Ford 2004 Annual Report Download - page 30

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2 8
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
In addition, the improvement in earnings reflected positive net pricing and favorable cost performance, offset partially by lower
vehicle unit sales, unfavorable changes in currency exchange rates (primarily weakening of the U.S. dollar compared with the Euro
and the Canadian dollar) and other special items (discussed below). Lower vehicle unit sales reflected a decline in market share.
Other special items in 2004 included a charge of $182 million related to our investment in Ballard Power Systems Inc.
(“Ballard”), a provider of fuel-cell technology. The charge included a write-down to fair market value of our investment in
Ballard for the portion that is held for sale and recognition of an other-than-temporary loss in value on the long-term portion of
our investment.
Ford South America. The improvement in earnings primarily reflected positive net pricing and higher vehicle unit sales, offset
partially by higher commodity costs.
Ford Europe and PAG Segment
Ford Europe. The improvement in earnings primarily reflected favorable cost performance, lower charges related to the Ford
Europe Improvement Plan (primarily employee separation charges) (less than $100 million in 2004 compared with
$513 million in 2003) and higher profits at our Ford Otosan joint venture in Turkey. Favorable cost performance reflected
successful execution of the Ford Europe Improvement Plan and material cost savings.
PAG. The increased loss primarily reflected unfavorable changes in currency exchange rates, as well as vehicle production
reductions and employee separation charges at Jaguar related to the implementation of the PAG Improvement Plan and higher
costs for launching new vehicles, offset partially by positive net pricing.
Ford Asia Pacific and Africa/Mazda Segment
Ford Asia Pacific and Africa. The improvement in earnings primarily reflected favorable changes in currency exchange rates
and higher vehicle unit sales, offset partially by a charge related to the disposition of certain dealerships.
Mazda and Associated Operations. The change primarily reflected improvements in our Mazda-related investments.
Other Automotive
The improvement in results primarily reflected higher tax-related interest on refund claims (about $600 million in 2004
compared to about $300 million in 2003) and the favorable effect on interest expense of the settlements in 2004 of prior-year
federal and state tax audits and 2004 debt repurchases. This was offset partially by the reclassification of interest expense on
our 6.50% Junior Subordinated Debentures due 2032 held by a subsidiary trust, Ford Motor Company Capital Trust II (prior to
July 1, 2003, this interest expense was included in Minority interests in net income/(loss) of subsidiaries). For 2005, we expect
pre-tax losses for Other Automotive to be in the range of $500 million to $900 million.
2003 COMPARED WITH 2002
Details by Automotive business unit of Income/(loss) before income taxes are shown below (in millions):
Income/(Loss) Before
Income Taxes
2003
Over/
(Under)
2003 2002 2002
Americas
- Ford North America $ 196 $ 2,534 $ (2,338)
- Ford South America (129) (620) 491
Total Americas 67 1,914 (1,847)
Ford Europe and PAG
- Ford Europe (1,620) (711) (909)
- PAG 171 (858) 1,029
Total Ford Europe and PAG (1,449) (1,569) 120
Ford Asia Pacific and Africa/Mazda
- Ford Asia Pacific and Africa (23) (173) 150
- Mazda and Associated Operations 69 (15) 84
Total Ford Asia Pacific and Africa/Mazda 46 (188) 234
Other Automotive (572) (1,211) 639
Total Automotive $ (1,908) $ (1,054) $ (854)