10-QPeriod: Q3 FY2008

FORD MOTOR CO Quarterly Report for Q3 Ended Sep 30, 2008

Filed November 7, 2008For Securities:FF-PCF-PDF-PB

Summary

Ford Motor Company reported a net loss of $129 million for the third quarter of 2008, a significant improvement from the $380 million loss in the same period of 2007. This improvement was largely driven by a substantial curtailment gain related to the retiree health care settlement agreement and the non-recurrence of a large loss from the conversion of trust preferred securities. However, the company's Automotive sector experienced a pre-tax loss of $699 million, primarily due to unfavorable volume and mix, particularly in North America, and higher personnel-related costs. The Financial Services sector, primarily Ford Credit, saw a significant decline in pre-tax income to $159 million from $556 million in the prior year. This was impacted by a higher provision for credit losses and the non-recurrence of derivative-related gains. Despite the challenges, Ford highlighted its commitment to restructuring and product development, aiming for $14 billion to $17 billion in Automotive gross cash improvements through cost reductions and capital spending adjustments. The company's liquidity remains a key focus amidst ongoing global credit market turmoil.

Financial Highlights

17 data points
Beta

Revenue

$31.75B

21.2% Gross Margin

Net Income

-$161.00M

-0.5% Net Margin

EPS (Diluted)

$-0.07

Free Cash Flow

$1.11B

Financial Statements
Beta
Revenue$31.75B
Cost of Revenue$25.00B
Gross Profit$6.75B
SG&A Expenses$4.58B
Operating Expenses$32.39B
Operating Income-$8.80B
Interest Expense$2.41B
Net Income-$161.00M
EPS (Basic)$-0.07
EPS (Diluted)$-0.07

Key Highlights

  • 1Reported a net loss of $129 million for Q3 2008, an improvement from a $380 million loss in Q3 2007.
  • 2Automotive sector reported a pre-tax loss of $699 million, impacted by unfavorable volume/mix and personnel costs.
  • 3Financial Services sector pre-tax income decreased to $159 million from $556 million due to higher credit loss provisions and non-recurrence of derivative gains.
  • 4Significant retiree health care curtailment gain ($2.5 billion) contributed to the improved net income.
  • 5Company is implementing cost reduction actions expected to generate $14-$17 billion in Automotive gross cash improvements.
  • 6Automotive sector gross cash declined to $18.9 billion, while debt remained significant at $26.1 billion, resulting in negative net cash.
  • 7Ford Credit's managed leverage ratio was 9.6:1, with a continued focus on liquidity amidst market volatility.

Frequently Asked Questions

The primary driver for the improved net income was a significant retiree health care curtailment gain of $2.5 billion recognized in the third quarter of 2008 related to the Retiree Health Care Settlement Agreement. The non-recurrence of a substantial loss from the conversion of trust preferred securities in the prior year also contributed to the improvement.

The Automotive sector is facing challenges from unfavorable volume and mix, particularly in North America, which is experiencing a significant decline in industry sales and a shift in consumer preferences away from trucks and SUVs. Higher personnel-related costs and commodity price volatility also remain significant concerns.

Ford Credit's financial services sector saw a decline in pre-tax income. Key challenges include a higher provision for credit losses, driven by increased severity and repossessions in the U.S. retail portfolio, and the non-recurrence of derivative-related gains. The company is also facing market volatility and disruptions in the asset-backed securities markets, impacting funding costs and access.

Ford's Automotive gross cash stood at $18.9 billion at the end of the quarter, a decrease from the prior year, resulting in negative net cash. The company is implementing cost reduction measures and capital spending adjustments to improve Automotive gross cash by an expected $14 billion to $17 billion. Ford Credit maintains substantial liquidity available for use, amounting to $24.8 billion, but is navigating market challenges and increasing funding costs.