10-QPeriod: Q2 FY2002

FORD MOTOR CO Quarterly Report for Q2 Ended Jun 30, 2002

Filed August 12, 2002For Securities:FF-PCF-PDF-PB

Summary

Ford Motor Company reported a net income of $570 million for the second quarter of 2002, a significant turnaround from the $752 million loss recorded in the same period of 2001. This improvement was driven primarily by the Automotive sector, which moved from a substantial loss to a profit, largely due to the non-recurrence of significant costs like the Firestone tire replacement program and improved pricing. However, the Financial Services sector saw a decline in income. Despite the quarterly improvement, the first half of 2002 resulted in a net loss of $524 million, heavily impacted by a $1,002 million after-tax charge related to the adoption of SFAS No. 142, which eliminated goodwill amortization but required impairment testing. The company's liquidity remains strong, with a substantial increase in gross cash for the Automotive sector, bolstered by significant cash and marketable securities. Management anticipates a small loss in the third quarter of 2002 but expects a modest profit for the full year, emphasizing continued progress on its Revitalization Plan.

Key Highlights

  • 1Ford Motor Company reported a net income of $570 million for Q2 2002, a significant improvement from a $752 million loss in Q2 2001.
  • 2Automotive sector operating income improved dramatically, moving from a $1.194 billion loss in Q2 2001 to a $178 million profit in Q2 2002.
  • 3The first half of 2002 resulted in a net loss of $524 million, largely due to a $1,002 million after-tax charge from the adoption of SFAS No. 142 (Goodwill Impairment).
  • 4Automotive sector sales were $35.2 billion in Q2 2002, slightly up from $34.6 billion in Q2 2001, while worldwide net income for the company was $570 million, compared to a loss of $752 million in the prior year.
  • 5Financial Services sector earnings decreased to $392 million in Q2 2002 from $442 million in Q2 2001, primarily due to higher credit losses at Ford Credit.
  • 6The company's Automotive sector ended Q2 2002 with $10.9 billion in net cash (gross cash less total debt), a significant increase from $3.9 billion at the end of 2001.
  • 7Ford announced its intent to sell Kwik-Fit Holdings Ltd. for approximately $500 million, anticipating a related after-tax loss of about $500 million in the third quarter of 2002.

Frequently Asked Questions

The primary driver was the significant turnaround in the Automotive sector. The company moved from a substantial loss in the second quarter of 2001 to a profit in the second quarter of 2002, largely benefiting from the non-recurrence of large charges like the Firestone tire replacement costs and improvements in pricing.

The adoption of SFAS No. 142, effective January 1, 2002, eliminated the amortization of goodwill and certain other intangible assets. However, it required impairment testing. This led to a significant after-tax, non-cash charge of $1,002 million in the first half of 2002, primarily related to goodwill impairment in the Automotive and Financial Services sectors, contributing to the overall net loss for the first half of the year.

Ford anticipates a small loss in the third quarter of 2002, largely due to lower vehicle production compared to the second quarter. However, the company expects to achieve a modest profit for the full year 2002, contingent on market conditions and the successful execution of its Revitalization Plan.

Ford's Automotive sector maintains strong liquidity. Gross cash, which includes cash, marketable securities, and VEBA assets, increased to $24.9 billion at June 30, 2002, from $17.7 billion at December 31, 2001. The Automotive sector ended Q2 2002 with $10.9 billion in net cash, a significant improvement.