-----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, papaXys0z88/rLlbjzYgNYCLKQzIjuHFIZ7YVZIZPM7flqFhTtIzh1y60KBK/tRw BTHR5FHUEkjXXrqU6QeM5Q== 0000037996-94-000005.txt : 19940322 0000037996-94-000005.hdr.sgml : 19940322 ACCESSION NUMBER: 0000037996-94-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940321 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORD MOTOR CO CENTRAL INDEX KEY: 0000037996 STANDARD INDUSTRIAL CLASSIFICATION: 3711 IRS NUMBER: 380549190 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-03950 FILM NUMBER: 94517065 BUSINESS ADDRESS: STREET 1: THE AMERICAN RD CITY: DEARBORN STATE: MI ZIP: 48121 BUSINESS PHONE: 3133223000 10-K 1 10-K 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, 1993 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 Boston Stock Exchange Midwest Stock Exchange New York Stock Exchange Pacific Coast Stock Exchange Philadelphia 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 New York Stock 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 Montreal Stock Exchange and the Toronto Stock Exchange in Canada, the Tokyo Stock Exchange in Japan and on certain stock exchanges in the United Kingdom and Continental Europe. [Cover page 1 of 2 pages] 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, 1994, the Registrant had outstanding 464,296,060 shares of Common Stock and 35,426,038 shares of Class B Stock. Based on the New York Stock Exchange Composite Transaction closing price of the Common Stock on that date ($66 3/4 a share), the aggregate market value of such Common Stock was $30,991,762,005. 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, 1994 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 12, 1994 (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] 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 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 subsidiaries: Ford Motor Credit Company ("Ford Credit"), Ford Credit Europe plc ("Ford Credit Europe"), First Nationwide Financial Corporation ("First Nationwide"), The Hertz Corporation ("Hertz"), Ford Holdings, Inc. ("Ford Holdings"), Associates First Capital Corporation ("The Associates"), The American Road Insurance Company ("American Road") and USL Capital Corporation (formerly United States Leasing International, Inc.) ("USL Capital"). The activities of these subsidiaries include financing operations, insurance operations, savings and loan operations and vehicle and equipment leasing. See Note 16 of Notes to Financial Statements and Item 6. "Selected Financial Data" 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. Item 1. Business (Continued) 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. 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. 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. 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", amendments to the Federal Clean Air Act extend the required useful life for emissions equipment on vehicles sold in the U.S. to 10 years or 100,000 miles (whichever occurs first). 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. -2- Item 1. Business (Continued) 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 -------------------------------- 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- Cars........................................ 8.5 8.2 8.2 9.3 9.8 Trucks...................................... 5.7 4.9 4.3 4.8 5.1 ---- ---- ---- ---- ---- Total....................................... 14.2 13.1 12.5 14.1 14.9
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 ---------------------------------------- 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- Small........................... 28.9% 29.3% 29.0% 28.9% 31.4% Middle.......................... 52.5 51.7 51.4 51.8 50.4 Large........................... 8.5 9.2 9.6 9.1 9.2 Luxury.......................... 10.1 9.8 10.0 10.2 9.0 ------ ------ ------ ------ ------ 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 ------------------------------------- 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- Small........................... 28.8% 26.6% 31.2% 31.1% 34.7% Middle.......................... 51.4 53.4 47.3 44.8 45.6 Large........................... 9.9 10.5 10.1 11.2 10.1 Luxury.......................... 9.9 9.5 11.4 12.9 9.6 ------ ------ ------ ------ ------ Total Ford U.S. Car Sales....... 100.0% 100.0% 100.0% 100.0% 100.0% * Includes Jaguar sales since 1990.
As shown in the first table above, the percentages of industry sales in the various car segments have remained relatively stable since 1989. As shown in the second table above, Ford's proportion of sales in 1992 and 1993 has increased in the middle segment and decreased in the small and luxury segments, reflecting higher sales of Thunderbird, Cougar, Taurus, Sable, Tempo and Topaz models and lower sales of Escort, Festiva, Mark and Continental models. -3- Item 1. Business (Continued) U.S. Industry Truck Sales by Segment Years Ended December 31 ----------------------------------------- 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- Compact pickup........ 18.9% 20.8% 22.4% 22.9% 23.7% Compact van/utility... 41.1 40.1 38.8 34.7 31.2 Full-Size pickup...... 24.8 24.2 25.1 26.0 26.4 Full-Size van/utility.. 10.6 10.6 9.4 11.4 13.2 Medium/Heavy........... 4.6 4.3 4.3 5.0 5.5 ---- ----- ---- ---- ---- 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 ------------------------------------- 1993 1992 1991 1990 1989 ----- ----- ----- ----- ----- Compact pickup............ 19.7% 17.0% 18.5% 19.8% 19.5% Compact van/utility........ 32.6 33.5 31.5 25.3 20.4 Full-Size pickup........... 32.6 33.6 35.8 36.8 38.9 Full-Size van/utility..... 12.4 13.1 11.7 14.9 17.4 Medium/Heavy.............. 2.7 2.8 2.5 3.2 3.8 ---- ---- ---- ---- ---- 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 1989, while the full-size segments (pickups and van/utility) have declined as a percentage of total truck sales. 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 ----------------------------------- 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- U.S. Manufacturers (Including Imports) Ford**............................... 22.3% 21.8% 20.1% 21.1% 22.3% General Motors....................... 34.1 34.6 35.6 35.6 35.1 Chrysler............................. 9.8 8.3 8.6 9.2 10.4 ---- ---- ---- ---- ---- Total U.S. Manufacturers........... 66.2 64.7 64.3 65.9 67.8 Foreign-Based Manufacturers*** Japanese............................. 29.1 30.1 30.2 27.9 25.4 All Other............................ 4.7 5.2 5.5 6.2 6.8 ---- ---- ---- ---- ---- Total Foreign-Based Manufacturer.. 33.8 35.3 35.7 34.1 32.2 ----- ----- ----- ----- ----- Total U.S. Car 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. ** Includes Jaguar sales since 1990. *** 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- Item 1. Business (Continued)
U.S. Truck Market Shares* Years Ended December 31 ------------------------------------ 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- U.S. Manufacturers (Including Imports) Ford................................. 30.5% 29.7% 28.9% 29.3% 28.8% General Motors....................... 31.4 32.2 32.9 34.3 33.7 Chrysler............................. 21.4 21.1 18.5 17.3 19.4 Navistar International............... 1.3 1.3 1.4 1.5 1.5 All Other............................ 1.7 1.4 1.3 1.4 1.7 ---- ---- ---- ---- ---- Total U.S. Manufacturers........... 86.3 85.7 83.0 83.8 85.1 Foreign-Based Manufacturers*** Japanese............................. 13.2 13.8 16.5 15.6 14.3 All Other............................ 0.5 0.5 0.5 0.6 0.6 ---- ---- ---- ---- ---- Total Foreign-Based Manufacturers.. 13.7 14.3 17.0 16.2 14.9 ---- ---- ---- ---- ---- 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 -------------------------------------------- 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- U.S. Manufacturers (Including Imports) Ford**............................... 25.5% 24.7% 23.2% 23.9% 24.5% General Motors....................... 33.1 33.7 34.6 35.2 34.7 Chrysler............................. 14.4 13.1 12.0 12.0 13.5 Navistar International............... 0.5 0.5 0.5 0.5 0.5 ---- ---- ---- ---- ---- Total U.S. Manufacturers........... 73.5 72.0 70.3 71.6 73.2 Foreign-Based Manufacturers*** Japanese............................. 22.8 24.0 25.5 23.7 21.6 All Other............................ 3.7 4.0 4.2 4.7 5.2 ---- ---- ---- ---- ---- Total Foreign-Based Manufacturers.. 26.5 28.0 29.7 28.4 26.8 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. ** Includes Jaguar sales since 1990. *** 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. 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 21.6% in 1989 to 25.5% in 1991, but declined to 22.8% in 1993, reflecting in part the effects of the strengthening of the Japanese yen on the prices of vehicles produced by the Japanese manufacturers. -5- Item 1. Business (Continued) 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. Production in the U.S. by Japanese transplants reached 1.6 million units in 1993 and is expected to reach about 2.5 million units a year when additional Japanese transplant capacity becomes fully operational. Excess Capacity In North America. In 1993, automotive capacity in North America, including Japanese transplants, exceeded industry sales by over 5.2 million units. This excess capacity (which includes overtime capacity) reflected the effect of productivity gains made by manufacturers, added capacity of Japanese transplants and lower-than-normal industry-wide sales resulting from modest economic growth. Marketing Incentives and Fleet Sales. As a result of intense competition from new product offerings (from both domestic and foreign manufacturers), excess industry capacity as discussed above 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). Ford's U.S. marketing costs as a percentage of net sales revenue for each of 1993, 1992 and 1991 were: 10.9%, 12% and 16%, respectively. During the 1983-1988 period, such costs as a percentage of sales revenue were in the 4% to 7% range. "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 -------------------------------------------------- 1993 1992 1991 1990 ---- ---- ---- ---- Units Sold.................... 881,000 882,000 782,000 821,000 Percent of Ford's Total Car and Truck Sales.... 25% 28% 27% 24%
Fleet sales generally are less profitable than retail sales. Within total fleet sales, the mix between sales to daily rental companies and sales to other fleet purchasers improved in 1992 and 1993; sales to daily rental companies declined, while other fleet sales (which tend to be more profitable) increased. 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 -6- Item 1. Business (Continued) further as Japanese manufacturers, which together had a European car market share of 11.6% for 1993, increase their production capacity in Europe and import restrictions on Japanese built-up vehicles gradually are removed. In 1993, European car industry sales were 10.8 million cars, down 16% from 1992 levels. Truck sales were 1.7 million units, down 17% from 1992 levels. Ford's European car share for 1993 was 11.8%, compared with 11.5% for 1992, and its European truck share for 1993 was 12.6%, compared with 11.7% for 1992. For Ford, Great Britain and Germany are the most important markets within Europe, although the Southern European countries are becoming increasingly significant. Great Britain traditionally has been Ford's major source of European automotive profits, and any adverse change in this market has a strong effect on total automotive profits. For 1993 compared with 1992, total industry sales were up 10% in Great Britain and down 19% 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; however, Canada continues to be in a recessionary period. In 1993, industry sales of cars and trucks in Canada were down 3% from 1992 levels, while the U.S. experienced an 8% increase in industry sales. Mexico has been a growing market; however, in 1993, industry sales were down 15% to 603,000 units. 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. Latin 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 1993, Ford's profitability in the region improved significantly compared with 1992, primarily reflecting strong results in Brazil. Autolatina (Ford's joint venture with Volkswagen in Brazil and Argentina) remained the market leader in Brazil. In Brazil, a new economic plan aimed at stabilizing the Brazilian economy and reducing inflation was unveiled in late 1993. It is presently unclear to what extent the new plan will affect overall economic conditions. In addition, duties on vehicles imported into Brazil have declined progressively from 85% in 1990 to 35% in October 1993. As a result, imports are expected to gain a progressively larger share of the car market in Brazil. Autolatina's future results 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 and Taiwan are the principal markets for Ford products. In both markets, Ford is the car market share leader. In Taiwan (where sales of built-up vehicles manufactured in Japan are prohibited), Ford has total vehicle sales leadership. Ford's principal competition in the Asia-Pacific region has been the Japanese manufacturers. It -7- Item 1. Business (Continued) 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 is investigating automotive component manufacturing and vehicle assembly opportunities in China and is expanding the number of right-hand- drive vehicles it will offer in Japan. A key element of Ford's presence in the Asia-Pacific region is its long-standing relationship with Mazda Motor Corporation, in which it has held a 25% ownership interest since 1979. Recent management appointments by Mazda of Ford personnel have been made to improve coordination of business and product plans in the Asia-Pacific region. 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 dealers 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 85% 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 ------------------------------------ 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- Retail*............... 38.5% 37.7% 35.2% 31.4% 29.7% Wholesale............. 81.4 77.6 74.9 71.0 69.8 ____________ * As a percentage of total sales and leases, including cash sales. -8- Item 1. Business (Continued)
Ford Credit's finance receivables and investments in operating leases were as follows at the dates indicated (in millions): December 31, --------------------- 1993 1992 ---- ---- Finance receivables Retail $38,609 $35,601 Wholesale 11,699 10,057 Diversified 3,084 3,550 Other 3,626 3,279 ------- ------- Total finance receivables 57,018 52,487 Loan origination costs, net 126 102 Unearned income (5,263) (5,213) Allowance for credit losses (718) (765) ------- ------- Finance receivables, net $51,163 $46,611 ======== ======== Investments in operating leases $15,773 $ 9,820 Accumulated depreciation (2,974) (1,922) Allowance for credit losses (198) (151) ------- ------- Investments in operating leases, net $12,601 $ 7,747 ======= =======
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, 1993 December 31, 1992 ----------------------- ----------------------- Installments Balances Installments Balances ------------ -------- ------------ -------- Retail $ 10 $ 98 $ 12 $ 97 Diversified 13 56 10 94 Other 24 95 29 89 ---- ---- ---- ---- Total $ 47 $249 $ 51 $280 ==== ==== ==== ====
Installments past-due less than 60 days included in finance receivables at December 31, 1993 and 1992 were $298 million and $231 million, respectively. -9- Item 1. Business (Continued)
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, ------------------------------ 1993 1992 1991 ---- ---- ---- Net losses Retail* $213 $298 $443 Wholesale (4) 15 40 Diversified 14 23 24 Other 5 6 22 ---- ---- ---- Total $228 $342 $529 ==== ==== ==== Net losses as a percentage of average receivables Retail* 0.46% 0.75% 1.18% Total finance receivables* 0.35 0.60 0.92 Provision for credit losses $270 $418 $578 Allowance for credit losses 916 916 825 Allowance as a percent of net receivables* 1.42% 1.66% 1.60%
*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):
1993 1992 1991 ---- ---- ---- Beginning balance $ 916 $ 825 $ 895 Additions 270 418 578 Deductions Losses 392 476 674 Recoveries (164) (134) (145) ----- ----- ----- Net losses 228 342 529 Other changes, including reclassifications and amounts related to finance receivables sold 42 (15) 119 --- --- --- Net deductions 270 327 648 ----- ----- ----- Ending balance $ 916 $ 916 $ 825 ===== ===== =====
-10- 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 "A2" 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 Corporation ("S&P"), respectively. Such ratings have been in effect since February 1991, when they were respectively reduced to the present levels from "Aa3" and "AA-" (in the case of long-term senior debt) and "Prime-1" and "A-1+" (in the case of commercial paper). Ford and Ford Credit have entered into 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 1993. 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. First Nationwide Financial Corporation First Nationwide, 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. The principal asset of First Nationwide is the capital stock of First Nationwide Bank, A Federal Savings Bank ("First Nationwide Bank" or the "Bank"). The Bank is a federally chartered, capital stock savings bank which, with its predecessor institutions, has been in the savings and loan business since 1885. The principal business of the Bank consists of attracting savings deposits from -11- Item 1. Business (Continued) the public and making loans collateralized by liens on residential and other real estate. Income is derived from interest charges on real estate loans and, to a lesser extent, from fees received in connection with such loans and interest on securities investments. The major expense of the Bank is the interest it pays on savings accounts and on borrowings. First Nationwide's loans receivable (including those of the Bank) were as follows at the dates indicated (in millions):
December 31, -------------------------- 1993 1992* ---- ----- Real estate loans $11,712 $13,097 Consumer and other loans 485 536 ------- ------- Total 12,197 13,633 Unearned fees and discounts, net (109) (120) Allowance for loan losses (396) (405) ------ ------- Total loans receivable, net $11,692 $13,108 ======= =======
______________ * Certain amounts for 1992 have been restated to conform with presentations adopted in 1993. Included in the above receivables at December 31, 1993 and 1992 were $9.0 billion and $10.2 billion, respectively, of variable rate real estate loans. Loans held for sale, not included above, were $288 million and $195 million at December 31, 1993 and 1992, respectively. The percentages of real estate loans by state were as follows at December 31, 1993, excluding accrued interest receivable, discounts and premiums, and loss reserves, and including $288 million of loans held for sale: California - 55.4%; New York - 10.8%; Florida - 3.8%; Illinois - 3.2%; and 46 other states, none of which exceeded 3.0% of total real estate loans. The following table reflects at the dates indicated the amount of non-accrual, past due, and troubled debt restructured loans including the interest income recognized and total interest income that would have been recognized had the borrowers performed under the original terms of the loans (in millions): -12- Item 1. Business (Continued)
December 31, ----------------------------------------------------------------- 1993 1992* ------------------------------ ------------------------------- Total Total Interest Interest Interest Interest Income Income if Income Income if Balance Recognized Performing Balance Recognized Performing -------- --------- ---------- ------- ---------- ---------- Non-accrual loans $ 708 $ 17 $ 55 $1,072 $19 $ 93 Accruing loans contractually past due 91 days or more 0 0 0 2 0 0 Troubled debt restructured loans 512 41 45 336 25 32 ------ --- ----- ------ --- ---- Total $1,220 $58 $100 $1,410 $44 $125 ====== === ==== ====== === ====
______________ * Certain amounts for 1992 have been restated to conform with presentations adopted in 1993. At December 31, 1993, there were no commitments to lend additional funds to borrowers whose loans were on non-accrual status or were restructured. An analysis of First Nationwide's allowance for losses on loans is as follows for the years indicated (in millions):
Real Consumer Estate and Other Commercial Total ------ -------- ---------- ----- Balance, December 31, 1990 $267 $16 $ 3 $ 286 Additions 254 5 14 273 Charge-offs (121) (14) (10) (145) Recoveries 2 3 - 5 ---- --- ---- ---- Balance, December 31, 1991 402 10 7 419 Additions 121 3 4 128 Charge-offs (135) (5) (6) (146) Recoveries 2 1 1 4 ---- --- ---- ---- Balance, December 31, 1992 390 9 6 405 Additions 137 3 - 140 Charge-offs (152) (5) (6) (163) Recoveries 12 1 1 14 ---- --- --- ---- Balance, December 31, 1993 $387 $ 8 $ 1 $396 ==== === === ==== Federally chartered savings and loan institutions are regulated principally by the Office of Thrift Supervision ("OTS"), a bureau of the Department of Treasury. Deposit insurance for these institutions is provided by the Federal Deposit Insurance Corporation ("FDIC"). Regulated areas include: capital requirements, payments of dividends, transactions with affiliates and activities that might create a serious risk to insured institutions. The Bank is subject to regular concurrent examinations of its operations by the OTS and the FDIC, the most recent of which were completed in December 1993. In response to examiners' concerns expressed in recent examinations, the -13- Item 1. Business (Continued) Bank has taken positive steps to improve asset quality and other areas of its operations. The Bank filed its response to the most recent OTS examination report in January 1994. Pursuant to an agreement with the OTS, the FDIC did not issue a separate examination report. For a discussion of the losses incurred by First Nationwide in 1993 and 1992, see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations." Ford presently is investigating strategic actions with respect to First Nationwide. Such actions could include the sale of a substantial portion of the Bank's assets. It is premature at this time, however, to determine whether any actions will occur and what impact, if any, such actions could have on Ford's financial results. 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%. Since the Company was a principal shareholder of Hertz prior to the purchase from Commerzbank, no significant change in the relationship between Ford and Hertz is expected. The effect of this transaction on Ford's consolidated financial statements is not expected to be material. Hertz had been accounted for on an equity basis; following the purchase, Hertz's operating results, assets, liabilities, and cash flows will be consolidated in Ford's financial statements, as part of the Financial Services business segment. Hertz is engaged principally in the business of renting automobiles and renting and leasing trucks, without drivers, in or through approximately 5,200 locations throughout the U.S. and in over 140 foreign countries. 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 shares of Flexible Rate Auction Preferred Stock (Exchange), Series A Cumulative Preferred Stock, Series B Cumulative Preferred Stock and Series C Cumulative 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. -14- Item 1. Business (Continued) 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, mortgage banking, 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, -------------------- 1993 1992 ---- ---- Consumer finance Residential real estate-secured receivables $10,626 $ 9,820 Direct installment and credit card receivables 6,060 5,277 Manufactured housing and other installment receivables 3,810 2,846 ------ ------- Total consumer finance receivables 20,496 17,943 Commercial finance Heavy-duty truck receivables 4,334 3,500 Other industrial equipment receivables 4,743 4,172 ------ -------- Total commercial finance receivables 9,077 7,672 ------ ------- Gross receivables 29,573 25,615 Unearned finance income (3,208) (2,781) ------ ------- Net finance receivables $26,365 $22,834 ======= ======= Allowance for losses on finance receivables $ 809 $ 699
-15- 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, ------------------------------ 1993 1992 1991 ---- ----- ---- NET CREDIT LOSSES Consumer finance Amount $ 372 $ 383 $ 354 % of average net receivables 2.19% 2.64% 2.84% % of receivables liquidated 3.41 4.57 5.65 Commercial finance Amount $ 22 $ 42 $ 35 % of average net receivables .30% .64% .60% % of receivables liquidated .26 .61 .61 Total net credit losses Amount $ 394 $ 425 $ 389 % of average net receivables 1.61% 2.02% 2.13% % of receivables liquidated 2.03 2.80 3.24 ALLOWANCE FOR LOSSES Balance at end of period $ 809 $ 699 $ 591 % of net receivables 3.07% 3.06% 2.93%
The following table shows total balances 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, 1993 $380 1.85% $48 .53% $428 1.45% 1992 359 2.00 63 .82 422 1.65
An analysis of The Associates' allowance for losses on finance receivables is as follows for the years indicated (in millions):
1993 1992 1991 ---- ---- ---- Beginning balance $699 $591 $450 Additions 477 513 434 Recoveries 88 72 54 Losses (482) (497) (443) Other adjustments, primarily reserves of acquired businesses 27 20 96 ---- ---- ---- Ending balance $809 $699 $591 ==== ==== ==== -16- Item 1. Business (Continued) 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 single premium deferred annuities which are sold primarily through banks and brokerage firms. The obligations of Ford Life, including annuities, are guaranteed by American Road. In the second quarter of 1992, Ford Credit discontinued purchasing collateral protection insurance ("CPI") from American Road for vehicles financed at retail by Ford Credit. As a result, total premiums written by American Road in 1992 were down 38% from 1991. The discontinuance of Ford Credit's purchase of CPI was a significant factor in American Road's 1992 profit decline from 1991 and had a negative but smaller impact on 1993 earnings. American Road exited the CPI market for vehicles and homes financed by other institutions by the end of 1993. 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. In November 1993, the corporation's name was changed from United States Leasing International, Inc. to USL Capital Corporation. 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 debt instruments. Certain of these financing transactions are carried on the books of Ford affiliates. -17- 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, ---------------------------- 1993 1992 1991 ----- ---- ---- Total earning assets Investments in finance leases - net $2,364 $2,075 $1,463 Investments in operating leases - net 695 558 492 Investments in leveraged leases - net 191 4 - Notes receivable 721 502 416 Investment in securities 563 329 236 Inventory held for sale or lease 55 97 100 Investments in associated companies 18 20 20 ------ ------ ------ Total $4,607 $3,585 $2,727 ====== ====== ====== Allowance for doubtful accounts Beginning balance $ 40 $ 30 $ 25 Additions 25 19 11 Deductions (10) (9) (6) ------ ------ ------ Ending balance $ 55 $ 40 $ 30 ====== ====== ====== Allowance for doubtful accounts as a percent of earning assets 1.2% 1.1% 1.1% Total balance over 90 days past due at year end $ 44 $ 49 $ 23 Percent of earning assets 1.0% 1.4% 0.8%
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 and Europe. In addition, manufacturing and assembly facilities in the United States and Europe 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. Many of the standards will become increasingly stringent. Moreover, additional and even more stringent standards and regulations, notably car and truck emissions and CAFE standards, may be made applicable to future model vehicles as well as to existing and future facilities. The technological feasibility of achieving compliance with some of these standards and regulations has not been established on a commercial basis. Assuming that compliance with all applicable standards and regulations can be achieved within the prescribed time frame, it will be extremely costly and it could be necessary for Ford to take such actions as curtailing or eliminating production of certain cars, trucks and engines. Such actions could have substantial adverse effects on Ford's sales volume and profits. -18- Item 1. Business (Continued) Mobile Source Emissions Control -- As amended in November 1990, the Federal Clean Air Act (the "Clean Air Act" or the "Act") imposes significantly more 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 than those previously in effect. The effective dates of these standards, some of which have phase-in periods, vary depending upon the type of vehicle, but begin to apply as early as the 1994 model year. In addition, the Act doubles the length of the "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 to sell its pro rata share of 150,000 vehicles in each of the 1996, 1997 and 1998 model years and its pro rata share of 300,000 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 referred to above will become effective as early as the 2003 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 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 a commercially viable electric vehicle. 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 non-electric vehicles. The California -19- Item 1. Business (Continued) 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 with air quality problems 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. In October 1991, a group of twelve northeastern states and the District of Columbia, the Ozone Transport Commission (the "OTC"), organized under provisions of the Act and executed a Memorandum of Understanding under which they agreed to propose adoption of the California LEV standards. On February 1, 1994, the OTC voted to recommend to the EPA that it require all member states to adopt the California LEV standards in their state implementation programs. The EPA must act on the petition within nine months after its receipt. Adoption of the California LEV standards by any state will present challenges and potential adverse effects similar to those that will be experienced in California, which may be further aggravated by conditions in a particular state. In November 1990, the Department of Environmental Conservation (the "DEC") of the State of New York adopted regulations, effective beginning in the 1993 model year, that are intended to require that vehicles sold in that state comply with California's 1993 model year (pre-LEV) emissions standards. In May 1992, the DEC adopted regulations purporting to implement the California LEV standards beginning in the 1994 model year. The American Automobile Manufacturers Association ("AAMA"), of which Ford is a member, and the Association of International Automobile Manufacturers ("AIAM") challenged the legality of the DEC's adoption of the LEV standards, as inconsistent with its legal authority under the Act. A ruling by the U.S. District Court in Binghamton, New York, that the DEC's adoption of the LEV standards violated certain provisions of the Act (and was, therefore, invalid) was appealed to the U.S. Court of Appeals for the Second Circuit (the "Second Circuit Court"). On February 4, 1994, the Second Circuit Court upheld certain aspects of the State of New York's adoption of the California LEV standards, including the ZEV sales mandate. However, the Second Circuit Court also held that the standard would not apply to 1995 model year vehicles, thereby making the standard applicable to 1996 and beyond model year vehicles. A 1990 Massachusetts law, as implemented by regulations issued in 1992, purports to adopt the California LEV standards beginning in the 1995 model year. A special study commission established by the Massachusetts legislature to re-evaluate adoption of the California Act and standards recommended proceeding with their adoption. The AAMA and AIAM are challenging the adoption of the standards in the U.S. District Court in Massachusetts. 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. -20- Item 1. Business (Continued) The European Union has established standards which, in many cases, will require motor vehicle emissions control equipment similar to that used in the U.S. These standards, which 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, are applicable to vehicles type-approved after July 1, 1992, and registered after December 31, 1992. The EU Council of Ministers has unanimously adopted a common position approving a proposal by the European Commission to adopt more stringent motor vehicle emission standards. Under the European Union's new co-decision procedure, the Council's common position must be referred to the European Parliament (which may accept, modify or reject the proposal) for further action before the proposal can be adopted. Under the co-decision procedure, adoption is expected to be completed in the first half of 1994. The proposed standards would apply to vehicle homologations (i.e., the European regulatory certification process) beginning January 1, 1996 and to new vehicle registrations beginning January 1, 1997 and are of generally equivalent numerical stringency to those which begin to apply in the U.S. for the 1994 model year. The common position also provides for the European Commission to propose by the end of 1994 supplementary reductions in motor vehicle emissions that would take effect beginning January 1, 2000. Such supplemental reductions would be a function of technical progress achieved between now and 2000. When the more stringent standards are adopted, European Union member countries would be 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. 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. Since 1968 the Safety Act has prohibited 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. The Safety Administration has announced its intention to establish additional such standards in the near future, which Ford supports in principle. Ford expects to be able to comply with those standards but only at significantly increased costs, because doing so will tend 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 obtains knowledge that any motor vehicle manufactured by it contains a defect determined in good faith by it to be 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 -21- Item 1. Business (Continued) 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. The European Union, individual Member States within the European Union and other countries in Europe 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 established CAFE standards applicable to 1994 and 1995 model year light trucks (under 8,500 lbs. GVW) at 20.5 mpg and 20.6 mpg, respectively (on a combined two-wheel drive/four- wheel drive basis). It also has issued a Notice of Proposed Rulemaking ("NPRM") proposing to set standards for light trucks within the range of 20.5 mpg to 21.5 mpg for model years 1996 and 1997. If the Safety Administration sets light truck standards for the 1996 and 1997 model years within the range proposed in the NPRM referred to above, Ford expects to be able to comply with the CAFE standards applicable to its 1994 through 1997 model year "domestic" and "import" cars and light trucks, although it may be necessary to use credits to do so. Despite Ford's expectations of compliance, however, 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. -22- Item 1. Business (Continued) 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 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 non-regulatory measures. If the entire goal, or a substantial portion of the goal, is to be achieved through higher CAFE standards, 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 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. 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. -23- Item 1. Business (Continued) 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 Pollution and Waste Control -- The European Union, individual Member States within the European Union and other countries in Europe also have requirements governing air and water pollution and hazardous waste control and are likely to adopt additional or more stringent requirements in the future. The cost of complying with these standards could be substantial. Ozone Depleting Chemicals -- An international agreement, the Montreal Protocol on Substances that Deplete the Ozone Layer, as amended (the "Montreal Protocol"), and the Clean Air Act require a phaseout beginning in 1993 of certain chemicals deemed to be ozone-depleting, including chlorofluorocarbons ("CFCs"), in both products and manufacturing processes. The EPA Administrator is required by the Clean Air Act to adopt regulations that are consistent with the Montreal Protocol. In February 1992, acting under provisions of the Clean Air Act, former President Bush announced the acceleration of the phase-out of CFCs by requiring the elimination of production of CFCs by December 31, 1995 (except for amounts necessary for essential uses and for servicing existing equipment) and directing CFC producers to reduce their production in each of the years 1992-1995 to one- half of 1986 production levels. In November 1992, the phaseout schedule for CFC production under the Montreal Protocol was accelerated even further, requiring CFC producers to reduce their production in 1994 and 1995 to one-quarter of 1986 production levels and requiring a complete phaseout of CFC production by January 1, 1996, except for production or importation of CFC's for "essential uses" only. The Act also specifies mandatory recycling of CFCs during vehicle air conditioning service. -24- Item 1. Business (Continued) The Company expects that its vehicle air-conditioning systems and most of its manufacturing operations will become free of CFCs within the mandated phaseout and elimination schedule for these chemicals, but some continued need for them will exist to service existing equipment and vehicles. Several states (e.g., Vermont and Maine) have enacted laws requiring a complete ban on CFCs in mobile air conditioners prior to imposition of the phaseout mandated by the Act. As a result, the Company may not be able to offer certain vehicles for sale with air conditioners in those states. The European Union also has adopted provisions accelerating the Montreal Protocol schedule for CFC reduction. Under the proposal adopted by the European Council, CFCs and certain other ozone depleting chemicals must be completely phased out by January 1, 1995. In addition, the EU Council of Environmental Ministers have agreed to accelerate by 15 years the timetable agreed to in the Montreal Protocol for restrictions on the use and sale of hydrochlorofluoro-carbons ("HCFCs"). The use of HCFCs within the European Union must now be reduced by 35% from their peak 1995 usage by 2004 before being phased out completely by 2015. The Montreal Protocol establishes a final phase-out by 2030. Pollution Control Costs -- During the period 1994 through 1998, Ford expects that approximately $700 million will be spent on its North American facilities (primarily all in the U.S.) 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 $140 million will be spent in 1994 and $150 million will be spent in 1995. Employment Data In 1993, Ford's worldwide employment decreased 1% to 322,213 from 325,333 in 1992. The decrease in average employment for 1993 resulted primarily from the ongoing cost-reduction programs in Europe. Worldwide payrolls were $13.8 billion in 1993, unchanged from 1992. Average employment by geographic area in 1993 compared with 1992 levels was as follows: 1993 1992 United States 166,943 158,377 Canada 15,747 14,863 Europe 99,527 109,156 Latin-America 27,259 29,668 Asia Pacific 12,737 13,269 ------- ------- Total 322,213 325,333 ======= ======= 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 -25- Item 1. Business (Continued) 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 of Britain at Dunton, England; and of Ford of Germany at Merkenich, Germany. In 1993, 1992 and 1991, $5 billion, $4.3 billion, and $3.7 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, $55 million, $46 million and $44 million were charged to income in 1993, 1992 and 1991, 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. -26- 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, 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 -- Three suits purporting to be nationwide class actions were filed by some of the plaintiffs of a previously dismissed federal action that allege claims that are substantially the same as those in the dismissed federal action - - - i.e., that they are or were purchasers or owners of or passengers in 1976 through 1979 model year Ford vehicles equipped with certain automatic transmissions who have incurred property damage, personal injury, economic losses or liability for such losses by reason of an alleged tendency of the vehicles to slip from park to reverse. A judgment dismissing the first such suit by the Superior Court for the District of Columbia was vacated by the local Court of Appeals for the District of Columbia, and renewed motions to dismiss are under consideration by the Superior Court. The second suit was filed in the Court of Common Pleas in Philadelphia, Pennsylvania, and has been stayed pending the entry of final and non-appealable orders in the action referred to in the immediately preceding sentence. The third suit was filed in the Circuit Court of Cook County, Illinois. That court granted the Company's motion to stay proceedings indefinitely and the plaintiffs have appealed that ruling to the Appellate Court of Illinois for the First Judicial District-Third Division. 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 $439 million at January 1, 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 $367 million at January 1, 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 $163 million at January 1, 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 -27- Item 3. Legal Proceedings (Continued) 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 notices from two government environmental enforcement agencies concerning two separate matters, each potentially involving monetary sanctions exceeding $100,000. One agency believes a Ford facility may have violated regulations relating to the management of certain of the facility's wastes and the other agency believes a Ford facility may violate or may have violated limits established by regulations or permits for emissions or discharges. 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 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. On August 7, 1992, Ford was sued in federal court in Nevada by an individual patent owner seeking damages and an injunction for alleged infringement of three (later amended to four) U.S. patents characterized by the individual as covering machine vision inspection technologies, including bar code reading. Ford and one of its suppliers, Motorola, have filed a declaratory judgment action in the same court to have those patents and several other patents directed to machine vision, radiation beam (e.g., laser and electron beam) uses and semiconductor manufacturing (17 patents in all) declared invalid, unenforceable and not infringed. 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. -28- Item 3. Legal Proceedings (Continued) On March 15, 1993, Ford was served with a private purported class action lawsuit in Texas relating to allegations of paint peeling on unspecified Ford vehicles. The purported class would include all persons who purchased new or used Ford vehicles in Texas and who experienced paint peeling as a result of unspecified defects in Ford's paint process. The plaintiffs seek an unspecified amount of 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. Ford of Germany and Volkswagen AG have formed a joint venture to produce a multi-purpose vehicle ("MPV") in Portugal. The Portuguese government has agreed to grant an incentive package to the joint venture. On June 15, 1993 the European Court of Justice rejected a claim filed by a French manufacturer of MPVs challenging the legality of the grant. The same manufacturer has filed an appeal with the European Court challenging the decision of the European Commission in December 1992 granting antitrust approval of the joint venture. Ford has intervened in these proceedings. If the French manufacturer succeeds in the antitrust case, which Ford considers unlikely, the joint venture could be dissolved, the grants may have to be repaid and the participants in the joint venture might have to write off substantial development costs. Item 4. Submission of Matters to a Vote of Security Holders Not required. -29- Item 4A. Executive Officers of the Registrant The executive officers of the Registrant and their respective positions and ages at March 25, 1994 are shown in the table below:
Present Position with the Registrant Name Position Held Since Age Alex Trotman.............. Chairman of the Board November 1993 60 (1)(2) of Directors, President and Chief Executive Officer Director Allan D. Gilmour.......... Vice Chairman January 1993 59 (2) Director Louis R. Ross............. Vice Chairman and Chief January 1993 62 (2) Technical Officer Director Stanley A. Seneker........ Executive Vice President October 1987 62 (2) and Chief Financial Officer Director Kenneth Whipple........... Executive Vice President-- March 1988 59 Ford and President, Ford Financial Services Group W. Wayne Booker........... Executive Vice President-- October 1992 59 International Automotive Operations Edward E. Hagenlocker..... Executive Vice President-- January 1993 54 North American Automotive Operations Peter J. Pestillo......... Executive Vice President-- January 1993 56 Corporate Relations William E. Odom........... Group Vice President--Ford December 1993 58 and Chairman of the Board of Directors and Chief Executive Officer, Ford Motor Credit Company Robert L. Rewey........... Group Vice President-- December 1993 55 Marketing and Sales Operations
-30- Item 4A. Executive Officers of the Registrant (Continued)
Present Position with the Registrant Name Position Held Since Age Albert Caspers............ Vice President--Ford and January 1991 61 Vice President-Engineering and Vehicle Manufacturing Group, Ford of Europe Incorporated James D. Donaldson........ Vice President--General July 1992 51 Manager, Truck Operations Norman F. Ehlers.......... Vice President--Purchasing January 1992 56 and Supply Edsel B. Ford II.......... Vice President--Ford and December 1993 45 (2) President and Chief Operating Officer, Ford Motor Credit Company Director Ronald E. Goldsberry...... Vice President--General February 1994 51 Manager, Ford Customer Service Division Elliott S. Hall........... Vice President--Washington July 1987 55 Affairs John A. Hall.............. Vice President--Employee November 1993 56 Relations Kenneth K. Kohrs.......... Vice President--Car December 1991 55 Product Development Keith C. Magee............ Vice President--General February 1994 47 Manager, Lincoln-Mercury Division John W. Martin, Jr........ Vice President--General April 1989 57 Counsel Oscar B. Marx III......... Vice President--Automotive January 1991 55 Components David N. McCammon......... Vice President--Finance October 1987 59 and Treasurer W. Dale McKeehan.......... Vice President--General November 1993 56 Manager, Vehicle Operations
-31- Item 4A. Executive Officers of the Registrant (Continued)
Present Position with the Registrant Name Position Held Since Age John P. McTague......... Vice President--Technical March 1990 55 Affairs Jacques A. Nasser....... Vice President--Ford and January 1993 46 Chairman of the Board, Ford of Europe Incorporated John A. Oldfield........ Vice President--Ford and February 1994 57 Chairman, Aston Martin Lagonda Limited Helen O. Petrauskas..... Vice President--Environmental March 1983 49 and Safety Engineering Murray L. Reichenstein.... Vice President--Controller January 1991 56 John M. Rintamaki......... Secretary July 1993 52 Ross H. Roberts........... Vice President--General May 1991 56 Manager, Ford Division David W. Scott............ Vice President--Public January 1988 53 Affairs Robert P. Sparvero........ Vice President--Asia-Pacific October 1992 53 Automotive Operations John J. Telnack........... Vice President--Corporate Design August 1993 56 Robert H. Transou......... Vice President-General January 1993 54 Manager, Powertrain Operations Thomas J. Wagner.......... Vice President-Customer February 1994 55 Communication and Satisfaction
(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. -32- Item 4A. Executive Officers of the Registrant (Continued) Alex Trotman, Allan D. Gilmour, Louis R. Ross, Stanley A. Seneker and Kenneth Whipple are members of the Office of the Chief Executive of the Registrant. 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. -33- 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, Boston, Philadelphia, Midwest and Pacific Coast Stock Exchanges in the United States; on the Montreal and Toronto Stock Exchanges in Canada; 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 U.S. regional and 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:
1993 1992 ------------------------------------ ----------------------------------- First Second Third Fourth First Second Third Fourth Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter ------- ------ ------ ------ ------ ------- ------- ------- Common Stock price per share* High $53 1/2 $56 1/2 $57 3/4 $66 1/8 $40 5/8 $48 7/8 $46 1/4 $43 5/8 Low 43 49 3/4 48 3/8 54 3/4 27 3/4 37 3/4 37 7/8 34 3/8 Dividends per share of Common and Class B Stock $0.40 $0.40 $0.40 $0.40 $0.40 $0.40 $0.40 $0.40
*Prices reflect New York Stock Exchange Composite Transactions As of January 31, 1994, stockholders of record of Ford included 255,378 holders of Common Stock and 107 holders of Class B Stock. J:\10K\10kpth -34- 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 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 Automotive Sales $91,568 $84,407 $72,051 $81,844 $82,879 $82,193 $71,797 $62,868 $52,915 $52,527 Operating income/(loss) 1,432 (1,775) (3,769) 316 4,252 6,612 6,256 4,142 2,902 3,528 Income/(Loss) before income taxes and cumulative effects of changes in accounting principles 1,291 (1,952) (4,052) 275 5,155 7,312 6,499 4,300 3,154 3,909 Income/(Loss) before cumulative effects of changes in accounting principles (1) 940 (1,534) (3,186) 99 3,175 4,609 3,767 2,512 2,012 2,528 Net income/(loss) 940 (8,628) (3,186) 99 3,175 4,609 3,767 2,512 2,012 2,528 Financial Services Revenues $16,953 $15,725 $16,235 $15,806 $13,267 $10,253 $8,096 $ 6,826 $4,700 $3,797 Income before income taxes and cumulative effects of changes in accounting principles 2,712 1,825 1,465 1,221 874 1,301 1,385 1,321 816 629 Income before cumulative effects of changes in accounting principles 1,589 1,032 928 761 660 691 858 773 504 379 Net income 1,589 1,243 928 761 660 691 858 773 504 379 Total Company Income/(Loss) before income taxes and cumulative effects of changes in accounting principles $4,003 $ (127) $ (2,587) $1,495 $6,030 $8,343 $7,885 $5,620 $4,015 $4,539 Provision/(Credit) for income taxes 1,350 295 (395) 530 2,112 2,999 3,226 2,324 1,487 1,584 Minority interests 124 80 66 105 82 44 34 12 13 48 Income/(Loss) before cumulative effects of changes in accounting principles (1) $2,529 $ (502) $(2,258) $ 860 $3,835 $5,300 $4,625 $3,285 $2,515 $2,907 Cumulative effects of changes in accounting principles - (6,883) - - - - - - - - Net income/(loss) 2,529 (7,385) (2,258) 860 3,835 5,300 4,625 3,285 2,515 2,907 Total Company Data Per Share of Common and Class B Stock (2) Income/(Loss) before cumulative effects of changes in accounting principles $4.55 $(1.46) $(4.79) $ 1.86 $8.22 $ 10.96 $ 9.05 $ 6.16 $4.54 $ 5.26 Income/(Loss) Assuming no dilution 4.55 (15.61) (4.79) 1.86 8.22 10.96 9.05 6.16 4.54 5.26 Assuming full dilution 4.20 (15.61) 4.79 1.84 8.12 10.80 8.92 6.05 4.40 4.97 Cash dividends 1.60 1.60 1.95 3.00 3.00 2.30 1.58 1.11 0.80 0.67 Common stock price range (NYSE) . High 66 1/8 48 7/8 37 3/4 49 1/8 56 5/8 55 56 3/8 31 3/4 19 3/4 17 1/8 . Low 43 27 3/4 23 3/8 25 41 3/8 38 1/8 28 1/2 18 13 3/8 11 Average number of shares of Common and Class B Stock outstanding (in millions) 493 486 476 463 467 484 511 533 554 552 (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. -35- Item 6. Selected Financial Data (Continued)
Summary of Operations, cont. 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 Total Company Balance Sheet Data at Year End Assets Automotive $ 61,737 $ 57,170 $ 52,397 $ 50,824 $ 45,819 $ 43,128 $ 39,734 $34,021 $29,297 $25,781 Financial Services 137,201 123,375 122,032 122,839 115,074 100,239 76,260 59,211 45,797 26,209 Total Assets $198,938 $180,545 $174,429 $173,663 $160,893 $143,367 $115,994 $93,232 $75,094 $51,990 Long-term debt Automotive $ 7,084 $ 7,068 $ 6,539 $ 4,553 $ 1,137 $ 1,336 $ 2,058 $ 2,467 $ 2,459 $ 2,347 Financial Services 47,900 42,369 43,680 40,779 37,784 30,777 26,009 19,128 13,753 8,833 Stockholders' equity (3) 15,574 14,753 22,690 23,238 22,728 21,529 18,493 14,860 12,269 9,838 Total Company Facility and Tooling Data Capital expenditures for facilities (excluding special tools) $ 4,339 $ 3,613 $ 3,611 $ 4,702 $ 4,412 $ 3,148 $ 2,415 $ 2,179 $ 2,385 $ 2,332 Depreciation 5,456 4,658 3,956 3,185 2,720 2,458 2,107 1,859 1,559 1,405 Expenditures for special tools 2,475 2,177 2,236 2,556 2,354 1,634 1,343 1,285 1,417 1,223 Amortization of special tools 2,012 2,097 1,822 1,695 1,509 1,335 1,353 1,293 948 979 Total Company Employee Data - Worldwide Payroll $ 13,753 $ 13,754 $ 12,850 $ 14,014 $ 13,327 $ 13,010 $ 11,683 $11,290 $10,175 $10,018 Total labor costs 20,087 19,824 17,998 18,962 18,152 18,108 16,591 15,610 14,033 13,803 Average number of employees 322,213 325,333 331,977 368,547 366,641 358,939 351,711 382,274 369,314 389,917 Total Company Employee Data - U.S. Operations Payroll $ 8,888 $ 8,015 $ 7,389 $ 8,309 $ 8,650 $ 8,473 $ 7,762 $ 7,704 $ 7,213 $ 6,875 Average number of employees 166,943 158,377 156,079 179,104 188,286 185,540 180,838 181,476 172,165 178,758 Average hourly labor costs (4) Earnings $ 20.94 $ 19.92 $ 19.10 $ 18.44 $ 17.77 $ 17.39 $ 16.50 $ 16.12 $ 15.70 $ 15.06 Benefits 18.12 19.24 17.97 14.12 13.21 13.07 12.38 11.01 10.75 9.40 Total hourly labor costs $ 39.06 $ 39.16 $ 39.07 $ 32.56 $ 30.98 $ 30.46 $ 28.88 $ 27.13 $ 26.45 $ 24.46 (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. -36- Item 6. Selected Financial Data (Continued)
Summary of Vehicle Sales (5) 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 U.S. Cars and Trucks (6) Cars United States 1,950,238 1,841,248 1,605,972 1,853,095 2,186,344 2,376,766 2,171,442 2,093,698 1,940,662 2,047,671 Canada 126,297 123,551 143,57 147,712 190,037 200,629 187,840 188,887 194,540 167,295 Total Cars 2,076,535 1,964,799 1,749,543 2,000,807 2,376,381 2,577,395 2,359,282 2,282,585 2,135,202 2,214,966 Trucks United States 1,875,711 1,520,049 1,260,439 1,422,116 1,523,275 1,540,926 1,481,059 1,404,002 1,260,123 1,238,928 Canada 125,906 109,161 103,757 112,930 136,082 145,142 151,982 126,758 119,583 94,552 Total Trucks 2,001,617 1,629,210 1,364,196 1,535,046 1,659,357 1,686,068 1,633,041 1,530,760 1,379,706 1,333,480 Total in U.S. and Canada 4,078,152 3,594,009 3,113,739 3,535,853 4,035,738 4,263,463 3,992,323 3,813,345 3,514,908 3,548,446 Cars and Trucks Outside U.S. and Canada Germany 831,216 923,763 969,003 979,941 1,023,380 1,008,198 899,609 862,288 769,883 789,655 Britain 421,939 473,178 481,794 481,260 515,520 507,367 484,057 438,155 422,003 371,598 Spain 211,413 310,957 340,796 334,665 310,481 281,679 276,448 268,114 265,783 269,021 Mexico 90,710 126,334 111,849 84,673 86,830 62,663 34,495 43,601 70,238 50,560 Australia 126,753 120,017 108,986 157,388 158,740 136,203 134,222 143,415 177,108 156,304 Taiwan 113,861 113,966 102,631 104,073 99,713 79,906 59,082 34,757 23,714 33,965 Japan 52,805 66,654 96,298 108,437 91,229 61,722 51,446 44,309 38,559 34,672 Other Countries (7) 36,737 35,496 20,461 18,529 14,723 39,471 119,692 267,761 268,304 330,430 Total Outside United States and Canada 1,885,434 2,170,365 2,231,818 2,268,966 2,300,616 2,177,209 2,059,051 2,102,400 2,035,592 2,036,205 Total Worldwide - -Cars and Trucks 5,963,586 5,764,374 5,345,557 5,804,819 6,336,354 6,440,672 6,051,374 5,915,745 5,550,500 5,584,651 Total Worldwide-Tractors (8) - - 13,243 67,50 71,690 76,514 63,914 68,336 83,848 82,511 Total Worldwide Factory Sales 5,963,586 5,764,374 5,358,800 5,872,389 6,408,044 6,517,186 6,115,288 5,984,081 5,634,348 5,667,162
(5) Includes units manufactured by other companies and sold by Ford. (6) Factory sales are by source of manufacture, except that Canadian, Mexican and Australian exports to the United States are included as U.S. vehicle sales, and U.S. exports to Canada are included as Canadian vehicle sales. (7) Includes units sold by Ford in Brazil and Argentina through June 30, 1987, and excludes units sold by Autolatina. (8) Ford's tractor operation, Ford New Holland, was sold on May 6, 1991. -37- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW The Company's worldwide net income in 1993 was $2,529 million, or $4.55 per share of Common and Class B Stock, compared with a loss of $7,385 million, or $15.61 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%. 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 $1.46 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. The Company continued its product development and cost reduction programs to strengthen its competitive position. In 1993, capital spending for new products and facilities was $6.8 billion, up $1 billion from 1992. Automotive debt at the end of 1993 was $8,016 million, down $301 million from year-end 1992. Cash and marketable securities for the Company's Automotive segment totaled $9,752 million, up $717 million from year-end 1992. In 1994, the Company expects continued improvements in operating results from cost reduction efforts, new product introductions, and a moderate rate of economic growth in the United States. The Company expects sales for the U.S. car and truck industry to reach about 15 million units in 1994. Several new products will be introduced in 1994, including the Ford Windstar, Ford Aspire, Ford Contour and Mercury Mystique. Per-unit U.S. marketing costs for Ford, which declined in 1993, should decline further in 1994 as industry sales increase and new products are introduced. The Company expects industry sales in Europe to be up slightly in 1994, compared with 1993. As a result of an expected continuation of the gradual economic recovery in Great Britain and the restructuring actions undertaken in Europe during 1993, the operating results of European Automotive operations are projected to improve in 1994, compared with 1993. In Latin America, the near-term business outlook is favorable, but business conditions have historically been volatile and subject to rapid change. Fourth Quarter of 1993 In the fourth quarter of 1993, the Company's worldwide net income was $719 million or $1.30 per share of Common and Class B Stock, compared with a loss of $840 million, or $1.85 per share in the fourth quarter of 1992. -38- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Worldwide Automotive operations earned $297 million in the fourth quarter of 1993, compared with a loss of $1,037 million a year ago. U.S. Automotive operations earned $669 million in the fourth quarter of 1993, compared with a loss of $128 million a year ago, while Automotive operations outside the U.S. incurred a loss of $372 million, compared with a loss of $909 million a year ago. Financial Services earned $422 million in the fourth quarter of 1993, compared with $197 million a year ago. Net income for Automotive operations outside the U.S. were adversely affected in the fourth quarter of 1993 by restructuring actions at Jaguar ($109 million) and Ford of Australia ($57 million), offset partially by the favorable one-time effects of a reduction in German tax rates ($59 million). Automotive operations in the U.S. were favorably affected by the gain on the sale of Ford's North American automotive seating and seat trim business ($73 million). The loss a year ago included one-time European restructuring charges of $334 million for Automotive operations and $85 million for Financial Services operations. The following discussion of the results of operations excludes the one- time effects associated with accounting changes in 1992 as discussed above. The consolidated financial statements on pages FS-1 through FS-28 should be read as an integral part of this review. RESULTS OF OPERATIONS: 1993 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). On an ongoing basis, the effect of the tax rate change on future tax expense will be unfavorable. In 1993, the U.S. economy continued to grow at a modest rate. In the eleven quarters since the recovery began in the Spring of 1991, the rate of growth in the gross domestic product (GDP) has averaged 2.7%, 60% of the rate over the comparable period during the last six recoveries. Slow growth has helped reduce interest rates and inflation to low levels. Industry sales of cars and trucks in the United States have gradually increased from 12.5 million units in 1991 to 14.2 million units in -39- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) 1993. Over this period, Ford's combined U.S. car and truck market share has improved -- from 23.2% in 1991 to 25.5% in 1993 -- to the highest level since 1978. The Company also has benefited from reduced marketing incentives, lower supplier cost increases, and other cost efficiencies. 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, and compact pickups). Ford's share of the U.S. car market (including Jaguar) was 22.3%, up 5/10 of a point from 1992. The Company's U.S. truck share was 30.5%, up 8/10 of a point from 1992. The improved market share for cars and trucks reflected strong product acceptance. Outside the U.S., Ford's Automotive operations lost $542 million in 1993 on sales of $30.0 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), primarily for resourcing stamping and restructuring other operations to improve efficiency, and at Ford of Australia ($57 million) related to discontinuing production of the Capri and Laser models, offset partially by the favorable one-time effect of a reduction in German tax rates ($59 million). Losses in 1992 included restructuring charges of $334 million. 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. Car and truck industry sales in Europe were 12.5 million units in 1993, compared with 15 million units in 1992. Ford's European car market share (including Jaguar) was 11.8% in 1993, up 3/10 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 and operating costs, and lower 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). -40- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Ford Credit's consolidated net income was a record $1,194 million in 1993, up $302 million or 34% from 1992 and included income from its financing operations and its 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 (formerly U.S. Leasing). 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. In addition, 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 loss performance and higher levels of earning assets. In addition, international operations managed by The Associates earned $38 million in 1993, the same as in 1992. First Nationwide 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. First Nationwide's 1993 revenues included $72 million from the Federal Savings and Loan Insurance Corporation Resolution Fund (FSLIC/RF), compared with $221 million in 1992. These revenues represented reimbursements for losses or guaranteed yields on covered assets paid pursuant to First Nationwide's agreements with FSLIC/RF to acquire certain savings and loan institutions, as described below in the discussion of 1992 compared with 1991. 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, partially offset by lower investment income. HISTORICAL REFERENCE: 1992 COMPARED WITH 1991 Automotive Operations In 1992, Ford's worldwide Automotive operations lost $1,534 million on sales of $84.4 billion. The losses include the portion of one-time European restructuring charges relating to Automotive operations ($334 million). As noted previously, these results exclude the one-time effects of accounting changes adopted in 1992. In 1991, the Company's Automotive operations lost $3.2 billion on sales of $72.1 billion. -41- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) In the U.S., Ford's Automotive operations lost $405 million in 1992 on sales of $51.9 billion, compared with a loss of $2.2 billion in 1991 on sales of $40.6 billion. Higher vehicle production, reflecting higher industry sales and a higher Ford market share, accounted for most of the improvement. Improved margins, reflecting mainly lower supplier cost increases and lower marketing costs, were offset partially by the ongoing effect of the accounting change for retiree health care and by revised accruals for estimates of costs for prior model-year customer satisfaction claims. Full year U.S. car and truck industry volumes increased from 12.5 million units in 1991 to 13.1 million units in 1992. Ford's share of the U.S. car market was 21.8%, up 1.7 percentage points from 1991, primarily reflecting record sales of the Ford Taurus. The Company's U.S. truck share was 29.7%, up 8/10 of a point from 1991, reflecting strong performance of the Econoline Van and Club Wagon, Explorer, and the new Mercury Villager minivan. The strong share performance and improved industry sales helped to reduce U.S. marketing costs from 16% of revenue in 1991 to 12% of revenue in 1992. Outside the U.S., Ford's Automotive operations lost $1,129 million in 1992 on sales of $32.5 billion, compared with a loss of $970 million in 1991 on sales of $31.4 billion. One-time restructuring charges and lower volume in Europe more than accounted for the decline. Partially offsetting these adverse factors were lower costs in Europe and improved operating results in Latin America and Asia-Pacific. Ford's European Automotive operations (excluding Jaguar operating results and acquisition costs) lost $647 million in 1992, compared with a loss of $478 million in 1991. The decline was more than accounted for by the one-time restructuring charge and lower volume, primarily reflecting lower Ford car market share. Ford's 1992 European car market share was 11.5%, down 6/10 of a percentage point from 1991, reflecting mainly reduced sales of the Sierra which was replaced by the all-new Mondeo in early 1993. Ford's European truck share improved 1.3 points to 11.7%. Car and truck industry sales in Europe were 15 million units in 1992. Manufacturing efficiencies and other cost improvements were offset partially by higher marketing incentives and the unfavorable effect of fluctuations in foreign currency exchange rates, primarily the devaluation of the Italian lira and British pound compared with the German mark. Financial Services Operations The Company's Financial Services operations earned $1,032 million in 1992, up $105 million or 11% from 1991. Results in 1992 exclude a favorable effect of $211 million associated with one-time effects of accounting changes, mainly for income taxes, but include organizational restructuring charges relating to European Financial Services operations ($85 million). The increase resulted primarily from lower credit losses and improved net interest margins, offset in part by adjustments to the carrying value of derivative securities, lower gains from sales of receivables and a decline in insurance underwriting and investment income. Depreciation costs increased in 1992 as a result of continued growth in operating leases at Ford Credit; the related lease revenues more than offset the increased depreciation. -42- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Ford Credit's consolidated net income was $892 million in 1992, up $143 million or 19% from 1991 and included income from its financing operations and its equity in the net income of affiliated companies, primarily Ford Holdings. Ford Credit's financing operations earned $737 million in 1992, up $179 million from 1991. The improvement in 1992 was more than explained by lower credit losses and improved net interest margins, offset partially by lower gains from sales of receivables. In addition, international operations managed by Ford Credit earned $188 million in 1992, up $23 million from 1991, primarily reflecting higher levels of receivables and lower credit losses. The Associates earned $393 million in the U.S. in 1992, up $46 million from 1991. The improvement resulted primarily from higher levels of receivables and improved net interest margins. In addition, international operations managed by The Associates earned $38 million in 1992, compared with $25 million in 1991. First Nationwide incurred a loss of $81 million in 1992, compared with a loss of $73 million in 1991. The decline resulted primarily from a lower level of earning assets, reductions in the carrying value of derivative securities, lower yields from reinvestment of proceeds received from a settlement with FSLIC/RF discussed below, and lower gains on sales of mortgage securities. These factors were offset partially by reduced borrowing costs, lower credit loss provisions, and continued reductions in operating costs. First Nationwide's 1992 revenues included $221 million from FSLIC/RF, compared with $310 million in 1991. These revenues represented reimbursements for losses or guaranteed yields on covered assets paid pursuant to First Nationwide's agreements with FSLIC/RF to acquire certain savings and loan institutions. During the second quarter of 1992, First Nationwide entered into a settlement agreement with the Resolution Trust Corporation ("RTC") which substantially terminated the assistance agreements between First Nationwide and the FSLIC/RF relating to the acquisitions. The proceeds from the assets that were reacquired by the FSLIC/RF as part of the agreement were used to reduce associated debt and to reinvest in other earning assets. Although the settlement is not expected to have a material effect on the longer-term earnings of First Nationwide, 1992 earnings were reduced because yields obtained from the reinvestment of the settlement proceeds were lower than yields obtained from the previously held assets. American Road earned $47 million in 1992, compared with $126 million in 1991. The decline resulted primarily from discontinuance of the sale of collateral protection insurance to Ford Credit and lower investment income. USL Capital earned $60 million in 1992, up $5 million from 1991. LIQUIDITY AND CAPITAL RESOURCES Automotive Operations Cash and marketable securities of the Company's Automotive operations were $9,752 million at December 31, 1993, up $717 million from December 31, 1992. The Company paid $1,086 million in cash dividends on its capital stock during 1993. In 1993, the Company contributed $1 billion to its pension funds. -43- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Automotive capital expenditures were $6.7 billion in 1993, up $1 billion from 1992. Over the last five years (1989 through 1993), the Company's worldwide capital spending totaled $32 billion. During the next several years, the pace of spending for product change at Ford will continue at similar or higher levels. At December 31, 1993, Automotive debt totaled $8,016 million, which was 34% of total capitalization (stockholders' equity and Automotive debt), compared with $8,317 million, or 36% of total capitalization, at year-end 1992. At December 31, 1993, Ford (parent company only) had long-term contractually committed credit agreements for use in the U.S. under which $4.8 billion is available from various banks at least through June 30, 1998. The entire $4.8 billion may be used, at Ford's option, by either Ford or Ford Credit. As of December 31, 1993, these facilities were unused. Outside the U.S., Ford has additional long-term contractually committed credit-line facilities of approximately $2.4 billion. These facilities are available in varying amounts from 1994 through 1998; none had been utilized at December 31, 1993. 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 $24.5 billion at December 31, 1993. Support facilities represent additional sources of funds, if required. At December 31, 1993, Ford Credit had approximately $15.4 billion of contractually committed facilities for use in the United States, 84% of which are available through June 30, 1998. These facilities included $12.5 billion of revolving credit agreements with banks (which included $4.8 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, 1993, all of the U.S. facilities were unused. In addition, at December 31, 1993, international subsidiaries and other credit operations managed by Ford Credit had $14.2 billion of support facilities available outside the U.S., approximately 44% of which were contractually committed. At December 31, 1993, approximately 42% of these support facilities outside the U.S. were in use. First Nationwide's principal sources of funds include borrowings, collections on loans, proceeds from the sale of loans, and customers' deposits. In addition, the Federal Home Loan Bank System provides both short- and long-term alternative sources of funds. Other sources include the sale of mortgage pass-through securities and -44- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) reverse repurchase agreements. Federal regulations require that an insured institution maintain certain regulatory capital requirements. New minimum regulatory capital standards were established in 1989 and will be phased in through 1994. First Nationwide Bank met all of the minimum capital requirements in effect at December 31, 1993. At December 31, 1993, The Associates had contractually committed lines of credit with banks of $3.1 billion, with various maturities ranging from January 30, 1994 to December 31, 1994, none of which was utilized at December 31, 1993. Also, at December 31, 1993, The Associates had $4.1 billion of contractually committed revolving credit facilities with banks, with maturity dates ranging from February 1, 1994 through October 1, 1997, and $1 billion of contractually committed receivables sale facilities, $500 million of which are available through April 15, 1994 and $500 million of which are available through April 30, 1995; none of these facilities was in use at December 31, 1993. At December 31, 1993, foreign operations managed by The Associates had $195 million of support facilities available outside the U.S., approximately 64% of which were contractually committed. At December 31, 1993, about 15% of these support facilities outside the U.S. were in use. At December 31, 1993, 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, 1993. In 1993, Ford Holdings sold 1,728 shares of its Series B Cumulative Preferred Stock having an aggregate liquidation preference of $173 million and 2,000 shares of its Series C Cumulative Preferred Stock having an aggregate liquidation preference of $200 million. 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, 1993. At December 31, 1993, USL Capital had $1.4 billion of contractually committed credit facilities, 70% of which are available through September 1998. These facilities included $200 million of contractually committed receivables sale facilities, of which about 86% were in use at December 31, 1993. At December 31, 1993, foreign operations managed by USL Capital had approximately $90 million of contractually committed support facilities available outside the U.S., of which about 75% were in use at December 31, 1993. NEW ACCOUNTING STANDARDS In November 1992, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 112, "Employers' Accounting for Postemployment Benefits", which requires companies to account for employee benefits on an accrual basis for periods when employees are no longer actively employed but have not yet reached retirement. The effect on the Company's financial statements was not material. In May 1993, the FASB issued SFAS 114, "Accounting by Creditors for Impairment of a Loan". The standard requires that impaired loans be measured based on the -45- Item 7. Managment's Discussion and Analysis of Financial Condition and Results of Operations (Continued) present value of expected future cash flows discounted at the loan's effective interest rate. The Company does not plan to adopt this standard until January 1, 1995, and the effect is not expected to be material. In May 1993, the FASB issued SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities". The standard establishes financial accounting and reporting requirements for investments in equity securities (excluding those accounted for under the equity method and investments in consolidated subsidiaries) that have readily determinable fair values and for all investments in debt securities. The Company has adopted this standard effective January 1, 1994, and the effect is not expected to be material. 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-28 immediately following the signature pages of this Report. Selected quarterly financial data of Ford and its consolidated subsidiaries for 1992 and 1993 are set forth in Note 17 of Notes to Financial Statements. Item 9. Disagreements With Accountants on Accounting and Financial Disclosure Not required. -46- 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 "Compensation of Directors" in the Proxy Statement. -47- 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, 1993, 1992 and 1991. Consolidated Balance Sheet, December 31, 1993 and 1992. Consolidated Statement of Cash Flows, for the years ended December 31, 1993, 1992 and 1991. Consolidated Statement of Stockholders' Equity, for the years ended December 31, 1993, 1992 and 1991. 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-28 immediately following the signatures pages of this Report. (a) 2. Financial Statement Schedules Designation Description - ----------- ----------- Schedule IX Short-Term Borrowings Schedule X Supplementary Income Statement Information Supplemental Schedule Condensed Financial Information of Subsidiary The Financial Statement Schedules listed above are filed as part of this Report and are set forth on pages FSS-1 through FSS-4 immediately following page FS-28. 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 Certificate of Incorporation, Filed as Exhibit 3-A to the as amended on November 19, Registrant's Annual Report on 1991 and as further amended Form 10-K for the year ended on October 28, 1992. December 31, 1992.*
-48- Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (Continued)
Designation Description Method of Filing - ----------- ----------- ---------------- Exhibit 3-B By-Laws of the Registrant as Filed with this Report. amended through December 9, 1993. Exhibit 4-A Form of Deposit Agreement Filed as Exhibit 4-E to dated as of November 20, 1991 the Registrant's among Ford Motor Company, Registration Statement Manufacturers Hanover Trust No. 33-43085.* 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 Convertible Preferred Stock. Exhibit 4-B Form of Deposit Agreement Filed as Exhibit 4-E to dated as of October 29, 1992 the Registrant's among Ford Motor Company, Registration Statement Chemical Bank, as Depositary, No. 33-53092.* 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 Filed with this Report. Agreement dated as of July 1, 1993 between the Registrant and Ford Credit. Exhibit 10-B 1985 Stock Option Plan of Filed as Exhibit 10-D to the Registrant.** the Registrant's Annual Report on Form 10-K for the year ended December 31, 1985.* Exhibit 10-B-1 Amendment dated as of Filed as Exhibit 10-C-1 March 8, 1990 to 1985 Stock to the Registrant's Option Plan.** Annual Report on Form 10-K for the year ended December 31, 1989.*
-49- Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (Continued)
Designation Description Method of Filing - ----------- ----------- ---------------- Exhibit 10-C 1980 Stock Option Plan of Filed as Exhibit 10-E to the Registrant, as amended the Registrant's Annual on October 8, 1981.** Report on Form 10-K for the year ended December 31, 1981.* Exhibit 10-C-1 Amendment dated as of Filed as Exhibit 10-D-1 March 8, 1990 to 1980 Stock to the Registrant's Option Plan.** Annual Report on Form 10-K for the year ended December 31, 1989.** Exhibit 10-D Ford Motor Company Filed as Exhibit 10-H Supplemental Compensation to the Registrant's Annual Plan as amended through Report on Form 10-K May 8, 1986.** for the year ended December 31, 1986.* Exhibit 10-D-1 Amendment to Ford Motor Filed as Exhibit 10-F-1 Company Supplemental to the Registrant's Annual Compensation Plan, dated Report on Form 10-K May 12, 1988.** for the year ended December 31, 1988.* Exhibit 10-D-2 Amendment to Ford Motor Filed as Exhibit 10-D-2 to Company Supplemental the Registrant's Annual Compensation Plan, dated Report on Form 10-K for the July 8, 1992.** year ended December 31, 1992.* Exhibit 10-E Ford Motor Company Executive Filed as Exhibit 10-G to Separation Allowance Plan as the Registrant's Annual revised for separations on Report on Form 10-K or after January 1, 1981.** for the year ended December 31, 1987.* Exhibit 10-E-1 Amendment to Ford Motor Filed as Exhibit 10-G-1 Company Executive Separation to the Registrant's Annual Allowance Plan.** Report on Form 10-K for the year ended December 31, 1988.*
-50- Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (Continued)
Designation Description Method of Filing - ----------- ----------- ---------------- Exhibit 10-F Description of Company Filed as Exhibit 10-I to practices regarding club the Registrant's Annual memberships for executives.** Report on Form 10-K for the year ended December 31, 1981.* Exhibit 10-G Description of Company Filed as Exhibit 10-J to practices regarding travel the Registrant's Annual expenses of spouses of Report on Form 10-K certain executives.** for the year ended December 31, 1980.* Exhibit 10-H Ford Motor Company Deferred Filed as Exhibit 10-L to Compensation Plan for Non- the Registrant's Annual Employee Directors, adopted Report on Form 10-K January 13, 1983.** for the year ended December 31, 1982.* Exhibit 10-H-1 Deferred Compensation Plan Filed as Exhibit 10-H-1 to for Non-Employee Directors, the Registrant's Annual as amended on July 11, 1991.** Report on Form 10-K for the year ended December 31, 1991.* Exhibit 10-I Ford Motor Company Benefit Filed as Exhibit 10-K to Equalization Plan, as amended the Registrant's Annual through January 10, 1985.** Report on Form 10-K for the year ended December 31, 1988.* Exhibit 10-I-1 Description of Amendment to Filed as Exhibit 10-K-1 to Ford Motor Company Benefit the Registrant's Annual Equalization Plan adopted Report on Form 10-K on November 10, 1988.** for the year ended December 31, 1988.* Exhibit 10-J Description of Financial Filed as Exhibit 10-N to Counseling Services provided the Registrant's Annual to certain executives.** Report on Form 10-K for for the year ended December 31, 1983.* -51-
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (Continued)
Designation Description Method of Filing - ----------- ----------- ---------------- Exhibit 10-K Agreement and Plan of Reor- Filed as Exhibit 2 to ganization Among Ford Motor the Registrant's Current Company and Ford Affiliate Report on Form 8-K dated Company and National Inter- December 16, 1985.* group, Inc. and NHC Corpor- ation and First Nationwide Financial Corporation dated as of August 2, 1985. Exhibit 10-L 1986 Long-Term Incentive Plan Filed as Exhibit 10-Q to of the Registrant.** the Registrant's Annual Report on Form 10-K for the year ended December 31, 1985.* Exhibit 10-L-1 Amendment dated as of June 1, Filed as Exhibit 10-N-1 1990 to 1986 Long-Term Incen- to the Registrant's tive Plan of the Annual Report on Form 10-K Registrant.** for the year ended December 31, 1990.* Exhibit 10-M Supplemental Executive Filed as Exhibit 10-R to Retirement Plan, as amended the Registrant's Annual as of December 11, 1986.** Report on Form 10-K December 31, 1986.* Exhibit 10-M-1 Description of Amendment to Filed as Exhibit 10-O-1 the Supplemental Executive to the Registrant's Retirement Plan, adopted Annual Report on Form 10-K July 13, 1989.** for the year ended December 31, 1990.* Exhibit 10-M-2 Description of Amendment to Filed as Exhibit 10-M-2 the Supplemental Executive to the Registrant's Retirement Plan, adopted Annual Report on Form 10-K October 10, 1991.** for the year ended December 31, 1991.* Exhibit 10-M-3 Description of Amendment to Filed as Exhibit 10-M-3 the Supplemental Executive to the Registrant's Retirement Plan, adopted Annual Report on Form 10-K October 8, 1992.** for the year ended December 31, 1992.* Exhibit 10-M-4 Description of Amendment to Filed with this Report. the Supplemental Executive Retirement Plan, adopted October 1, 1993.**
-52- Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (Continued)
Designation Description Method of Filing - ----------- ----------- ---------------- Exhibit 10-N Ford Motor Company Restricted Filed as Exhibit 10-P to Stock Plan for Non-Employee the Registrant's Annual Directors adopted by the Board Report on Form 10-K of Directors on November 10, for the year ended 1988, and approved by the December 31, 1988.* stockholders at the 1989 Annual Meeting.** Exhibit 10-O 1990 Long-Term Incentive Plan, Filed as Exhibit 10-R to amended as of June 1, 1990, of the Registrant's Annual the Registrant.** Report on Form 10-K for the year ended December 31, 1990.* Exhibit 10-O-1 Amendment to 1990 Long-Term Filed as Exhibit 10-P-1 Incentive Plan, effective as to the Registrant's Annual of October 1, 1990.** Report on Form 10-K for the year ended December 31, 1991.* Exhibit 10-P Description of Matching Gift Filed as Exhibit 10-Q to Program for Non-Employee the Registrant's Annual Directors.** Report on Form 10-K for the year ended December 31, 1991.* Exhibit 10-Q Description of Non-Employee Filed as Exhibit 10-R to Directors Life Insurance the Registrant's Annual and Optional Retirement Report on Form 10-K for Plan (amended as of the year ended December January 1, 1993).** 31, 1992.* Exhibit 10-R Description of Non-Employee Filed as Exhibit 10-S to Directors Accidental Death, the Registrant's Annual Dismemberment and Permanent Report on Form 10-K for Total Disablement the year ended December Indemnity.** 31, 1992.* Exhibit 10-S Agreement dated December 10, Filed as Exhibit 10-T to 1992 between William C. Ford the Registrant's Annual and the Registrant.** Report on Form 10-K for the year ended December 31, 1992.*
-53- Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (Continued)
Designation Description Method of Filing - ----------- ----------- ---------------- Exhibit 10-T Support Agreement dated as of Filed with this Report. October 1, 1993 between the Registrant and Ford Credit Europe. Exhibit 10-U Description of Amendments to Filed with this Report. Company Benefit Plans, including the Supplemental Executive Retirement Plan, Benefit Equalization Plan and Executive Separation Allowance Plan, adopted December 9, 1993.** Exhibit 11 Computation of Primary and Filed with this Report. Fully Diluted Earnings a Share. Exhibit 12 Computation of Ratio of Filed with this Report. Earnings to Combined Fixed Charges and Preferred Stock Dividends. Exhibit 21 List of Subsidiaries of Filed with this Report. the Registrant as of December 31, 1993. Exhibit 23 Consent of Independent Filed with this Report. Certified Public Accountants. Exhibit 24 Powers of Attorney. Filed with this Report.
- ------------------- * Incorporated by reference as an exhibit hereto ** Management contract or compensatory plan or arrangement -54- 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, 1993, the Registrant filed the following Current Reports on Form 8-K: 1. Current Report on Form 8-K dated September 29, 1993 that included information relating to the ratification of a new collective bargaining agreement between the Registrant and the UAW. 2. Current Report on Form 8-K dated October 27, 1993 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, 1993. 3. Current Report on Form 8-K dated December 1, 1993 that included information regarding certain comments made by Alex Trotman, Chairman of the Board of Directors, President and Chief Executive Officer of the Registrant. 4. Current Report on Form 8-K dated December 13, 1993 that included information regarding certain comments made by W. Wayne Booker, Executive Vice President--International Automotive Operations of the Registrant. -55- 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 21, 1994 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 21, 1994 (Alex Trotman) Colby H. Chandler* Director March 21, 1994 (Colby H. Chandler) Michael D. Dingman* Director March 21, 1994 (Michael D. Dingman) Director, Vice President-Ford and President and Chief Operating Officer, Ford Edsel B. Ford II* Motor Credit Company March 21, 1994 (Edsel B. Ford II)
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Signature Title Date Director and Chairman William Clay Ford* of the Finance Committee March 21, 1994 (William Clay Ford) Director and General Manager, William Clay Ford, Jr.* Climate Control Division March 21, 1994 (William Clay Ford, Jr.) Director and Allan D. Gilmour* Vice Chairman March 21, 1994 (Allan D. Gilmour) Roberto C. Goizueta* Director March 21, 1994 (Roberto C. Goizueta) Irvine O. Hockaday, Jr.* Director March 21, 1994 (Irvine O. Hockaday, Jr.) Drew Lewis* Director March 21, 1994 (Drew Lewis) Ellen R. Marram* Director March 21, 1994 (Ellen R. Marram) Kenneth H. Olsen* Director March 21, 1994 (Kenneth H. Olsen)
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Signature Title Date Carl E. Reichardt* Director March 21, 1994 (Carl E. Reichardt) Director and Vice Chairman Louis R. Ross* and Chief Technical Officer March 21, 1994 (Louis R. Ross) Director and Executive Vice President and Chief Financial Officer Stanley A. Seneker* (principal financial officer) March 21, 1994 (Stanley A. Seneker) Clifton R. Wharton, Jr.* Director March 21, 1994 (Clifton R. Wharton, Jr.) *By:/s/John M. Rintamaki (John M. Rintamaki, Attorney-in-Fact) -58-
Ford Motor Company and Subsidiaries HIGHLIGHTS -----------
Fourth Quarter Full Year ----------------- ---------------- 1993 1992 1993 1992 Worldwide factory sales of cars and trucks (in thousands) - - United States 942 873 3,826 3,361 - - Outside United States 512 529 2,138 2,403 ------ ------- ------ ----- Total 1,454 1,402 5,964 5,764 ======= ======= ====== ===== Sales and revenues (in millions) - - Automotive $23,511 $21,498 $ 91,568 $ 84,407 - - Financial Services 4,330 3,908 16,953 15,725 ------- ------- -------- -------- Total $27,841 $25,406 $108,521 $100,132 ======= ======= ======== ======== Income/(loss) before cumulative effects of changes in accounting principles (in millions) - - Automotive $ 297 $(1,037) $ 940 $ (1,534) - - Financial Services 422 197 1,589 1,032 ------- -------- -------- ------- Total $ 719 $ (840) $ 2,529 $ (502) ======= ======= ======== ======== Net income/(loss) (in millions) - - Automotive $ 297 $(1,037) $ 940 $ (8,628) - - Financial Services 422 197 1,589 1,243 ------- -------- -------- ------- Total $ 719 $ (840) $ 2,529 $ (7,385) ======= ======= ======== ======== Capital expenditures (in millions) - - Automotive $ 1,985 $ 1,747 $ 6,714 $ 5,697 - - Financial Services 32 41 100 93 ------- ------- --------- ------- Total $ 2,017 $ 1,788 $ 6,814 $ 5,790 ======= ======= ======== ======== Stockholders' equity at December 31 - - Total (in millions) $15,574 $14,753 $ 15,574 $ 14,753 - - After-tax return on Common and Class B stockholders' equity 21.1% * 18.6% * Automotive cash, cash equivalents, and marketable securities at December 31 (in millions) $ 9,752 $ 9,035 $ 9,752 $ 9,035 Automotive debt at December 31 (in millions) $ 8,016 $ 8,317 $ 8,016 $ 8,317 After-tax returns on sales - - Automotive 1.3% * 1.1% * - - Total Company 2.6% * 2.4% * Shares of Common and Class B Stock (in millions) - - Average number outstanding 498 488 493 486 - - Number outstanding at December 31 499 489 499 489 AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK AFTER PREFERRED STOCK DIVIDENDS Income/(loss) before cumulative effects of changes in accounting principles - - Automotive $ 0.45 $ (2.25) $ 1.33 $ (3.58) - - Financial Services 0.85 0.40 3.22 2.12 Total $ 1.30 $ (1.85) $ 4.55 $ (1.46) ======= ======= ======== ======== Income/(loss) - - Automotive $ 0.45 $ (2.25) $ 1.33 $ (18.16) - - Financial Services 0.85 0.40 3.22 2.55 Total $ 1.30 $ (1.85) $ 4.55 $ (15.61) ======= ======= ======== ======== Income/(loss) assuming full dilution $ 1.19 $ (1.85) $ 4.20 $ (15.61) Cash dividends per share of Common and Class B Stock $ 0.40 $ 0.40 $ 1.60 $ 1.60 - - - - - - *Results in this period were a loss. FS-1
Ford Motor Company and Subsidiaries VEHICLE FACTORY SALES ---------------------- For the Periods Ended December 31, 1993 and 1992
Fourth Quarter Full Year ------------------------- --------------------------- 1993 1992 1993 1992 ------- ------- -------- ------- U.S. and Canada Cars - U.S. 458,253 446,772 1,950,238 1,841,248 - Canada 34,668 28,978 126,297 123,551 Total cars 492,921 475,750 2,076,535 1,964,799 Trucks - U.S. 483,623 426,166 1,875,711 1,520,049 - Canada 42,571 34,938 125,906 109,161 Total trucks 526,194 461,104 2,001,617 1,629,210 Total U.S. and Canada 1,019,115 936,854 4,078,152 3,594,009 Outside U.S. and Canada Germany 192,563 201,851 831,216 923,763 Britain 98,146 82,302 421,939 473,178 Spain 48,208 70,739 211,413 310,957 Taiwan 18,881 23,923 113,861 113,966 Mexico 22,429 31,577 90,710 126,334 Australia 33,527 32,092 126,753 120,017 Japan 10,725 13,855 52,805 66,654 Other countries 10,562 9,177 36,737 35,496 Total overseas 435,041 465,516 1,885,434 2,170,365 Total worldwide vehicle factory sales 1,454,156 1,402,370 5,963,586 5,764,374 ========= ========= ========= ========= Includes units manufactured by other companies and sold by Ford. Factory sales are shown by source of manufacture, except that Canadian, Mexican and Australian exports to the United States are included as U.S. vehicle sales, and U.S. exports to Canada are included as Canadian vehicle sales. FS-2
Ford Motor Company and Subsidiaries CONSOLIDATED STATEMENT OF INCOME -------------------------------- For the Years Ended December 31, 1993, 1992 and 1991 (in millions)
1993 1992 1991 ------ ------- -------- AUTOMOTIVE Sales (Note 1) $91,568 $84,407 $72,051 Costs and expenses (Note 1) Costs of sales 85,168 81,748 71,827 Selling, administrative, and other expenses 4,968 4,434 3,993 Total costs and expenses 90,136 86,182 75,820 Operating income/(loss) 1,432 (1,775) (3,769) Interest income 563 653 677 Interest expense 807 860 903 Net interest expense (244) (207) (226) Equity in net income/(loss) of affiliated companies (Note 1) 127 15 (29) Net (expense)/revenue from transactions with Financial Services (Note 16) (24) 15 (28) Income/(loss) before income taxes and cumulative effects of changes in accounting principles - Automotive 1,291 (1,952) (4,052) FINANCIAL SERVICES Revenues (Note 1) 16,953 15,725 16,235 Costs and expenses (Note 1) Interest expense 6,482 7,056 8,317 Operating and other expenses 3,196 2,945 2,822 Provision for credit and insurance losses 1,523 1,795 2,159 Depreciation 3,064 2,089 1,500 Total costs and expenses 14,265 13,885 14,798 Net revenue/(expense) from transactions with Automotive (Note 16) 24 (15) 28 Income before income taxes and cumulative effects of changes in accounting principles - Financial Services 2,712 1,825 1,465 TOTAL COMPANY Income/(loss) before income taxes and cumulative effects of changes in accounting principles 4,003 (127) (2,587) Provision/(credit) for income taxes (Note 6) 1,350 295 (395) Income/(loss) before minority interests and cumulative effects of changes in accounting principles 2,653 (422) (2,192) Minority interests in net income of subsidiaries 124 80 66 Income/(loss) before cumulative effects of changes in accounting principles 2,529 (502) (2,258) Cumulative effects of changes in accounting principles (Notes 6 and 8) - (6,883) - Net income/(loss) 2,529 (7,385) (2,258) Preferred stock dividend requirements 288 209 22 Income/(loss) attributable to Common and Class B Stock $ 2,241 $(7,594) $(2,280) ======= ======= ======= FS-3
Ford Motor Company and Subsidiaries CONSOLIDATED STATEMENT OF INCOME --------------------------------- For the Years Ended December 31, 1993, 1992, and 1991 (in millions)
1993 1992 1991 ---- ---- ---- Average number of shares of Common and Class B Stock outstanding 493 486 476 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 $ 4.55 $ (1.46) $(4.79) Cumulative effects of changes in accounting principles - (14.15) - ------ ------- ------ Income/(loss) $ 4.55 $(15.61) $(4.79) ====== ======= ====== Income/(loss) assuming full dilution $ 4.20 $(15.61) $(4.79) Cash dividends $ 1.60 $ 1.60 $ 1.95 The accompanying notes are part of the financial statements. FS-4
Ford Motor Company and Subsidiaries CONSOLIDATED BALANCE SHEET -------------------------- (in millions)
December 31, December 31, 1993 1992 ------------- ----------- ASSETS Automotive Cash and cash equivalents $ 5,667 $ 3,504 Marketable securities, at cost and accrued interest (approximates market, Note 2) 4,085 5,531 -------- -------- Total cash, cash equivalents, and marketable securities 9,752 9,035 Receivables 2,302 2,204 Inventories (Note 4) 5,538 5,451 Deferred income taxes 2,830 2,480 Other current assets 1,226 1,298 Net current receivable from Financial Services (Note 16) 834 1,368 -------- -------- Total current assets 22,482 21,836 Equity in net assets of affiliated companies (Note 1) 3,002 2,751 Net property (Note 5) 23,059 22,160 Deferred income taxes 5,427 5,015 Other assets (Notes 1 and 8) 7,691 5,339 Net noncurrent receivable from Financial Services (Note 16) 76 69 ------- -------- Total Automotive assets 61,737 57,170 Financial Services Cash and cash equivalents 2,555 3,182 Investments in securities (Note 2) 8,219 6,874 Net receivables and lease investments (Note 3) 119,535 106,144 Other assets (Note 1) 6,892 7,175 Total Financial Services assets 137,201 123,375 ------- ------- Total assets $198,938 $180,545 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Automotive Trade payables $ 8,769 $ 7,944 Other payables 1,976 1,631 Accrued liabilities (Note 7) 10,815 9,983 Income taxes payable 160 318 Debt payable within one year (Note 9) 932 1,249 -------- -------- Total current liabilities 22,652 21,125 Long-term debt (Note 9) 7,084 7,068 Other liabilities (Note 7) 25,911 21,866 Deferred income taxes 1,089 1,333 ------- -------- Total Automotive liabilities 56,736 51,392 Financial Services Payables 1,881 1,514 Debt (Note 9) 103,960 90,188 Deposit accounts (Note 10) 10,549 14,030 Deferred income taxes 2,287 1,616 Other liabilities and deferred income 5,583 4,532 Net payable to Automotive (Note 16) 910 1,437 ------- ------- Total Financial Services liabilities 125,170 113,317 Preferred stockholders' equity in a subsidiary company (Note 1) 1,458 1,083 Stockholders' equity Capital stock (Notes 11 and 14) Preferred Stock, par value $1.00 per share (aggregate liquidation preference of $3.4 billion) * * Common Stock, par value $1.00 per share (464 and 454 million shares issued) 464 454 Class B Stock, par value $1.00 per share (35 million shares issued) 35 35 Capital in excess of par value of stock 5,082 4,698 Foreign currency translation adjustments and other (Note 1) (678) (62) Minimum pension liability adjustment (400) - Earnings retained for use in business 11,071 9,628 ------ ----- Total stockholders' equity 15,574 14,753 ------ ------ Total liabilities and stockholders' equity $198,938 $180,545 ======== ======== - - - - - - *Less than $1 million The accompanying notes are part of the financial statements. Certain amounts for 1992 have been reclassified to conform with presentations adopted in 1993. FS-5
Ford Motor Company and Subsidiaries CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY ----------------------------------------------- For the Years Ended December 31, 1993, 1992, and 1991 (in millions)
1993 1992 1991 ------ --------- --------- CAPITAL STOCK (Note 11) Common Stock Balance at beginning of year $ 454 $ 448 $ 438 Issued for employee benefit plans and other 10 6 10 ------- ------- ------- Balance at end of year 464 454 448 Class B Stock 35 35 35 Series A Preferred Stock Balance at beginning of year * * - Sale of Series A Preferred Stock 0 0 * ------- ------- ------- Balance at end of year * * * Series B Preferred Stock Balance at beginning of year * - - Sale of Series B Preferred Stock 0 * - ------- ------- ------- Balance at end of year * * - CAPITAL IN EXCESS OF PAR VALUE OF STOCK Balance at beginning of year 4,698 3,379 766 Issued for employee benefit plans and other 384 215 361 Sale of Series A Preferred Stock 0 0 2,252 Sale of Series B Preferred Stock 0 1,104 - ----- ----- ----- Balance at end of year 5,082 4,698 3,379 FOREIGN CURRENCY TRANSLATION ADJUSTMENTS AND OTHER (Note 1) Balance at beginning of year (62) 838 823 Translation adjustments during year (508) (975) 8 Minimum pension liability adjustment (400) - - Other (108) 75 7 ----- ----- ---- Balance at end of year (1,078) (62) 838 EARNINGS RETAINED FOR USE IN THE BUSINESS Balance at beginning of year 9,628 17,990 21,175 Net income/(loss) 2,529 (7,385) (2,258) Cash dividends (1,086) (977) (927) ------ ------ ------ Balance at end of year 11,071 9,628 17,990 ------ ------ ------ Total stockholders' equity $15,574 $14,753 $22,690 ======= ======= =======
Common Class B Preferred Preferred SHARES OF CAPITAL STOCK Stock Stock Stock Stock --------- -------- ---------- --------- Issued at December 31, 1990 438 35 - - Additions 1991 10 0 0.046 - 1992 6 0 0 0.023 1993 10 0 0 0 --- -- ----- ----- Net additions 26 0 0.046 0.023 --- -- ----- ----- Issued at December 31, 1993 464 35 0.046 0.023 ====== ====== ======= ======= - - - - - - *Less than 1 million The accompanying notes are part of the financial statements. FS-7
Ford Motor Company and Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS ------------------------------------- For the Years Ended December 31, 1993, 1992, and 1991 (in millions)
1993 1992 1991 ----------------------- ----------------------- --------------------- Financial Financial Financial Automotive Services Automotive Services Automotive Services Cash and cash equivalents at January 1 $ 3,504 $ 3,182 $ 4,958 $ 3,175 $ 4,599 $ 2,168 Cash flows from operating activities (Note 15) 6,862 7,145 5,753 5,762 3,341 4,780 Cash flows from investing activities Capital expenditures (6,714) (100) (5,697) (93) (5,723) (124) Proceeds from sale and leaseback of fixed assets 884 - 263 - 619 - Acquisitions of other companies 0 (336) 0 (461) 0 (860) Proceeds from sales of subsidiaries 173 0 52 0 273 0 Acquisitions of receivables and lease investments - (163,858) - (134,619) - (124,606) Collections of receivables and lease investments - 142,844 - 123,144 - 117,581 Purchases of securities (100,493) (13,741) (50,437) (12,877) (56,141) (11,876) Sales of securities 101,927 12,426 49,629 12,169 52,795 14,450 Proceeds from sales of receivables - 4,794 - 6,465 - 4,533 Loans originated net of principal payments - (1,466) - (938) - (321) Investing activity with Financial Services (117) - 709 - 837 - Other (69) 389 (492) 372 (175) 555 ------ ------ ----- ------- ------- ------ Net cash used in investing activities (4,409) (19,048) (5,973) (6,838) (7,515) (668) Cash flows from financing activities Cash dividends (1,086) - (977) - (927) - Sale of Preferred Stock 0 - 1,104 - 2,252 - Issuance of Common Stock 394 - 221 - 371 - Changes in short-term debt (66) 6,065 (426) 2,739 117 (3,931) Proceeds from issuance of other debt 424 22,128 1,865 13,382 4,808 13,889 Principal payments on other debt (376) (13,791) (1,598) (13,122) (2,477) (9,981) Financing activity with Automotive - 117 - (709) - (837) Changes in customers' deposits, excluding interest credited - (3,861) - (3,418) - (1,875) Receipts from annuity contracts - 821 - 703 - 46 Issuance of subsidiary company preferred stock - 375 - 283 - 0 Other (124) (76) 79 (10) 3 12 ---- ----- ----- ------ ----- ---- Net cash (used in)/provided by financing activities (834) 11,778 268 (152) 4,147 (2,677) Effect of exchange rate changes on cash 17 25 (220) (47) (35) (7) Net transactions with Automotive/ Financial Services 527 (527) (1,282) 1,282 421 (421) ---- ------ ----- ----- ----- ----- Net increase/(decrease) in cash and cash equivalents 2,163 (627) (1,454) 7 359 1,007 -------- -------- ------- ------ ----- ----- Cash and cash equivalents at December 31 $ 5,667* $ 2,555 $ 3,504* $ 3,182 $ 4,958* $ 3,175 ======== ======== ======== ======== ========= =======
Total cash and cash equivalents $8,222 $6,686 $8,133 ====== ====== ======
- - - - - - *Automotive cash, cash equivalents, and marketable securities on December 31 were as follows (in millions): 1993 - $9,752 ; 1992 - $9,035; 1991 - $9,753 The accompanying notes are part of the financial statements. FS-6 [TEXT] 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 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 sale. 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 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; these interest supplements and other support costs are recorded as sales reductions by the Automotive operations at the time of sale of the related vehicle. Other Costs - ----------- Advertising and sales promotion costs are expensed as incurred. Anticipated costs related to product warranty are accrued at the time of sale. Research and development costs are expensed as incurred and were $5,021 million in 1993, $4,332 million in 1992 and $3,728 million in 1991. FS-8 NOTE 1. Accounting Policies - Continued - --------------------------------------- Income/(Loss) Per Share of Common and Class B Stock - --------------------------------------------------- Income/(loss) per share of Common and Class B Stock is calculated by dividing 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. The company has outstanding securities, primarily Series A Preferred Stock and certain convertible debt of subsidiary companies, 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. 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 1993, particularly in Europe. 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 entity involved. The effect of changes in foreign exchange rates on assets and liabilities, as described above, increased net income by $419 million in 1993 and decreased the net loss by $132 million in 1992 and by $81 million in 1991. These amounts included net transaction and translation gains before taxes of $988 million in 1993, $557 million in 1992 and $662 million in 1991. These gains were offset substantially by costs of sales that reflected historical exchange rates for costs associated with inventories 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 being amortized using the straight-line method principally over 40 years. Total goodwill included in Automotive and Financial Services other assets at December 31, 1993 was $2.6 billion and $2.9 billion, respectively. 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 and voting power is owned by persons other than Ford. FS-9 NOTE 2. Marketable and Other Securities - ---------------------------------------- Automotive - ---------- Automotive marketable securities are recorded at cost plus accrued interest, which approximates fair value. Financial Services - ------------------ Investments in debt securities are recorded at amortized cost because of the ability to hold such securities until maturity and the intent to hold them for the foreseeable future. If market conditions change, however, certain of these securities may be sold prior to maturity. Marketable equity securities are recorded at fair value. Investments in debt securities at December 31 were as follows (in millions):
1993 1992 ------------------------------------ ----------------------------------------- Gross Gross Gross Gross Book Unrealized Unrealized Fair Book Unrealized Unrealized Fair Value Gains Losses Value Value Gains Losses Value ------ ------- -------- ------ ------ -------- ------ ----- Debt securities issued by the U.S. government and agencies $ 974 $ 27 $ 1 $1,000 $ 964 $17 $ 1 $ 980 Municipal securities 126 3 0 129 35 1 0 36 Debt securities issued by foreign governments 88 4 1 91 35 1 0 36 Corporate securities 1,779 48 19 1,808 1,107 28 10 1,125 Mortgage-backed securities (including derivatives) 2,588 39 82 2,545 1,851 17 140 1,728 Other debt securities 192 0 1 191 407 1 3 405 ------ ---- ---- ------ ------ --- ---- ------ Total $5,747 $121 $104 $5,764 $4,399 $65 $154 $4,310 ====== ==== ==== ====== ====== === ==== ======
The fair value of most securities was estimated based on quoted market prices for those securities. 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. The book value and fair value of investments in debt securities at December 31, by contractual maturity, are shown below (in millions). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty.
1993 1992 ----------------- ----------------- Book Fair Book Fair Value Value Value Value ------- ----- ----- ----- Due in one year or less $ 96 $ 96 $ 280 $ 281 Due after one year through five 1,023 1,035 1,119 1,126 Due after five years through ten years 563 580 434 443 Due after ten years 1,477 1,508 715 732 Mortgage-backed securities (including derivatives) 2,588 2,545 1,851 1,728 ------ ----- ----- ----- Total $5,747 $5,764 $4,399 $4,310 ====== ====== ====== ======
Proceeds from sales of investments in debt securities were $11.2 billion in 1993, $10.5 billion in 1992 and $13.9 billion in 1991. 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, and gross gains of $141 million and gross losses of $22 million were realized in 1991. Investments in securities other than debt securities totaled $2,472 million at December 31, 1993 and $2,475 million at December 31, 1992. The estimated fair value in excess of book value of those securities which were practicable to value was $59 million at December 31, 1993 and $2 million at December 31, 1992. It was not practicable to calculate the fair value of certain securities totaling $660 million at December 31, 1993 and $740 million at December 31, 1992 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. FS-10 NOTE 3. Net Receivables and Lease Investments - 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): 1993 1992 --------- -------- Automotive $ 58,738 $54,807 Real estate, mainly residential 24,152 24,421 Other 24,968 19,945 --------- ------ Total finance receivables 107,858 99,173 Loan origination costs 124 158 Unearned income (9,037) (8,325) Allowance for credit losses (2,017) (1,948) Unearned insurance premiums and unpaid insurance claims related to finance receivables (139) (199) -------- ------- Net finance receivables $ 96,789 $88,859 ======== ======= Fair value $ 98,505 $90,992 Included in finance receivables was a total of $1.5 billion for 1993 and $1.9 billion for 1992 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, 1993 and 1992 were $2,430 million and $1,767 million, 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): 1994 - $41,376; 1995 - $16,316; 1996 - $11,321; thereafter - $14,693. Experience indicates that a substantial portion of the portfolio generally is repaid before 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 $60 million in 1993, $7 million in 1992 and $84 million in 1991. Allowances for anticipated credit losses are made where limited guarantee provisions of the sales contracts exist. Investments in direct financing leases at December 31 were as follows (in millions): 1993 1992 ---- ---- Minimum lease rentals $ 7,382 $ 7,673 Estimated residual values 2,764 2,395 Lease origination costs 69 47 Unearned income (2,010) (2,169) Allowance for credit losses (133) (154) ------- ----- Net investments in direct financing leases $ 8,072 $ 7,792 ======= ======= Minimum direct financing lease rentals (including executory costs of $68 million) are as follows (in millions): 1994 - $2,485; 1995 - $1,731; 1996 - $1,031; 1997 - $576; thereafter - $1,627. FS-11 NOTE 3. Net Receivables and Lease Investments - Financial Services (Continued) - ------------------------------------------------------------------- Investments in operating leases at December 31 were as follows (in millions): 1993 1992 ---- ---- Vehicles and other equipment, at cost $18,589 $12,231 Lease origination costs 23 8 Accumulated depreciation (3,736) (2,591) Allowance for credit losses (202) (155) ------- ------- Net investments in operating leases $14,674 $ 9,493 ======= ======= Future minimum rentals on operating leases are as follows (in millions): 1994 - $3,719; 1995 - $1,837; 1996 - $387; 1997 - $77; thereafter - $118. Depreciation expense on operating leases reflects primarily the straight-line method over the term of the leases and was as follows (in millions): 1993 - $2,984; 1992 - $2,000; 1991 - $1,400. Allowances For Credit Losses - ---------------------------- 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): 1993 1992 1991 Beginning Balance $2,257 $2,078 $1,847 Additions 1,019 1,218 1,485 Net losses (903) (993) (1,304) Other changes (21) (46) 50 Ending Balance $2,352 $2,257 $2,078 ====== ====== ====== NOTE 4. Inventories - Automotive - --------------------------------- 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 substantially by the first-in, first-out ("FIFO") method. If FIFO was the only method of inventory accounting used by the company, inventories would have been $1,342 million and $1,365 million higher than reported at December 31, 1993 and 1992, respectively. The major classes of inventories at December 31 were as follows (in millions): 1993 1992 Raw materials, work in process and supplies $2,937 $2,959 Finished products 2,601 2,492 ------ ------ Total Inventories $5,538 $5,451 ====== ====== Inventories - U.S. Automotive $2,575 $2,401 FS-12 NOTE 5. Net Property, Depreciation and Amortization - Automotive - ----------------------------------------------------------------- Net property, at cost, at December 31 was as follows (in millions): 1993 1992 Land $ 360 $ 362 Buildings and land improvements 5,923 6,059 Machinery, equipment and other 29,655 28,294 Construction in progress 1,551 1,493 Total land, plant and equipment 37,489 36,208 Accumulated depreciation (20,691) (19,991) Net land, plant and equipment 16,798 16,217 Unamortized special tools 6,261 5,943 Net Property $ 23,059 $ 22,160 ======== ======== 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. The effect of this change was not significant in 1993. 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. 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. All maintenance, repair and rearrangement costs are expensed as incurred. Expenditures that increase the value or productive capacity of assets are capitalized. Special tools are amortized over periods of time representing the productive use of those tools. Preproduction costs related to new facilities are expensed as incurred. Depreciation and amortization expenses were as follows (in millions): 1993 1992 1991 Depreciation $2,392 $2,569 $2,456 Amortization 2,012 2,097 1,822 ------ ------ ------ Total $4,404 $4,666 $4,278 ====== ====== ====== NOTE 6. Income Taxes - --------------------- The provision/(credit) for income taxes was as follows (in millions): 1993 1992 1991 Currently payable/(refundable) U.S. federal $1,259 $(122) $ 92 Foreign 169 427 445 State and local 123 104 82 ------ ----- ------- Total currently payable 1,551 409 619 Deferred tax liability/(benefit) U.S. federal (161) 434 (742) Foreign (106) (499) (272) State and local 66 (49) 0 ------ ----- ------ Total deferred (201) (114) (1,014) ------- ------ ------ Total provision/(credit) $1,350 $ 295* $ (395) ====== ===== ======= - - - - - - *Excludes cumulative effects of changes in accounting principles The provision/(credit) 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 $4.9 billion of retained earnings at December 31, 1993 which have been invested by foreign subsidiaries. These retained earnings have incurred foreign income taxes that would have the effect of reducing substantially income tax liabilities that could result from their distribution. FS-13 NOTE 6. Income Taxes (Continued) - -------------------------------- The company adopted Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes," as of January 1, 1992. The cumulative effect of this change in accounting principle decreased the net loss in 1992 by $657 million. Financial statements for prior years were not restated to apply the provisions of SFAS 109. The adoption of SFAS 109 changes 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. 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):
1993 1992 ---------------------------------- ----------------------------- Deferred Tax Deferred Tax Deferred Tax Deferred Tax Assets Liabilities Assets Liabilities Employee benefit plans $ 5,839 $ 697 $ 5,376 $ 576 Dealer and customer allowances and claims 3,243 - 2,864 - Net operating loss carryforwards 1,378 - 909 - Allowance for credit losses 858 - 840 - Alternative minimum tax 129 - 426 - Depreciation and amortization (excludes leasing transactions) 30 2,574 27 2,694 Leasing transactions - 3,166 - 2,437 All other 1,093 1,157 732 882 ------- ----- ----- ----- Subtotal 12,570 7,594 11,174 6,589 Valuation allowances (174) - (181) - -------- ------ ------- ----- Total deferred taxes $12,396 $7,594 $10,993 $6,589 ======= ====== ====== ======
Net foreign operating loss carryforwards for tax purposes were $3.7 billion at December 31, 1993. A significant portion of these losses have an indefinite carryforward period; the remaining losses have expiration dates beginning in 1995. For financial statement purposes, the tax benefit of operating losses is recognized as a deferred tax asset, subject to appropriate valuation allowances. Deferred income taxes for 1991 were derived using the guidelines in APB 11. Under APB 11, deferred income taxes result from timing differences in the recognition of revenues and expenses between financial statements and tax returns. The principal sources of these differences and the related effect of each on the provision for income taxes were as follows (in millions): 1991 Depreciation and amortization (excludes leasing transactions) $ 191 Dealer and customer allowances and claims (542) Employee benefit plans (442) Net operating loss carryforwards - foreign (399) Leasing transactions 377 Alternative minimum tax (26) Income/(loss) before income taxes and cumulative effects of changes in accounting principles for U.S. and foreign operations, excluding equity in net income/(loss) of affiliated companies, was as follows (in millions): 1993 1992 1991 ------ ------- ------- U.S. $4,152 $ 889 $(2,049) Foreign (276) (1,031) (509) ------ ------- ------- Total income/(loss) before income taxes $3,876 $ (142)* $(2,558) ====== ======= ======= - - - - - - *Excludes cumulative effects of changes in accounting principles FS-14 NOTE 6. Income Taxes (Continued) - -------------------------------- A reconciliation of the provision/(credit) for income taxes compared with the amounts at the U.S. statutory tax rate is shown below (in millions): 1993 1992 1991 ----- ----- ---- Tax provision/(credit) at U.S. statutory rate of 35% for 1993 and 34% for 1992 and 1991 $1,357 $ (48) $(870) Effect of: Foreign taxes over U.S. tax rate 219 263 345 State and local income taxes 118 36 54 Rate adjustments on U.S. and foreign deferred taxes (199) - - Income not subject to tax or subject to tax at reduced rates (70) (112) (121) Other (75) 156 197 ------ ----- ----- Provision/(credit) for income taxes $1,350 $ 295* $(395) ====== ===== ===== Effective Tax Rate 34.8% - 15.4% - - - - - - *Excludes cumulative effects of changes in accounting principles NOTE 7. Liabilities - Automotive - --------------------------------- Current Liabilities - ------------------- Included in accrued liabilities at December 31 were the following (in millions): 1993 1992 ------- ------ Dealer and customer allowances and claims $ 6,645 $6,266 Employee benefit plans 1,415 1,471 Salaries, wages, and employer taxes 594 562 Postretirement benefits other than pensions 674 595 Other 1,487 1,089 Total accrued liabilities $10,815 $9,983 ======= ====== Noncurrent Liabilities - ---------------------- Included in other liabilities at December 31 were the following (in millions): 1993 1992 ------- ------- Postretirement benefits other than pensions $13,288 $12,744 Dealer and customer allowances and claims 5,170 4,348 Employee benefit plans 2,353 2,241 Minority interests in net assets of subsidiaries 161 144 Unfunded pension obligation 2,873 136 Other 2,066 2,253 Total other liabilities $25,911 $21,866 ======= ======= - - - - - - Certain amounts for 1992 have been reclassified to conform with presentations adopted in 1993. FS-15 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 that provide unfunded benefits. 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 such, an unfunded liability is recorded. The company's pension expense, including Financial Services, reflected the following (in millions):
1993 1992 1991 ------------------------ ----------------------- --------------------- 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 $ 419 $ 181 $ 342 $ 213 $ 311 $ 204 Interest on projected benefit obligations 1,517 667 1,437 698 1,413 619 Return on assets: Actual (gain) (2,264) (1,370) (1,465) (865) (3,909) (877) Deferred gain/(loss) 389 677 (204) 190 2,497 188 ----- ----- ----- --- ----- --- Recognized (gain) (1,875) (693) (1,669) (675) (1,412) (689) Net amortization and other 259 169 228 180 331 84 ------- ------ ------ ----- ------- ----- Net pension expense $ 320 $ 324 $ 338 $ 416 $ 643 $ 218 ======= ======= ======= ====== ======== ======
Costs associated with amendments made in 1993 to the Ford-UAW Retirement Plan and to the General Retirement Plan were more than offset by an increased return on assets that decreased net pension expense in 1993 compared with 1992. Non-U.S. pension expense also decreased in 1993, reflecting the result of restructuring actions in Europe. FS-16 NOTE 8. Employee Retirement Benefits (Continued) - ------------------------------------------------ The status of these plans at December 31 was as follows (in millions):
1993 1992 ---------------------------- ------------------------------ Assets Accum. Assets Accum. Exceed Benefits Exceed Benefits Accum. Exceed Total Accum. Exceed Total Benefits Assets Plans Benefits Assets Plans U.S. Plans Plan assets at fair value $12,122 $10,779 $22,901 $11,776 $ 9,441 $21,217 Actuarial present value of: Vested benefits $ 8,708 $ 9,962 $18,670 $ 7,546 $ 7,757 $15,303 Accumulated benefits 9,700 12,603 22,303 8,248 9,691 17,939 Projected benefits 10,896 12,767 23,663 9,222 9,759 18,981 Plan assets in excess of/(less than) projected benefits $ 1,226 $(1,988) $ (762) $ 2,554 $ (318) $ 2,236 Unamortized (net asset)/net transition obligation a/ (760) 563 (197) (861) 640 (221) Unamortized prior service cost b/ 538 2,053 2,591 347 1,174 1,521 Unamortized net (gains)/losses c/ (159) 297 138 (1,333) (817) (2,150) --- --- ----- ----- ---- ----- Prepaid pension asset/(liability) 845 925 1,770 707 679 1,386 Adjustment required to recognize minimum liability d/ - (2,771) (2,771) - (950) (950) ------- ------- ------- ------- ----- ---- Prepaid pension asset/ (liability) recognized in the balance sheet $ 845 $(1,846) $(1,001) $ 707 $(271) $ 436 ======= ======= ======= ====== ====== ======= Plan assets in excess of/(less than) accumulated benefits $ 2,422 $(1,824) $ 598 $ 3,528 $(250) $ 3,278 Assumptions: Discount rate 7.0% 8.0% Average rate of increase in compensation 5.5% 5.5% Long-term rate of return on assets 9.5% 9.5% Non-U.S. Plans - -------------- Plan assets at fair value $ 5,806 $ 1,815 $ 7,621 $ 6,037 $ 617 $ 6,654 Actuarial present value of: Vested benefits $ 4,538 $ 3,888 $ 8,426 $ 4,608 $ 2,124 $ 6,732 Accumulated benefits 4,619 4,092 8,711 4,685 2,264 6,949 Projected benefits 5,333 4,484 9,817 5,573 2,435 8,008 Plan assets in excess of/(less than) projected benefits $ 473 $(2,669) $(2,196) $ 464 $(1,818) $(1,354) Unamortized (net asset)/net transition obligation a/ (209) 461 252 42 253 295 Unamortized prior service cost b/ 267 232 499 303 36 339 Unamortized net (gains)/losses c/ (88) 863 775 (105) 7 (98) ------- ----- ------ ------- ------ ----- Prepaid pension asset/(liability) 443 (1,113) (670) 704 (1,522) (818) Adjustment required to recognize minimum liability d/ - (1,164) (1,164) - (126) (126) ------- ----- ----- ------- ------- ------- Prepaid pension asset/(liability) recognized in the balance sheet $ 443 $(2,277) $(1,834) $ 704 $(1,648) $ (944) ======= ======= ======= ======= ======= ======= Plan assets in excess of/(less than) accumulated benefits $ 1,187 $(2,277) $(1,090) $ 1,352 $(1,647) $ (295) Assumptions: Discount rate 7.2% 8.6% Average rate of increase in compensation 5.1% 6.0% Long-term rate of return on assets 9.5% 9.6% - - - - - - 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 benefit obligation in the balance sheet for plans whose benefits exceed the assets -- in 1993 the unfunded liability in excess of $3,250 million of unamortized prior service cost and net transition obligation is recorded net of deferred taxes as a $400 million reduction in stockholders' equity.
FS-17 NOTE 8. Employee Retirement Benefits (Continued) - ------------------------------------------------- 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. Prior to 1992, the expense recognized for postretirement health care benefits was based on actual expenditures for the year. Beginning in 1992, the estimated cost for postretirement health care benefits is accrued on an actuarially determined basis, in accordance with the requirements of Statement of Financial Accounting Standards No. 106 ("SFAS 106"), "Employer's Accounting for Postretirement Benefits Other Than Pensions". Implementation of SFAS 106 has not increased the company's cash expenditures for postretirement benefits. 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 liability of $12 billion, offset partially by projected tax benefits of $4.5 billion. In addition, the loss in 1992 was increased by $455 million ($723 million before taxes) for the ongoing effect of adopting SFAS 106. Net postretirement benefit expense included the following (in millions): 1993 1992 Benefits attributed to employees' service $ 240 $ 235 Interest on accumulated benefit obligation 1,207 1,129 ------ ------ Net postretirement benefit expense $1,447 $1,364 ====== ====== Retiree benefit payments were as follows (in millions): 1993 - $654; 1992 - $641; 1991 - $628. The status of these plans, reconciled with the amounts recognized in the company's balance sheet at December 31, was as follows (in millions): 1993 1992 Accumulated postretirement benefit obligation: Retirees $ 8,147 $ 7,035 Active employees eligible to retire 2,725 2,269 Other active employees 5,984 5,091 ------- ------- Total accumulated obligation 16,856 14,395 Unamortized amendments 387 0 Unamortized net (loss) (2,880) (807) ------- ------- Accrued liability $14,363 $13,588 ======= ======= Assumptions: Discount rate at year-end 7.5% 8.5% Present health care cost trend rate 9.7% 10.3% Ultimate trend rate in ten years 5.5% 5.5% Weighted-average trend rate 6.8% 6.9% Changing the assumed health care cost trend rates by one percentage point would change the aggregate service and interest cost components of net periodic postretirement benefit cost for 1993 by $240 million and the accumulated postretirement benefit obligation at December 31, 1993 by $2.4 billion. FS-18 NOTE 9. Debt - ------------- Automotive - ---------- Debt at December 31 was as follows (in millions):
1993 ------------------------------ Book Value Weighted Average ----------------- Interest Rate* Maturity 1993 1992 ------------------------------- ----- ----- Debt payable within one year Short-term debt $ 887 $1,200 Long-term debt payable within one year 45 49 ------ ------ Total debt payable within one year 932 1,249 Long-term debt Notes and other debt 9.0% 1995-2043 7,084 7,020 Short-term obligations issued under long-term borrowing agreements 0 48 ------- ----- Total long-term debt 7,084 7,068 ------- ----- Total debt $8,016 $8,317 ======= ====== Fair value $9,044 $8,855 - - - - - - *Excludes the effect of interest-rate swap agreements
The fair value of debt was estimated based on quoted market prices or current rates for similar debt with the same remaining maturities. Long-term debt at December 31, 1993 included maturities as follows (in millions): 1994 - $45 (included in current liabilities); 1995 - $44; 1996 - $998; 1997 - $599; 1998 - $1,738; thereafter - $3,705. Included in debt at December 31, 1993 and December 31, 1992 were obligations payable in foreign currencies of $970 million and $957 million, respectively. Financial Services - ------------------ Debt at December 31 was as follows (in millions):
1993 -------------------------------- Book Value Weighted Average ---------------- Interest Rate* Maturity 1993 1992 ------------------- ---------- ---- ---- Debt payable within one year Unsecured short-term debt $ 2,852 $ 2,944 Commercial paper 37,793 32,192 Other short-term debt 3,111 2,213 -------- ------- Total short-term debt 43,756 37,349 Long-term debt payable within one year 12,304 10,470 -------- ------- Total debt payable within one year 56,060 47,819 Long-term debt Secured indebtedness 8.0% 1995-2016 1,821 2,292 Unsecured senior indebtedness Notes and bank debt 7.1% 1995-2048 41,471 36,884 Debentures 9.4% 1995-2010 916 798 Unamortized premium/(discount) (55) 1 ------- -------- Total unsecured senior indebtedness 42,332 37,683 Unsecured subordinated indebtedness Notes 8.9% 1995-2022 3,634 2,077 Debentures 8.1% 1995-2009 141 333 Convertible debentures 4.5% 1995-1996 1 2 Unamortized (discount) (29) (18) ------ ------ Total unsecured subordinated indebtedness 3,747 2,394 ----- ----- Total long-term debt 47,900 42,369 ------ ------ Total debt $103,960 $90,188 ======== ======= Fair value $107,233 $92,409 - - - - - - *Excludes the effect of interest-rate swap agreements
The fair value of debt was estimated based on quoted market prices or current rates for similar debt with the same remaining maturities. FS-19 NOTE 9. Debt (Continued) - ----------------------- Information concerning short-term borrowings (excluding long-term debt payable within one year) is as follows (in millions): 1993 1992 1991 ------- ------- ------- Average amount of short-term borrowings $38,353 $33,993 $32,568 Weighted average short-term interest rates per annum 3.8% 5.2% 7.7% Average remaining term of commercial paper at December 31 29 days 29 days 33 days Secured indebtedness is collateralized by pledges of real estate loans, mortgage-backed certificates and municipal securities having an aggregate carrying amount of $5,926 million at December 31, 1993. Long-term debt at December 31, 1993 included maturities as follows (in millions): 1994 - $12,304; 1995 - $9,362; 1996 - $11,042; 1997 - $5,810; 1998 - $8,502; thereafter - $13,184. Included in debt at December 31, 1993 and December 31, 1992 were obligations payable in foreign currencies of $12.9 billion and $14.7 billion, respectively. These obligations were issued primarily to fund foreign business operations. Support Facilities - ------------------ At December 31, 1993, Ford (parent company only) had long-term contractually committed credit agreements in the U.S. under which $4.8 billion is available from various banks at least through June 30, 1998. The entire $4.8 billion may be used, at Ford's option, by either Ford or Ford Credit. These facilities were unused at December 31, 1993. Outside the U.S., Ford had additional long-term contractually committed credit-line facilities of $2.4 billion. These facilities are available in varying amounts from 1994 through 1998; these facilities were unused at December 31, 1993. At December 31, 1993, Financial Services had $24.9 billion of support facilities (including the $4.8 billion of the Ford credit agreements) for use in the U.S., all of which were contractually committed. At December 31, 1993, less than 1% of these facilities, excluding the Ford credit agreements, were in use. At that date, an additional $14.5 billion of support facilities were available outside the U.S., of which $6.4 billion were contractually committed. At December 31, 1993, $6 billion of these support facilities outside the U.S. were in use. NOTE 10. Deposit Accounts and Annuity Contracts - Financial Services - ------------------------------------------------------------ Deposit accounts by category at December 31 were as follows (in millions):
1993 1992 --------------------------- --------------------------- Weighted Average Weighted Average Interest Rate Amount Interest Rate Amount Term accounts 5.16% $ 5,417 5.80% $ 8,008 Money market deposit accounts 2.51% 2,786 2.95% 3,342 Passbook accounts 2.14% 840 2.98% 1,313 NOW accounts and other 0.53% 1,506 1.82% 1,367 ------- ------- Total deposit accounts $10,549 $14,030 ======= ======= Fair value $10,650 $14,208
The fair value of demand deposits, savings accounts, and certain money market deposits was the amount payable on demand at December 31, 1993. The fair value of fixed-maturity certificates of deposit was estimated using the rate currently offered for deposits with similar remaining maturities. At December 31, 1993, term accounts included scheduled maturities as follows (in millions): 1994 - $3,846; 1995 - $596; 1996 - $596; 1997 - $214; 1998 - $145; thereafter - $20. FS-20 NOTE 10. Deposit Accounts and Annuity Contracts - Financial Services - -------------------------------------------------------------------- The liability for annuity contracts, included in other liabilities, was $1,598 million at December 31, 1993 and $777 million at December 31, 1992, and reflected deposits received and interest credited, less related withdrawals. The weighted-average interest rate on annuity contracts outstanding at December 31, 1993 and 1992 was 6.2% and 7.3%, 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, 1993 and 1992 approximated book value because the contractual interest rate due holders is reset annually for more than 97% of contracts outstanding. NOTE 11. Capital Stock - ----------------------- The authorized capital stock of the company consists of Common Stock, Class B Stock and Preferred Stock. Authorized shares of stock at December 31, 1993 were as follows: 1 billion shares of Common Stock; 88.4 million shares of Class B Stock; and 30 million shares of Preferred Stock. At December 31, 1993, 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. In 1991, the company sold 46,000,000 Depositary Shares, each representing 1/1,000 of a share of Series A Cumulative Convertible Preferred Stock ("Series A Preferred Stock"), for a total public offering price of $2.3 billion. As a result, 46,000 shares of Series A Preferred Stock were issued. The Series A Preferred Stock has a liquidation preference equivalent to $50 per Depositary Share and dividends accumulate on the Series A Preferred Stock at a rate equivalent to $4.20 per year per Depositary Share. The Series A Preferred Stock is convertible at the option of the holder at any time into shares of Common Stock of the company at a rate equivalent to 1.6327 shares of Common Stock for each Depositary Share (equivalent to a conversion price of $30.625 per share of Common Stock). The Series A Preferred Stock and the Depositary Shares representing such stock are not redeemable prior to December 7, 1997. On and after December 7, 1997, the Series A Preferred Stock is redeemable for cash at the company's option, in whole or in part, initially at an amount equivalent to $51.68 per Depositary Share and thereafter at prices declining to $50 per Depositary Share on and after December 1, 2001, plus, in each case, an amount equal to the sum of all accrued and unpaid dividends. At December 31, 1993, the liquidation preference of Series A Preferred Stock was $2.3 billion, and 45,994 shares were outstanding. In 1992, the company sold 45,600,000 Depositary Shares, each representing 1/2,000 of a share of Series B Cumulative Preferred Stock ("Series B Preferred Stock"), for a total public offering price of $1.1 billion. As a result, 22,800 shares of Series B Preferred Stock were issued. The Series B Preferred Stock has a liquidation preference equivalent to $25 per Depositary Share and dividends accumulate at a rate equivalent to $2.0625 per year per Depositary Share. The Series B Preferred Stock and the Depositary Shares representing such stock are not redeemable prior to December 1, 2002. On and after December 1, 2002 and upon satisfaction of certain conditions, the Series B Preferred Stock is redeemable for cash at the option of Ford, in whole or in part, at a redemption price equivalent to $25 per Depositary Share, plus an amount equal to the sum of all accrued and unpaid dividends. The Series B Preferred Stock does not have any sinking fund and is not convertible into any other securities. At December 31, 1993, the liquidation preference of the Series B Preferred Stock was $1.1 billion, and 22,800 shares were outstanding. FS-21 NOTE 11. Capital Stock (Continued) - ---------------------------------- The Series A Preferred Stock 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. 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 for the last three years is shown below (shares in millions): 1993 1992 1991 ------ ------ ------ Option price of new grants a/ $57.69 $37.00 $30.00 and $24.13 Shares subject to option - ---------------------- Outstanding at beginning of period 20.6 16.5 13.3 New grants 3.6 4.8 3.6 Exercised b/ (3.4) (0.5) (0.1) Surrendered upon exercise of stock appreciation rights (1.9) (0.2) (0.1) Terminated and expired (0.1) * (0.2) ---- ----- ----- Outstanding at end of period 18.8 c/ 20.6 16.5 Outstanding but not exercisable (9.7) (9.8) (8.1) ---- ----- ----- Exercisable at end of period 9.1 10.8 8.4 ===== ====== ====== Shares authorized for future grants (as of December 31)d/ 0 0 0.9 - - - - - - * Less than 50,000 shares. a/ Fair market value of Common Stock at dates of grant. b/ At option prices ranging from $18.19 to $51.69 during 1993, from $7.03 to $30.69 during 1992, and from 4.25 to $26.84 during 1991. c/ Including 6.0 and 12.8 million shares under the 1985 and 1990 Plans, respectively, at option prices ranging from $18.19 to $57.69 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 1,163,600 shares in 1993, 632,400 shares in 1992 and 1,015,500 shares in 1991 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. FS-22 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, the outcome of individual litigated matters is not predictable with assurance, and it is reasonably possible that some of the foregoing matters could be decided unfavorably to the company or the subsidiary involved. Although the amount of the ultimate liability at December 31, 1993 with respect to these matters cannot be ascertained, the company believes that any resulting liability should not materially affect the consolidated financial position of the company at December 31, 1993. NOTE 14. Commitments and Contingencies - --------------------------------------- At December 31, 1993, the company had the following minimum rental commitments under non-cancelable operating leases (in millions): 1994 - $509; 1995 - $573; 1996 - $501; 1997 - $463; 1998 - $201; thereafter - $708. These amounts include rental commitments related to the sales and leasebacks of certain Automotive machinery and equipment. During 1993, the company and certain of its subsidiaries 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, 1993 was $1.7 billion. The company has provided for the estimated net cost of these programs as a vehicle marketing cost based on the estimated number of participants who will ultimately purchase vehicles. The company and many of its subsidiaries have entered into foreign exchange agreements to manage exposure to foreign exchange rate fluctuations. These exchange agreements hedge primarily debt, firm commitments and dividends that are denominated in foreign currencies and net investments in foreign subsidiaries. Agreements entered into to manage these exposures include foreign currency forward contracts, currency swaps and foreign currency options. Gains or losses on the various agreements are either recognized during the period or included in the bases of the related transactions. The fair value of these foreign exchange agreements generally was estimated using current market prices provided by outside quotation services. The fair value was estimated to be a net receivable of $124 million at December 31, 1993 and $302 million at December 31, 1992. In the unlikely event that a counterparty fails to meet the terms of a foreign exchange agreement, the company's market risk is limited to the currency rate differential. In the case of currency swaps, the company's market risk also may include an interest rate differential. At December 31, 1993 and 1992, the total amount of the company's foreign currency forward contracts, option contracts and currency swaps outstanding was $8.6 billion and $11.3 billion, respectively, maturing primarily through 1995. The company and many of its subsidiaries have entered into arrangements to manage exposure to fluctuations in interest rates. These arrangements include primarily interest-rate swap agreements and, to a lesser extent, interest-rate futures contracts. The differential paid or received on interest-rate swap agreements is recognized as an adjustment to interest expense. Realized and unrealized gains and losses on interest-rate futures contracts are deferred and recognized as adjustments to interest income or expense. FS-23 NOTE 14. Commitments and Contingencies (Continued) - --------------------------------------------------- The fair value of interest-rate swaps is the estimated amount the company would receive or pay to terminate the swap agreement. The 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 counterparties. The fair value was estimated to be a net receivable of $585 million at December 31, 1993 and $371 million at December 31, 1992. In the unlikely event that a counterparty fails to meet the terms of an interest-rate swap agreement, the company's exposure is limited to the interest rate differential. The underlying principal amounts on which the company has interest-rate swap agreements and futures contracts outstanding aggregated $36.5 billion at December 31, 1993 and $21.1 billion at December 31, 1992. Certain Financial Services subsidiaries make credit lines available to holders of their credit cards. At December 31, 1993 and 1992, the unused portion of available credit was approximately $9.9 billion and $5.5 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. 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. The fair value of these agreements and the potential risk of loss was not considered to be significant. NOTE 15. Cash Flows - -------------------- The reconciliation of net income/(loss) to cash flows from operating activities is as follows (in millions):
1993 1992 1991 ------------------- --------------------- ----------------------- Financial Financial Financial Automotive Services Automotive Services Automotive Services ----------- ----------- ----------- ----------- ------------- ----------- Net income/(loss) $ 940 $1,589 $(8,628) $1,243 $(3,186) $ 927 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 4,404 3,064 4,666 2,089 4,278 1,500 (Earnings)/losses of affiliated companies in excess of dividends remitted (21) (9) 16 51 83 61 Provision for credit and insurance losses - 1,523 - 1,795 - 2,159 Foreign currency adjustments (650) - (362) - (331) - (Credit)/provision for deferred income taxes (796) 595 (447) 333 (1,122) 108 Gain on sales of receivables - (98) - (9) - (113) Interest credited to deposit accounts - 380 - 571 - 873 Changes in assets and liabilities: (Increase)/decrease in accounts receivable and other current assets 34 - 103 - 673 - (Increase)/decrease in inventory (275) - 380 - 78 - Increase in accounts payable and accrued and other liabilities 3,735 594 2,617 295 3,006 142 Changes in unearned premiums - (65) - (281) - (288) Other (509) (428) 314 (114) (138) (589) ----- ---- ----- ---- ----- ---- Cash flows from operating activities $6,862 $7,145 $ 5,753 $ 5,762 $ 3,341 $4,780 ======= ======= ======= ======= ======= =======
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. Cash paid for interest and income taxes was as follows (in millions): 1993 1992 1991 ------ ------ ------ Interest $6,969 $8,255 $9,458 Income taxes 1,522 31 356 FS-24 NOTE 16. Segment Information - ---------------------------- The company operates in two principal business segments: Automotive and Financial Services. The Automotive segment consists of the manufacture, assembly and sale of cars, trucks and related parts and accessories. The Financial Services segment consists primarily of financing operations, insurance operations, savings and loan 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 through negotiations between the affected entities. Financial information segregated by major geographic area is as follows (in millions): Automotive - ---------- 1993 1992 1991 -------- ------- -------- Sales to unaffiliated customers United States $ 61,559 $ 51,918 $ 40,627 Europe* 18,507 21,579 21,012 All other 11,502 10,910 10,412 -------- -------- -------- Total $ 91,568 $ 84,407 $ 72,051 ======== ======== ======== Intercompany sales among geographic areas United States $ 8,721 $ 6,978 $ 7,094 Europe* 1,690 1,717 1,619 All other 9,791 10,120 8,644 -------- -------- -------- Total $ 20,202 $ 18,815 $ 17,357 ======== ======== ======== Total sales United States $ 70,280 $ 58,896 $ 47,721 Europe* 20,197 23,296 22,631 All other 21,293 21,030 19,056 Elimination of intercompany sales (20,202) (18,815) (17,357) -------- ------- --------- Total $ 91,568 $ 84,407 $ 72,051 ======== ======== ======== Operating income/(loss) United States $ 1,677 $ (582) $ (3,238) Europe* (402) (924) (280) All Other 157 (269) (251) -------- -------- -------- Total $ 1,432 $ (1,775) $ (3,769) ======== ======== ======== Net income/(loss) before cumulative effects of changes in accounting principles United States $ 1,482 $ (405) $ (2,215) Europe* (407) (647) (478) All other (135) (482) (492) -------- -------- -------- Total $ 940 $ (1,534) $ (3,185) ======== ======== ======== Assets at December 31 United States $ 39,666 $ 34,334 $ 26,728 Europe* 13,452 13,414 15,950 All Other 18,248 17,534 17,938 Net receivables from Financial Services 910 1,437 156 Elimination of intercompany receivables (10,539) (9,549) (8,375) -------- -------- -------- Total $ 61,737 $ 57,170 $ 52,397 ======== ======== ======== Capital expenditures (facilities, machinery and equipment and tooling) United States $ 4,289 $ 3,018 $ 3,042 Europe* 1,376 1,857 1,979 All Other 1,049 822 702 -------- -------- -------- Total $ 6,714 $ 5,697 $ 5,723 ======== ======== ======== - - - - - - *Excludes Jaguar Certain amounts for 1992 and 1991 have been reclassified to conform with presentations adopted in 1993. FS-25 NOTE 16. Segement Information (Continued) - ---------------------------------------- Financial Services - ------------------ 1993 1992 1991 ------- -------- ------ Revenues United States $ 14,102 $ 12,514 $ 13,182 Europe 1,673 2,051 1,847 All other 1,178 1,160 1,206 -------- -------- -------- Total $ 16,953 $ 15,725 $ 16,235 ======== ======== ======== Income before income taxes and cumulative effects of changes in accounting principles** United States $ 2,311 $ 1,452 $ 1,163 Europe 285 266 184 All other 116 107 118 -------- -------- -------- Total $ 2,712 $ 1,825 $ 1,465 ======== ======== ======== - - - - - - ** Financial Services activities do not report operating income; income before income taxes is representative of operating income. Net income before cumulative effects of changes in accounting principles United States $ 1,340 $ 919 $ 768 Europe 187 68 118 All other 62 45 41 -------- -------- -------- Total $ 1,589 $ 1,032 $ 927 ======== ======== ======== Assets at December 31 United States $117,290 $104,749 $100,730 Europe 12,132 11,512 13,662 All other 7,779 7,114 7,640 -------- -------- -------- Total $137,201 $123,375 $122,032 ======== ======== ======== Financial Services revenues included $72 million in 1993, $221 million in 1992 and $310 million in 1991 from the Federal Savings and Loan Insurance Corporation Resolution Fund in connection with the acquisition by First Nationwide of certain savings and loan institutions. During 1992, First Nationwide entered into a settlement agreement with the Resolution Trust Corporation which substantially terminated these assistance agreements. FS-26 Note 17. Summary Quarterly Financial Data (Unaudited) - ----------------------------------------------------- (in millions except amounts per share)
1993 1992 ------------------------------------------ -------------------------------------- First Second Third Fourth First Second Third Fourth Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter ------------------------------------------- ----------------------------------------- Automotive Sales $22,686 $25,264 $20,107 $23,511 $20,636 $22,903 $19,370 $21,498 Operating income/ (loss) 505 787 (242) 382 243 551 (964) (1,605) Financial Services Revenues 4,077 4,155 4,391 4,330 3,922 3,940 3,955 3,908 Income before income taxes 670 654 732 656 420 483 501 421 Total Company Income/(loss) before cumulative effects of changes in accounting principles $ 572 $ 775 $ 463a/ $ 719b/ $ 223c/ $ 387 $ (272) $ (840)d/ Cumulative effects of changes in accounting principles - - - - (6,883) - - - Net income/(loss) 572 775 463 719 (6,660) 387 (272) (840) Preferred stock dividend requirements 72 72 72 72 48 48 48 65 Income/(loss) attributable to Common and Class B Stock $ 500 $ 703 $ 391 $ 647 $(6,708) $ 339 $ (320) $ (905) ======= ======= ======= ======= ======== ======= ======== ======== AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK AFTER PREFERRED STOCK DIVIDENDSe/ Income/(loss) before cumulative effects of changes in accounting principles $ 1.02 $ 1.43 $ 0.79 $ 1.30 $ 0.36 $ 0.70 $ (0.66) $ (1.85) Cumulative effects of changes in accounting principles - - - - (14.21) - - - ------- ------- ------- ------- ------- ------- ------- ------- Income/(loss) $ 1.02 $ 1.43 $ 0.79 $ 1.30 $(13.85) $ 0.70 $ (0.66) $ (1.85) ======= ======= ======= ======= ======= ======= ======= ======= Income/(loss) assuming full dilution $ 0.95 $ 1.30 $ 0.76 $ 1.19 $(13.85) $ 0.68 $ (0.66) $ (1.85) Dividends $ 0.40 $ 0.40 $ 0.40 $ 0.40 $ 0.40 $ 0.40 $ 0.40 $ 0.40 - - - - - - a/ 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). b/ 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). c/ Includes a gain of $61 million on the sale of the U.S. portion of Ford's Dealer Computer Services business. d/ Includes $419 million of one-time charges principally associated with restructuring actions in Europe. e/ The sum of the per-share amounts in 1993 and 1992 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.
FS-27 Coopers & Lybrand certified public accountants REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders Ford Motor Company We have audited the consolidated financial statements, the financial statement schedules 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, financial statement schedules and supplemental schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements, financial statement schedules 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, 1993 and 1992 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedules and supplemental schedule referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included 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. /s/ COOPERS & LYBRAND COOPERS & LYBRAND 400 Renaissance Center Detroit, Michigan 48243 313-446-7100 February 1, 1994 FS-28 Schedule IX
Ford Motor Company and Subsidiaries SHORT-TERM BORROWINGS For the Years Ended December 31, 1993, 1992 and 1991 (in millions) Weighted Maximum Average Weighted Average Amount Amount Average Balance Interest Outstanding Outstanding Interest Rate Category of Aggregate at End of Rate at End During the During the During the Short-Term Borrowings a/ Period of Period Period b/ Period c/ Period d/ - ----------------------- ------ ----------- ----------- ----------- -------------- AUTOMOTIVE 1993 Bank Borrowings $ 887 5.6% $ 1,004 $ 903 7.1% 1992 Bank Borrowings $ 1,200 8.9% $ 1,552 $ 1,528 8.3% 1991 Bank Borrowings $ 2,479 10.3% $ 3,177 $ 2,519 10.0%
- - - - - - a/At December 31, 1993, Ford (parent company only) had long-term contractually committed credit agreements in the U.S. under which $4.8 billion is available from various banks at least through June 30, 1998. The entire $4.8 billion may be used, at Ford's option, by either Ford or Ford Credit. These facilities were unused at December 31, 1993. Outside the U.S., Ford has additional long-term contractually committed credit-line facilities of approximately $2.4 billion. These facilities are available in varying amounts from 1994 through 1998; these facilities were unused at December 31, 1993. b/For Automotive operations, the maximum amount outstanding during the period represents the maximum quarter-end balance. c/For Automotive operations, the average amount outstanding during the period represents the average of quarter-end balances. d/For Automotive operations, the weighted average interest rate represents total annual short-term interest expense divided by the average quarter-end short-term debt outstanding. FSS-1 Schedule IX
Ford Motor Company and Subsidiaries SHORT-TERM BORROWINGS (Continued) For the Years Ended December 31, 1993, 1992 and 1991 (in millions) Weighted Maximum Average Weighted Average Amount Amount Average Balance Interest Outstanding Outstanding Interest Rate Category of Aggregate at End of Rate at End During the During the During the Short-Term Borrowings a/ Period of Period Period b/ Period c/ Period d/ FINANCIAL SERVICES e/ 1993 Commercial Paper $37,793 3.5% $37,793 $34,199 3.4% Short-Term Borrowing Agreements 444 12.8 480 432 14.9 Bank Debt 5,098 5.7 5,357 4,153 7.2 Other Short-Term Debt 421 6.0 1,248 580 7.6 1992 Commercial Paper $31,446 3.7% $32,888 $28,734 4.0% Short-Term Borrowing Agreements 360 6.9 413 266 7.1 Bank Debt 3,853 9.8 4,273 3,620 11.1 Other Short-Term Debt 1,690 6.3 3,247 2,107 6.4 1991 Commercial Paper $28,151 5.4% $29,953 $27,663 6.1% Short-Term Borrowing Agreements 251 5.4 2,627 1,725 6.5 Bank Debt 4,016 9.9 5,092 3,920 11.4 Other Short-Term Debt 2,876 7.2 3,024 1,800 6.8 - - - - - - a/At December 31, 1993, Financial Services had approximately $24.9 billion of support facilities (including $4.8 billion of the Ford credit lines) for use in the U.S., all of which were contractually committed. At December 31, 1993, less than 1% of these facilities, excluding the Ford credit agreements, were in use. At that date, an additional $14.5 billion of support facilities were available outside the U.S., of which $6.4 billion were contractually committed. At December 31, 1993, $6 billion of these support facilities outside the U.S. were in use. b/For Financial Services operations, the maximum amount outstanding during the period represents the maximum month-end balance. c/For Financial Services operations, the average amount outstanding during the period represents the daily average debt outstanding. d/For Financial Services operations, the weighted average interest rate represents total annual short-term interest expense divided by the daily average debt outstanding. e/U.S. commercial paper, the majority of commercial paper outstanding, is comprised of short-term, unsecured promissory notes with maturities ranging from one day to 270 days. Borrowings under short-term borrowing agreements (STBAs) are payable on demand. Bank debt outstandings range from short-term borrowings to bank notes payable on specific dates. Other short-term debt primarily consists of notes having either a provision for optional redemption within one year or original maturities of less than one year. FSS-2 Schedule X Ford Motor Company and Consolidated Subsidiaries SUPPLEMENTARY INCOME STATEMENT INFORMATION Charged to Costs and Expenses For the Years Ended December 31 1993 1992 1991 (Mils.) (Mils.) (Mils.) Maintenance, repairs and rearrangement expenses $1,933.6 $1,872.0 $1,641.8 Depreciation and amortization of intangible assets, preoperating costs and Not Not Not similar deferrals significant significant significant Taxes, other than payroll Not Not Not and income taxes significant significant significant Royalties Not Not Not significant significant significant Advertising costs $1,772.7 $1,702.3 $1,568.7 FSS-3 Supplemental Schedule
Ford Motor Company CONDENSED FINANCIAL INFORMATION OF SUBSIDIARY (in millions) December 31, December 31, Ford Capital B.V. 1993 1992 Current assets $ 919 $ 894 Noncurrent assets 5,205 5,019 ------ ------ Total assets $6,124 $5,913 ====== ====== Current liabilities $ 434 $ 412 Noncurrent liabilities 5,245 5,100 Minority's interest in net assets of subsidiaries 7 3 Stockholder's equity 438 398 ------ ------ Total liabilities and stockholder's equity $6,124 $5,913 ====== ======
1993 1992 1991 ------- ------- ------- Sales and other revenue $1,935 $2,141 $2,117 Operating income/(loss) 2 (30) 28 Income/(loss) before income taxes and cumulative effects of changes in accounting principles 18 (33) 31 Net income/(loss) 14 (19) 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-4
EXHIBIT INDEX Designation Description Method of Filing - ----------- --------------------------- ------------------------------ Exhibit 3-A Certificate of Incorporation, Filed as Exhibit 3-A to the as amended on November 19, Registrant's Annual Report on 1991 and as further amended Form 10-K for the year ended on October 28, 1992. December 31, 1992. Exhibit 3-B By-Laws of the Registrant as Filed with this Report. amended through December 9, 1993. Exhibit 4-A Form of Deposit Agreement Filed as Exhibit 4-E to dated as of November 20, 1991 the Registrant's among Ford Motor Company, Registration Statement Manufacturers Hanover Trust No. 33-43085.* 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 Convertible Preferred Stock. Exhibit 4-B Form of Deposit Agreement Filed as Exhibit 4-E to dated as of October 29, 1992 the Registrant's among Ford Motor Company, Registration Statement Chemical Bank, as Depositary, No. 33-53092.* 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 Filed with this Report. Agreement dated as of July 1, 1993 between the Registrant and Ford Credit. Exhibit 10-B 1985 Stock Option Plan of Filed as Exhibit 10-D to the Registrant.** the Registrant's Annual Report on Form 10-K for the year ended December 31, 1985.* Exhibit 10-B-1 Amendment dated as of Filed as Exhibit 10-C-1 March 8, 1990 to 1985 Stock to the Registrant's Option Plan.** Annual Report on Form 10-K for the year ended December 31, 1989.
Exhibit Index (Continued)
Designation Description Method of Filing Exhibit 10-C 1980 Stock Option Plan of Filed as Exhibit 10-E to the Registrant, as amended the Registrant's Annual on October 8, 1981.** Report on Form 10-K for the year ended December 31, 1981.* Exhibit 10-C-1 Amendment dated as of Filed as Exhibit 10-D-1 March 8, 1990 to 1980 Stock to the Registrant's Option Plan.** Annual Report on Form 10-K for the year ended December 31, 1989.** Exhibit 10-D Ford Motor Company Filed as Exhibit 10-H Supplemental Compensation to the Registrant's Annual Plan as amended through Report on Form 10-K May 8, 1986.** for the year ended December 31, 1986.* Exhibit 10-D-1 Amendment to Ford Motor Filed as Exhibit 10-F-1 Company Supplemental to the Registrant's Annual Compensation Plan, dated Report on Form 10-K May 12, 1988.** for the year ended December 31, 1988.* Exhibit 10-D-2 Amendment to Ford Motor Filed as Exhibit 10-D-2 to Company Supplemental the Registrant's Annual Compensation Plan, dated Report on Form 10-K for the July 8, 1992.** year ended December 31, 1992.* Exhibit 10-E Ford Motor Company Executive Filed as Exhibit 10-G to Separation Allowance Plan as the Registrant's Annual revised for separations on Report on Form 10-K or after January 1, 1981.** for the year ended December 31, 1987.* Exhibit 10-E-1 Amendment to Ford Motor Filed as Exhibit 10-G-1 Company Executive Separation to the Registrant's Annual Allowance Plan.** Report on Form 10-K for the year ended December 31, 1988.*
Exhibit Index (Continued)
Designation Description Method of Filing Exhibit 10-F Description of Company Filed as Exhibit 10-I to practices regarding club the Registrant's Annual memberships for executives.** Report on Form 10-K for the year ended December 31, 1981.* Exhibit 10-G Description of Company Filed as Exhibit 10-J to practices regarding travel the Registrant's Annual expenses of spouses of Report on Form 10-K certain executives.** for the year ended December 31, 1980.* Exhibit 10-H Ford Motor Company Deferred Filed as Exhibit 10-L to Compensation Plan for Non- the Registrant's Annual Employee Directors, adopted Report on Form 10-K January 13, 1983.** for the year ended December 31, 1982.* Exhibit 10-H-1 Deferred Compensation Plan Filed as Exhibit 10-H-1 to for Non-Employee Directors, the Registrant's Annual as amended on July 11, 1991.** Report on Form 10-K for the year ended December 31, 1991.* Exhibit 10-I Ford Motor Company Benefit Filed as Exhibit 10-K to Equalization Plan, as amended the Registrant's Annual through January 10, 1985.** Report on Form 10-K for the year ended December 31, 1988.* Exhibit 10-I-1 Description of Amendment to Filed as Exhibit 10-K-1 to Ford Motor Company Benefit the Registrant's Annual Equalization Plan adopted Report on Form 10-K on November 10, 1988.** for the year ended December 31, 1988.* Exhibit 10-J Description of Financial Filed as Exhibit 10-N to Counseling Services provided the Registrant's Annual to certain executives.** Report on Form 10-K for for the year ended December 31, 1983.*
Exhibit Index (Continued)
Designation Description Method of Filing Exhibit 10-K Agreement and Plan of Reor- Filed as Exhibit 2 to ganization Among Ford Motor the Registrant's Current Company and Ford Affiliate Report on Form 8-K dated Company and National Inter- December 16, 1985.* group, Inc. and NHC Corpor- ation and First Nationwide Financial Corporation dated as of August 2, 1985. Exhibit 10-L 1986 Long-Term Incentive Plan Filed as Exhibit 10-Q to of the Registrant.** the Registrant's Annual Report on Form 10-K for the year ended December 31, 1985.* Exhibit 10-L-1 Amendment dated as of June 1, Filed as Exhibit 10-N-1 1990 to 1986 Long-Term Incen- to the Registrant's tive Plan of the Annual Report on Form 10-K Registrant.** for the year ended December 31, 1990.* Exhibit 10-M Supplemental Executive Filed as Exhibit 10-R to Retirement Plan, as amended the Registrant's Annual as of December 11, 1986.** Report on Form 10-K December 31, 1986.* Exhibit 10-M-1 Description of Amendment to Filed as Exhibit 10-O-1 the Supplemental Executive to the Registrant's Retirement Plan, adopted Annual Report on Form 10-K July 13, 1989.** for the year ended December 31, 1990.* Exhibit 10-M-2 Description of Amendment to Filed as Exhibit 10-M-2 the Supplemental Executive to the Registrant's Retirement Plan, adopted Annual Report on Form 10-K October 10, 1991.** for the year ended December 31, 1991.* Exhibit 10-M-3 Description of Amendment to Filed as Exhibit 10-M-3 the Supplemental Executive to the Registrant's Retirement Plan, adopted Annual Report on Form 10-K October 8, 1992.** for the year ended December 31, 1992.*
Exhibit Index (Continued)
Designation Description Method of Filing Exhibit 10-M-4 Description of Amendment to Filed with this Report. the Supplemental Executive Retirement Plan, adopted October 1, 1993.** Exhibit 10-N Ford Motor Company Restricted Filed as Exhibit 10-P to Stock Plan for Non-Employee the Registrant's Annual Directors adopted by the Board Report on Form 10-K of Directors on November 10, for the year ended 1988, and approved by the December 31, 1988.* stockholders at the 1989 Annual Meeting.** Exhibit 10-O 1990 Long-Term Incentive Plan, Filed as Exhibit 10-R to amended as of June 1, 1990, of the Registrant's Annual the Registrant.** Report on Form 10-K for the year ended December 31, 1990.* Exhibit 10-O-1 Amendment to 1990 Long-Term Filed as Exhibit 10-P-1 Incentive Plan, effective as to the Registrant's Annual of October 1, 1990.** Report on Form 10-K for the year ended December 31, 1991.* Exhibit 10-P Description of Matching Gift Filed as Exhibit 10-Q to Program for Non-Employee the Registrant's Annual Directors.** Report on Form 10-K for the year ended December 31, 1991.* Exhibit 10-Q Description of Non-Employee Filed as Exhibit 10-R to Directors Life Insurance the Registrant's Annual and Optional Retirement Report on Form 10-K for Plan (amended as of the year ended December January 1, 1993).** 31, 1992.* Exhibit 10-R Description of Non-Employee Filed as Exhibit 10-S to Directors Accidental Death, the Registrant's Annual Dismemberment and Permanent Report on Form 10-K for Total Disablement the year ended December Indemnity.** 31, 1992.*
Exhibit Index (Continued)
Designation Description Method of Filing Exhibit 10-S Agreement dated December 10, Filed as Exhibit 10-T to 1992 between William C. Ford the Registrant's Annual and the Registrant.** Report on Form 10-K for the year ended December 31, 1992.* Exhibit 10-T Support Agreement dated as of Filed with this Report. October 1, 1993 between the Registrant and Ford Credit Europe. Exhibit 10-U Description of Amendments to Filed with this Report. Company Benefit Plans, including the Supplemental Executive Retirement Plan, Benefit Equalization Plan and Executive Separation Allowance Plan, adopted December 9, 1993.** Exhibit 11 Computation of Primary and Filed with this Report. Fully Diluted Earnings a Share. Exhibit 12 Computation of Ratio of Filed with this Report. Earnings to Combined Fixed Charges and Preferred Stock Dividends. Exhibit 21 List of Subsidiaries of Filed with this Report. the Registrant as of December 31, 1993. Exhibit 23 Consent of Independent Filed with this Report. Certified Public Accountants. Exhibit 24 Powers of Attorney. Filed with this Report. * Incorporated by reference as an exhibit hereto ** Management contract or compensatory plan or arrangement
EX-3.B 2 EXHIBIT 3B Exhibit 3-B BY-LAWS OF FORD MOTOR COMPANY ARTICLE I OFFICES The registered office of the Company shall be in the City of Wilmington, County of New Castle, State of Delaware. The Company may also have an office in the City of Dearborn, State of Michigan, and at such other places as the Board of Directors may from time to time determine or as the business of the Company may require. The books and records of the Company may be kept (except as otherwise provided by law) at the office of the Company in the City of Dearborn, State of Michigan, outside of the State of Delaware, or at such other places as from time to time may be determined by the Board of Directors. ARTICLE II STOCKHOLDERS Section 1. Annual Meeting. The annual meeting of the stockholders for the purpose of electing directors and of transacting such other business as may come before it shall be held in the City of Detroit, State of Michigan, unless otherwise determined by the Board of Directors, on the second Thursday of May in each and every year, if not a legal holiday, and if a legal holiday then on the next day not a legal holiday. The Board of Directors shall, by resolution duly adopted, fix the place within the City of Detroit, Michigan, or elsewhere if so determined, and the time for the holding of each such meeting. At least twenty (20) days' notice shall be given to each stockholder entitled to vote at such meeting of the place and time so fixed. Section 2. Special Meetings. Special meetings of the stockholders shall be held at the office of the Company in the City of Dearborn, State of Michigan, unless otherwise determined by resolution of the stockholders or of the Board of Directors, whenever called in the manner required by law for purposes as to which there are special statutory provisions, and for other purposes whenever called by the Chairman of the Board of Directors, a Vice Chairman of the Board of Directors or the President, or by resolution of the Board of Directors, and whenever the holders of thirty percent (30%) or more of the total number of outstanding shares of any class of stock the holders of which are entitled to vote on every matter that is to be voted on without regard to class at such meeting shall file with the Secretary a written application for such meeting stating the time and purpose thereof. -1- Section 3. Notice of Meetings. Except as otherwise provided by law, at least twenty (20) days' notice of stockholders' meetings stating the time and place and the objects thereof shall be given by the Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, the President or the Secretary to each stockholder of record having voting power in respect of the business to be transacted thereat. No business other than that stated in the notice shall be transacted at any meeting. Section 4. Quorum. At any meeting of the stockholders the number of shares the holders of which shall be present or represented by proxy in order to constitute a quorum for, and the votes that shall be necessary for, the transaction of any business shall be as expressly provided in Article FOURTH of the Certificate of Incorporation, as amended. At any meeting of stockholders at which a quorum is not present, the holders of shares entitled to cast a majority of all of the votes (computed, in the case of each share of Class B Stock, as provided in subsection 1.3 of said Article FOURTH) which could be cast at such meeting by the holders of outstanding shares of stock of the Company who are present in person or by proxy and who are entitled to vote on every matter that is to be voted on without regard to class at such meeting may adjourn the meeting from time to time. Section 5. Organization. The Chairman of the Board of Directors shall act as chairman of meetings of the stockholders. The Board of Directors may designate any other officer or director of the Company to act as chairman of any meeting in the absence of the Chairman of the Board of Directors, and the Board of Directors may further provide for determining who shall act as chairman of any stockholders meeting in the absence of the Chairman of the Board of Directors and such designee. The Secretary of the Company shall act as secretary of all meetings of the stockholders, but in the absence of the Secretary the presiding officer may appoint any other person to act as secretary of any meeting. Section 6. Proxies and Voting. Every stockholder entitled to vote at any meeting may vote in person, or by proxy appointed by an instrument in writing, subscribed by such stockholder or by his or her duly authorized attorney, and filed with the Secretary before being voted on, but no proxy shall be voted after three years from its date unless such proxy provides expressly for a longer period. Shares of the Company's stock belonging to the Company shall not be voted upon directly or indirectly. Section 7. Stock Lists. A complete list of stockholders entitled to vote at any meeting of stockholders shall be prepared, in alphabetical order by class, by the Secretary and shall be open to the examination of any stockholder, at the -2- place where the meeting is to be held, for at least ten days before the meeting and during the whole time of the meeting. Section 8. Ratification. Any transaction questioned in any stockholders' derivative suit, or any other suit to enforce alleged rights of the Company or any of its stockholders, on the ground of lack of authority, defective or irregular execution, adverse interest of any director, officer or stockholder, nondisclosure, miscomputation or the application of improper principles or practices of accounting may be approved, ratified and confirmed before or after judgment by the Board of Directors or by the holders of Common Stock and the holders of Class B Stock voting as provided in subsection 1.6 of Article FOURTH of the Certificate of Incorporation, as amended, and, if so approved, ratified or confirmed, shall have the same force and effect as if the questioned transaction had been originally duly authorized, and said approval, ratification or confirmation shall be binding upon the Company and all of its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction. Section 9. Judges. All votes by ballot at any meeting of stockholders shall be conducted by two judges appointed for the purpose either by the directors or by the meeting. The judges shall decide upon the qualifications of voters, count the votes and declare the result. ARTICLE III BOARD OF DIRECTORS Section 1. Number, Term of Office and Eligibility. Except as provided by the laws of the State of Delaware or by the Certificate of Incorporation, as amended, the business and the property of the Company shall be managed by or under the direction of a Board of not less than fifteen and not more than twenty-two directors, the exact number of which shall be fixed from time to time by resolution of the Board. Each director shall be elected annually by ballot by the holders of Common Stock and the holders of Class B Stock voting as provided in subsection 1.6 of Article FOURTH of the Certificate of Incorporation, as amended, at the annual meeting of stockholders, to serve until his or her successor shall have been elected and shall have qualified, except as provided in this Section. No person may be elected or re-elected a director of the Company if at the time of his or her election or re-election he or she shall have attained the age of seventy years, and the term of any director who shall have attained such age while serving as a director shall terminate as of the time of the first annual meeting of stockholders following his or her seventieth birthday; provided, however, that the Board by resolution may waive such age limitation in any year and from year to year with respect to any director or directors. -3- Section 2. Meetings. The directors may hold their meetings outside of the State of Delaware, at the office of the Company in the City of Dearborn, State of Michigan, or at such other place as from time to time they may determine. The annual meeting of the Board of Directors, for the election of officers and the transaction of other business, shall be held at the World Headquarters of the Company in Dearborn, Michigan, on the same day as, and as soon as practicable following, the annual meeting of stockholders, or at such other time or place as shall be determined by the Board at its regular meeting next preceding said annual meeting of stockholders. No notice of said annual meeting of the Board shall be required to be given to the directors. Regular meetings of the Board of Directors may be held at such time and place as shall from time to time be determined by the Board. Special meetings of the Board of Directors shall be held whenever called by direction of the Chairman of the Board of Directors, a Vice Chairman of the Board of Directors or the President or by one-third of the directors then in office. Section 3. Notice of Meetings. The Secretary or an Assistant Secretary shall give notice of the time and place of holding of meetings of the Board of Directors (excepting the annual meeting of directors) by mailing such notice not later than during the second day preceding the day on which such meeting is to be held, or by sending a cablegram, facsimile transmission, mailgram, radiogram, telegram or other form of recorded communication containing such notice or delivering such notice personally or by telephone not later than during the first day preceding the day on which such meeting is to be held to each director. Unless otherwise stated in the notice thereof any and all business may be transacted at any meeting. Section 4. Quorum and Organization of Meetings. A third of the total number of members of the Board of Directors as constituted from time to time, but in no event less than three, shall constitute a quorum for the transaction of business; but if at any meeting of the Board of Directors there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time, and the meeting may be held as adjourned without further notice or waiver. Except as otherwise provided by law or by the Certificate of Incorporation, as amended, or by these By-Laws, a majority of the directors present at any duly constituted meeting may decide any question brought before such meeting. Meetings shall be presided over by the Chairman of the Board of Directors, or in his or her absence, by a Vice Chairman of the Board of Directors or the President, as designated by the Board of Directors, or in the absence of all of the aforesaid officers by such other person as the Board of Directors may designate or the members present may select. -4- Section 5. Powers. In addition to the powers and authorities by these By-Laws expressly conferred upon them, the Board of Directors shall have and may exercise all such powers of the Company and do all such lawful acts and things that are not by statute or by the Certificate of Incorporation, as amended, or by these By-Laws directed or required to be exercised or done by the stockholders. Without prejudice to or limitation of such general powers and any other powers conferred by statute, or by the Certificate of Incorporation, as amended, or by these By-Laws, the Board of Directors shall have the following powers: (1) To determine, subject to the requirements of law and of Section 5 of Article FOURTH of the Certificate of Incorporation, as amended, what, if any, dividends shall be declared and paid to the stockholders out of net profits, current or accumulated, or out of surplus or other assets of the Company available for dividends. (2) To fix, and from time to time to vary, the amount of working capital of the Company, and to set aside from time to time out of net profits, current or accumulated, or surplus of the Company such amount or amounts as they in their discretion may deem necessary and proper as, or as a safeguard to the maintenance of, working capital, as a reserve for contingencies, as a reserve for repairs, maintenance, or rehabilitation, or as a reserve for revaluation of profits of the Company or for such other proper purpose as may in the opinion of the directors be in the best interests of the Company; and in their sole discretion to abolish or modify any such provision for working capital or any such reserve, and to credit the amount thereof to net profits, current or accumulated, or to the surplus of the Company. (3) To purchase, or otherwise acquire for the Company, any business, property, rights or privileges which the Company may at the time be authorized to acquire, at such price or consideration and generally on such terms and conditions as they think fit; and at their discretion to pay therefor either wholly or partly in money, stock, bonds, debentures or other securities of the Company. (4) To create, make and issue mortgages, bonds, deeds of trust, trust agreements or negotiable or transferable instruments or securities, secured by mortgage or otherwise, and to do every other act and thing necessary to effect the same. (5) To appoint any person or corporation to accept and hold in trust for the Company any property belonging to the Company, or in which it is interested, or for any other purpose, and to execute such deeds and do all things requisite in relation to any such trust. -5- (6) To delegate any of the powers of the Board in the course of the business of the Company to any officer, employee or agent, and to appoint any person the agent of the Company, with such powers (including the power to subdelegate) and upon such terms as the Board may think fit. (7) To remove any officer of the Company with or without cause, and from time to time to devolve the powers and duties of any officer upon any other person for the time being. (8) To confer upon any officer of the Company the power to appoint, remove and suspend subordinate officers, agents and employees. (9) To determine who shall be authorized on the Company's behalf, either generally or specifically, to make and sign bills, notes, acceptances, endorsements, checks, releases, receipts, contracts, conveyances, and all other written instruments executed on behalf of the Company. (10) To make and change regulations, not inconsistent with these By-Laws, for the management of the Company's business and affairs. (11) To adopt and, unless otherwise provided therein, to amend and repeal, from time to time, a bonus or supplemental compensation plan for employees (including employees who are officers or directors) of the Company or any subsidiary. Power to construe, interpret, administer, modify or suspend such plan shall be vested in the Board of Directors or a committee thereof. (12) To adopt a retirement plan, or plans, for the purpose of making retirement payments to employees (including employees who are officers or directors) of the Company or of any subsidiary thereof; and to adopt a group insurance plan, or plans, for the purpose of enabling employees (including employees who are officers or directors) of the Company or of any subsidiary thereof to acquire insurance protection; any such retirement plan or insurance plan, unless otherwise provided therein, shall be subject to amendment or revocation by the Board of Directors. Section 6. Reliance upon Books, Reports and Records. Each director, each member of any committee designated by the Board of Directors and each officer, in the performance of his or her duties, shall be fully protected in relying in good faith upon the books of account or reports made to the Company by any of its officials, or by an independent certified public accountant, or by an appraiser selected with reasonable care by the Board of Directors or by any such committee, or in relying in good faith upon other records of the Company. Section 7. Compensation of Directors. Directors, as such, may receive, pursuant to resolution of the Board of Directors, fixed fees and other compensation for their services as directors, including, without limitation, services as members of committees of the directors; provided, however, that nothing herein contained shall be construed to preclude any director from serving the Company in any other capacity and receiving compensation therefor. ARTICLE IV COMMITTEES Section 1. Committees of the Board of Directors. There are hereby established as committees of the Board of Directors a Finance Committee, an Audit Committee, a Compensation and Option Committee, and an Organization Review and Nominating Committee, each of which shall have the powers and functions set forth in Sections 2, 3, 4, and 5 hereof, respectively, and such additional powers as may be delegated to it by the Board of Directors. The Board of Directors may from time to time establish additional standing committees or special committees of the Board of Directors, each of which shall have such powers and functions as may be delegated to it by the Board of Directors. The Board of Directors may abolish any committee established by or pursuant to this Section 1 as it may deem advisable. Each such committee shall consist of two or more directors, the exact number being determined from time to time by the Board of Directors; provided, however, that membership on the Audit Committee and on the Compensation and Option Committee shall be limited to directors who are not officers or employees of the Company. Designations of the Chairman and members of each such committee, and, if desired, a Vice Chairman and alternates for members, shall be made by the Board of Directors. Each such committee shall have a secretary who shall be designated by its chairman. A vice chairman of a committee shall act as the chairman of the committee in the absence or disability of the chairman. Section 2. Finance Committee. The Finance Committee shall include the Chairman of the Board of Directors, the Vice Chairmen of the Board of Directors, the President, and the Executive Vice President and Chief Financial Officer, together with such other directors as the Board of Directors shall designate. The Committee during intervals between meetings of the Board of Directors shall have, and may exercise in such manner as it shall deem to be in the best interests of the Company, all the powers of the Board of Directors (except with respect to matters within the powers of the Audit Committee or the Compensation and Option Committee) concerning the determination of financial policies of the Company and the management of its financial affairs, not inconsistent, however, with law or with such specific directions as to the conduct of affairs as shall have been given by the Board of Directors. The Committee also shall perform such other -7- functions and exercise such other powers as may be delegated to it from time to time by the Board of Directors. The Committee may redelegate from time to time and to the full extent permitted by law, in writing, to any officer or employee of the Company any of such powers. During intervals between meetings of the Committee, the Chairman, and, if any, the Vice Chairman, of the Committee shall have and may exercise such of the powers of the Committee as from time to time shall be conferred upon them by resolution of the Board of Directors or of the Finance Committee. All actions by the Committee shall be reported to the Board of Directors and shall be subject to revision by the Board of Directors, provided no acts or rights of third parties shall be affected thereby. Section 3. Audit Committee. The Audit Committee shall select and engage, on behalf of the Company, independent public accountants to (1) audit the books of account and other corporate records of the Company and (2) perform such other duties as the Committee may from time to time prescribe. The Committee shall transmit financial statements certified by such independent public accountants to the Board of Directors after the close of each fiscal year. The selection of independent public accountants for each fiscal year shall be made in advance of the annual meeting of stockholders in such fiscal year and shall be submitted for ratification or rejection at such meeting. The Committee shall confer with such accountants and review and approve the scope of the audit of the books of account and other corporate records of the Company. The Committee shall have the power to confer with and direct the officers of the Company to the extent necessary to review the internal controls, accounting practices, financial structure and financial reporting of the Company. From time to time the Committee shall report to and advise the Board of Directors concerning the results of its consultation and review and such other matters relating to the internal controls, accounting practices, financial structure and financial reporting of the Company as the Committee believes merit review by the Board of Directors. The Committee also shall perform such other functions and exercise such other powers as may be delegated to it from time to time by the Board of Directors. Section 4. Compensation and Option Committee. The Compensation and Option Committee shall fix from time to time the salaries of members of the Board of Directors who are officers or employees of the Company and of all Executive Vice Presidents, Group Vice Presidents and Vice Presidents of the Company. It also shall perform such functions as may be delegated to it under the provisions of any bonus, supplemental compensation, special compensation or stock option plan of the Company. Section 5. Organization Review and Nominating Committee. The Organization Review and Nominating Committee from time to time shall consider and make recommendations to the Board of Directors, to the -8- Chairman of the Board of Directors and to the Chief Operating Officer with respect to the management organization of the Company, the nominations or elections of directors and officers of the Company and the appointments of such other employees of the Company as shall be referred to the Committee. The Committee from time to time shall consider the size and composition of the Board of Directors and make recommendations to the Board of Directors with respect to such matters. Prior to the annual meeting of stockholders each year, and prior to any special meeting of stockholders at which a director is to be elected, the Committee shall recommend to the Board of Directors persons proposed to constitute the nominees whose election at such meeting will be recommended by the Board of Directors. The authority vested in the Committee by this section shall not derogate from the power of individual members of the Board of Directors to recommend or place in nomination persons other than those recommended by the Committee. The Committee also shall perform such other functions and exercise such other powers as may be delegated to it from time to time by the Board of Directors. Section 6. Other Committees. The Board of Directors, or any committee, officer or employee of the Company may establish additional standing committees or special committees to serve in an advisory capacity or in such other capacities as may be permitted by law, by the Certificate of Incorporation and by the By-Laws. The members of any such committee need not be members of the Board of Directors. Any committee established pursuant to this Section 6 may be abolished by the person or body by whom it was established as he, she or it may deem advisable. Each such committee shall consist of two or more members, the exact number being determined from time to time by such person or body. Designations of members of each such committee and, if desired, alternates for members, shall be made by such person or body, at whose will all such members and alternates shall serve. The chairman of each such committee shall be designated by such person or body. Each such committee shall have a secretary who shall be designated by the chairman. Section 7. Rules and Procedures. Each committee may fix its own rules and procedures and shall meet at such times and places as may be provided by such rules, by resolution of the committee, or by call of the chairman or vice chairman. Notice of meeting of each committee, other than of regular meetings provided for by its rules or resolutions, shall be given to committee members. The presence of one-third of its members, but not less than two, shall constitute a quorum of any committee, and all questions shall be decided by a majority vote of the members present at the meeting. All action taken at each committee meeting shall be recorded in minutes of the meeting. -9- Section 8. Application of Article. Whenever any provision of any other document relating to any committee of the Company named therein shall be in conflict with any provision of this Article IV, the provisions of this Article IV shall govern, except that if such other document shall have been approved by the stockholders, voting as provided in the Certificate of Incorporation, or by the Board of Directors, the provisions of such other document shall govern. ARTICLE V OFFICERS Section 1. Officers. The Officers of the Company shall include a Chairman of the Board of Directors and may include one or more Vice Chairmen of the Board of Directors and a President, each of whom shall be chosen from among the directors, and one or more Executive Vice Presidents, one or more Group Vice Presidents, one or more Vice Presidents, a Treasurer, a Controller and a Secretary, each of whom shall be elected by the Board of Directors to hold office until his or her successor shall have been chosen and shall have qualified. The Board of Directors may elect or appoint one or more Assistant Treasurers, one or more Assistant Secretaries, and such other officers as it may deem necessary, or desirable, each of whom shall have such authority, shall perform such duties and shall hold office for such term as may be prescribed by the Board of Directors from time to time. Any person may hold at one time more than one office. Section 2. Office of the Chief Executive. The Chairman of the Board of Directors and such other members as the Chief Executive Officer shall designate shall constitute the Office of the Chief Executive. Subject to the provisions of these By-Laws and to the direction of the Board of Directors and the Chief Executive Officer, the members of this Office shall share in the responsibilities for the general management and control of the affairs and business of the Company. Section 3. Chairman of the Board of Directors. The Chairman of the Board of Directors shall be the Chief Executive Officer of the Company. He or she shall be a member of the Office of the Chief Executive and, a subject to the provisions of these By-Laws and to the direction of the Board of Directors, shall have ultimate authority for decisions relating to the general management and control of the affairs and business of the Company and shall perform all other duties and exercise all other powers commonly incident to the position of Chief Executive Officer or which are or from time to time may be delegated to him or her by the Board of Directors, or which are or may at any time be authorized or required by law. He or she shall preside at all meetings of the Board of Directors. He or she may redelegate from time to time and to the full extent permitted by law, in writing, to officers or employees of -10- the Company any or all of such duties and powers, and any such redelegation may be either general or specific. Whenever he or she so shall delegate any of his or her authority, he or she shall file a copy of the redelegation with the Secretary of the Company. Section 4. Vice Chairmen of the Board of Directors. Subject to the provisions of these By-Laws and to the direction of the Board of Directors and of the Chief Executive Officer, the Vice Chairmen shall have such powers and shall perform such duties as from time to time may be delegated to them by the Board of Directors or by the Chief Executive Officer, or which are or may at any time be authorized or required by law. Section 5. President. Subject to the provisions of these By-Laws and to the direction of the Board of Directors and of the Chief Executive Officer, the President shall have such powers and shall perform such duties as from time to time may be delegated to him or her by the Board of Directors or by the Chief Executive Officer, or which are or may at any time be authorized or required by law. Section 6. Chief Operating Officer. The Chief Operating Officer shall be selected from among the Vice Chairmen and the President by the Board of Directors. Subject to the provisions of these By-Laws and to the direction of the Board of Directors and of the Chief Executive Officer, he or she shall have such powers and shall perform such duties as from time to time may be delegated to him or her by the Board of Directors or by the Chief Executive Officer, or which are or may at any time be authorized or required by law. In the absence or disability of the Chairman of the Board of Directors, or in the event of, and during the period of, a vacancy in such office, the Chief Operating Officer also shall be the Chief Executive Officer. Section 7. Executive Vice Presidents, Group Vice Presidents and Vice Presidents. Each of the Executive Vice Presidents, each of the Group Vice Presidents and each of the other Vice Presidents shall have such powers and shall perform such duties as may be delegated to him or her by the Board of Directors, by the Chairman of the Board of Directors or by the Chief Operating Officer. In addition, the Board of Directors shall designate one of the Executive Vice Presidents as the Chief Financial Officer, who, among his or her other powers and duties, shall provide and maintain, subject to the direction of the Board of Directors and the Finance Committee, financial and accounting controls over the business and affairs of the Company. Such office shall maintain, among others, adequate records of the assets, liabilities and financial transactions of the Company, and shall direct the preparation of financial statements, reports and analyses. The Chief Financial Officer shall perform such other duties and exercise such other -11- powers as are incident to such functions, subject to the control of the Board of Directors. Section 8. Treasurer and Assistant Treasurer. The Treasurer, subject to the direction of the Board of Directors, shall have the care and custody of all funds and securities which may come into his or her hands. When necessary or proper he or she shall endorse on behalf of the Company, for collection, checks, notes and other obligations, and shall deposit all funds of the Company in such banks or other depositaries as may be designated by the Board of Directors or by such officers or employees as may be authorized by the Board of Directors so to designate. He or she shall perform all acts incident to the office of Treasurer, subject to the control of the Board of Directors. He or she may be required to give a bond for the faithful discharge of his or her duties, in such sum and upon such conditions as the Board of Directors may require. At the request of the Treasurer, any Assistant Treasurer, in the case of the absence or inability to act of the Treasurer, temporarily may act in his or her place. In the case of the death of the Treasurer, or in the case of his or her absence or inability to act without having designated an Assistant Treasurer to act temporarily in his or her place, the Assistant Treasurer so to perform the duties of the Treasurer shall be designated by the Chairman of the Board of Directors, the Chief Operating Officer or an Executive Vice President. Section 9. Secretary and Assistant Secretary. The Secretary shall keep the minutes of the meetings of the stockholders and of the Board of Directors, and, when required, the minutes of meetings of the committees, and shall be responsible for the custody of all such minutes. Subject to the direction of the Board of Directors, the Secretary shall have custody of the stock ledgers and documents of the Company. He or she shall have custody of the corporate seal and shall affix and attest such seal to any instrument whose execution under seal shall have been duly authorized. He or she shall give notice of meetings and, subject to the direction of the Board of Directors, shall perform all other duties and enjoy all other powers commonly incident to his or her office. At the request of the Secretary, any Assistant Secretary, in the case of the absence or inability to act of the Secretary, temporarily may act in his or her place. In the case of the death of the Secretary, or in the case of his or her absence or inability to act without having designated an Assistant Secretary to act temporarily in his or her place, the Assistant Secretary or other person so to perform the duties of the Secretary shall be designated by the Chairman of the Board of Directors, the Chief Operating Officer or an Executive Vice President. -12- Section 10. General Counsel. The Company may have a General Counsel who shall be appointed by the Board of Directors and who shall have general supervision of all matters of a legal nature concerning the Company. Section 11. Controller. The Controller shall have such powers and shall perform such duties as may be delegated to him or her by the Board of Directors, the Chairman of the Board of Directors, the Chief Operating Officer or the appropriate Executive Vice President, Group Vice President or Vice President. Section 12. Salaries. Salaries of officers, agents or employees shall be fixed from time to time by the Board of Directors or by such committee or committees, or person or persons, if any, to whom such power shall have been delegated by the Board of Directors. An employment contract, whether with an officer, agent or employee, if expressly approved or specifically authorized by the Board of Directors, may fix a term of employment thereunder; and such contract, if so approved or authorized, shall be valid and binding upon the Company in accordance with the terms thereof, provided that this provision shall not limit or restrict in any way the right of the Company at any time to remove from office, discharge or terminate the employment of any such officer, agent or employee prior to the expiration of the term of employment under any such contract, except that the Company shall not thereby be relieved of any continuing liability for salary or other compensation provided for in such contract. ARTICLE VI RESIGNATIONS, REMOVALS AND VACANCIES Section 1. Resignations. Any director, officer or agent of the Company, or any member of any committee, may resign at any time by giving written notice to the Board of Directors, to the Chairman of the Board of Directors, to a Vice Chairman of the Board of Directors, to the President or to the Secretary of the Company. Any such resignation shall take effect at the time specified therein, or if the time be not specified therein, then upon receipt thereof. The acceptance of such resignation shall not be necessary to make it effective. Section 2. Removals. At any meeting thereof called for the purpose, the holders of Common Stock and the holders of Class B Stock voting as provided in subsection 1.6 of Article FOURTH of the Certificate of Incorporation, as amended, may remove from office or terminate the employment of any director, officer or agent with or without cause; and the Board of Directors, by vote of not less than a majority of the entire Board at any meeting thereof called for -13- the purpose, may, at any time, remove from office or terminate the employment of any officer, agent or member of any committee. Section 3. Vacancies. Subject to the last sentence of Section 1 of Article III, any vacancy in the office of any director, officer or agent through death, resignation, removal, disqualification, increase in the number of directors or other cause may be filled by the Board of Directors (in the case of vacancies in the Board, by the affirmative vote of a majority of the directors then in office, even though less than a quorum remains) and the person so elected shall hold office until his or her successor shall have been elected and shall have qualified. ARTICLE VII CAPITAL STOCK-DIVIDENDS-SEAL Section 1. Certificates of Shares. The certificates for shares of the capital stock of the Company shall be in such form, not inconsistent with the Certificate of Incorporation, as amended, as shall be approved by the Board of Directors. The certificates shall be signed by the Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, the President, an Executive Vice President, a Group Vice President or a Vice President, and also by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary. Any and all signatures may be facsimiles. All certificates shall bear the name of the person owning the shares represented thereby, shall state the number of shares represented by such certificate and the date of issue; and such information shall be entered in the Company's original stock ledger. Section 2. Addresses of Stockholders. It shall be the duty of every stockholder to notify the Company of his or her post office address and of any change therein. The latest address furnished by each stockholder shall be entered on the original stock ledger of the Company and the latest address appearing on such original stock ledger shall be deemed conclusively to be the post office address and the last-known post office address of such stockholder. If any stockholder shall fail to notify the Company of his or her post office address, it shall be sufficient to send corporate notices to such stockholder at the address, if any, understood by the Secretary to be his or her post office address, or in the absence of such address, to such stockholder, at the General Post Office in the City of Wilmington, State of Delaware. Section 3. Lost, Destroyed or Stolen Certificate. Any person claiming a stock certificate in lieu of one lost, destroyed or stolen, shall give the Company an affidavit as to his, her or -14- its ownership of the certificate and of the facts which go to prove that it has been lost, destroyed or stolen. If required by the Board of Directors, he, she or it also shall give the Company a bond, in such form as may be approved by the Board of Directors, sufficient to indemnify the Company against any claim that may be made against it on account of the alleged loss of the certificate or the issuance of a new certificate. Section 4. Fixing a Record Date. The Board of Directors may fix in advance a date not exceeding (i) sixty (60) days preceding the date of any meeting of stockholders, or the date for payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of stock shall go into effect (other than conversions or exchanges pursuant to Sections 2, 3 or 4 of Article FOURTH of the Certificate of Incorporation, as amended), as a record date for the determination of the stockholders entitled to notice of and to vote at any such meeting and any adjournment thereof, or entitled to payment of any such dividend or to any such allotment of rights or to exercise the rights in respect of any such change, or conversion or exchange of stock (other than conversions or exchanges pursuant to Sections 2, 3 or 4 of Article FOURTH of the Certificate of Incorporation, as amended), or (ii), ten (10) days after adoption of the resolution fixing such date, as a record date for the determination of the stockholders entitled to consent in writing to corporate action; and in any such case, such stockholders and only such stockholders, as shall be stockholders of record on the date so fixed, shall be entitled, subject to the provisions of Article FOURTH of the Certificate of Incorporation, as amended, to such notice of and to vote at such meeting and any adjournment thereof or to receive payment of such dividend or to receive such allotment of rights or to exercise such rights or to give such consent, as the case may be, notwithstanding any transfer of any stock on the books of the Company after such record date. Section 5. Regulations. The Board of Directors shall have power and authority to make all such rules and regulations not inconsistent with any of the provisions of Sections 2, 3, 4 or 5 of Article FOURTH of the Certificate of Incorporation, as amended, as it may deem expedient, concerning the issue, transfer and registration of certificates for shares of the stock of the Company. Section 6. Corporate Seal. The corporate seal shall have inscribed thereon the name of the Company, the year of its organization, and the words "Corporate Seal" and "Delaware." If and when so authorized by the Board of Directors, a duplicate of the seal may be kept and used by the Secretary or Treasurer or by any Assistant Secretary or Assistant Treasurer. -15- ARTICLE VIII EXECUTION OF CONTRACTS AND OTHER DOCUMENTS Section 1. Contracts, etc. Except as otherwise prescribed in these By-Laws, such officers, employees or agents of the Company as shall be specified by the Board of Directors shall sign, in the name and on behalf of the Company, all deeds, bonds, contracts, mortgages and other instruments or documents, the execution of which shall be authorized by the Board of Directors; and such authority may be general or confined to specific instances. Except as so authorized by the Board of Directors, no officer, agent or employee of the Company shall have power or authority to bind the Company by any contract or engagement or to pledge, mortgage, sell or otherwise dispose of its credit or any of its property or to render it pecuniarily liable for any purpose or in any amount. Section 2. Checks, Drafts, etc. Except as otherwise provided in these By-Laws, all checks, drafts, notes, bonds, bills of exchange or other orders, instruments or obligations for the payment of money shall be signed by such officer or officers, employee or employees, or agent or agents, as the Board of Directors shall by resolution direct. The Board of Directors may, in its discretion, also provide by resolution for the countersignature or registration of any or all such orders, instruments or obligations for the payment of money. ARTICLE IX FISCAL YEAR The fiscal year of the Company shall begin the first day of January in each year. ARTICLE X MISCELLANEOUS Section 1. Original Stock Ledger. As used in these By-Laws and in the Certificate of Incorporation, as amended, the words "original stock ledger" shall mean the record maintained by the Secretary of the Company of the name and address of each of the holders of shares of any class of stock of the Company, and the number of shares and the numbers of the certificates for such shares held by each of them, taking into account transfers at the time made by and recorded on the transfer sheets of each of the Transfer Agents of the Company although such transfers may not then have been posted in the record maintained by the Secretary. -16- Section 2. Notices and Waivers Thereof. Whenever any notice whatever is required by these By-Laws or by the Certificate of Incorporation, as amended, or by any of the laws of the State of Delaware to be given to any stockholder, director or officer, such notice, except as otherwise provided by the laws of the State of Delaware, may be given personally or by telephone or be given by cablegram, facsimile transmission, mailgram, radiogram, telegram or other form of recorded communication, addressed to such stockholder at the address set forth as provided in Section 2 of Article VII, or to such director or officer at his or her Company location, if any, or at such address as appears on the books of the Company, or the notice may be given in writing by depositing the same in a post office, or in a regularly maintained letter box, in a postpaid, sealed wrapper addressed to such stockholder at the address set forth in Section 2 of Article VII, or to such director or officer at his or her Company location, if any, or such address as appears on the books of the Company. Any notice given by cablegram, mailgram, radiogram or telegram shall be deemed to have been given when it shall have been delivered for transmission. Any notice given by facsimile transmission or other form of recorded communication shall be deemed to have been given when it shall have been transmitted. Any notice given by mail shall be deemed to have been given when it shall have been mailed. A waiver of any such notice in writing, including by cablegram, facsimile transmission, mailgram or telegram, signed or dispatched by the person entitled to such notice or by his or her duly authorized attorney, whether before or after the time stated therein, shall be deemed equivalent to the notice required to be given, and the presence at any meeting of any person entitled to notice thereof shall be deemed a waiver of such notice as to such person. Section 3. Voting upon Stocks. The Board of Directors (whose authorization in this connection shall be necessary in all cases) may from time to time appoint an attorney or attorneys or agent or agents of the Company, or may at any time or from time to time authorize the Chairman of the Board of Directors, any Vice Chairman of the Board of Directors, the President, any Executive Vice President, any Group Vice President, any Vice President, the Treasurer or the Secretary to appoint an attorney or attorneys or agent or agents of the Company, in the name and on behalf of the Company, to cast the votes which the Company may be entitled to cast as a stockholder or otherwise in any other corporation or association, any of the stock or securities of which may be held by the Company, at meetings of the holders of the stock or other securities of such other corporation or association, or to consent in writing to any action by any such other corporation or association, and the Board of Directors of any aforesaid officer so authorized may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and the Board of Directors or any aforesaid officer so authorized may from time to time authorize the execution and delivery, on behalf of the Company and under its corporate seal, or otherwise, of such written proxies, consents, -17- waivers or other instruments as may be deemed necessary or proper in the premises. ARTICLE XI AMENDMENTS The Board of Directors shall have power to make, alter, amend or repeal the By-Laws of the Company by vote of not less than a majority of the entire Board at any meeting of the Board. The holders of Common Stock and the holders of Class B Stock voting as provided in subsection 1.6 of Article FOURTH of the Certificate of Incorporation, as amended, shall have power to make, alter, amend or repeal the By-Laws at any regular or special meeting, if the substance of such amendment be contained in the notice of such meeting of stockholders. -18- EX-10.A 3 EXHIBIT 10-A Exhibit 10-A AMENDED AND RESTATED PROFIT MAINTENANCE AGREEMENT dated as of July 1, 1993 between Ford Motor Company, a Delaware corporation (hereinafter called "Ford"), and Ford Motor Credit Company, a Delaware corporation (hereinafter called "Ford Credit") WITNESSETH: WHEREAS, Ford and Ford Credit (i) entered into a profit maintenance agreement dated as of December 12, 1974, as amended by amendments dated as of April 14, 1978, January 15, 1980, March 28, 1989 and March 15, 1990; and (ii) desire to further amend and restate the same to read as set forth below (such amended and restated profit maintenance agreement being hereinafter called the "Agreement"). NOW, THEREFORE, the parties hereto agree that the Agreement shall read as follows: WHEREAS, Ford Credit is a wholly-owned subsidiary of Ford; WHEREAS, Ford Credit has agreed, for the remainder of the calendar year 1993 and for each subsequent calendar year through 1998, to continue to make available financing accommodations to dealers in vehicles manufactured or sold by Ford to no less an extent than Ford Credit made such services available during the calendar year 1992 and the first half of 1993. WHEREAS, in consideration of the foregoing, Ford has agreed to make payments to Ford Credit in the events and upon the conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the foregoing and of the mutual agreements hereinafter provided, the parties hereto hereby agree as follows: 1. As used herein, "Invested Capital" shall mean an amount equal to stockholder's equity less net assets of unconsolidated subsidiaries, as shown on a consolidated balance sheet of Ford Credit and its consolidated subsidiaries, determined as of the beginning of the calendar year for which any computation is made hereunder. 2.(a) Ford shall make a payment, to the extent required, to Ford Credit, as of the end of each quarterly accounting period during the years 1993 through 1998 (beginning with the third quarter of 1993), equal to the greater of (i) an amount sufficient to cause the income before income taxes of Ford Credit and its consolidated subsidiaries, for the portion of the calendar year ended at the end of such quarterly period, as shown on a consolidated statement of income of Ford Credit and its consolidated subsidiaries for such portion of the calendar year, to be not less than 2% on an annualized basis of Invested Capital, or (ii) an amount sufficient to cause the net income of Ford Credit and its consolidated subsidiaries (which is, among other things, after provision for income taxes and after giving effect to net income or loss of unconsolidated subsidiaries), for such portion of the calendar year, as shown on such statement of income, to be not less than 1% on an annualized basis of Invested Capital. In the event that the amounts computed under clauses (i) and (ii) above shall be equal, Ford shall make a payment to Ford Credit equal to such amount. (b) In the event that Ford shall have made a payment to Ford Credit under paragraph 2(a) with respect to any portion of a calendar year, and Ford Credit thereafter shall have, for the portion of the calendar year ended at the end of any subsequent quarterly accounting -1- period during the same calendar year, both (i) income before income taxes of Ford Credit and its consolidated subsidiaries in an amount in excess of 2% on an annualized basis of Invested Capital, and (ii) net income of Ford Credit and its consolidated subsidiaries in an amount in excess of 1% on an annualized basis of Invested Capital, Ford Credit shall make a repayment to Ford equal to the lesser of (A) an amount sufficient to reduce income before income taxes of Ford Credit and its consolidated subsidiaries to 2% on an annualized basis of Invested Capital, or (B) an amount sufficient to reduce net income of Ford Credit and its consolidated subsidiaries to 1% on an annualized basis of Invested Capital (but not to exceed the aggregate of any payments made to Ford Credit hereunder during such year less any prior repayments made by Ford Credit during such year under this paragraph 2(b)). In the event that the amounts computed under the clauses (A) and (B) above shall be equal, Ford Credit shall make a repayment to Ford equal to such amount. 3. Ford Credit shall continue to make wholesale inventory and retail financing accommodations generally available to dealers in vehicles manufactured or sold by Ford and to their customers during the remainder of 1993 and during each subsequent calendar year through 1998 to no less an extent than Ford Credit made such services available during 1992 and the first half of 1993. 4. All determinations hereunder shall be made in accordance with generally accepted accounting principles. 5. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated hereby and shall supersede all prior agreements between the parties hereto with respect to the subject matter hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. Attest: FORD MOTOR COMPANY /Thomas DeZure/ /M.S. Macdonald/ FORD MOTOR CREDIT COMPANY /Hurley D. Smith/ /W. O. Staehlin/ a:\agreement\profit EX-10.M4 4 EXHIBIT 10-M-4 Exhibit 10-M-4 Description of Amendment to Supplemental Executive Retirement Plan As a result of the sale by Ford of a portion of its North American automotive seating and seat trim business to Lear Seating Corporation (Lear), an amendment to the Supplemental Executive Retirement Plan (SERP) was adopted October 1, 1993 to provide that SERP eligible employees who were transferred to Lear as a result of the sale, and who were eligible to retire as of January 1, 1994 (the date employees were transferred to Lear), remain eligible for a SERP benefit when they retire from Lear. J:\10k\Exh10M4 EX-10.T 5 EXHIBIT 10T Exhibit 10-T SUPPORT AGREEMENT dated as of October 1, 1993 between Ford Motor Company, a Delaware corporation (hereinafter called "Ford") and Ford Credit Europe plc, a corporation organized under the laws of England (hereinafter called "Ford Credit Europe") WHEREAS, Ford Credit Europe presently is substantially wholly owned by Ford; and WHEREAS, Ford Credit Europe has agreed for the remainder of 1993, and for each of the calendar years 1994 through 1996, to continue to make available financing accommodations to dealers in of vehicles manufactured or sold by Ford and other manufacturers to no less an extent than such services were made available during calendar year 1992 by the subsidiaries of Ford that are now owned by, or whose businesses are now included as part of, Ford Credit Europe. WHEREAS, in consideration of the foregoing, Ford has agreed to maintain a minimum ownership interest in Ford Credit Europe and to make certain payments contributions to Ford Credit Europe in the events and upon the conditions set forth in this agreement. NOW, THEREFORE, in consideration of the foregoing and of the mutual agreements hereinafter provided, the parties hereto agree as follows: 1. Ford shall, at all times during the term of this Agreement, maintain an ownership interest in Ford Credit Europe, either directly or indirectly through one or more subsidiaries, of not less than 75% of the issued and outstanding shares of Ford Credit Europe. 2(a). Ford shall make a payment contribution, to the extent required, to Ford Credit Europe, as with respect to the extent each quarterly accounting period during the years 1993 through 1996 (beginning with the Fourth Quarter of 1993) in an amount sufficient to cause the net worth (paid-in-capital plus retained earnings) of Ford Credit Europe for such calendar quarter, as shown on the financial statements on a U.S. basis (prepared in accordance with U.S. generally accepted accounting principles) of Ford Credit Europe for such quarter, to be not less than US$500 million. Such payment contribution, if required, will be made within 30 days of receipt by Ford of such quarterly financial statements of Ford Credit Europe on a U.S. basis. 2(b). In the event that Ford shall have made a contribution to Ford Credit Europe under paragraph 2(a) with respect to any portion of a calendar year, and Ford Credit Europe thereafter shall have, at the end of the same calendar year in which the contribution has been made, a net worth in excess of US$500 million after giving effect to any dividends paid by Ford Credit Europe to its shareholders during or at the end of such year, then Ford Credit Europe shall, at Ford's discretion, make a repayment to Ford equal to the lesser of (i) such excess or (ii) the aggregate of any contribution made by Ford to Ford Credit Europe under paragraph 2(a) during such year. 3. Ford Credit Europe shall continue to make wholesale inventory and retail financing accommodations generally available to dealers in vehicles manufactured or sold by Ford and other manufacturers and to their customers during the remainder of 1993 and during each subsequent calendar year through 1996 to no less an extent than such services were made available during 1992 by the companies or businesses that are now included as part of Ford Credit Europe. 4. All determinations hereunder shall be made in accordance with U.S. generally accepted accounting principles. 5. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated hereby and shall supersede all prior agreements between the parties hereto with respect to the subject matter hereto. 6. This agreement shall be governed by and construed under the laws of the United Kingdom. 7. The terms of this Agreement shall not be waived, altered, modified, amended, supplemented or terminated in any manner whatsoever except by a written instrument signed by each of the parties hereto; provided, however, that Ford, unilaterally, may orally waive any obligation of Ford Credit Europe to make a repayment under paragraph 2(b) hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be fully executed as of the day and year first above written. FORD MOTOR COMPANY /s/David N. McCammon David N. McCammon Vice President-Finance and Treasurer FORD CREDIT EUROPE plc /s/Myron Young Myron Young Chairman of the Board of Directors J:\10k\support EX-10.U 6 EXHIBIT 10U Exhibit 10-U Description of Amendments to Company Benefit Plans Amendments to all Company employee benefit plans, including the Supplemental Executive Retirement Plan, the Benefit Equalization Plan and the Executive Separation Allowance Plan, were adopted on December 9, 1993 to exclude employees of Jaguar Cars, a Company division created by the dissolution of Jaguar Cars Inc. (JCI) effective December 16, 1993. The Company assumed the sponsorship of the former JCI employee benefit plans and Jaguar Cars employees will continue to participate in such plans. J:\10k\Exh10-U EX-11 7 EXHIBIT 11 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 1993 1992 1991 ------------------------- ---------------------------- ------------------------------ Income (Loss) (Loss) Avg. Shares Attributable Avg. Shares Attributable Avg. Shares Attributable of Common to Common of Common to Common of Common to Common and Class B and Class B Stock and Class B and Class B Stock and Class B and Class B Stock ----------------- ----------------- ----------------- 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 493 $2,241 $4.55 487 $(7,594) $(15.61) 476 $(2,280) $(4.79) . Assuming exercise of options 23 12 8 . Assuming purchase of shares with proceeds of options (14) (7) (5) . Assuming issuance of shares contingently issuable 1 1 1 --- --- --- Net Common Stock Equivalents 10 6 4 Primary Earnings Per Share Calculation 503 $2,241 $4.46a/ 493 $(7,594) $(15.61)a/ 480 $(2,280) $(4.79)a/ === ===== ===== === ======= ======= === ======= ====== II. Fully Diluted Earnings Per Share ---------------------- Primary Earnings Per Share Calculation 503 $2,241 $4.46a/ 493 $(7,594) $(15.61)a/ 480 $(2,280) $(4.79)a/ . Assuming conversion of convertible preferred stock 75 193b/ 75 193b/ 11c/ 22b/ . Reduction in shares assumed to be purchased with option proceeds d/ 2 1 0 --- ------ --- --------- --- ------- Fully Diluted Earnings Per Share Calculation 580 $2,434 $4.20 569 $(7,401) $(15.61)a/ 491 $(2,258) $(4.79)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/ If all of the Series A Preferred Stock were converted to Common Stock, an additional 75 million shares of Common Stock would be outstanding. This shows the effect on average shares outstanding during the year from the issuance date of November 13, 1991. d/ 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. ye93ex.11 EX-12 8 EXHIBIT 12 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 ---------------------------------------------------- 1993 1992 1991 1990 1989 ---- ----- ------ ------ ---- Earnings - -------- Income/(loss) before income taxes and cumulative effects of changes in accounting principles $ 4,003 $ (127) $(2,587) $ 1,495 $ 6,030 Equity in net (income)/loss of affiliates plus dividends from affiliates (98) 26 69 171 (137) Adjusted fixed charges a/ 7,648 8,113 9,360 9,690 9,032 ------- ------- ------- -------- ------ Earnings $11,553 $ 8,012 $ 6,842 $11,356 $14,925 ======= ======= ======= ======= ======= Combined Fixed Charges and Preferred Stock Dividends - -------------------------- Interest expense b/ $ 7,351 $ 7,987 $ 9,326 $ 9,647 $ 8,624 Interest portion of rental expense c/ 266 185 124 105 103 Preferred stock dividend requirements of majority-owned subsidiaries d/ 155 77 56 83 16 ------- ------ ------ ------- ------- Fixed charges 7,732 8,249 9,506 9,835 8,743 Ford preferred stock dividend requirements e/ 442 317 26 0 0 -------- ------ ----- ------- ------- Total combined fixed charges and preferred stock dividends $ 8,174 $ 8,566 $ 9,532 $ 9,835 $ 8,743 ======== ======= ======= ======= ======= Ratios - ------ Ratio of earnings to fixed charges 1.5 f/ g/ 1.2 1.7 Ratio of earnings to combined fixed charges and preferred stock dividends 1.4 h/ i/ 1.2 1.7 - - - - - - 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 9 EXHIBIT 21 Exhibit 21 Ford Motor Company SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 1993 Jurisdiction of Organization First Nationwide Financial Corporation Delaware, U.S.A. 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 578 Other U.S. Subsidiaries 301 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 10 EXHIBIT 23 Exhibit 23 Ford Motor Company The American Road Dearborn, Michigan CONSENT OF COOPERS & LYBRAND Re: Ford Motor Company Registration Statements Nos. 2-71847, 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 and 33-54348 on Form S-8, and 2-42133, 33-32641, 33-40638, 33-43085, 33-45887, 33-49927 and 33-55474 on Form S-3 We consent to the incorporation by reference in the above Registration Statements of our report dated February 1, 1994 to the Board of Directors and Stockholders of Ford Motor Company which is included in this Annual Report on Form 10-K. /s/ COOPERS & LYBRAND COOPERS & LYBRAND 400 Renaissance Center Detroit, Michigan 48243 March 17, 1994 EX-24 11 EXHIBIT 24 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 10, 1994 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, 1993 (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 S. A. Seneker, 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 14th day of March, 1994. FORD MOTOR COMPANY /s/T. J. DeZure T. J. DeZure Assistant Secretary (SEAL) POWER OF ATTORNEY WITH RESPECT TO ANNUAL REPORT OF FORD MOTOR COMPANY ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1993 KNOW ALL MEN BY THESE PRESENTS that each of the undersigned, an officer and/or director of FORD MOTOR COMPANY, does hereby constitute and appoint S. A. Seneker, 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 and agent at any time and from time to time to do any and all acts and things and execute, in his or her name (whether on behalf of FORD MOTOR COMPANY, or as an officer or director of FORD MOTOR COMPANY, or by attesting the seal of FORD MOTOR COMPANY, or otherwise) any and all instruments which said attorney and agent may deem necessary or advisable in order to enable FORD MOTOR COMPANY to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereof, in connection with the Annual Report of FORD MOTOR COMPANY on Form 10-K for the year ended December 31, 1993 and any and all amendments thereto, as authorized at a meeting of the Board of Directors of FORD MOTOR COMPANY held on March 10, 1994, including specifically but without limitation thereto, power and authority to sign his or her name (whether on behalf of FORD MOTOR COMPANY, or as an officer or director of FORD MOTOR COMPANY, or by attesting the seal of FORD MOTOR COMPANY, or otherwise) to such Annual Report and to any such amendments to be filed with the Securities and Exchange Commission, or any of the exhibits or financial statements and schedules filed therewith, and to file the same with the Securities and Exchange Commission; and the undersigned does hereby ratify and confirm all that said attorneys and agents, and each of them, shall do or cause to be done by virtue hereof. Any one of said attorneys and agents shall have, and may exercise, all the powers hereby conferred. IN WITNESS WHEREOF, each of the undersigned has signed his or her name hereto as of the 10th day of March, 1994. /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/Allan D. Gilmour /s/Roberto C. Goizueta (Allan D. Gilmour) (Roberto C. Goizueta) /s/Irvine O. Hockaday, Jr. /s/Drew Lewis (Irvine O. Hockaday, Jr.) (Drew Lewis) /s/Ellen R. Marram /s/Kenneth H. Olsen (Ellen R. Marram) (Kenneth H. Olsen) /s/Carl E. Reichardt /s/Louis R. Ross (Carl E. Reichardt) (Louis R. Ross) /s/Stanley A. Seneker /s/Clifton R. Wharton, Jr. (Stanley A. Seneker) (Clifton R. Wharton, Jr.) /s/Murray L. Reichenstein (Murray L. Reichenstein) -----END PRIVACY-ENHANCED MESSAGE-----