Ford 2002 Annual Report Download - page 55

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51
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, in June 2002. This Statement
requires obligations associated with disposing of operations to be recognized and measured at fair value when certain liabilities
are incurred. The current accounting guidance allows for recognition of liabilities on the commitment date of a disposal or exit
plan. We adopted this Statement on January 1, 2003 and plant closures related to our Revitalization Plan will follow SFAS No.
146 accounting guidelines. We do not expect adoption of this Statement to have a material impact on our consolidated
financial position or results of operations.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This
Statement superseded SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of, and addresses financial accounting and reporting for impairment of long-lived assets to be held and used, and
long-lived assets and components of an entity to be disposed of. We adopted this Statement on January 1, 2002.
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations, which requires entities to establish
liabilities for legal obligations associated with the retirement of tangible long-lived assets. We adopted the Statement on January
1, 2003 and do not expect a material impact on our consolidated financial position or results of operations.
In November 2002, the FASB issued Interpretation No. 45 (FIN 45), Guarantor’s Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 clarifies the requirements of SFAS No. 5,
Accounting for Contingencies, relating to a guarantor’s accounting for, and disclosure of, the issuance of certain types of
guarantees. For certain guarantees issued after December 31, 2002, FIN 45 requires a guarantor to recognize, upon issuance
of a guarantee, a liability for the fair value of the obligations it assumes under the guarantee. Guarantees issued prior to
January 1, 2003, are not subject to liability recognition, but are subject to expanded disclosure requirements. We do not
believe that the adoption of this Interpretation will have a material impact on our consolidated financial position or statement
of operations. For further discussion, see Note 24 of the Notes to our Financial Statements.
In January 2003, FASB issued FIN 46, an interpretation of Accounting Research Bulletin No. 51. Under FIN 46, which requires us
to consolidate variable interest entities for which we are deemed to be the primary beneficiary and disclose information about
variable interest entities in which we have a significant variable interest. FIN 46 became effective immediately for variable interest
entities formed after January 31, 2003 and will become effective in the third quarter of 2003 for any variable interest entities
formed prior to February 1, 2003. We are adopting FIN 46 as it becomes effective, which could materially impact our financial
statements. For further discussion of FIN 46, see “Off-Balance Sheet Arrangements-Variable Interest Entities” above and
Note 13 of the Notes to our Financial Statements.
OUTLOOK
2003 FINANCIAL MILESTONES
We have set and communicated certain financial milestones for 2003. The financial milestones for 2003 are as follows:
Planning Assumptions
Industry Volume
U.S. 16.5 million units
Europe 17.0 million units
Net Pricing
U.S. Zero
Europe 1%
Physicals Milestone
Quality Improve in all regions
Market Share Improve in all regions
Automotive:
Cost Performance Improve by at least $500 million
(at constant volume and mix)
Capital Spending $8 billion
Financial Results
Automotive
Income Before Taxes Breakeven
Operating Cash Flow* Breakeven
Ford Credit Improve cash contribution to Parent
Maintain managed leverage in low end of 13–14 to 1 range**
* Consistent with operating cash flow calculation under “Liquidity and Capital Resources – Automotive Sector” above.
** Consistent with definition of leverage under “Liquidity and Capital Resources – Financial Services Sector” above.