10-KPeriod: FY2002

FORD MOTOR CO Annual Report, Year Ended Dec 31, 2002

Filed March 14, 2003For Securities:FF-PCF-PDF-PB

Summary

Ford Motor Company's 2002 10-K filing highlights a company undergoing a significant "Revitalization Plan" aimed at improving profitability and market position. The plan focuses on introducing 20 new or refreshed products annually, reducing plant capacity, streamlining the workforce, and cutting costs by $6 billion. The company is also discontinuing low-margin models. Despite these efforts, Ford faced challenges, including a decline in its overall U.S. market share and increased marketing costs due to intense competition. The financial services segment, primarily Ford Motor Credit Company, showed resilience, with improved income from continuing operations, though credit losses increased due to the weak economy. Hertz, its car rental subsidiary, also saw a recovery in its financial performance. Ford is actively managing its market risks, including currency exchange rates, commodity prices, and interest rates, through various hedging strategies and a robust risk management program. Overall, the filing paints a picture of a company in transition, working to navigate a competitive automotive landscape and economic headwinds through strategic restructuring and cost management. Investors should pay close attention to the execution of the Revitalization Plan and its impact on future sales, market share, and profitability.

Key Highlights

  • 1Ford announced a "Revitalization Plan" in January 2002 with key elements including 20 new/refreshed products annually, capacity reduction, workforce adjustments, $6 billion in cost reductions, and discontinuation of low-margin models.
  • 2The company's overall U.S. car and truck market share has been declining since 1998, attributed to increased competition and new competitive truck offerings.
  • 3Marketing costs for Ford, Lincoln, and Mercury brands in the U.S. increased to 15.8% of gross sales revenue in 2002, up from 14.7% in 2001 and 11.1% in 2000, reflecting intensified competition.
  • 4The Financial Services sector, primarily Ford Motor Credit Company, reported improved income from continuing operations in 2002 compared to 2001, despite an increase in net credit losses.
  • 5Hertz, the car rental subsidiary, showed a recovery, with profits in Q4 2002 after a loss in Q4 2001, driven by improved rental volume, pricing, and cost reductions.
  • 6The company is actively managing market risks, including foreign currency exchange rates, commodity prices, and interest rates, using derivative instruments and risk management programs.
  • 7Ford's Automotive sector reported a net loss from continuing operations of $987 million in 2002, an improvement from the $6,155 million loss in 2001, largely due to the non-recurrence of significant charges and impairments.

Frequently Asked Questions

The primary goal of Ford's Revitalization Plan, announced in January 2002, is to improve profitability and market position. Key components include introducing 20 new or refreshed products annually, reducing North American assembly capacity by one million vehicles, achieving $6 billion in cost reductions, adjusting workforce numbers, and discontinuing low-margin models.

Ford's overall U.S. car and truck market share has shown a declining trend since 1998, falling from 25.3% in 1998 to 21.1% in 2002. This decline is attributed to increased competition, particularly from new truck product offerings, and strategic decisions like discontinuing certain vehicle lines.

The Financial Services sector, dominated by Ford Motor Credit Company, is assessed on income from continuing operations, net credit losses, and managed leverage. In 2002, Ford Credit reported improved income from continuing operations, but experienced an increase in net credit losses. The sector's overall contribution to the parent company's cash flow is a key performance metric. Hertz, the car rental segment, showed a financial recovery.

Ford faces several risks, including significant price competition, potential declines in industry sales due to economic slowdowns, lower-than-anticipated market acceptance of new products, production disruptions, recalls due to vehicle defects, increasing regulatory requirements (safety, emissions, fuel economy), significant litigation, adverse economic conditions in international markets (South America, Asia), and fluctuations in currency and commodity prices. The company also faces risks related to its pension and health care obligations.