Ford 2002 Annual Report Download - page 38

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34
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The improved fourth quarter results in our North American automotive operations reflected primarily the non-recurrence of
the 2001 asset impairments and other one-time charges that were primarily related to our Revitalization Plan, as well as
improvements in cost performance (primarily lower costs related to warranty coverages and additional service actions), net
revenue and vehicle mix. These were offset partially by lower unit sales volume in 2002 due primarily to lower U.S. industry
demand (down 400,000 units to 17.1 million units on a seasonally adjusted annual basis) and lower market share (down
1.6 percentage points to 21.2%) for Ford, Lincoln and Mercury brand vehicles, compared with 2001 levels.
The decrease in fourth quarter results in Europe reflected charges related to restructuring actions involving our Ford-brand
Europe and Premier Automotive Group operations, as well as a less favorable vehicle mix and lower production for dealer
inventories. These were partially offset by a higher European market share (up 0.6 percentage points to 10.6%) for all
vehicle brands.
The fourth quarter restructuring charges in Europe discussed above totaled $117 million for Ford-brand operations and $106
million for Premier Automotive Group operations, with each primarily reflecting employee separation costs. In the case of
Ford-brand operations, the employee separation costs were incurred primarily in preparation for the planned transfer of
production of the Transit vehicle from our Genk, Belgium facility to a facility owned by an unconsolidated joint venture in
Turkey–Ford Otosan–in which we have a 41% equity interest.
Our Automotive sector losses in South America were $11 million from operations in the fourth quarter of 2002, compared with
a loss of $598 million for the same period one year ago. The improvement reflected primarily the non-recurrence of the 2001
asset impairments and other restructuring charges that were largely related to our Revitalization Plan and the reversal of
accruals related to trade tariffs as a result of the settlement between Brazil and Argentina of MERCOSUR trade balance
rules. The results also reflected improved operating fundamentals, partially offset by lower industry volumes. The earnings
improvement of $185 million in Rest of World reflected primarily the non-recurrence of a Mazda pension-related charge
in the fourth quarter of 2001.
FINANCIAL SERVICES SECTOR
Details of our Financial Services sector earnings from continuing operations are shown below (in millions):
Fourth Quarter
Income/(Loss) from Continuing Operations
2002
Over/(Under)
2002 2001 2001
Ford Credit $ 372 $ (301) $ 673
Hertz 16 (58) 74
Minority interests and other (57) (5) (52)
Total Financial Services sector $ 331 $ (364) $ 695
Ford Credit’s consolidated income from continuing operations in the fourth quarter of 2002 was $372 million, compared with
a loss of $301 million in 2001, which included charges associated with the Revitalization Plan ($204 million). Apart from the
non-recurrence of last year’s Revitalization Plan charges, the improvement reflected a lower provision for credit losses, lower
charges from hedging activities, and the net favorable impact of receivables sales, offset partially by lower net financing margins.
Earnings at Hertz in the fourth quarter of 2002 were $16 million, compared with a loss of $58 million a year ago. The profit
increase was primarily due to improved worldwide car rental volume and pricing, the continued recovery from the adverse
impact the terrorist attacks of September 11, 2001 had on business travel during the fourth quarter of 2001, and cost reductions.
Included in the $57 million loss for “minority interests and other” within the Financial Services sector incurred in the fourth
quarter of 2002 is an after-tax charge related to our equity interest in a partnership that holds diversified financing assets.
This partnership owns leased assets, primarily leveraged leases involving aircraft, power generation, rail, shipping, and
telecommunications equipment. These are assets that we retained in connection with our sale of the assets of USL Capital
Corporation in 1996. The charge, totaling $40 million after-tax, is specifically related to aircraft leases to United Airlines
(twelve aircraft), which is in bankruptcy.