Ford 2011 Annual Report Download - page 41

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Management’s Discussion and Analysis of Financial Condition and Results of Operations
Ford Motor Company | 2011 Annual Report 39
Total costs and expenses for our Automotive sector for 2011 and 2010 was $122.4 billion and $113.5 billion,
respectively, a difference of $8.9 billion. An explanation of the change as reconciled to our income statement is shown
below (in billions):
Explanation of change:
Volume and mix, exchange, and other
Contribution costs (a)
Commodity costs (incl. hedging)
Material costs excluding commodity costs
Warranty/Freight
Other costs (a)
Structural costs
Other
Special items (b)
Total
2011
Better/(Worse)
2010
$ (11.4)
(2.3)
(1.2)
(0.7)
(1.4)
0.1
8.0
$(8.9)
_________
(a) Our key cost change elements are measured primarily at present-year exchange; in addition, costs that vary directly with volume, such as material,
freight and warranty costs, are measured at present-year volume and mix. Excludes special items.
(b) Special items primarily reflect the non-recurrence of Volvo costs and expenses in 2011.
Results by Automotive Segment. Details by segment of Income/(Loss) before income taxes are shown below
for 2011.
Total Automotive pre-tax operating profit of $6.3 billion was led by a $6.2 billion profit from Ford North America. Ford
South America earned a solid profit, while Ford Europe was about breakeven, incurring a small loss driven by the
economic uncertainty in the region. Ford Asia Pacific Africa incurred a loss as well, more than explained by the impact of
the Japan and Thailand natural disasters. The loss in Other Automotive was $601 million, reflecting higher interest
expense net of interest income and unfavorable fair market valuation adjustments, mainly for our investment in Mazda.
For 2012, we expect interest expense net of interest income to be about the same as 2011. While interest expense
will be reduced reflecting our lower debt levels, the effect of lower interest rates will be reduced interest income.