Ford
Motor Company ("Ford") hereby incorporates by reference its news releases
dated
October 23, 2006, which are herewith furnished as Exhibit 99.1 and
Exhibit 99.2.
Ford's
President and Chief Executive Officer, Alan Mulally, and Executive
Vice
President and Chief Financial Officer, Don Leclair, will host a presentation
for
the investment community and news media beginning at 9:00 a.m. to review
preliminary third quarter 2006 financial results. Investors may access
this
presentation by dialing 800-706-7741 (or 1-617-614-3471 from outside
the United
States). The passcode for either telephone number is a verbal response
of "Ford
Earnings."
At
the
same time, a listen-only webcast and supporting presentation materials
for the
call will be available on the Internet at www.shareholder.ford.com.
Investors may also access replays for one week following the presentation
by
visiting www.shareholder.ford.com,
or by
dialing 888-286-8010 (or 1-617-801-6888 from outside the United States).
The
passcode for replays is 29481628. All times referenced above are in
Eastern
Time.
Please
note that Exhibit 99.2 to this Form 8-K discusses pre-tax profits excluding
special items for Ford's Automotive sector and the primary operating
segments
and business units within the Automotive sector. The most directly
comparable
financial measure calculated and presented in accordance with U.S.
Generally
Accepted Accounting Principles is pre-tax profits including special
items. We
believe that pre-tax profits excluding special items is a useful measure
to
provide investors, because it excludes those items that we do not consider
to be
indicative of earnings from ongoing operating activities. As a result,
pre-tax
profits excluding special items provides investors with a more relevant
measure
of the results generated by our operations.
Item
2.05. Costs Associated with Exit or Disposal
Activities.
On
January 19, 2006, we committed to a major business improvement plan
for our
North American Automotive operations, which we refer to as the Way
Forward plan,
key aspects of which were set forth in our Annual Report on Form 10-K
for the
year ended December 31, 2005. Responding to changing facts and circumstances,
on
September 14, 2006, we committed to an acceleration of this plan, including
actions designed to further reduce operating costs and to increase
the flow of
new products, and we provided a revised financial outlook.
As
part
of this accelerated plan, we have announced our intention to idle
and cease
operations at 16 manufacturing facilities, nine of which have been
identified
and slated for idling by the end of 2008; the remaining facilities
are to be
idled after 2008. Additionally, we have announced our intention to
sell or close
all of our Automotive Components Holdings, LLC ("ACH") facilities,
and to
redeploy or separate all ACH employees by the end of
2008.1
Our
best
estimate of costs associated with these exit or disposal activities
primarily
reflects personnel-related costs. We have estimated costs (accrued
in the first
nine months of 2006) and cash expenditures over time of $2.5 billion for
Jobs Bank Benefits and employee separation packages.2 We have
estimated
1
The identification of the nine facilities slated for idling by
2008 and
additional detail about non-exit or disposal activities related
to our
accelerated Way Forward plan (such as the reduction of salaried-related
costs)
can be found in our Current Report on Form 8-K dated September
13, 2006.
2 "Jobs
Bank Benefits" are defined in Note 4 of the Notes to the Financial
Statements in
our Quarterly Report on Form 10-Q for the period ended March
31,
2006.
- 3
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costs
(accrued in the first nine months of 2006) of $1.3 billion for related
non-cash pension curtailment charges. During the first quarter of 2006,
we also
accrued $300 million for fixed-asset write-off costs associated with
the
immediate idling of St. Louis Assembly Plant; we expect the cost of
fixed-asset
write-offs for future facility idlings to be included in operating
costs.
We
have
not yet accrued any costs for benefits that may be provided to employees
working
at the facilities to be idled after 2008. The cost of executing plans
for these
facilities is dependent on the resolution of many contingencies, including
the
negotiation of future labor agreements, the successful implementation
of our
product cycle plan, the resolution of alternative capacity actions,
and changes
in our market share between now and the planned idling of these facilities.
At
this time, we are estimating a charge of up to $750 million (on a discounted
basis) for benefits that we anticipate may be paid to employees expected
to be
permanently idled as a result of the future idling of these facilities.
Although
it is probable that we will take the necessary actions to reduce our
manufacturing employment, the amount of our estimated benefit obligation
is
highly dependent on the resolution of the previously-mentioned contingencies.
No
estimated value is more likely than another, and therefore the benefit
obligation is not reasonably estimable.
Item
4.02 (a). Non-Reliance on Previously Issued Financial Statements or
a Related
Audit Report or Completed Interim Review.
During
the preparation of its response to a comment letter from the Division
of
Corporation Finance of the Securities and Exchange Commission related
to a
routine review of its Annual Report on Form 10-K for the year ended
December 31,
2005, our indirect wholly-owned subsidiary, Ford Motor Credit Company
("Ford
Credit"), became aware of a matter related to accounting for interest
rate swaps
under Statement of Financial Accounting Standards
No. 133, Accounting
for Derivative Instruments and Hedging Activities,
as
amended ("SFAS 133").
Specifically, Ford Credit discovered that certain interest rate swaps
it had
entered into to hedge the interest rate risk inherent in certain long-term
fixed
rate debt were accounted for incorrectly because they did not satisfy
the
technical accounting rules under SFAS 133 to qualify for exemption
from the more
strict effectiveness testing requirements. PricewaterhouseCoopers LLP, our
independent registered public accounting firm, audited our 2001 through
2005
financial statements, which included a review of these swaps.
These
interest rate swaps were entered into as part of Ford Credit's asset-liability
management strategy. As noted above, the swaps economically hedge the
interest
rate risk associated with long-term debt issuances, and we continue
to believe
that these swaps have been and will continue to be highly effective
economic
hedges. The correction to the accounting does not impact the economics
of the
hedges, nor does it affect cash.
Although
the final restatement amounts have not yet been determined, based on
the
information to date, we estimate that Ford and Ford Credit's results
in 2002
will improve materially.
On
October 20, 2006, we recommended to the Audit Committee of our Board
of
Directors that we restate our financial statements for each of the
years ended
December 31, 2003, 2004 and 2005, and our selected financial data for
each of
the years 2001 - 2005 appearing in Item 15 and Item 6 of our Annual
Report on
Form 10-K for the year ended December 31, 2005, as well as our interim
financial
statements for the quarters ended March 31, 2005 and 2006,
June 30, 2005 and 2006, and September 30, 2005. The Audit
Committee agreed with management’s recommendation and it was concluded that
these financial statements should no longer be relied upon by investors.
The Audit Committee has discussed this matter with PricewaterhouseCoopers
LLP.
- 4
-
The
revised financial statements and selected financial data for the periods
referenced above will be included, as applicable, in an amended Annual
Report on
Form 10-K for the year ended December 31, 2005, and in an amended
Quarterly Report on Form 10-Q for the quarters ended March 31, 2006
and June 30, 2006. The revised interim financial statements for the
quarter ended September 30, 2005 will be included in the Quarterly
Report on
Form 10-Q for the quarter ended September 30, 2006. We expect to file
the
amended documents by the time we file our Quarterly Report on Form
10-Q for the
quarter ended September 30, 2006.
Management
is currently assessing the impact this matter has on its previously-issued
report on internal controls over financial reporting as of December
31, 2005 and
management's conclusions regarding the Company's disclosure controls
and
procedures. If management concludes that this matter resulted from
a material
weakness in its controls over interest rate swap accounting at Ford
Credit,
management may conclude that its internal controls over financial reporting
and
disclosure controls and procedures were ineffective as of December
31, 2005. If
management reaches such a conclusion, we also expect that the control
deficiency
will have been remediated by the time of the filing of the revised
financial
statements and selected financial data.
Item
8.01. Other Events.
As
previously disclosed, we expect that we will have Automotive gross
cash and
committed credit lines totaling approximately $26 billion at year-end
2006.1
In
addition, we expect that we will have approximately $3 billion of
long-term VEBA
that will be accessible over time. Further, as previously announced,
we are
seeking to raise additional liquidity through the sale of Aston Martin
and
Automobile Protection Corporation.
During
the fourth quarter of 2006 and for the near to medium term, we expect
our
operating-related cash flow to be negative by a substantial amount.
This
primarily reflects significant operating losses in our Automotive sector
through
2008, cash expenditures incurred in connection with our restructuring
efforts,
primarily for personnel separations, and pension contributions. This
also
reflects throughout this period our expectation to continue to invest
in new
products at about the same level as we have during the past few years,
or
approximately $7 billion annually.
To
fund
the substantial negative cash flow we expect to experience over this
period and
to provide added liquidity to protect against a recession or other
unexpected
events, we are exploring various financing strategies, including secured
financing involving a substantial portion of our Automotive assets.
3Automotive
gross cash includes cash and cash equivalents, marketable securities,
loaned
securities and short-term Voluntary Employee Benefit Association
("VEBA") trust
funds.
- 5
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Item
9.01. Financial Statements and Exhibits.
EXHIBITS
|
Designation
|
Description
|
Method
of Filing
|
| |
|
|
|
Exhibit
99.1
|
News
Release dated
|
Furnished
with this Report
|
| |
October
23, 2006
|
|
| |
|
|
|
Exhibit
99.2
|
News
Release dated
|
Furnished
with this Report
|
| |
October
23, 2006
|
|