Ford 2003 Annual Report Download - page 41

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2003 ANNUAL REPORT 39
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS
Details of Automotive sector market share for selected markets for 2003 and 2002 are shown below:
2003
Over/(Under)
2003 2002 2002 Market
Americas
- Ford North America 19.2% 19.9% (0.7)pts. U.S.*
- Ford South America 11.5 9.9 1.6 Brazil*
International
- Ford Europe 8.6 8.6 - Europe*
- Ford Asia Pacific 13.9 13.2 0.7 Australia*
- Premier Automotive Group 1.3/2.2 1.2/2.2 0.1/ - U.S./Europe
–––––––––––––
* Excludes market share of our Premier Automotive Group brand vehicles (i.e. Volvo, Jaguar, Land Rover and Aston Martin).
AMERICAS AUTOMOTIVE SEGMENT
Ford North America — The decrease in income before income taxes for Ford North America included a charge of
$1.6 billion related to agreements reached with Visteon Corporation (“Visteon”) in the fourth quarter of 2003. Visteon is
our largest supplier and is the primary supplier of many critical components for several of our vehicle lines. The agreements
primarily address pricing and sourcing arrangements between Ford and Visteon, as well as costs related to approximately
20,000 UAW-represented Ford employees assigned to Visteon.
The principal terms of these agreements include:
• Our assumption of approximately $1.65 billion of Visteon’s responsibility for the postretirement health care and life
insurance benefit obligations for our UAW-represented employees assigned to Visteon.*
• Extending the term for Visteon to complete pre-funding of its remaining hourly and salaried postretirement health
care and life insurance liabilities to 2049, rather than 2020 as was agreed at the time of our spin-off of Visteon.*
• Visteon’s agreement to pay us $150 million in lieu of further price reductions for 2003 business in North America. In
addition, Visteon has committed to a schedule of annual price reductions over the next four years for North American
business.
• All new Ford business sourced to Visteon will be at competitive prices and terms and we are generally obligated to
source to Visteon in North America when it is competitive. In addition, we will subsidize part of Visteon’s costs of paying
higher wages to our UAW-represented employees assigned to Visteon, assuming industry-competitive manning levels,
beginning with any new Ford business sourced to Visteon.
• We and Visteon will share equally up to $200 million in costs to upgrade Visteon’s information technology systems as
it completes its separation from our information technology systems.
–––––––––––––
* See Note 19 of the Notes to Financial Statements for more information regarding this aspect of the agreement with Visteon.
In addition to the impact of the Visteon agreements, the reduction in income reflected lower vehicle unit sales, unfavorable net
pricing and unfavorable exchange rates partially offset by cost reductions and favorable product mix. Lower vehicle unit sales
reflected the absence of a dealer stock change in 2003 compared with a dealer stock build in 2002 and lower market share.
Lower market share reflected the discontinuation of low-margin models (Mercury Cougar, Ford Escort, Mercury Villager,
Lincoln Continental and Ford Explorer Sport) and a planned reduction in sales to daily rental car companies.
Ford South America — The improvement in earnings reflected the non-recurrence of the adverse effects of currency
devaluation in Brazil and Argentina, increased market share primarily due to market acceptance of two new models,
the Ford Fiesta and EcoSport, and continuing improvement in the business structure.
FIN33_72 3/21/04 5:39 PM Page 39