Ford 2005 Annual Report Download - page 83

Ford Motor Company Annual Report 2005 80 Ford Motor Company Annual Report 2005 81
Notes to the Financial Statements
NOTE 17. VARIABLE INTEREST ENTITIES (Continued)
VIEs of which we are not the primary beneficiary:
During the third quarter of 2005, as part of the Hertz transaction, Ford provided cash-collateralized letters of credit to support
the payment obligations of Hertz Vehicle Financing, a VIE which is wholly owned by Hertz of which we are not the primary
beneficiary. The fair value of our obligation related to these letters of credit, which will expire no later than December 21, 2011, is
approximately $27 million. For additional discussion of these letters of credit, see Note 27.
The risks and rewards associated with our interests in joint ventures which are VIEs of which we are not the primary
beneficiary are based primarily on ownership percentages. Our maximum exposure (approximately $158 million at
December 31, 2005) to any potential losses, should they occur, associated with these VIEs is limited to equity investments.
Financial Services Sector
VIEs of which we are the primary beneficiary:
Ford Credit uses SPEs in a variety of on-balance sheet and off-balance sheet securitization transactions. On-balance sheet
SPEs discussed in Note 11 are considered VIEs of which Ford Credit is the primary beneficiary and have been consolidated.
VIEs of which we are not the primary beneficiary:
Ford Credit has investments in certain joint ventures deemed to be VIEs of which it is not the primary beneficiary. The risks
and rewards associated with Ford Creditʼs interests in these entities are based primarily on ownership percentages. Ford Creditʼs
maximum exposure (approximately $182 million at December 31, 2005) to any potential losses, should they occur, associated with
these VIEs is limited to its equity investments and, where applicable, receivables due from the VIEs.
Ford Credit also sells, under contractually-committed agreements, finance receivables to bank-sponsored asset-backed
commercial paper issuers that are SPEs of the sponsor bank; these SPEs are not consolidated by us. In addition, certain of these
SPEs hold notes issued by Ford Credit that are backed by interests in operating leases and the related vehicles, which reduce the
commitment of these SPEs to purchase finance receivables. At December 31, 2005, approximately $5.6 billion of finance
receivables and notes were held by these SPEs.
NOTE 18. CAPITAL STOCK AND AMOUNTS PER SHARE
All general voting power is vested in the holders of Common Stock and 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.
As discussed in Note 16, Trust II Preferred Securities with an aggregate liquidation preference of $5 billion are outstanding. At
the option of the holder, each Preferred Security is convertible, at any time on or before January 15, 2032, into shares of our
Common Stock at a rate of 2.8249 shares for each Preferred Security (equivalent to a conversion price of $17.70 per share).
Conversion of all shares of such securities would result in the issuance of 282 million shares of our Common Stock.