10-QPeriod: Q1 FY2005

FORD MOTOR CO Quarterly Report for Q1 Ended Mar 31, 2005

Filed May 10, 2005For Securities:FF-PCF-PDF-PB

Summary

Ford Motor Company reported a net income of $1.21 billion for the first quarter of 2005, a decrease from $1.95 billion in the same period of 2004. This decline was primarily driven by a significant drop in operating income from the Automotive sector, which fell to $473 million from $1.82 billion year-over-year. Despite an increase in automotive sales to $39.3 billion from $38.8 billion, higher costs, unfavorable product mix, and exchange rate impacts weighed on profitability. The Financial Services sector demonstrated resilience, with income before taxes increasing slightly to $1.08 billion from $1.04 billion, supported by improved credit loss performance at Ford Credit. However, the company's overall financial health is facing pressure, as evidenced by recent credit rating downgrades, which are expected to increase borrowing costs and potentially restrict access to unsecured debt markets.

Key Highlights

  • 1Net income decreased by approximately 38% year-over-year, from $1.95 billion to $1.21 billion.
  • 2Automotive sector operating income saw a substantial decline of over 70%, from $2.00 billion to $665 million.
  • 3Automotive sales increased slightly to $39.33 billion from $38.80 billion, but costs and expenses also rose significantly.
  • 4Financial Services sector income before income taxes saw a modest increase from $1.04 billion to $1.08 billion.
  • 5Consolidated total assets decreased from $306.5 billion to $293.2 billion.
  • 6The company's Automotive sector experienced unfavorable cost performance and lower unit sales volume, impacting profitability.
  • 7Recent credit rating downgrades to non-investment grade are expected to lead to increased borrowing costs for Ford and Ford Credit.

Frequently Asked Questions

The primary driver of the decrease in net income was a significant decline in the Automotive sector's operating income. While automotive sales saw a slight increase, higher costs and unfavorable product mix and exchange rates led to a substantial drop in profitability for this segment.

The Financial Services sector showed a slight improvement, with income before income taxes increasing from $1.04 billion in Q1 2004 to $1.08 billion in Q1 2005. This was largely due to improved credit loss performance at Ford Credit, which offset lower receivable levels and higher borrowing costs.

Recent credit rating downgrades to non-investment grade (e.g., BB+) are anticipated to increase Ford and Ford Credit's borrowing costs. Ford Credit may also face restricted access to unsecured debt markets, potentially leading to a need to reduce purchased receivables and impacting profitability.

Ford completed the sale of its interest in Mahindra & Mahindra Ltd. and Vastera, Inc., recognizing small gains. It also committed to selling a trademark licensing subsidiary, recording charges and impairments related to this planned disposal. Additionally, the sale of Triad Financial Corporation (a discontinued operation) was completed in April 2005.