01—Abstract
Summary
Summary of the 10-K filed February 27, 2008. Cited figures are marked; the original filing is the authoritative source.
Ford Motor Company's 2007 Form 10-K reports a net loss of $2.7 billiona, or $1.38 per share, compared with a loss of $12.6 billion ($6.72 per share) in 2006.
Total sales and revenues rose to $172.5 billionb from $160.1 billion, driven by higher Automotive pricing, favorable mix, and currency effects, although wholesale volumes fell about 1% to 6.55 million units. The improvement was largely due to lower restructuring and pension charges, a $1.3 billion retiree health care curtailment gain, and smaller impairments, partly offset by a $2.4 billion Volvo goodwill impairment. The Automotive sector remained loss-making at a $4.97 billion pre-tax loss, while Financial Services (Ford Credit) earned $1.2 billion pre-tax, down from $2.0 billion.
The balance sheet remains stressed. Stockholders' equity recovered to $5.6 billionc from a deficit of $3.5 billion, helped by debt-to-equity conversions and pension/OPEB accounting gains. Automotive gross cash was $34.6 billion and net cash was $7.9 billion, supported by $13.1 billion of committed credit facilities and about $46.5 billion of total Automotive liquidity.
Management expects 2008 Automotive operating-related cash flow to be negative, a full-year 2008 pre-tax loss that is smaller than 2007, and a return to North American and total Automotive profitability in 2009. Credit ratings are deep sub-investment grade (S&P B, Moody's B3), and the company paid no dividends in 2007 and is restricted from paying them under its secured credit agreement. Key risks include continued market share erosion (U.S. combined share fell to 15.6% from 20.5% in 2003), tougher U.S. and California fuel economy and greenhouse gas rules, a pending $2 billiond-plus diesel engine countersuit, the UAW retiree health care MOU that depends on court approval, and Ford Credit's reliance on securitization markets that became more costly after August 2007.
02—Key points
Key Highlights
- Net loss narrowed to $2.7 billion ($1.38/share) in 2007 from $12.6 billion ($6.72/share) in 2006, an improvement of about $9.9 billion.
- Total sales and revenues grew about 8% to $172.5 billion; Automotive sales rose to $154.4 billion on higher net pricing, product mix and currency effects, while wholesale volume fell about 1% to 6.55 million units.
- Automotive pre-tax loss narrowed to $5.0 billion from $17.0 billion, aided by lower Jobs Bank and personnel-reduction charges and a $1.3 billion retiree health care curtailment gain, but offset by a $2.4 billion Volvo goodwill impairment.
- Financial Services pre-tax income fell to $1.2 billion from $2.0 billion, pressured by higher credit losses, borrowing costs and lease depreciation at Ford Credit.
- Automotive gross cash of $34.6 billion and about $46.5 billion total liquidity provide a cushion, but 2008 Automotive operating cash flow is guided to be negative.
- U.S. combined car and truck market share fell to 15.6% in 2007 from 20.5% in 2003, and the company expects a 2008 pre-tax loss that is smaller than 2007's.
- Stockholders' equity turned positive at $5.6 billion, and no dividends were paid in 2007; the secured credit agreement prohibits dividends, and credit ratings remain in the B range.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2007, Ford Motor Co lost $0.02.
- Revenue$170.57B100.0%
- Cost of revenue−$142.59B83.6%
- Gross profit$27.98B16.4%
- Operating costs−$30.82B18.1%
- Operating income−$2.84B1.7%
- Interest, other & tax$41.0M0.0%
- Net income−$2.79B1.6%
04—Financials
Financial Highlights
Figures from 10-KFY2007filed February 27, 2008Financial Statements
| Revenue | $170.57B |
| Cost of Revenue | $142.59B |
| Gross Profit | $27.98B |
| SG&A Expenses | $21.17B |
| Operating Expenses | $177.86B |
| Operating Income | -$2.84B |
| Interest Expense | $11.04B |
| Net Income | -$2.79B |
| EPS (Basic) | $-1.41 |
| EPS (Diluted) | $-1.41 |
| Shares Outstanding (Basic) | 1.98B |
05—Questions
Frequently Asked Questions
Is Ford profitable, and how did its results change in 2007?
Ford was not profitable in 2007. It reported a net loss of $2.7 billion ($1.38 per share), a large improvement from the $12.6 billion loss in 2006. The improvement came mainly from lower restructuring and pension charges, a retiree health care curtailment gain, and fewer asset impairments. The Automotive sector still lost money before taxes, and management expects a smaller but continuing loss in 2008, with a return to profitability targeted for 2009.
Is Ford's balance sheet and liquidity sufficient to fund its restructuring?
Liquidity is substantial but under pressure. At year-end 2007 Automotive gross cash was $34.6 billion, net cash was $7.9 billion, and total liquidity was about $46.5 billion including $13.1 billion of committed credit facilities. Ford expects cumulative Automotive operating cash outflows of $7 to $8 billion and restructuring cash of $5 to $6 billion over 2007 to 2009, and Ford Credit plans to pay about $5 billion in distributions through 2009. Stockholders' equity improved to $5.6 billion but was still thin relative to total assets of $285.7 billion.
What are the biggest risks to Ford's outlook?
Key risks include continued U.S. market share loss, intense price competition from industry overcapacity (estimated at 16.8 million units globally), a shift in demand away from trucks and SUVs, and high fuel and commodity prices. Regulatory risks include tougher CAFE and greenhouse gas rules, and the California AB 1493 standards. Ford also faces a $2 billion-plus countersuit from its diesel engine supplier, the pending UAW retiree health care MOU, and a Ford Credit funding squeeze after the 2007 asset-backed market disruption.
Will Ford pay dividends or repurchase shares?
Not in the foreseeable future. Ford paid no dividends in 2007, and its December 2006 secured credit agreement prohibits dividends on common and Class B stock, with limited exceptions. Ford has no publicly announced share repurchase program, and its only 2007 repurchases were 8,327 shares withheld from employees to cover taxes on equity awards.
06—Continue