10-QPeriod: Q1 FY2002

FORD MOTOR CO Quarterly Report for Q1 Ended Mar 31, 2002

Filed May 10, 2002For Securities:FF-PCF-PDF-PB

Summary

Ford Motor Company reported a significant net loss of $800 million for the first quarter of 2002, a stark contrast to the $1.06 billion profit recorded in the same period of 2001. This downturn was heavily influenced by a substantial $708 million after-tax, non-cash charge related to the impairment of goodwill under the new SFAS No. 142 accounting standard. Excluding this charge, the company's operating loss was $92 million. Worldwide sales and revenues also decreased by $2.6 billion to $39.9 billion, primarily due to lower vehicle sales volumes and increased marketing expenditures. The automotive sector, in particular, experienced a considerable decline, posting a loss of $308 million before the goodwill impairment charge, compared to a profit of $689 million in the prior year. This was driven by a substantial loss in North America, which was partially offset by improved performance in Europe. While the automotive segment struggled, Ford's Financial Services sector provided some relief, reporting net income of $216 million, albeit down from $370 million in the first quarter of 2001. This decline was mainly attributable to lower earnings from Ford Credit, impacted by unfavorabale securitization effects and increased credit losses, and a significant increase in losses at Hertz, exacerbated by the post-September 11th economic environment. Despite the overall loss, Ford's liquidity remains robust, with gross cash balances for the automotive sector increasing to $21.5 billion at March 31, 2002, bolstered by a significant issuance of convertible preferred securities.

Key Highlights

  • 1Reported a net loss of $800 million for Q1 2002, a significant reversal from a $1.06 billion profit in Q1 2001.
  • 2A substantial $708 million after-tax, non-cash charge for goodwill impairment (SFAS No. 142) heavily impacted the net loss.
  • 3Worldwide sales and revenues declined by $2.6 billion to $39.9 billion, driven by lower vehicle volumes and higher marketing costs.
  • 4The Automotive sector posted a loss of $308 million (before goodwill impairment), with North America experiencing a significant downturn.
  • 5The Financial Services sector saw reduced net income to $216 million, primarily due to lower results at Ford Credit and increased losses at Hertz.
  • 6Automotive sector gross cash increased to $21.5 billion, partly due to a $4.9 billion issuance of convertible preferred securities.
  • 7Hertz experienced a significant increase in losses, attributed to lower rental volumes and economic conditions post-September 11th.

Frequently Asked Questions

The primary driver of the $800 million net loss was a $708 million after-tax, non-cash charge for the impairment of goodwill, a requirement under the new accounting standard SFAS No. 142. This charge, combined with the underlying operational challenges in the automotive sector, led to the significant loss.

The automotive sector reported a loss of $308 million before the goodwill impairment charge, a substantial decrease from the $689 million profit in the prior year's quarter. This decline was largely driven by a significant loss in North America, attributed to increased marketing costs, warranty expenses, higher interest expense, and lower sales volume. Europe showed improved earnings, but this was not enough to offset the North American weakness.

Ford Credit's net income decreased to $256 million from $393 million in the prior year. This was mainly due to the unfavorable impact of securitizations and higher net credit losses, partially offset by improved financing margins. Hertz, however, incurred significantly higher losses of $48 million compared to $4 million a year ago, largely due to lower rental volumes post-September 11th and overall economic conditions impacting corporate spending.

Ford's automotive sector maintained a strong liquidity position, with gross cash balances increasing to $21.5 billion at March 31, 2002. This increase was partly supported by the issuance of $4.9 billion in convertible preferred securities in January 2002. The company also saw an increase in capital expenditures for its automotive operations.