ---------------------------- --------------------------------- (Michael D. Dingman) (Edsel B. Ford II) /s/William C. Ford /s/William C. Ford, Jr. - ---------------------------- ---------------------------------- (William C. Ford) (William C. Ford, Jr.) /s/Roberto C. Goizueta /s/Irvine O. Hockaday, Jr. - ---------------------------- --------------------------------- (Roberto C. Goizueta) (Irvine O. Hockaday, Jr.) /s/Marie-Josee Kravis /s/Drew Lewis - ---------------------------- --------------------------------- (Marie-Josee Kravis) (Drew Lewis) /s/Ellen R. Marram /s/Kenneth H. Olsen - ---------------------------- ---------------------------------- (Ellen R. Marram) (Kenneth H. Olsen)
3 - 2 - /s/Carl E. Reichardt /s/Louis R. Ross - ---------------------------- ---------------------------------- (Carl E. Reichardt) (Louis R. Ross) /s/Clifton R. Wharton, Jr. /s/John M. Devine - ---------------------------- ------------------------------------ (Clifton R. Wharton, Jr.) (John M. Devine) /s/Murray L. Reichenstein - ---------------------------- (Murray L. Reichenstein)
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