Ford Announces New Agreements With Visteon, Increases 2003 Earnings Guidance
9 A.M. Conference Call Also to Cover New Contributions to Ford's Pension Funds and VEBA, and Other 2003 Fourth-Quarter Special Items
Visteon Agreements: * Deliver near-term price reductions and provide a basis for fully competitive pricing to Ford over time. * Build on the 2003 UAW-Ford negotiations that provided a framework for competitive wages and benefits for Visteon's future UAW employees. * Result in net pre-tax charge of about $1.6 billion to Ford's 2003 fourth-quarter financial results. This largely non-cash special charge primarily reflects the transfer from Visteon of certain post- retirement health care and life insurance benefit liabilities.
Other Fourth-Quarter Items: * Non-cash, pre-tax charges of about $150 million expected for the disposition of several non-core businesses. * New contributions of $1 billion to Ford's U.S. pension fund and $6 billion to its Voluntary Employees' Beneficiary Association (VEBA) trust.
Earnings Guidance: * Increasing full-year 2003 earnings guidance from $0.95-to-$1.05 per share to $1.05-to-$1.10 per share from continuing operations, excluding special items.
DEARBORN, Mich., Dec. 22 -- Ford Motor Company today announced it has signed new agreements with Visteon Corporation -- its largest supplier and former automotive components subsidiary -- that improve the competitiveness of both companies.
The agreements primarily address pricing and sourcing arrangements between Ford and Visteon, as well as costs related to approximately 20,000 UAW-represented Ford employees working at Visteon. These employees were assigned to Visteon as part of Visteon's June 2000 spin off from Ford.
"The agreements we signed with Visteon will enable our largest supplier to deliver parts and components to Ford at more competitive prices," said Don Leclair, Ford Motor Company's chief financial officer. "That's good business, because our ability to compete relies, in part, on partnering with our suppliers. With the UAW's strong support, we have laid the foundation for a stronger Visteon, and, thus, a stronger Ford Motor Company."
The principal highlights of the agreements include:
Purchasing and Supply Elements (North America):
* A payment of $150 million from Visteon to Ford on the automaker's
2003 purchases. This is in lieu of further price reductions for
2003. In addition, Visteon has committed to a schedule of annual
price reductions over the next four years and other actions that
should enable Visteon to achieve fully competitive prices over time.
* All new Ford business sourced to Visteon will be at competitive
prices and terms. Ford will provide labor differential relief for
UAW workers at efficient manning levels.
* Ford agreed to look to Visteon first for new business at
UAW-represented Visteon plants. However, Ford can seek alternative
sourcing solutions if Visteon is not competitive.
Cost-Sharing Elements:
* Ford will assume about $1.65 billion of Visteon's total estimated
$3 billion post-retirement health care and life insurance benefit
liabilities (OPEB) related to UAW-represented Ford employees at
Visteon.
* Visteon and Ford will share equally up to $200 million in costs to
upgrade Visteon's information and technology systems as it completes
its separation from Ford's IT systems.
Other Elements:
* As job openings occur, Ford employees assigned to Visteon will
return to Ford over time. As agreed to in concept by the UAW
(the final terms presently are being negotiated between Visteon and
the UAW), Visteon will fill future job openings with UAW-represented
workers earning Tier I UAW supplier-level wages.
* The timeframe for Visteon to fund its remaining post-retirement OPEB
liability -- which begins in 2006 -- will be extended to 2049 from
2020.
* Visteon's contributions to potential profit-sharing payments for
UAW-represented Ford employees will be capped at $2,040 per
employee.
* Ford and Visteon will share equally future Visteon capital
investments for select products. Payments from Ford to Visteon will
be made over a seven-year period for each investment.
* Ford will accelerate payment terms to Visteon over the next three
years, after which terms will return to normal.
* A Ford-Visteon governance council will be established to monitor the
relationship between the two companies, as well as manage
implementation of the agreements.
Financial Impact to Ford Motor Company:
* A net pre-tax charge will be incurred in the 2003 fourth quarter of
about $1.6 billion, or $0.52 per share.
* The charge includes approximately $1.65 billion of transferred
OPEB liability and $100 million of IT separation costs, offset
partly by the $150 million payment on 2003 Visteon purchases by
Ford.
* The OPEB liability transfer will have minimal impact on Ford's
near-term cash flow, because the additional liability will not be
fully due for about 50 years. Ford's health care expense will
increase by about $100 million annually, beginning in 2004.
Other Fourth Quarter Matters:
* Ford will take a non-cash, pre-tax charge of approximately
$150 million for disposition of several non-core businesses. These
operations are being "held for sale." Additional charges of about
$100-to-$150 million for disposition of non-core businesses are
anticipated during 2004.
* The fourth-quarter charge for our previously announced restructuring
of Ford Europe will be about $450 million. The remaining expected
charges (about $100-to-$150 million) associated with these
restructuring actions will occur in the first half of 2004.
* The effect of all fourth-quarter special items on earnings per share
is expected to be $0.72.
* Ford will contribute $1 billion to its U.S. pension funds and
$6 billion to its Voluntary Employees' Beneficiary Association
(VEBA) trust. Of the contribution to the VEBA trust, $2 billion
will be set aside for long-term investments.
Increased Earnings Guidance:
* Excluding special items, the Company increased its full-year 2003
earnings guidance from continuing operations from its $0.95-to-$1.05
per share range to a new range of $1.05-to-$1.10 per share.
"The increase in our 2003 earnings outlook primarily reflects continued strong cost savings, strong unit revenue from the new F-150 and other vehicles, and the ongoing strength of Ford Motor Credit's operating results," Leclair said.
Conference Call Scheduled
Investors and media can hear Ford CFO Don Leclair discuss today's announcements via conference call at 800-901-5217 (617-786-2964 for international dial-in) or on the Internet at http://www.shareholder.ford.com/. Supporting presentation materials will be available at the same Internet address. The presentation will begin at 9:00 a.m. EST, Dec. 22. Replays of the call will be available at 888-286-8010 (617-801-6888 for international dial-in) for seven days.
Ford Motor Company, headquartered in Dearborn, Mich., is the world's second largest automaker, with approximately 335,000 employees in 200 markets on six continents. Its automotive brands include Aston Martin, Ford, Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. Its automotive-related services include Ford Credit, Quality Care and Hertz. Ford Motor Company celebrated its 100th anniversary on June 16, 2003.
EARNINGS PER SHARE RECONCILIATION
ESTIMATED 2003
EARNINGS PER SHARE FULL YEAR
From Continuing Operations, Excluding Special Items $1.05 - $1.10
Special Items (0.72)
Cumulative Effect of Accounting Changes (0.14)
Discontinued Operations (0.01)
Net Income $0.18 - $0.23
Statements included or incorporated by reference herein may constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation:
-- greater price competition in the U.S. and Europe resulting from
currency fluctuations, industry overcapacity or other factors;
-- a significant decline in industry sales, particularly in the U.S. or
Europe, resulting from slowing economic growth, geo-political events
or other factors;
-- lower-than-anticipated market acceptance of new or existing
products;
-- work stoppages at key Ford or supplier facilities or other
interruptions of supplies;
-- the discovery of defects in vehicles resulting in delays in new
model launches, recall campaigns or increased warranty costs;
-- increased safety, emissions, fuel economy or other regulation
resulting in higher costs and/or sales restrictions;
-- unusual or significant litigation or governmental investigations
arising out of alleged defects in our products or otherwise;
-- worse-than-assumed economic and demographic experience for our
post-retirement benefit plans (e.g., investment returns, interest
rates, health care cost trends, benefit improvements);
-- currency or commodity price fluctuations;
-- a market shift from truck sales in the U.S.;
-- economic difficulties in South America or Asia;
-- reduced availability of or higher prices for fuel;
-- labor or other constraints on our ability to restructure our
business;
-- a change in our requirements under long-term supply arrangements
under which we are obligated to purchase minimum quantities or pay
minimum amounts;
-- a further credit rating downgrade;
-- inability to access debt or securitization markets around the world
at competitive rates or in sufficient amounts;
-- higher-than-expected credit losses;
-- lower-than-anticipated residual values for leased vehicles;
-- increased price competition in the rental car industry and/or a
general decline in business or leisure travel due to terrorist
attacks, act of war or measures taken by governments in response
thereto that negatively affect the travel industry; and
-- our inability to implement the Revitalization Plan.