Ford 2009 Annual Report Download - page 32

Management’s Discussion and Analysis of Financial Condition and Results of Operations
30 Ford Motor Company | 2009 Annual Report
Overall Automotive Sector
The decline in earnings primarily reflects unfavorable volume and mix ($6.9 billion), fixed asset impairment charges in
Ford North America ($5.3 billion), lower returns on our cash portfolio ($1 billion), lower returns on the assets held in the
TAA (about $700 million), and unfavorable net pricing (about $700 million). These factors were offset partially by favorable
cost changes ($4.3 billion), the non-recurrence of a goodwill impairment charge related to Volvo ($2.4 billion), and
favorable retiree health care changes (primarily curtailment gains) ($1.3 billion). The favorable costs changes primarily
reflect lower structural costs, offset partially by higher net product costs.
The decrease in revenue is more than explained by lower volumes and lower revenue for Jaguar Land Rover, offset
partially by favorable changes in currency exchange.
The table below details our Automotive sector 2008 structural cost changes at constant exchange, excluding special
items and discontinued operations (in billions):
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Ford North America Segment. The decline in earnings is more than explained by unfavorable volume and mix
($5.4 billion), fixed asset impairment charges ($5.3 billion), and unfavorable net pricing ($1.3 billion), offset partially by
favorable cost changes ($3.5 billion), favorable retiree health care changes (primarily curtailment gains) ($1.3 billion), and
the non-recurrence of a variable marketing charge related to a business practice change ($1.1 billion). The favorable cost
changes are more than explained by lower structural costs (including lower manufacturing and engineering, spending-
related, and pension and OPEB costs), offset partially by higher net product costs.
Ford South America Segment. The increase in earnings is more than explained by favorable net pricing, offset partially
by unfavorable cost changes, unfavorable volume and mix, and unfavorable changes in currency exchange. The
unfavorable cost changes are more than explained by higher net product costs.
Ford Europe Segment. The increase in earnings primarily reflects favorable cost changes, favorable net pricing, and
the non-recurrence of a variable marketing charge related to a business practice change, offset partially by unfavorable
changes in currency exchange rates and unfavorable volume and mix. The favorable cost changes are more than
explained by lower structural costs (including lower pension costs) and lower warranty-related costs.
Ford Asia Pacific Africa Segment. The decline in results primarily reflects unfavorable volume and mix, unfavorable
changes in currency exchange rates, and higher costs associated with personnel-reduction actions, offset partially by
favorable cost changes and higher net pricing. The favorable cost changes are more than explained by lower structural
costs (including lower overhead, spending-related, and advertising and sales promotions costs) and lower net product
costs.
Volvo Segment. The improvement in earnings is more than explained by the non-recurrence of a goodwill impairment
charge and favorable cost changes. These factors were offset partially by unfavorable volume and mix, mainly in the
United States and Europe (largely due to lower industry sales volumes, lower market share, and unfavorable product mix),
unfavorable net pricing, and unfavorable changes in currency exchange rates. The favorable cost changes primarily
reflects lower structural costs (including lower manufacturing and engineering, overhead, and advertising and sales
promotions costs), lower net product costs, and lower warranty-related costs.
Other Automotive. The decline in earnings primarily reflected lower returns on our cash portfolio and lower returns on
the assets held in the TAA. These factors were offset partially by the non-recurrence of the conversion of convertible
securities, lower interest expense, and favorable mark-to-market adjustments for changes in currency exchange rates on
intercompany loans.