Ford 2004 Annual Report Download - page 39

3 7
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Capital transactions with the Financial Services sector of $4.2 billion in 2004 reflected primarily dividends paid by Ford
Credit. In addition, dividends of about $200 million from the Financial Services sector in 2004 are reflected in the table above
as divestitures because they resulted primarily from the sale by the Financial Services sector of dealership and
surplus properties.
Shown in the table below is a reconciliation between financial statement Cash flows from operating activities before securities
trading and operating-related cash flows (calculated as shown in the table above), for the last three years (in billions):
Debt and Net Cash. At December 31, 2004, our Automotive sector had total senior debt of $13.3 billion compared with
$15.0 billion a year ago. The decrease in debt primarily reflected the retirement of about $1.5 billion of relatively high-cost
debt through open-market repurchases. Most of the retired debt had maturity dates between 2028 and 2032.
During 2005, we intend, depending on market conditions, to continue repurchasing our outstanding debt securities from time
to time and to continue making contributions to our funded pension plans and VEBA. Such debt repurchases likely would be
concentrated in, but not limited to, the following four debt issues, of which up to 50% of any one issue potentially may be
purchased: 6-5/8% Debentures due October 1, 2028 with an original aggregate principal amount of $1.5 billion; 6-3/8%
Debentures due February 1, 2029 with an original aggregate principal amount of $1.5 billion; 7.45% Global Landmark
Securities due July 16, 2031 with an original aggregate principal amount of $4.8 billion; and 8.90% Debentures due January
15, 2032 with an original aggregate principal amount of $502 million.
Ford Motor Company Capital Trust II (“Trust II”) had outstanding $5.0 billion of trust preferred securities at December 31,
2004. The dividend and liquidation preference on these securities are paid from interest and principal payments on our junior
subordinated debentures held by Trust II in a principal amount of $5.2 billion.
On January 2, 2004, we redeemed our outstanding junior subordinated debentures held by Ford Motor Company Capital
Trust I. This had the effect of reducing total Automotive subordinated debt by about $700 million.
At December 31, 2004, our Automotive sector had net cash (defined as gross cash less total senior and subordinated debt) of
$5.2 billion, compared with $5.1 billion and $5.4 billion at the end of 2003 and 2002, respectively.
The weighted average maturity of our total long-term debt (including subordinated debt), substantially all of which is fixed-rate
debt, is approximately 25 years with about $3.7 billion maturing by December 31, 2024. The weighted average maturity of
total debt (long-term and short-term including subordinated debt) is approximately 25 years. For additional information on
debt, see Note 15 of the Notes to the Financial Statements.
Seasonal Working Capital Funding. In July 2004, we raised $2.3 billion of short-term (i.e., less than 90 days) bank loans to
finance our annual summer vacation plant shutdown. The shutdown period normally results in temporary cash outflow as cash
payments to suppliers and dealers continue, but vehicles are not produced. The short-term seasonal working capital funding
reduced the annual cash volatility that results from our shutdown period. Similarly, we raised $1.9 billion in January 2005 to
finance our annual holiday shutdown at the end of 2004.
Credit Facilities. At December 31, 2004, the Automotive sector had $7.2 billion of contractually committed credit agreements
with various banks, of which $7.1 billion were available for use. For further discussion of our committed credit facilities, see
Note 15 of the Notes to the Financial Statements.
2004 2003 2002
Cash flows from operating activities
before securities trading a/ $ 1.4 $ 1.3 $ 9.5
Items included in operating-related cash flow
Capital expenditures (6.3) (7.4) (6.8)
Net transactions between Automotive and
Financial Services sectors b/ 1.3 1.2 (0.1)
Other, primarily exclusion of cash flow from
short-term VEBA contribution/(draw-down) (0.1) 1.9 (0.2)
Operating-related cash flows $ (3.7) $ (3.0) $ 2.4
a/ As shown in our Sector Statement of Cash Flows for the Automotive sector.
b/ Primarily payables and receivables between the sectors in the normal course of business, as shown in our Sector Statement of Cash Flows for the
Automotive sector.