Ford 2002 Annual Report Download - page 80

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NOTES TO FINANCIAL STATEMENTS
NOTE 13. VARIABLE INTEREST ENTITIES
In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46 (FIN 46), Consolidation of
Variable Interest Entities. Under FIN 46, we are required to consolidate variable interest entities for which we are deemed to
be the primary beneficiary by the third quarter of 2003, and disclose information about those in which we have significant
variable interests effective immediately.
The Automotive sector has invested in and contracted with several joint ventures to manufacture and/or assemble vehicles
or components. The net investment in joint ventures that may be deemed variable interest entities was approximately
$806 million at December 31, 2002.
Ford Credit has activities with a limited purpose trust owned by a Ford Credit subsidiary and outside investors. Activities are
limited to the purchase of asset-backed securities and the issuance of commercial paper. In its existing structure, it is likely
that this trust would be consolidated. Ford Credit's equity investment and retained beneficial interest in this trust is approxi-
mately $1.7 billion. At December 31, 2002, this trust had gross assets of $12.2 billion and gross liabilities of $11.8 billion.
Ford Credit also participates in bank-sponsored asset-backed commercial paper conduits where pools of retail installment
contracts are sold to committed issuers that are variable interest entities of the sponsoring banks. At December 31, 2002,
about $5.9 billion of retail installment receivables originated by Ford Credit were held by these conduits. In general, the
percentage of Ford Credit assets sold to these variable interest entities is less than 50% of the variable interest entities
total assets.
We continue to analyze the impact of FIN 46 on our financial statements. Consolidation of the above variable interests could
result in a material impact to the 2003 earnings and would be reported as a change in accounting principle. Because we are
not required to perform on behalf of these entities if they do not fulfill their obligations, consolidation of any variable interest
entities would not increase our exposure to risk or loss or increase our obligations related to these entities. We believe that
the meaningful estimate of potential loss related to variable interest entities is equal to our investment and retained interests.
NOTE 14. COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF A SUBSIDIARY TRUST
Ford Motor Company Capital Trust I, a subsidiary trust (Trust), has outstanding 9% Trust Originated Preferred Securities
with an aggregate liquidation preference of $632 million (the Preferred Securities). The sole assets of the Trust are
$651 million aggregate principal amount of Ford Motor Company 9% Junior Subordinated Debentures due December 2025
(Debentures). At our option, we may redeem the Debentures, in whole or in part. To the extent we redeem the Debentures
and upon the maturity of the Debentures, the Trust is required to redeem the Preferred Securities at $25 per share plus
accrued and unpaid distributions. We guarantee the payment of all distributions and other payments on the Preferred
Securities to the extent not paid by the Trust, but only if and to the extent we have made a payment of interest or principal
on the Debentures.
Ford Motor Company Capital Trust II, a subsidiary trust (Trust II), has outstanding 6.50% Cumulative Convertible Trust
Preferred Securities with an aggregate liquidation preference of $5 billion (the Trust II Preferred Securities). The sole assets
of Trust II are $5,155 million principal amount of 6.50% Junior Subordinated Debentures due 2032 of Ford Motor Company
(the Subordinated Debentures). At our option, we may redeem the Subordinated Debentures, in whole or in part, on or
after January 15, 2007. To the extent we redeem the Subordinated Debentures or upon the maturity of the Subordinated
Debentures, Trust II is required to redeem the Trust II Preferred Securities at $50 per share plus accrued and unpaid distri-
butions. We guarantee the payment of all distribution and other payments of the Trust II Preferred Securities to the extent
not paid by Trust II, but only if and to the extent we have made a payment of interest or principal on the Subordinated
Debentures.
NOTE 15. CAPITAL STOCK AND AMOUNTS PER SHARE
All general voting power is vested in the holders of Common Stock and the holders of Class B Stock. Holders of Common
Stock have 60% of the general voting power and holders of Class B Stock are entitled to such number of votes per share
as would give them the remaining 40%. Shares of Common Stock and Class B Stock share equally in dividends, with stock
dividends payable in shares of stock of the class held. If liquidated, each share of Common Stock will be entitled to the first
$0.50 available for distribution to holders of Common Stock and Class B Stock, each share of Class B Stock will be entitled
to the next $1.00 so available, each share of Common Stock will be entitled to the next $0.50 so available and each share
of Common and Class B Stock will be entitled to an equal amount thereafter.
In August 2000, under a recapitalization known as the Value Enhancement Plan, shareholders elected to receive $5.7 billion
in cash, and the total number of Common and Class B shares that became issued and outstanding was 1.893 billion. Prior
period outstanding share and earnings per share amounts were not adjusted.