10-QPeriod: Q3 FY2007

FORD MOTOR CO Quarterly Report for Q3 Ended Sep 30, 2007

Filed November 8, 2007For Securities:FF-PCF-PDF-PB

Summary

Ford Motor Company's third quarter of 2007 saw a significant reduction in net loss to $380 million ($0.19 per share) from $5.2 billion ($2.79 per share) in the prior year's quarter. This improvement was driven by the non-recurrence of substantial impairment charges from 2006, alongside higher net pricing and favorable cost changes across the Automotive sector. The Financial Services sector, primarily Ford Credit, experienced a decrease in income before income taxes due to higher provisions for credit losses and lease residual depreciation. For the first nine months of 2007, Ford reported a net profit of $88 million ($0.05 per share), a marked improvement from a net loss of $7 billion ($3.73 per share) in the same period of 2006. This turnaround was bolstered by the significant reduction in Automotive sector losses, primarily due to the absence of major impairment charges and a substantial decrease in personnel-related costs. Ford Credit's contribution, while lower than the previous year, remained positive. The company ended the period with increased gross cash, demonstrating progress in its liquidity strategy.

Key Highlights

  • 1Reported a net loss of $380 million for Q3 2007, a substantial improvement from a $5.2 billion loss in Q3 2006.
  • 2For the first nine months of 2007, Ford achieved a net profit of $88 million, a significant turnaround from a $7 billion net loss in the comparable 2006 period.
  • 3Automotive sector results improved significantly, largely due to the non-recurrence of substantial impairment charges recorded in 2006.
  • 4Ford Credit's income before income taxes decreased by $194 million in Q3 2007 compared to Q3 2006, primarily due to higher provision for credit losses and lease residual depreciation.
  • 5Automotive gross cash increased to $35.6 billion at September 30, 2007, from $23.6 billion at September 30, 2006, reflecting improved cash generation and liquidity management.
  • 6The company announced a tentative agreement with the UAW on a new collective bargaining agreement and a separate memorandum of understanding for retiree health care benefits, subject to ratification.
  • 7Ford is exploring the potential sale of Jaguar and Land Rover, with discussions progressing with selected parties.

Frequently Asked Questions

The primary reason for the substantial improvement in net income was the non-recurrence of significant impairment charges that were recorded in the third quarter of 2006. Additionally, higher net pricing and favorable cost changes within the Automotive sector contributed to the improved results.

The Financial Services sector, primarily Ford Credit, saw a decrease in income before income taxes by $194 million. This was mainly due to higher provisions for credit losses, increased depreciation expense for leased vehicles related to unfavorable lease residual performance, and lower financing margins due to higher borrowing costs.

Ford is actively engaged in discussions with selected parties who have expressed interest in purchasing Jaguar and Land Rover. The company anticipates these discussions will culminate in an agreement by early 2008.

The tentative agreement with the UAW, if ratified, is expected to improve Ford's competitiveness in the United States. A key component is the establishment of an independent VEBA trust to provide retiree health care benefits, funded by Ford with cash, a second-lien secured note, and a convertible note. This aims to reduce ongoing Automotive obligations to Ford Credit.