3rd Quarter Results
Ford Motor Co
23 October 2006
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: October 20, 2006
(Date of earliest event reported)
FORD MOTOR COMPANY
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-3950 38-0549190
(Commission File Number) (IRS Employer Identification No.)
One American Road, Dearborn, Michigan 48126
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 313-322-3000
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
( ) Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
( ) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
140.14a-12)
( ) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
( ) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
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Item 2.02. Results of Operations and Financial Condition.
Ford Motor Company ('Ford') hereby incorporates by reference its news releases
dated October 23, 2006, which are herewith furnished as Exhibit 99.1 and Exhibit
99.2.
Ford's President and Chief Executive Officer, Alan Mulally, and Executive Vice
President and Chief Financial Officer, Don Leclair, will host a presentation for
the investment community and news media beginning at 9:00 a.m. to review
preliminary third quarter 2006 financial results. Investors may access this
presentation by dialing 800-706-7741 (or 1-617-614-3471 from outside the United
States). The passcode for either telephone number is a verbal response of 'Ford
Earnings.'
At the same time, a listen-only webcast and supporting presentation materials
for the call will be available on the Internet at www.shareholder.ford.com.
Investors may also access replays for one week following the presentation by
visiting www.shareholder.ford.com, or by dialing 888-286-8010 (or 1-617-801-6888
from outside the United States). The passcode for replays is 29481628. All times
referenced above are in Eastern Time.
Please note that Exhibit 99.2 to this Form 8-K discusses pre-tax profits
excluding special items for Ford's Automotive sector and the primary operating
segments and business units within the Automotive sector. The most directly
comparable financial measure calculated and presented in accordance with U.S.
Generally Accepted Accounting Principles is pre-tax profits including special
items. We believe that pre-tax profits excluding special items is a useful
measure to provide investors, because it excludes those items that we do not
consider to be indicative of earnings from ongoing operating activities. As a
result, pre-tax profits excluding special items provides investors with a more
relevant measure of the results generated by our operations.
Item 2.05. Costs Associated with Exit or Disposal Activities.
On January 19, 2006, we committed to a major business improvement plan for our
North American Automotive operations, which we refer to as the Way Forward plan,
key aspects of which were set forth in our Annual Report on Form 10-K for the
year ended December 31, 2005. Responding to changing facts and circumstances, on
September 14, 2006, we committed to an acceleration of this plan, including
actions designed to further reduce operating costs and to increase the flow of
new products, and we provided a revised financial outlook.
As part of this accelerated plan, we have announced our intention to idle and
cease operations at 16 manufacturing facilities, nine of which have been
identified and slated for idling by the end of 2008; the remaining facilities
are to be idled after 2008. Additionally, we have announced our intention to
sell or close all of our Automotive Components Holdings, LLC ('ACH') facilities,
and to redeploy or separate all ACH employees by the end of 2008.1
Our best estimate of costs associated with these exit or disposal activities
primarily reflects personnel-related costs. We have estimated costs (accrued in
the first nine months of 2006) and cash expenditures over time of $2.5 billion
for Jobs Bank Benefits and employee separation packages.2 We have estimated
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1 The identification of the nine facilities slated for idling by 2008 and
additional detail about non-exit or disposal activities related to our
accelerated Way Forward plan (such as the reduction of salaried-related costs)
can be found in our Current Report on Form 8-K dated September 13, 2006.
2 'Jobs Bank Benefits' are defined in Note 4 of the Notes to the Financial
Statements in our Quarterly Report on Form 10-Q for the period ended March 31,
2006.
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costs (accrued in the first nine months of 2006) of $1.3 billion for related
non-cash pension curtailment charges. During the first quarter of 2006, we also
accrued $300 million for fixed-asset write-off costs associated with the
immediate idling of St. Louis Assembly Plant; we expect the cost of fixed-asset
write-offs for future facility idlings to be included in operating costs.
We have not yet accrued any costs for benefits that may be provided to employees
working at the facilities to be idled after 2008. The cost of executing plans
for these facilities is dependent on the resolution of many contingencies,
including the negotiation of future labor agreements, the successful
implementation of our product cycle plan, the resolution of alternative capacity
actions, and changes in our market share between now and the planned idling of
these facilities. At this time, we are estimating a charge of up to $750 million
(on a discounted basis) for benefits that we anticipate may be paid to employees
expected to be permanently idled as a result of the future idling of these
facilities. Although it is probable that we will take the necessary actions to
reduce our manufacturing employment, the amount of our estimated benefit
obligation is highly dependent on the resolution of the previously-mentioned
contingencies. No estimated value is more likely than another, and therefore the
benefit obligation is not reasonably estimable.
Item 4.02 (a). Non-Reliance on Previously Issued Financial Statements or a
Related Audit Report or Completed Interim Review.
During the preparation of its response to a comment letter from the Division of
Corporation Finance of the Securities and Exchange Commission related to a
routine review of its Annual Report on Form 10-K for the year ended December 31,
2005, our indirect wholly-owned subsidiary, Ford Motor Credit Company ('Ford
Credit'), became aware of a matter related to accounting for interest rate swaps
under Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended ('SFAS 133').
Specifically, Ford Credit discovered that certain interest rate swaps it had
entered into to hedge the interest rate risk inherent in certain long-term fixed
rate debt were accounted for incorrectly because they did not satisfy the
technical accounting rules under SFAS 133 to qualify for exemption from the more
strict effectiveness testing requirements. PricewaterhouseCoopers LLP, our
independent registered public accounting firm, audited our 2001 through 2005
financial statements, which included a review of these swaps.
These interest rate swaps were entered into as part of Ford Credit's
asset-liability management strategy. As noted above, the swaps economically
hedge the interest rate risk associated with long-term debt issuances, and we
continue to believe that these swaps have been and will continue to be highly
effective economic hedges. The correction to the accounting does not impact the
economics of the hedges, nor does it affect cash.
Although the final restatement amounts have not yet been determined, based on
the information to date, we estimate that Ford and Ford Credit's results in 2002
will improve materially.
On October 20, 2006, we recommended to the Audit Committee of our Board of
Directors that we restate our financial statements for each of the years ended
December 31, 2003, 2004 and 2005, and our selected financial data for each of
the years 2001 - 2005 appearing in Item 15 and Item 6 of our Annual Report on
Form 10-K for the year ended December 31, 2005, as well as our interim financial
statements for the quarters ended March 31, 2005 and 2006, June 30, 2005 and
2006, and September 30, 2005. The Audit Committee agreed with management's
recommendation and it was concluded that these financial statements
should no longer be relied upon by investors. The Audit Committee has discussed
this matter with PricewaterhouseCoopers LLP.
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The revised financial statements and selected financial data for the periods
referenced above will be included, as applicable, in an amended Annual Report on
Form 10-K for the year ended December 31, 2005, and in an amended Quarterly
Report on Form 10-Q for the quarters ended March 31, 2006 and June 30, 2006. The
revised interim financial statements for the quarter ended September 30, 2005
will be included in the Quarterly Report on Form 10-Q for the quarter ended
September 30, 2006. We expect to file the amended documents by the time we file
our Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.
Management is currently assessing the impact this matter has on its
previously-issued report on internal controls over financial reporting as of
December 31, 2005 and management's conclusions regarding the Company's
disclosure controls and procedures. If management concludes that this matter
resulted from a material weakness in its controls over interest rate swap
accounting at Ford Credit, management may conclude that its internal controls
over financial reporting and disclosure controls and procedures were ineffective
as of December 31, 2005. If management reaches such a conclusion, we also expect
that the control deficiency will have been remediated by the time of the filing
of the revised financial statements and selected financial data.
Item 8.01. Other Events.
As previously disclosed, we expect that we will have Automotive gross cash and
committed credit lines totaling approximately $26 billion at year-end 2006.1
In addition, we expect that we will have approximately $3 billion of long-term
VEBA that will be accessible over time. Further, as previously announced, we are
seeking to raise additional liquidity through the sale of Aston Martin and
Automobile Protection Corporation.
During the fourth quarter of 2006 and for the near to medium term, we expect our
operating-related cash flow to be negative by a substantial amount. This
primarily reflects significant operating losses in our Automotive sector through
2008, cash expenditures incurred in connection with our restructuring efforts,
primarily for personnel separations, and pension contributions. This also
reflects throughout this period our expectation to continue to invest in new
products at about the same level as we have during the past few years, or
approximately $7 billion annually.
To fund the substantial negative cash flow we expect to experience over this
period and to provide added liquidity to protect against a recession or other
unexpected events, we are exploring various financing strategies, including
secured financing involving a substantial portion of our Automotive assets.
------------
3Automotive gross cash includes cash and cash equivalents, marketable
securities, loaned securities and short-term Voluntary Employee Benefit
Association ('VEBA') trust funds.
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Item 9.01. Financial Statements and Exhibits.
EXHIBITS
Designation Description Method of Filing
Exhibit 99.1 News Release dated Furnished with this Report
October 23, 2006
Exhibit 99.2 News Release dated Furnished with this Report
October 23, 2006
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FORD MOTOR COMPANY
(Registrant)
Date: October 23, 2006 By: /s/Peter J. Sherry, Jr.
Peter J. Sherry, Jr.
Secretary
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EXHIBIT INDEX
Designation Description
Exhibit 99.1 News Release dated October 23, 2006
Exhibit 99.2 News Release dated October 23, 2006
Exhibit 99.1
NEWS
Contact: Media: Equity Investment Fixed Income Shareholder Inquiries:
Becky Sanch Community: Investment Community: 1.800.555.5259 or
1.313.594.4410 Raj Modi Rob Moeller 1.313.845.8540
bsanch@ford.com 1.313.323.8221 1.313.621.0881 stockinf@ford.com
fordir@ford.com fixedinc@ford.com
Editor's note: The following is one of two related press releases Ford Motor
Company is issuing today. Please also refer to the release entitled: 'FORD
REPORTS PRELIMINARY THIRD QUARTER 2006 FINANCIAL RESULTS.'
FOR IMMEDIATE RELEASE
FORD TO RESTATE RESULTS SINCE 2001 FOR ACCOUNTING UNDER SFAS 133
DEARBORN, Mich., Oct. 23, 2006 - Ford Motor Company (NYSE: F) today announced it
plans to restate previous financial results from 2001 through the second quarter
of 2006 to correct the accounting for certain derivative transactions under the
Statement of Financial Accounting Standards (SFAS) 133, Accounting for
Derivative Instruments and Hedging Activities.
The correction to the accounting does not affect the economics of the derivative
transactions, nor have any impact on the company's cash. However, the
restatements are expected to affect the preliminary financial results Ford
announced today for its 2006 third quarter. The company expects to finalize
restatement amounts for the current period and all previous periods by the time
of the filing of its Quarterly Report on Form 10-Q for the quarter ended Sept.
30, 2006. (For full details regarding Ford's preliminary results for the 2006
third quarter, please see press release entitled, 'FORD REPORTS PRELIMINARY
THIRD QUARTER 2006 FINANCIAL RESULTS.')
Ford discovered that since 2001, certain interest rate swaps Ford Motor Credit
Company had entered into to hedge the interest rate risk inherent in certain
long-term fixed rate debt were accounted for incorrectly under SFAS 133 because
they did not satisfy the standard's technical accounting rules to qualify for
exemption from the more strict effectiveness testing requirements. Ford Motor
Credit Company uses transactions involving derivatives, including swaps,
forwards and options, to reduce economic risk and volatility in a disciplined
and defensive manner. PricewaterhouseCoopers LLP, the company's independent
registered public accounting firm, audited Ford's 2001 through 2005 financial
statements, which included a review of these swaps.
'This is a very complicated accounting standard, and interpretation of its
proper application has continued to evolve,' said Executive Vice President and
Chief Financial Officer Don Leclair. 'Our overall hedging strategy is sound. We
will correct our accounting for these types of derivative instruments. We remain
committed to strong internal controls and reporting transparency.'
Ford Motor Credit Company's interest rate swaps were entered into as part of the
unit's asset-liability management strategy. The swaps economically hedge the
interest rate risk associated with long-term debt issuances. Although the final
restatement amounts have not yet been determined, we estimate based on the
information to date that Ford and Ford Motor Credit Company's results in 2002
will improve materially. Other periods are still under study.
About Ford Motor Company:
Ford Motor Company, a global automotive industry leader based in Dearborn,
Mich., manufactures and distributes automobiles in 200 markets across six
continents. With about 300,000 employees and 108 plants worldwide, the company
[?c=8217]s core and affiliated automotive brands include Aston Martin, Ford,
Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. Its automotive-related
services include Ford Motor Credit Company.
- # # # -
2
Exhibit 99.2
NEWS
Contact: Media: Equity Investment Fixed Income Shareholder Inquiries:
Becky Sanch Community: Investment Community: 1.800.555.5259 or
1.313.594.4410 Raj Modi Rob Moeller 1.313.845.8540
bsanch@ford.com 1.313.323.8221 1.313.621.0881 stockinf@ford.com
fordir@ford.com fixedinc@ford.com
Editor's note: The following is one of two related press releases Ford Motor
Company is issuing today. Please also refer to the release entitled: 'FORD TO
RESTATE RESULTS SINCE 2001 FOR ACCOUNTING UNDER SFAS 133.'
FOR IMMEDIATE RELEASE
FORD REPORTS PRELIMINARY 3Q 2006 FINANCIAL RESULTS*
• Ford also announces plans to restate certain financial results to correct
accounting under SFAS 133. The preliminary third-quarter results announced
today do not reflect these corrections.
• Third-quarter net loss of $5.8 billion, or $3.08 per share.
• Loss from continuing operations, excluding special items, of $1.2 billion, or
62 cents per share.**
• Strong liquidity with total cash, including automotive cash, marketable
securities, loaned securities and short-term VEBA assets, of $23.6 billion.
DEARBORN, Mich., Oct. 23, 2006 - Ford Motor Company (NYSE: F) today reported
preliminary third-quarter 2006 financial results.
In a separate announcement, Ford said it would restate financial results from
2001 through the second quarter of 2006 to correct the accounting for certain
derivative transactions under Statement of Financial Accounting Standards (SFAS)
133, Accounting for Derivative Instruments and Hedging Activities.
--------------------------------------------------------------------------------
*The financial results discussed herein are presented on a preliminary basis;
final data will be included in our Quarterly Report on Form 10-Q for the quarter
ended Sept. 30, 2006 ('Form 10-Q Report').
** Earnings per share from continuing operations, excluding special items, is
calculated on a basis that includes pre-tax profit and provision for taxes and
minority interest. See table following 'Safe Harbor/Risk Factors'
for the nature and amount of these special items and a reconciliation
to GAAP.
These corrections are not reflected in the preliminary results announced today
for Ford's 2006 third quarter. The company expects to finalize restatement
amounts for this and previous periods by the time it files its Quarterly Report
on Form 10-Q for the quarter ended Sept. 30, 2006. Financial statements
pertaining to the 2006 third quarter will be provided at that time.
SUMMARY OF PRELIMINARY RESULTS
For the third quarter, Ford Motor Company reported a net loss of $5.8 billion,
or $3.08 per share. This compares with a net loss of $284 million, or 15 cents
per share, in the 2005 third quarter.
Excluding special items, the third quarter loss from continuing operations was
$1.2 billion, or 62 cents per share, compared with a loss of $191 million, or 10
cents per share, a year earlier.
The performance from continuing operations primarily reflected operating
challenges in the company's North America, Asia Pacific and Africa, and Premier
Automotive Group operations. Performance also included continued profitability
in South America and at Ford Credit. Though it lost money during the quarter,
Ford Europe showed a year-over-year improvement in operating results and
remained poised to deliver full-year profitability.
Special items included in the quarter's net loss primarily reflected the costs
associated with restructuring efforts, primarily in North America, as well as
the revaluation of long-lived assets related to automotive operations in North
America and Jaguar/Land Rover. On an after-tax basis, special items reduced
third-quarter earnings by a total of $4.6 billion or $2.46 per share. The total
pre-tax effect of these special items was $5.3 billion. (See appendix at the end
of this press release for a detailed explanation of special items and other
changes during the period.)
In addition, effective this quarter, the company established a valuation
allowance of $2.2 billion against deferred tax assets primarily at its North
America and Jaguar/Land Rover operations. The valuation allowance was
established because of the cumulative losses the company has incurred and the
financial outlook for these operations.
2
Alan Mulally, Ford's president and chief executive officer, said he and his
senior management team are committed to creating a viable Ford Motor Company
business going forward.
'These business results are clearly unacceptable,' Mulally said. 'We are
committed to dealing decisively with the fundamental business reality that
customer demand is shifting to smaller, more efficient vehicles. Our focused
priorities are to restructure aggressively to operate profitably at lower
volumes, and to accelerate the development of new, more efficient vehicles that
customers really want.
'We have great global assets and resources that we will leverage to
significantly improve our product strategy, our production efficiency and
quality. This will enable us to meet customer expectations for distinctive
vehicles much more cost effectively. These actions will lead to profitable
growth of our business over the long term.'
The following discussion of the preliminary results of our Automotive sector and
Automotive business units is on a basis that excludes special items. See table
following 'Safe Harbor/Risk Factors' for the nature and amount
of these special items and a reconciliation to GAAP.
AUTOMOTIVE SECTOR
On a pre-tax basis, worldwide Automotive sector losses in the third quarter were
$1.8 billion. This compares with a pre-tax loss of $1.3 billion during the same
period a year ago.
Worldwide automotive sales for the third quarter declined to $32.6 billion from
$34.7 billion in the same period last year. Worldwide vehicle unit sales in the
quarter were 1,511,000, down from 1,531,000 a year ago.
North America: In the third quarter, Ford[?c=8217]s North America automotive
operations reported a pre-tax loss of $2.0 billion, compared with a pre-tax loss
of $1.2 billion a year ago. The decline was largely attributed to lower volumes
and unfavorable mix, primarily associated with lower industry volume and lower
market share, and higher incentives. Cost reductions were a partial offset.
Sales were $15.4 billion, down from $18.2 billion for the same period a year
ago.
South America: Ford[?c=8217]s South America automotive operations reported a
third-quarter pre-tax profit of $222 million, an improvement from a pre-tax
profit of $96 million a year ago. The improvement was primarily explained by
higher volume and favorable pricing. Sales for the third quarter improved to
$1.5 billion from $1.2 billion in 2005.
3
Ford Europe: Ford Europe's third-quarter pre-tax loss was $13 million
compared with a pre-tax loss of $55 million during the 2005 period. The
improvement came from higher vehicle sales, partially offset by higher
pension-related costs, lower profits from operations in Turkey and negative net
pricing. During the third quarter, Ford Europe's sales were $7.3
billion, compared with $6.4 billion during third quarter 2005.
Premier Automotive Group (PAG): PAG reported a pre-tax loss of $593 million for
the third quarter, compared with a pre-tax loss of $108 million for the same
period in 2005. The decline was explained by adverse cost performance,
primarily reflecting adjustments to Jaguar and Land Rover warranty accruals and
lower volume at all operations, excluding Aston Martin. Improvements in overhead
costs were offset by increases in advertising. Third-quarter sales for PAG were
$6.5 billion, compared with $6.8 billion a year ago.
Asia Pacific and Africa: For the third quarter, Asia Pacific and Africa reported
a pre-tax loss of $56 million, compared with a pre-tax profit of $21 million a
year ago. The decline primarily reflected lower production and dealer
inventories, adverse mix, and higher incentives, partially offset by cost
reductions. Sales were $1.6 billion, compared with $1.9 billion in 2005.
Mazda: During the third quarter of 2006, Ford's share of Mazda pre-tax
profits and associated operations was $40 million, compared with $112 million
during the same period a year ago. The decline primarily reflected the
non-recurrence of mark-to-market gains on Mazda convertible bonds during 2005,
which have now been entirely converted to equity.
Other Automotive: Third-quarter results included a pre-tax profit of $553
million in Other Automotive, compared with a loss of $241 million a year ago.
The year-over-year improvement relates to tax-related interest and higher
portfolio returns.
FINANCIAL SERVICES SECTOR
For the third quarter, the Financial Services sector earned a pre-tax profit of
$448 million, compared with a pre-tax profit of $1.1 billion a year ago.
Ford Motor Credit Company: Ford Motor Credit Company reported net income of $262
million in the third quarter of 2006, down $315 million from net income of $577
million a year earlier. On a pre-tax basis from continuing operations, Ford
Motor Credit earned $428 million in the third quarter, compared with $901
million in the previous year. The decrease in earnings was attributed to lower
financing margins, higher depreciation expense and the impact of lower average
receivable levels.
4
CASH AND LIQUIDITY
The company ended the quarter with total cash, including automotive cash,
marketable securities, loaned securities and short-term Voluntary Employee
Beneficiary Association (VEBA) assets at Sept. 30, 2006 of $23.6 billion,
unchanged from the end of the second quarter. The company's operating-related
cash flow was $3.1 billion negative for the quarter. During the quarter, $3.0
billion was transferred out of long-term VEBA and is now included in total cash.
Don Leclair, executive vice president and chief financial officer said, 'As we
restructure our business we will continue to make investments in products
necessary to ensure Ford's future success. Throughout this period, maintaining
strong liquidity will continue to be a high priority.'
THIRD-QUARTER CONFERENCE CALL DETAILS
At 9 a.m. EDT, Alan Mulally and Don Leclair will host a conference call for news
media and analysts to discuss the preliminary third quarter financial results
and issues related to SFAS 133.
As a result, the previously scheduled fixed-income conference call has been
canceled.
The presentations (listen-only) and supporting materials will be available on
the Internet at www.shareholder.ford.com. Representatives of the news media and
the investment community participating by teleconference will have the
opportunity to ask questions following the presentations.
Access Information - Monday, Oct. 23
Earnings: 9:00 a.m. EDT
Toll Free: 800-706-7741
International: 617-614-3471
Earnings Passcode: 'Ford Earnings'
Replays - Available through Monday, Oct. 30
www.shareholder.ford.com
Toll Free: 888-286-8010
International: 617-801-6888
Passcodes:
Earnings: 29481628
About Ford Motor Company:
5
Ford Motor Company, a global automotive industry leader based in Dearborn,
Mich., manufactures and distributes automobiles in 200 markets across six
continents. With about 300,000 employees and 108 plants worldwide, the company's
core and affiliated automotive brands include Aston Martin, Ford,
Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. Its automotive-related
services include Ford Motor Credit Company.
- # # # -
6
Safe Harbor/Risk Factors
Statements included or incorporated by reference herein may constitute
'forward-looking statements' within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are based on
expectations, forecasts and assumptions by our management and involve a number
of risks, uncertainties, and other factors that could cause actual results to
differ materially from those stated, including, without limitation:
• Continued decline in market share;
• Continued or increased price competition resulting from industry
overcapacity, currency fluctuations or other factors;
• A market shift (or an increase in or acceleration of market shift) away from
sales of trucks or sport utility vehicles, or from sales of other more
profitable vehicles, in the United States;
• A significant decline in industry sales, particularly in the United States
or Europe, resulting from slowing economic growth, geo-political events
(e.g., an escalation or expansion of armed conflict in or beyond the Middle
East) or other factors;
• Lower-than-anticipated market acceptance of new or existing products;
• Continued or increased high prices for or reduced availability of fuel;
• Currency or commodity price fluctuations;
• Adverse effects from the bankruptcy or insolvency of, change in ownership or
control of, or alliances entered into by a major competitor;
• Economic distress of suppliers that has in the past and may in the future
require us to provide financial support or take other measures to ensure
supplies of components or materials;
• Work stoppages at Ford or supplier facilities or other interruptions of
supplies;
• Single-source supply of components or materials;
• Labor or other constraints on our ability to restructure our business;
• Worse-than-assumed economic and demographic experience for our postretirement
benefit plans (e.g., discount rates, investment returns, and health care
cost trends);
• The discovery of defects in vehicles resulting in delays in new model
launches, recall campaigns or increased warranty costs;
• Increased safety, emissions, fuel economy or other (e.g., pension funding)
regulation resulting in higher costs, cash expenditures, and/or sales
restrictions;
• Unusual or significant litigation or governmental investigations arising out
of alleged defects in our products or otherwise;
• A change in our requirements for parts or materials where we have entered
into long-term supply arrangements that commit us to purchase minimum or
fixed quantities of certain parts or materials, or to pay a minimum amount
to the seller ('take-or-pay contracts');
• Inability to access debt or securitization markets around the world at
competitive rates or in sufficient amounts due to additional credit rating
downgrades or otherwise;
• Higher-than-expected credit losses;
• Increased competition from banks or other financial institutions seeking to
increase their share of financing Ford vehicles;
• Changes in interest rates;
• Collection and servicing problems related to finance receivables and net
investment in operating leases;
• Lower-than-anticipated residual values or higher-than-expected return
volumes for leased vehicles;
• New or increased credit, consumer or data protection or other regulations
resulting in higher costs and/or additional financing restrictions; and
• Inability to implement the Way Forward plan.
We cannot be certain that any expectation, forecast or assumption made by
management in preparing these forward-looking statements will prove accurate, or
that any projection will be realized. It is to be expected that there may be
differences between projected and actual results. Our forward-looking statements
speak only as of the date of their initial issuance, and we do not undertake any
obligation to update or revise publicly any forward-looking statement, whether
as a result of new information, future events or otherwise. For additional
discussion, see 'Item 1A. Risk Factors' in our 2005 10-K Report.
***
7
TOTAL COMPANY 2006 THIRD QUARTER INCOME FROM CONTINUING OPERATIONS COMPARED WITH
NET INCOME - PRELIMINARY**
Third Quarter
Pre-Tax Profit After-Tax Earnings Per
Profit Share*
(Mils.) (Mils.)
Income/(Loss) from Continuing Operations Excluding Special $ (1,379 ) $ (1,170 ) $ (0.62 )
Items
Special Items
• Jobs Bank/Employee Separation $ (861 )
• Additional Personnel Reduction Programs (259 )
• Pension Curtailment Charges (437 )
• Fixed Asset Impairment
- North America (2,200 )
- Jaguar/Land Rover (1,600 )
• Other Gains 99
Total Special Items $ (5,258 ) $ (4,630 ) $ (2.46 )
$ (6,637 ) $ (5,800 ) $ (3.08 )
Income/(Loss) from Continuing Operations
Memo:
Deferred Tax Asset Valuation Allowance Included Above $(2,221)
* Earnings per share from continuing operations is calculated on a basis that
includes pre-tax profit, provision for taxes, and minority interest; additional
information regarding the method of calculating earnings per share is available
in the materials supporting the Oct. 23, 2006, conference calls at
www.shareholder.ford.com.
** Results exclude accounting corrections related to SFAS 133.
8
Appendix: Detailed Explanation of Third-Quarter Special Items and Other Changes
On an after-tax basis, total special items reduced third-quarter earnings by
$4.6 billion or $2.46 per share.
The total pre-tax effect of these special items was $5.3 billion and included:
• A net charge of $861 million for jobs bank benefits and employee separations
directly related to plans to idle facilities in North America. The charge
reflects plans to sell or close all Automotive Components Holdings, LLC
(ACH) plants by the end of 2008, as well as the planned idling of the Maumee
(Ohio) Stamping Plant and the Essex Ontario, Canada) Engine Plant.
• A charge of $259 million associated with continued global personnel reduction
programs at facilities other than those identified for idling, as well as a
related charge of $437 million for pension curtailment related to
third-quarter jobs bank and hourly separation actions. The pension
curtailment charge represents the impact of retirements earlier than planned,
enhanced benefits, and the accelerated recognition of prior service costs and
actuarial losses associated with our U.S. and Canadian hourly pension plan.
• An impairment charge of $2.2 billion for North America assets and $1.6 billion
for Jaguar/Land Rover assets. The charges were taken after determining the
fair value of long-lived assets for North America and Jaguar/Land Rover
were below book value. These impairments are a result of the structural
changes in North America, revisions to market share and currency exchange
assumptions, and recent operating results.
• A non-recurring gain of $99 million that reflects the release of a reserve
for excise taxes in South America based on a recent legal ruling.
In addition, effective this quarter, the company established a valuation
allowance of $2.2 billion against deferred tax assets of primarily North America
and Jaguar/Land Rover operations. The valuation allowance was established
because of the cumulative losses the company has incurred and the reassessment
of their financial outlook. In the third quarter the company recorded partial
tax offsets. Beginning in the fourth quarter, the company will not record tax
offsets for further losses or profits for these operations until a return to
sustained profitability.
9
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The company news service from the London Stock Exchange
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