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# Ford Motor Company / 2004 Annual Report
# R W A R D F O R W A R D
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<img src='content_image/1050.jpg'>
## A B O U T T H I S R E P O R T
At Ford Motor Company, we are moving forward with confidence and purpose as we strengthen the foundation of our business today to meet the challenges of tomorrow. Our 2004 Annual Report to Shareholders tells of the exciting products, growing markets and innovative technologies – backed by a talented global workforce – that are helping us plot a course toward the future.
## A B O U T T H I S C O M P A N Y
Ford Motor Company, a global automotive industry leader based in Dearborn, Mich., manufactures and distributes automobiles in 200 markets across six continents. With about 325,000 employees worldwide, our core and affiliated automotive brands include Aston Martin, Ford, Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. Our automotive-related services include Ford Motor Credit Company, Genuine Parts & Service and Hertz.
Ford Motor Company / 2004 Annual Report
## F O R W A R D
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## C A S T
T his is a business of looking ahead. When Ford looks at the world automotive market only 10 years in the future, we see a dramatically different scenario from the one we compete in today.
North America and Europe, which account for about two-thirds of today’s worldwide automotive market, will remain the largest regions for automakers in the immediate future. But these regions will likely account for just over half the world market by 2014, as growth in per-capita income moves more of the world’s population into a position to acquire new cars and trucks.
Ford is working to be viable and competitive in areas where markets are growing. We have the strongest portfolio of global brands of any automaker in the world. We’ve established a presence in and near the growing markets of China and other emerging regions. We’ve overcome economic challenges in South America and Asia Pacific, leaving us well situated for the years ahead. We engage on a world scale, from Thailand, which exports to more than 100 markets worldwide,
to Europe, where we build luxury products for every automotive market on Earth.
Our competition is fierce. While volume growth will come from developing markets, our revenue growth will come from established markets, with their steadily increasing demand for higher-content vehicles. We know we have to be ever more competitive in critical areas such as fuel economy. And we know that we need to continue to add flexibility in our manufacturing processes, so we will have the products people want, when they want them, at margins that are both competitive and profitable.
<img src='content_image/75075.jpg'>
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F
O
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## PRODUCTS
T
F orty all-new, or substantially new, products in one year. That’s what we introduced in 2004. It’s not only impressive – it’s a company record.
Why so many ? Because we are and always have been, first and foremost, an automaker. In the times when we remembered that, we were strong, and in the times we strayed from that core business, we weakened. Products are the key to our strength.
We also know that in today’s information- driven world having fresh vehicles with up- to-the-minute technology is important to our customers. That makes it important to us.
The challenges in staying ahead are significant. Developing a new car or truck requires investment, so we have carefully realigned our vehicle architectures. This allows us to produce a greater variety of attractive and competitive vehicles with more shared components and less complexity. Yet we are making headlines with innovations such as hybrid vehicles that offer all the advantages of their conventional cousins.
Our one family of products that does not come on wheels – the financial-services family of Ford Motor Credit Company – offers a competitive way for our customers to own what we build. It’s the finishing piece to our core business
– having the products people want and the means to put them in the driver’s seat.
Having the best is essential when your goal is to be the best. Our products are our future.
Y
<img src='content_image/124526.jpg'>
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ae} = N Be) SMO Oo KING jie
## F O R E {
Chicago Assembly Plant employees (from left) Liz Williams, Jeff Alliss, Rick Vasquez (in vehicle) and Sylvester Ware Jr. add a final touch of pride at the end of the line where the Mercury Montego, Ford Freestyle and Ford Five Hundred are built using the latest in flexible manufacturing.
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T o have a strong business, we need to establish and retain competitiveness in the ways we build our products. For us, that means the ability to assemble exactly the products that our customers want, in the regions where they want them, and at a cost that allows us to compete profitably. In established markets such as Europe, North America and Japan, we are making the technological investment to stay in the forefront of flexible manufacturing. Flexible manufacturing allows us to produce a number of different vehicles in a single location. It enables us to add a vehicle line or change over to a new model by reprogramming, rather than retooling, the vast majority of the machinery involved. In North America, eight of our plants are operating as or on their way to becoming flexible manufacturing facilities. In Europe, our Valencia Assembly Plant in Spain will join our Cologne and Saarlouis locations in Germany as fully flexible facilities. Our Premier Automotive Group is on target to attain 80 percent
F R O N T
flexibility by the end of 2010. In addition, Mazda operations are among the most flexible in the world.
And to maintain a presence and competitive pricing, it is likely that Ford and its suppliers will gradually increase their production in those parts of the world where markets are emerging.
Doing that while maintaining our economic presence in established markets requires careful, strategic thinking. But we believe it’s both possible and necessary if we are to realize our vision of being the best.
<img src='content_image/9852.jpg'>
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New crash test dummies at the Dearborn Proving Ground in Michigan are loaded with the most advanced internal sensors and instrumentation, giving engineers detailed data to help improve passenger safety.
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] | overall_image/cb1a3b25856aad8c42999cca52f9df4f12249de4e4a63d1ceaff245aec5c7eec.png | ## TECHNOLOGY
O ur industry is changing more now than it has in the last century. Real alternatives to conventional fuels and powertrains are more practical than ever. New technologies help us craft more sophisticated safety systems in our vehicles. Technology also is allowing us to continuously reduce the environmental impact of the vehicles we build and where we build them.
At Ford, we are taking advantage of this exciting new climate. More than half of our research and development is related directly to safety or the environment. Because many environmental and safety features also are selling features, we strive whenever practical to introduce such technologies before they are required by law.
Because a better world is such an integral part of the Ford mission, we have made sustainability a priority. This means creating business value by improving our environmental, social and economic performance.
## S I G H T
To support our sustainability efforts, we continually examine how societal and customer concerns regarding climate change, energy security and fuel economy will affect the business. We are exploring actions to position Ford as a leader in vehicles with advanced technology and better environmental performance. Ford Escape Hybrid, for instance, does everything a
regular Escape will do – but in city driving, it achieves up to 75 percent better fuel economy. Eight V-10 Ford E-450 hydrogen-powered shuttles will go into service in 2006 in Florida as part of the state’s “Hydrogen Highway” initiative promoting a hydrogen infrastructure.
Our better-world vision makes us a better automaker. We believe our customers will agree.
<img src='content_image/53724.jpg'>
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Ford employees Staci and Calvin Washington often enjoy lunch with their children, Sydnei and Myles, at the Dearborn (Mich.) West UAW-Ford Family Service and Learning Center. This and a number of other U.S. centers, supported through a joint UAW-Ford effort, provide child care, family programs and volunteer opportunities for busy Ford families.
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PEOPLE
A t Ford, our most important asset isn’t real estate, and it isn’t machinery; it’s our employees. We make diversity and inclusion a priority.
We emphasize corporate citizenship in the places we call home. We sponsor programs and opportunities to help employees improve their work-life balance. We value the longstanding contributions made by members of labor organizations around the world. We also work to inspire our suppliers worldwide to extend that same level of inclusion to the people who work for them. Our global terms and conditions call on them to offer safe and fair working conditions, no matter where they may be.
Ford employees repay that investment by serving as the heart of our company. From going the extra mile for customers, to raising awareness and funds for juvenile diabetes and other charities worldwide, our extended family has proven its willingness to reach out and to serve.
In 2005, we are embracing that spirit with the creation of the Ford Volunteer Corps, an umbrella organization under which our employees can volunteer for a wide range of corporate citizenship projects. The first major project of the Corps will be to rebuild in areas hardest hit by the Dec. 26 tsunami in Asia, continuing the efforts initiated by Ford employees in the first hours following this tragedy.
Our history is filled with families who have, generation after generation, found Ford to be a great place to work. They show that in their dedication and their spirit. And that’s one piece of our heritage that we’ll carry into our future.
<img src='content_image/101720.jpg'>
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] | overall_image/def5ff72cdb1017f9ecfc9ae4fc20703508d459df713af613bcc38b017d0e63b.png | A t the March 2005 board meeting William Clay Ford announced his intention to retire as a director after 57 years of service. At the Board’s request, he was named Director Emeritus.
“Ford Motor Company has always been part of my life and I continue to draw a lot of energy from this wonderful and exciting business,” Mr. Ford said. “Leaving the Board will relieve me of formal duties and give me more flexibility, but I will continue to help the company and the Board in any way I can.”
In 1978, Mr. Ford was elected chairman of the Executive Committee and appointed a member of the Office of the Chief Executive. He was elected vice chairman of the Board in 1980 and chairman of the Finance Committee in 1987. He retired from his post as vice chairman in 1989 and as chairman of the Finance Committee in 1995. At the time of his retirement, he served on the Finance Committee.
Mr. Ford served on the Board for more than half of the company’s 102 years. As the only surviving grandson of the late Henry Ford and father of the current chairman, he uniquely links the company’s past and future.
Mr. Ford was elected to the Board of Directors on June 4, 1948, and began his employment with the company after graduating from Yale University in 1949. Throughout his career he oversaw the design and development of a number of classic vehicles, including the Continental Mark II, considered by many to be one of the greatest cars ever built.
“My dad helped lead Ford into the modern era and make us who we are,” said Chairman and CEO Bill Ford. “His institutional knowledge is an incredible asset and his love for the company is unmatched. We will continue to turn to him for advice and counsel.”
<img src='content_image/123550.jpg'>
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<img src='content_image/81426.jpg'>
a/ Voluntary Employee Beneficiary Association trust, in which $4.1 billion of financial assets were held at the end of 2004 and $4.0 billion at the end of 2003 to fund certain future employee benefit obligations in the near term.
b/ Automotive cash, marketable and loaned securities and assets held in a short-term VEBA trust less Automotive debt.
c/ From Bloomberg Total Return Analysis assuming dividends are reinvested in Ford stock.
Prior-year amounts have been reclassified to conform to current-year presentation.
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John R.H. Bond (2, 3, 5) Stephen G. Butler (1, 4, 5) Kimberly A. Casiano (3, 4, 5) Edsel B. Ford II (3, 4) William Clay Ford (4) William Clay Ford, Jr. (3, 4) Irvine O. Hockaday, Jr. (1, 5) Marie-Josée Kravis (2, 5)
## EXECUTIVE OFFICERS GROUP (As of April 1, 2005)
William Clay Ford, Jr. Chairman of the Board and Chief Executive Officer
James J. Padilla President and Chief Operating Officer
Mark Fields Executive Vice President, Ford of Europe and Premier Automotive Group
Donat R. Leclair Executive Vice President and Chief Financial Officer
Mark A. Schulz Executive Vice President, Asia Pacific and Africa
Greg C. Smith Executive Vice President and President, The Americas
Michael E. Bannister Group Vice President, Chairman and Chief Executive Officer, Ford Motor Credit Company
Lewis W. K. Booth Group Vice President, Chairman and Chief Executive Officer, Ford of Europe
Earl J. Hesterberg Group Vice President, North America Marketing Sales and Service, The Americas
## OTHER VICE PRESIDENTS (As of April 1, 2005)
Marvin W. Adams Senior Vice President, Chief Information Officer
Thomas K. Brown Senior Vice President, Global Purchasing
Stephen E. Biegun International Governmental Affairs
William W. Boddie, Jr. North America Engineering
Mei Wei Cheng President, Ford Motor (China) Ltd.
Susan M. Cischke Environmental and Safety Engineering
Francisco N. Codina President, Customer Service Division
Deborah S. Coleman Global Quality
Peter J. Daniel Chief Operating Officer, Ford Asia Pacific and Africa
Mathew A. DeMars North America Vehicle Operations
Felicia J. Fields Human Resources
John Fleming President, Ford of Europe
Bennie W. Fowler Jaguar and Land Rover Operations
Barbara L. Gasper Investor Relations
Louise K. Goeser President and Chief Executive Officer, Ford of Mexico
Joseph Greenwell Chairman and Chief Executive Officer, Jaguar and Land Rover
Richard A. Manoogian (2, 5) Ellen R. Marram (1, 3, 5) Dr. Homer A. Neal (1, 3, 4, 5) Jorma Ollila (1, 3, 5) James J. Padilla Carl E. Reichardt (4) Robert E. Rubin (2, 4, 5) John L. Thornton (4, 5)
Roman J. Krygier Group Vice President, Global Manufacturing
Joe W. Laymon Group Vice President, Corporate Human Resources and Labor Affairs
Philip R. Martens Group Vice President, Product Creation
J C. Mays Group Vice President, Design, and Chief Creative Officer
Ziad S. Ojakli Group Vice President, Corporate Affairs
Richard Parry-Jones Group Vice President, Chief Technical Officer
Anne Stevens Group Vice President, Canada, Mexico and South America
Dennis E. Ross Vice President and General Counsel
James C. Gouin Vice President and Controller
Darryl B. Hazel President, Lincoln and Mercury
Charles B. Holleran Chief Communications Officer
Derrick M. Kuzak Product Development, Ford of Europe
Stephen G. Lyons President, Ford Division
Antonio Maciel President, South America
Paul A. Mascarenas North American Vehicle Programs
Martin J. Mulloy Labor Affairs
Timothy J. O’Brien Corporate Relations
Hans-Olov Olsson President, Volvo Cars
John G. Parker Vice President
Committee Memberships:
(1) Audit
(2) Compensation
(3) Environmental and Public Policy
(4) Finance
(5) Nominating and Governance
Ann Marie Petach Treasurer
Geoff P. Polites Marketing, Sales and Service, Ford of Europe
Gerhard Schmidt Research and Advanced Engineering
Robert L. Shanks Operations Support, Finance and Strategy, Ford of Europe and Premier Automotive Group
David T. Szczupak Powertrain Operations
James G. Vella Chief of Staff
Alex P. Ver Advanced Manufacturing Engineering
A.J. Wagner President, Ford Motor Credit Company North America
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<img src='content_image/93665.jpg'>
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## Generation of Revenue, Income and Cash
Our Automotive sector’s revenue, income and cash are generated primarily from sales of vehicles to our dealers and distributors (i.e., our customers). Vehicles we produce generally are subject to firm orders from our customers and generally are deemed sold (with the proceeds from such sale recognized in revenue) immediately after they are produced and shipped to our customers. This is not the case, however, with respect to vehicles produced for sale to daily rental car companies that are subject to a guaranteed repurchase option or vehicles produced for use in our own fleet (including management evaluation vehicles).
Vehicles sold to daily rental car companies that are subject to a guaranteed repurchase option are accounted for as operating leases, with lease revenue and profits recognized over the term of the lease. When we sell the vehicle at auction, we recognize a gain or loss on the difference, if any, between actual auction value and the projected auction value. Therefore, except for the impact of the daily rental units sold subject to a guaranteed repurchase option and those units placed into our own fleet, vehicle production is closely linked with unit sales and revenue from such sales.
Most of the vehicles sold by us to our dealers and distributors are financed at wholesale by Ford Credit. Upon Ford Credit originating the wholesale receivable related to a dealer’s purchase of a vehicle, Ford Credit pays cash to the relevant legal entity in our Automotive sector in payment of the dealer’s obligation for the purchase price of the vehicle. The dealer then pays off the wholesale finance receivable when it sells the vehicle to a retail customer. (See Note 1 of the Notes to the Financial Statements.)
Our Financial Services sector’s revenue is generated primarily from interest on finance receivables, net of certain deferred loan origination costs that are included as a reduction of financing revenue, and such revenue is recognized over the term of the receivable using the interest method. Also, revenue from operating leases, net of certain deferred origination costs, is recognized on a straight-line basis over the term of the lease. Income is generated to the extent revenues exceed expenses, most of which are interest and operating expenses.
Transactions between the Automotive and Financial Services sectors occur in the ordinary course of business. For example, Ford Credit receives interest supplements and other support cost payments from the Automotive sector in connection with special vehicle financing and leasing programs that it sponsors. Ford Credit records these payments as revenue over the term of the related finance receivable or operating lease. The Automotive sector records the estimated costs of marketing incentives, including dealer and retail customer cash payments (e.g., rebates) and costs of special financing and leasing programs, as a reduction to revenue at the later of the date the related vehicle sales are recorded or at the date the incentive program is both approved and communicated.
## Key Economic Factors and Trends Affecting Automotive Industry
Excess Capacity. According to CSM Worldwide, an automotive research firm, in 2004 the estimated automotive industry global production capacity for light vehicles (about 74 million units) significantly exceeded global production of cars and trucks (about 60 million units). In North America and Europe, the two regions where the majority of revenue and profits are earned in the industry, excess capacity was an estimated 17% and 13%, respectively. CSM Worldwide projects that excess capacity conditions could continue for several more years.
Pricing Pressure. Excess capacity, coupled with a proliferation of new products being introduced in key segments by the industry, will keep pressure on manufacturers’ ability to increase prices on their products. In addition, the incremental new capacity in the United States by foreign manufacturers (so-called “transplants”) in recent years has contributed, and is likely to continue to contribute, to the severe pricing pressure in that market. In the United States, the reduction of real prices for similarly contented vehicles has become more pronounced since the late 1990s, and we expect that a challenging pricing environment will continue for some time to come. In Europe, the automotive industry also has experienced intense pricing pressure for several years for the same reasons discussed above, which has been exacerbated in recent years as a result of the Block Exemption Regulation.
Consumer Spending Trends. We expect, however, that a decline in, or the inability to increase, vehicle prices could be offset by the spending habits of consumers and their propensity to purchase over time higher-end, more expensive vehicles and/or vehicles with more features. Over the next decade, in the United States and in other mature markets, we expect that growth in spending on vehicle mix and content will grow at least as fast as real GDP per capita. The benefits of this to revenue growth in the automotive industry are significant. In the United States, for example, consumers in the highest income bracket are buying more often and are more frequently buying upscale.
Although growth in vehicle unit sales (i.e., volume) will be greatest in emerging markets in the next decade, we expect that the mature automotive markets (e.g., North America, Western Europe and Japan) will continue to be the source of a substantial majority of global industry revenues over the next decade. We also expect that the North American market will continue as the single largest source of revenue for the automotive industry in the world in the next decade.
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Although we have taken measures to have employees and retirees bear a higher portion of the costs of their health care benefits, we expect our health care costs to increase. For 2005, our trend assumptions for U.S. health care costs include an initial trend rate of 9%, gradually declining to a steady state trend rate of 5% reached in 2011. These assumptions include the effect of actions we are taking and expect to take to offset health care inflation, including eligibility management, employee education and wellness, competitive sourcing and appropriate employee cost sharing.
Commodity Price Increases. Commodity price increases, particularly for steel and resins (which are used extensively in the automotive industry), have occurred recently and are continuing during a period of strong global demand for these materials. Manufacturers in China and other global steelmakers have responded through increases in capacity and production of steel. We expect this, coupled with an easing in global demand pressures, to result in pricing trends beginning to moderate in the intermediate term.
Currency Exchange Rate Volatility. The U.S. dollar depreciated against most major currencies in 2004. This created downward margin pressure on auto manufacturers that have U.S. dollar revenue with foreign currency cost. Because we produce vehicles in Europe (e.g., Jaguar, Land Rover and Volvo models) for sale in the United States and produce components in Europe (e.g., engines) for use in some of our North American vehicles, Ford experienced margin pressure, although this was partially offset by gains on foreign exchange derivatives. Ford, like most other automotive manufacturers with sales in the United States, is not always able to price for depreciation of the U.S. dollar due to the extremely competitive pricing environment in the United States.
## Trends and Strategies
Revenue Management. To address the pricing pressure that exists in the automotive industry, we have employed a customer- focused revenue management strategy to maximize per unit revenue. This strategy is focused on a disciplined approach to utilizing customer demand data – available from many sources, including internet hits, transaction data, customer leads, and research – to help us develop and sell vehicles that more closely match customer desires.
We believe our revenue management strategy has contributed significantly to increases in our average net revenue per vehicle sold for our Ford North America business unit of $745 and $729 for 2004 and 2003, respectively. Since 2001, our average net revenue per vehicle sold in North America has improved by over $1,700 on a cumulative basis. This improvement reflected positive net pricing, as well as a more favorable product mix.
Market Share. An ongoing challenge in the current automotive industry is balancing market share with profitability. Due to the excess industry capacity, most manufacturers engage in some amount of price discounting to increase, maintain or limit decreases in their respective market shares. In the last few years, we have implemented a strategy of de-emphasizing less profitable sales to daily rental car companies, which typically are associated with a large amount of discounting, and placing greater emphasis on our share of the retail market (i.e., market share among end-use customers). This strategy benefits us by reducing the overall amount of marketing incentives we incur and improving the auction and resale values of our products. This latter benefit, in turn, has the added benefit of reducing depreciation expense for vehicles in Ford Credit’s vehicle lease portfolio. The strategy to de-emphasize sales to daily rental car companies, while contributing to improved profits, also has contributed to a loss of share in the United States.
Product Differentiation and Innovation. The fundamental requirement for success in the automotive business is having products with great appeal, whether in terms of styling, quality, innovative features, breakthrough technology or a combination of those characteristics. Our strategy for product creation includes a strong focus on new technology. This is not, however, limited to developing and introducing breakthrough vehicle technologies, but also can be applied to the total vehicle package. For example, our new Ford F-150 pick-up truck, first introduced as a 2004 model, utilizes more than 130 patented inventions related to performance, utility and styling. This model helped establish a sales record for F-Series pick-up trucks in 2004 with nearly one million units sold. Other differentiating technologies that we have introduced or are working to introduce for general availability are:
• Hybrid powertrains, which use a combination of electric power, generated from onboard batteries that are recharged while driving the vehicle, and a gasoline internal combustion engine. The Ford Escape Hybrid, introduced as a 2004 model, is an example of this technology, and we plan to offer four additional vehicle models with this technology.
• Other alternative fuel vehicles, such as hydrogen-powered internal combustion engines, bio or clean diesel powered vehicles and fuel cells. We believe we are the only automobile manufacturer doing significant development work on all these alternative fuel technologies, as well as hybrid powertrain technologies.
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• All-aluminum bodies, which reduce the weight of the vehicle, compared with steel bodies, thereby increasing vehicle fuel economy and performance. The current version of the Jaguar XJ, first introduced as a 2004 model, is an example of a vehicle with this technology.
Cost Reductions. Given the difficult competitive environment of the automotive industry, we continue to focus on reducing our cost structure. During 2004 and 2003, we reduced our costs by $900 million and $3 billion, respectively (at constant volume, mix and exchange and excluding special items and discontinued operations). For 2005, we expect costs for pensions and health care, commodities, and depreciation and amortization will increase, compared with 2004. We expect quality-related costs (i.e., those related to warranty claims and additional service actions) in 2005 to be about the same as they were in 2004. In 2005, we expect to achieve reduced manufacturing, engineering and overhead costs, as well as significant savings in product costs (which comprise material and component costs for our vehicles), compared with 2004. Overall, we expect our costs in 2005 will be about the same as they were in 2004 (at constant volume, mix and exchange and excluding special items and discontinued operations).
Shared Technologies. One of the strategies we are employing to realize efficiencies in manufacturing, engineering and product costs for new vehicles is to share vehicle architectures, technologies and components among various models and re-use them from one generation of a vehicle model to the next. This is illustrated in our recently launched Ford Five Hundred and Mercury Montego car models, which are 85% (by value) common, and the Ford Freestyle cross-over model, which shares 65% (by value) of the components used in those aforementioned models. In addition, the architecture for all three of these vehicles is derived from an existing architecture.
## Business Improvement Actions
Ford Europe Improvement Plan. In October 2003, we announced that we were taking actions to improve efficiency resulting from our flexible manufacturing capability by concentrating production of the next generation of our Ford Focus model in two assembly plants rather than three. This plan included canceling investment for the Focus model at our Genk, Belgium plant. In addition, it included revising production for our Ford Mondeo model at Genk to a 2-shift rather than 3-shift pattern beginning in January 2004. These Genk actions, together with a series of manufacturing, engineering and staff efficiency actions at various other locations in Europe, all of which comprised the Ford Europe Improvement Plan, were expected to reduce personnel levels by 6,700 and result in pre-tax charges of $675 million, including $513 million in 2003. During 2004, we completed the planned Ford Europe improvement actions; the associated pre-tax charges totaled $605 million. Including the results of these actions, Ford Europe has reduced total personnel levels by more than 7,000 since mid-2003.
PAG Improvement Plan. In September 2004, we announced that we were taking actions to improve the structure of our Premier Automotive Group (“PAG”) business unit. These actions included closing the final assembly operations at our Browns Lane plant in Coventry, England, where Jaguar XJ and XK models are produced, and reducing salaried staffing levels at our Jaguar and Land Rover operations. We estimated at that time that we would incur pre-tax charges and cash expenditures of about $175 million for employee separation costs. Our 2004 results include $94 million of these costs, and we expect to incur $75 million in 2005 associated with the shutdown of the final assembly operations at Browns Lane. These actions reduced our personnel levels by 1,100 in 2004, with further personnel reductions in 2005 expected to be about 400.
In addition, we decided to exit Formula One racing and to sell our Formula One racing operations, which incurred pre-tax operating losses of $45 million in the first nine months of 2004. We sold the operations in the fourth quarter of 2004. For a further discussion of the disposition of our Formula One racing operations, see Note 4 of the Notes to the Financial Statements.
Revitalization Plan. One of the elements of our Revitalization Plan, which we announced and began implementing in January 2002, included a reduction of maximum-installed assembly capacity for North American vehicles of over 900,000 units (down from 5.7 million units in 2001 to an ongoing level of approximately 4.8 million units). Through 2004, including the closure of our Ontario Truck Plant and Edison Plant, maximum-installed capacity will have been reduced by over 700,000 units. Plans through 2007 (including closure of our Lorain, Ohio assembly plant) will achieve further net reductions of approximately 200,000 units, resulting in a total net reduction of about 920,000 units.
The Revitalization Plan also included a global reduction of more than 35,000 personnel by 2006, including selected actions prior to 2002. Progress towards this target is measured by excluding employees of entities recently consolidated pursuant to Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51 (“FIN 46”), discussed in Note 16 of the Notes to the Financial Statements, as well as personnel associated with divested and newly-acquired operations (the latter of which would represent a net reduction of 11,000 personnel through year-end 2004 if included in the measurement). On this basis, we have realized a reduction of about 36,000 hourly and salaried employees and salaried equivalents (i.e., salaried positions filled with agency personnel or the functions of which are provided by purchased services) through year-end 2004.
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Certain prior-year amounts have been reclassified to conform to current period presentation.
## FULL-YEAR 2004 RESULTS OF OPERATIONS
Our worldwide net income was $3.5 billion or $1.73 per share of Common and Class B stock in 2004, up $3.0 billion from a profit of $495 million or $0.27 per share in 2003.
Results by business sector for 2004, 2003, and 2002 are shown below (in millions):
<img src='content_image/121876.jpg'>
a/ Primarily related to Ford Europe’s consolidated less-than-100%-owned affiliates.
b/ Related to adoption of FIN 46 in 2003 and the adoption of Statement of Financial Accounting Standards No. 142 in 2002 (see Notes 16 and 9, respectively, of the Notes to the Financial Statements).
Included in Income/(loss) before income taxes are items we do not consider indicative of our ongoing operating activities (“special items”). The following table details the 2004 special items by business unit (in millions):
<img src='content_image/121877.jpg'>
See “Automotive Sector Results of Operations – 2004 Compared with 2003” below for discussion of special items.
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## 2004 COMPARED WITH 2003
Details by Automotive business unit of Income/(loss) before income taxes are shown below (in millions):
<img src='content_image/122713.jpg'>
Details of Automotive sector sales and vehicle unit sales by Automotive business unit for 2004 and 2003 are shown below:
<img src='content_image/122714.jpg'>
* Included in vehicle unit sales of Ford Asia Pacific and Africa are Ford-badged vehicles sold in China and Malaysia by our unconsolidated affiliates totaling 66,190 and 33,906 units in 2004 and 2003, respectively. “Sales”above does not include revenue from these units.
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Details of Automotive sector market share for selected markets for 2004 and 2003 are shown below:
<img src='content_image/45251.jpg'>
a/ Excludes market share of our PAG brand vehicles (i.e., Volvo, Jaguar, Land Rover and Aston Martin).
b/ European market share for Ford Europe and PAG are based, in part, on estimated 2004 vehicle registrations for our 19 major markets.
## Overall Automotive Sector
The improvement in Income/(loss) before income taxes primarily reflected the change in charges related to Visteon Corporation (“Visteon”), Ford’s largest supplier (see “Ford North America” discussion below), higher net pricing, favorable cost performance and the favorable effect of tax-related interest on refunds and settlements of prior-year federal and state audits, offset partially by lower vehicle unit sales and unfavorable changes in currency exchange rates.
The table below details our achievement of our 2004 cost performance milestone (in billions):
<img src='content_image/45247.jpg'>
* At constant volume, mix and exchange and excluding special items and discontinued operations.
## The Americas Segment
- Non-recurrence of 2003 reserve adjustments, offset partially by 2004 improvements.
- Primarily reductions in hourly and salaried personnel as a result of the Ford Europe Improvement Plan, North American plant closings, and engineering efficiency actions, offset partially by higher costs to launch new vehicles in 2004.
- Primarily administrative cost savings (largely personnel related), reduced parts distribution costs, and lower litigation expenses, offset partially by higher fixed marketing costs.
- Primarily the effect of new Medicare drug legislation and higher VEBA contributions, partially offset by the effect of a lower discount rate.
- New product and commodities-related cost increases, offset by design cost reductions on existing products and pricing efficiencies at our suppliers.
- Related to investments for new vehicles.
## Explanation of Cost Performance
Ford North America. The improvement in earnings primarily reflected the non-recurrence of $1.6 billion of charges in 2003 related to Visteon, offset by a charge of $600 million to establish an allowance against a receivable from Visteon in 2004. The receivable relates to costs for postretirement health care and life insurance benefits provided to Ford hourly employees assigned to Visteon and other select Visteon employees who are former employees of Ford. The charges in 2003 related to agreements with Visteon, which primarily addressed postretirement health care costs for service prior to 2000 for Ford hourly employees assigned to Visteon, as well as pricing, sourcing and other arrangements.
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Other special items in 2004 included a charge of $182 million related to our investment in Ballard Power Systems Inc. (“Ballard”), a provider of fuel-cell technology. The charge included a write-down to fair market value of our investment in Ballard for the portion that is held for sale and recognition of an other-than-temporary loss in value on the long-term portion of our investment.
Ford South America. The improvement in earnings primarily reflected positive net pricing and higher vehicle unit sales, offset partially by higher commodity costs.
## Ford Europe and PAG Segment
Ford Europe. The improvement in earnings primarily reflected favorable cost performance, lower charges related to the Ford Europe Improvement Plan (primarily employee separation charges) (less than $100 million in 2004 compared with $513 million in 2003) and higher profits at our Ford Otosan joint venture in Turkey. Favorable cost performance reflected successful execution of the Ford Europe Improvement Plan and material cost savings.
PAG. The increased loss primarily reflected unfavorable changes in currency exchange rates, as well as vehicle production reductions and employee separation charges at Jaguar related to the implementation of the PAG Improvement Plan and higher costs for launching new vehicles, offset partially by positive net pricing.
## Ford Asia Pacific and Africa/Mazda Segment
Ford Asia Pacific and Africa. The improvement in earnings primarily reflected favorable changes in currency exchange rates and higher vehicle unit sales, offset partially by a charge related to the disposition of certain dealerships.
Mazda and Associated Operations. The change primarily reflected improvements in our Mazda-related investments.
## Other Automotive
The improvement in results primarily reflected higher tax-related interest on refund claims (about $600 million in 2004 compared to about $300 million in 2003) and the favorable effect on interest expense of the settlements in 2004 of prior-year federal and state tax audits and 2004 debt repurchases. This was offset partially by the reclassification of interest expense on our 6.50% Junior Subordinated Debentures due 2032 held by a subsidiary trust, Ford Motor Company Capital Trust II (prior to July 1, 2003, this interest expense was included in Minority interests in net income/(loss) of subsidiaries) . For 2005, we expect pre-tax losses for Other Automotive to be in the range of $500 million to $900 million.
## 2003 COMPARED WITH 2002
Details by Automotive business unit of Income/(loss) before income taxes are shown below (in millions):
<img src='content_image/67008.jpg'>
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Details of Automotive sector sales and vehicle unit sales for 2003 and 2002 are shown below:
<img src='content_image/81459.jpg'>
* Included in vehicle unit sales of Ford Asia Pacific and Africa are Ford-badged vehicles sold in China and Malaysia by our unconsolidated affiliates totaling 33,906 and 17,404 units in 2003 and 2002, respectively. “Sales” above does not include revenue from these units.
Details of Automotive sector market share for selected markets for 2003 and 2002 are shown below:
<img src='content_image/81460.jpg'>
* Excludes market share of our PAG brand vehicles (i.e., Volvo, Jaguar, Land Rover and Aston Martin).
## The Americas Segment
Ford North America. The reduction in earnings primarily reflected the charges related to agreements with Visteon discussed above (see “2004 compared with 2003 – The Americas Segment: Ford North America”), lower vehicle unit sales, unfavorable net pricing and unfavorable changes in currency exchange rates, offset partially by cost reductions and favorable product mix.
Ford South America. The improvement in earnings primarily reflected the non-recurrence of the adverse effects of currency devaluation in Brazil and Argentina, increased market share and continuing improvement in the business structure.
## Ford Europe and PAG Segment
Ford Europe. The increased loss primarily reflected the charges related to the Ford Europe Improvement Plan discussed above (see “2004 compared with 2003 – Ford Europe and PAG Segment: Ford Europe”), unfavorable net pricing, a less favorable product mix, unfavorable changes in currency exchange rates and a larger reduction in dealer stocks, offset partially by cost reductions and improved results at Ford Otosan, our joint venture in Turkey.
PAG. The improvement in earnings primarily reflected cost reductions and improved product mix, offset partially by unfavorable changes in currency exchange rates and the non-recurrence of employee separation charges incurred in 2002.
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## Ford Asia Pacific and Africa/Mazda Segment
Ford Asia Pacific and Africa. The improvement in earnings primarily reflected favorable changes in currency exchange rates, higher vehicle unit sales and positive net pricing.
Mazda. The improvement in earnings primarily reflected our share of Mazda’s improved operating results.
## Other Automotive
The improvement in loss primarily reflected the non-recurrence of a charge in 2002 related to the sale of non-core businesses, primarily Kwik-Fit Holdings Ltd.
## FINANCIAL SERVICES SECTOR RESULTS OF OPERATIONS
## 2004 COMPARED WITH 2003
Details of the full year Financial Services sector Income/(loss) before income taxes for 2004 and 2003 are shown below (in millions):
<img src='content_image/14197.jpg'>
## Ford Credit
The increase in income before income taxes of $1,475 million primarily reflected improved credit loss performance and improved leasing results. The improved credit loss performance primarily resulted from fewer repossessions and a lower average loss per repossession. The improvement in leasing results primarily reflected higher used vehicle prices and a reduction in the percentage of vehicles returned to Ford Credit at lease termination.
Ford Credit reviews its business performance from several perspectives, including:
• On-balance sheet basis - includes the receivables Ford Credit owns and receivables sold for legal purposes that remain on Ford Credit’s balance sheet;
• Securitized off-balance sheet basis - includes receivables sold in securitization transactions that are not reflected on Ford Credit’s balance sheet;
• Managed basis - includes on-balance sheet and securitized off-balance sheet receivables that Ford Credit continues to service; and
• Serviced basis - includes managed receivables and receivables sold in whole-loan sale transactions where Ford Credit retains no interest in the sold receivables, but which it continues to service.
Ford Credit analyzes its financial performance primarily on an on-balance sheet and managed basis. It retains interests in receivables sold in off-balance sheet securitizations, and with respect to subordinated retained interests, has credit risk. As a result, it evaluates credit losses, receivables and leverage on a managed basis as well as on an on-balance sheet basis. In contrast, Ford Credit does not have the same financial interest in the performance of receivables sold in whole-loan sale transactions, and as a result it generally reviews the performance of the serviced portfolio only to evaluate the effectiveness of its origination and collection activities. To evaluate the performance of these activities, Ford Credit monitors a number of measures, such as repossession statistics, losses on repossessions and the number of bankruptcy filings.
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] | overall_image/2d17036b0acbdffc1fc23877bf3ab5dfedd0113a930d2507328bb0cbc0173cee.png | ## MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Ford Credit’s finance receivables, net of allowance for credit losses, and net investment in operating leases for its on-balance sheet, securitized off-balance sheet, managed and serviced portfolios are shown below (in billions):
<img src='content_image/132951.jpg'>
* At December 31, 2004 and 2003, Ford Credit’s retained interests in sold receivables were $9.2 billion and $12.6 billion, respectively. For more information regarding these retained interests, see “Off-Balance Sheet Arrangements” below.
On-Balance Sheet Receivables. At December 31, 2004 and 2003, about $16.9 billion and $14.3 billion, respectively, of finance receivables have been sold for legal purposes to consolidated securitization special purpose entities (“SPEs”). In addition, at December 31, 2004, interests in operating leases and the related vehicles of about $2.5 billion have been transferred for legal purposes to consolidated securitization SPEs. These receivables and interests in operating leases and the related vehicles are available only for repayment of debt issued by those entities, and to pay other securitization investors and other participants; they are not available to pay Ford Credit’s other obligations or the claims of Ford Credit’s other creditors.
Securitized Off-Balance Sheet Receivables. Total securitized off-balance sheet receivables decreased $11.3 billion from a year ago.
Managed Receivables. Total managed receivables decreased $7.1 billion from a year ago. The decrease primarily reflected lower retail and operating lease contract placement volumes. The lower level of managed receivables reflected Ford Credit’s continued focus on financing Ford brand vehicles.
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] | overall_image/b9b333fbe34a90a3c888b285ee1e8bc79bf13124896931ea70c9052754423674.png | ## MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table shows actual credit losses net of recoveries, which are referred to as charge-offs, for Ford Credit’s worldwide on-balance sheet, reacquired, securitized off-balance sheet and managed receivables, for the various categories of financing during the periods indicated. Reacquired receivables reflect the amount of receivables that resulted from the accounting consolidation of FCAR Owner Trust (“FCAR”) in the second quarter of 2003. The loss-to-receivables ratios, which equal charge-offs divided by the average amount of net receivables outstanding for the period, are shown for the on-balance sheet and managed portfolios.
<img src='content_image/45176.jpg'>
* Ford Credit believes that the use of the on-balance sheet loss-to-receivables ratio that includes the charge-offs related to reacquired receivables is useful to investors because it provides a more complete presentation of Ford Credit’s on-balance sheet charge-off performance.
In 2004, charge-offs for Ford Credit’s on-balance sheet and its securitized off-balance sheet receivables declined from a year ago primarily reflecting fewer repossessions and a lower average loss per repossession in its U.S. retail installment and operating lease portfolio. These improvements resulted from Ford Credit’s emphasis on purchasing higher quality retail installment and lease contracts and enhancements to its collection practices. The on-balance sheet loss-to-receivables ratio decreased primarily reflecting improvements in charge-offs as described above.
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Shown below is an analysis of Ford Credit’s allowance for credit losses related to finance receivables and operating leases for the years ended December 31 (dollar amounts in billions):
<img src='content_image/32544.jpg'>
The decrease in the allowance for credit losses of approximately $500 million primarily reflected significantly improved charge- off performance in the United States, specifically fewer repossessions and a lower average loss per repossession in the Ford, Lincoln and Mercury brand U.S. retail installment sale and operating lease portfolio. Ford Credit’s emphasis on purchasing higher quality receivables, enhancements to its collection practices and higher used vehicle prices resulted in a reduction in net charge-offs and the associated provision for credit losses.
The following table summarizes the activity related to off-balance sheet sales of receivables reported as revenues for the periods indicated (in millions except for ratios):
<img src='content_image/32543.jpg'>
The decrease in investment and other income related to sales of receivables reflected lower levels of outstanding sold receivables compared with 2003.
Sales of finance receivables through off-balance sheet securitizations have the impact on earnings of recalendarizing and reclassifying net financing margin (i.e., financing revenue less interest expense) and credit losses related to the sold receivables, compared with how they would have been reported if Ford Credit continued to report the sold receivables on-balance sheet and funded them through asset-backed financings. Recalendarization effects occur initially when the gain or loss on sales of receivables is recognized in the period the receivables are sold. Over the life of the securitization transaction, Ford Credit recognizes income from residual interest in securitization transactions, interest income from retained securities, servicing fees and other receivable sale income.
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] | overall_image/84b11dfb903ce18f2fdabee361a01b7bcc2252289e8f34194b34c2740f3fedc9.png | In addition, credit losses related to the off-balance sheet securitized receivables are included in the initial and ongoing valuation of Ford Credit’s residual interest in the securitization transaction (see “Off-balance Sheet Arrangements – Sales of Receivables by Ford Credit” for definition) and neither impact the Provision for credit and insurance losses on the income statement nor influence the assessment of the adequacy of the Allowance for credit losses related to Ford Credit’s on-balance sheet receivables.
Therefore, over the life of each off-balance sheet securitization transaction, the gain or loss on sale of receivables, income from residual interest in securitization transactions, interest income from retained securities, servicing fees and other receivable sale income is equal to the net financing margin and credit losses that would have been reported had Ford Credit reported the receivables on its balance sheet and funded them through asset-backed financings.
The net impact of off-balance sheet securitizations on Ford Credit’s earnings in a given period will vary depending on the amount and type of receivables sold and the timing of the transactions in the current period and the preceding two-to-three year period, as well as the interest rate environment at the time the finance receivables were originated and securitized.
The following table shows, on an analytical basis, the earnings impact of off-balance sheet securitizations as if Ford Credit had reported them as on-balance sheet and funded them through asset-backed financings for the periods indicated (in millions):
<img src='content_image/42621.jpg'>
In 2004, the impact on earnings of reporting the sold receivables as off-balance sheet securitizations was $86 million lower than had these transactions been structured as on-balance sheet securitizations. This difference resulted from recalendarization effects caused by gain-on-sale accounting requirements, as discussed above. This effect will fluctuate as the amount of receivables sold in Ford Credit’s off-balance sheet securitizations increases or decreases over time. In a steady state of securitization activity, the difference between reporting securitizations on- or off-balance sheet in a particular year approaches zero. While the difference in earnings impact between on- or off-balance sheet securitizations is minimal, this funding source has provided Ford Credit with significant borrowing cost savings compared with unsecured debt and funding flexibility in a difficult economic environment.
## Hertz
The improvement in earnings primarily reflected higher vehicle and equipment rental volumes, lower fleet costs and higher proceeds received in excess of book value on the disposal of used vehicles and equipment, offset partially by lower pricing.
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] | overall_image/5f17cf4028513e8607e947ee5578eb1a784108e97390c1920da2e813aa8bea7f.png | ## 2003 COMPARED WITH 2002
Details of the full-year Financial Services sector Income/(loss) before income taxes for 2003 and 2002 are shown below (in millions):
<img src='content_image/52706.jpg'>
## Ford Credit
The increase in income before income taxes primarily reflected improved credit loss performance and the net favorable market valuation of derivative instruments and associated exposures, offset partially by the impact of lower average net receivables.
## Hertz
The improvement in earnings primarily reflected an improved car rental pricing environment and lower costs.
## LIQUIDITY AND CAPITAL RESOURCES
## Automotive Sector
Our strategy is to ensure we have sufficient funding available with a high degree of certainty throughout the business cycle. The key elements of this strategy include maintaining large gross cash balances, generating cash from operating-related activities, having a long-dated debt maturity profile, maintaining committed credit facilities and funding long-term liabilities over time.
Gross Cash. Automotive gross cash includes cash and cash equivalents, marketable and loaned securities and assets contained in a short-term Voluntary Employee Beneficiary Association trust (“VEBA”) (see below). Gross cash as of December 31, 2004, 2003 and 2002 is detailed below (in billions):
<img src='content_image/52707.jpg'>
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] | overall_image/1da112dac4b0a354d59e6625c41b431b94c11c25f968fa49e11473532ece42fa.png | In managing our business, we classify changes in gross cash into four categories: operating-related (both including and excluding pension/long-term VEBA contributions and tax refunds), capital transactions with the Financial Services sector, acquisitions and divestitures and other (primarily financing related). Our key metric for operating-related cash flow is cash flow before funded pension and long-term VEBA contributions and tax refunds. This metric best represents the ability of our Automotive operations to generate cash. We believe the cash flow analysis reflected in the table below, which differs from a cash flow statement presented in accordance with GAAP, is useful to investors because it includes cash flow elements that we consider to be related to our operating activities (e.g., capital spending) that are not included in Cash flows from operating activities before securities trading , the most directly comparable GAAP financial measure.
Changes in Automotive gross cash for the last three years are summarized below (in billions):
<img src='content_image/106304.jpg'>
Total 2004 operating-related cash flows before funded pension plan and long-term VEBA contributions and tax refunds were $1.0 billion positive. Other operating-related changes, primarily timing differences between expense or revenue recognition and the corresponding cash payments for costs such as health care, pension, marketing, and warranty, offset partially by higher year-end inventory, contributed about $900 million in 2004. The $1.1 billion decrease in capital expenditures in 2004 from 2003, primarily reflected the high level of North American spending in 2003 for new product launches consistent with our product-led revitalization plan.
Including funded pension plan and long-term VEBA contributions and tax refunds, operating-related cash flows were an outflow of $3.7 billion. Contributions to our worldwide funded pension plans totaled $2.2 billion in 2004, compared to approximately $2.8 billion in 2003. In 2004, we also contributed $2.8 billion to a long-term VEBA used to pre-fund a portion of Ford’s other postretirement benefits liability. We made no contributions to our short-term VEBA in 2004 which we include in gross cash. The $4.1 billion of short-term VEBA assets are invested in a manner similar to our cash portfolio and are available to fund certain employee benefit obligations in the near term. The $5.2 billion of long-term VEBA assets are invested in a manner similar to our pension fund assets. The assets of the long-term VEBA are not included in gross cash, but are dedicated to pay longer-term healthcare obligations. See Note 22 of the Notes to the Financial Statements for plans to contribute to funded pension plans and VEBA.
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] | overall_image/fee2f485885714d78868f89e99c3c7b88010c287f0b2685e889815276660a88f.png | 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):
<img src='content_image/66726.jpg'>
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.
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.
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## Ford Credit
Debt and Cash. Ford Credit’s total debt was $144.3 billion at December 31, 2004, down $5.4 billion compared with a year ago, primarily reflecting lower funding requirements due to lower asset levels. Ford Credit’s outstanding unsecured commercial paper at December 31, 2004 totaled $8.9 billion, up $2.8 billion compared with a year ago and up approximately $700 million compared with year-end 2002, primarily reflecting increased investor demand.
At December 31, 2004, Ford Credit had cash and cash equivalents of $12.7 billion. In the normal course of its funding activities, Ford Credit may generate more proceeds than are necessary for its immediate funding needs. These excess amounts are maintained primarily as highly liquid investments, which provide liquidity for Ford Credit’s short-term funding obligations and give Ford Credit flexibility in the use of its other funding programs.
Funding. Ford Credit requires substantial funding in the normal course of business. Ford Credit’s funding requirements are driven mainly by the need to (i) purchase retail installment sale contracts and vehicle leases to support the sale of Ford products, which are influenced by Ford-sponsored special financing and leasing programs that are available exclusively through Ford Credit, (ii) provide vehicle inventory and capital financing for Ford dealers, and (iii) repay its debt obligations.
Ford Credit’s funding sources include debt issuances, sales of receivables in securitizations and other structured financings, and bank borrowings. Debt issuance consists of short- and long-term unsecured debt, placed directly by Ford Credit or through securities dealers or underwriters in the United States and international capital markets, and reaches both retail and institutional investors. Ford Credit issues commercial paper in the United States, Europe, Canada and other international markets. In addition to its commercial paper programs, Ford Credit also obtains short-term funding from the sale of floating rate demand notes, which may be redeemed at any time at the option of the holder thereof without restriction. At December 31, 2004, the principal amount outstanding of such notes was $7.7 billion. Ford Credit does not hold reserves to fund the payment of the demand notes or any other short-term funding obligation. Ford Credit’s policy is to have sufficient cash and cash equivalents, unused committed bank-sponsored asset-backed commercial paper issuer capacity, securitizable assets, and back-up credit facilities to provide liquidity for all of its short-term funding obligations.
During 2004, Ford Credit continued to meet a significant portion of its funding requirements through securitizations because of the stability of the market for asset-backed securities, their lower relative costs given our credit ratings (as described below), and the diversity of funding sources that they provide. Securitized funding (both on- and off-balance sheet, net of retained interests) as a percent of total managed receivables was as follows as of the end of each of the last three years: 2004 - 24%, 2003 - 25%, 2002 - 28%.
The following table illustrates Ford Credit’s term public funding issuances for 2003 and 2004 and its planned issuances for 2005 (in billions):
<img src='content_image/31181.jpg'>
The cost of both debt and funding in securitizations is based on a margin or spread over a benchmark interest rate, such as interest rates paid on U. S. Treasury securities of similar maturities. Over the last two years, on an indicative basis, spreads on Ford Credit’s securitized funding have fluctuated between 35 and 63 basis points above 3-year U.S. Treasury securities, while Ford Credit’s unsecured long-term debt funding spreads have fluctuated between 124 and 638 basis points above comparable U.S. Treasury securities. In 2004, on an indicative basis, Ford Credit’s unsecured term-debt spreads fluctuated between 124 and 205 basis points above 3-year U.S. Treasury securities, with an average spread of 162 basis points and a year-end spread of 165 basis points above comparable U.S. Treasury securities.
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] | overall_image/4a9004944826267c3fcbca2c592bf74ef2533e9fd04f4606f3c019adf3767218.png | G reat products. Strong business. Better world. These are the ways we’re working to make Ford Motor Company the best automotive company on the planet. We aim to be the most trusted, the most respected and the most successful.
We know great products are essential to this vision, because products always have been the foundation of our success. Ford put the world on wheels with the Model T, and we put ourselves on steady ground with vehicles like the Model A, the ’49 Ford, the F-Series, the Mustang and the Explorer. We’re solidifying our company right now with the greatest tide of exciting new products in our 102-year history. We know a strong, world-class business structure is essential. Not just quality- and cost-awareness, but solid relationships with our employees, our dealers, our suppliers and every Ford stakeholder. We’re proud to be a company with family-based values. We believe that strengthens our competitive advantage.
<img src='content_image/104109.jpg'>
And because we are family-based, we are people- oriented. That uniquely qualifies us to leverage our better-world vision as a tremendous business opportunity. It begins with the quality and safety of our products, and it extends into everything we do that impacts people’s lives, their communities and their world. Increasing the social benefit and reducing the environmental impact of our products adds value. We love our heritage. We’re proud of it. We’ll be even prouder of the heritage we’re building today.
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As a result of lower credit ratings over the last three years, Ford Credit focused its efforts on further diversification of funding sources and reduced its reliance on short-term funding, especially unsecured commercial paper. Ford Credit launched new asset-backed commercial paper and retail unsecured bond programs, and it expanded its securitization and other structured financing channels, including transactions by foreign affiliates and expansion of its bank-sponsored asset-backed commercial paper issuers program. As Ford Credit’s short-term credit ratings have declined, asset-backed commercial paper programs have become more cost-effective compared with unsecured commercial paper, and allow Ford Credit access to a larger investor base. As a result of Ford Credit’s funding strategy and the reduction in its managed receivables, lower credit ratings during the past three years have not had a material impact on Ford Credit’s ability to fund its operations. Any further lowering of its credit ratings may increase Ford Credit’s borrowing costs and potentially constrain its funding sources. This could cause Ford Credit to increase its use of securitization or other sources of liquidity or to reduce the amount of receivables it could purchase, thereby potentially adversely affecting its ability to support the sale of Ford vehicles.
For additional funding and to maintain liquidity, Ford Credit and its majority-owned subsidiaries, including FCE, have contractually committed credit facilities with financial institutions that totaled approximately $7.5 billion at December 31, 2004. This includes $4.3 billion of Ford Credit facilities ($3.9 billion global and approximately $400 million non-global) and $3.2 billion of FCE facilities ($3.0 billion global and approximately $200 million non-global). Approximately $800 million of the total facilities were in use at December 31, 2004. Additionally, at December 31, 2004, banks provided $18.0 billion of contractually committed liquidity facilities supporting two asset-backed commercial paper programs established by Ford Credit. Ford Credit also has entered into agreements with a number of bank-sponsored asset-backed commercial paper issuers under which such issuers are contractually committed to purchase from Ford Credit, at Ford Credit’s option, up to $14.3 billion of receivables in the aggregate at December 31, 2004. For further discussion of these facilities and agreements, see Note 15 of the Notes to the Financial Statements.
Leverage. Ford Credit uses leverage, or the debt-to-equity ratio, to make various business decisions, including establishing pricing for retail, wholesale and lease financing, and assessing its capital structure. Ford Credit calculates leverage on a financial statement basis and on a managed basis using the following formulas:
<img src='content_image/105780.jpg'>
The following table illustrates the calculation of Ford Credit’s financial statement leverage (in billions, except for ratios):
<img src='content_image/105781.jpg'>
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] | overall_image/e19f7de52f8618df53cfb940ea7ae33576037a7087dcdb34bc44ec41d6157ee5.png | ## MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table illustrates the calculation of Ford Credit’s managed leverage (in billions, except for ratios):
<img src='content_image/74854.jpg'>
a/ Includes securitized funding from discontinued operations.
b/ Includes retained interest in securitized receivables from discontinued operations.
Ford Credit believes that managed leverage, which is the result of adjustments to its financial statement leverage, is useful to its investors because it reflects the way Ford Credit manages its business. Ford Credit retains interests in receivables sold in off-balance sheet securitization transactions, and with respect to subordinated retained interests, is exposed to credit risk. Accordingly, Ford Credit considers securitization as an alternative source of funding and evaluates credit losses, receivables and leverage on a managed as well as a financial statement basis. Ford Credit also deducts cash and cash equivalents because they generally correspond to excess debt beyond the amount required to support its operations. In addition, Ford Credit adds its minority interests to its financial statement equity, because all of the debt of such consolidated entities is included in its total debt. SFAS No. 133 requires Ford Credit to make fair value adjustments to its assets, debt and equity positions to reflect the impact of interest rate instruments Ford Credit uses in connection with its term debt issuances and securitizations. SFAS No. 133 adjustments vary over the term of the underlying debt and securitized funding obligations based on changes in market interest rates. Ford Credit generally repays its debt funding obligations as they mature. As a result, Ford Credit excludes the impact of SFAS No. 133 on both the numerator and denominator in order to exclude the interim effects of changes in market interest rates. Accordingly, the managed leverage measure provides Ford Credit’s investors with meaningful information regarding management’s decision-making processes.
Ford Credit’s managed leverage strategy involves establishing a leverage level that it believes reflects the risk characteristics of its underlying assets. In establishing a target leverage level, Ford Credit considers the characteristics of the receivables in its managed portfolio and the prevailing market conditions.
At December 31, 2004, Ford Credit’s managed leverage was 13.7 to 1, compared with 13.0 to 1 a year ago. Ford Credit’s dividend policy is based in part on its strategy to maintain managed leverage at the lower end of the 13 - 14 to 1 range. Based on profitability and managed receivable levels, Ford Credit paid dividends of $4.3 billion in 2004. In the first quarter of 2005, Ford Credit expects to decrease its managed leverage to the lower end of its target range, and remain at the low end of the range throughout the year.
## Hertz
Hertz requires funding for the acquisition of revenue earning equipment, which consists of vehicles and industrial and construction equipment. Hertz purchases this equipment in accordance with the terms of agreements negotiated with automobile and equipment manufacturers. The financing requirements of Hertz are seasonal and are mainly explained by the seasonality of the travel industry. Hertz’ fleet size, and its related financing requirements, generally peak in the summer months, and decline during the winter months.
Hertz maintains unsecured domestic and foreign commercial paper programs and a secured domestic commercial paper program to cover short-term funding needs, and also draws from bank lines, as a normal business practice, to fund international needs. Hertz also is active in the domestic secured and unsecured medium-term and long-term debt markets and in the unsecured international medium-term debt market.
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At December 31, 2004, Hertz had committed credit facilities totaling $2.8 billion. Of this amount, $1.3 billion represented global and other committed credit facilities ($708 million of which are available through June 30, 2009 and $560 million of which have various maturities of up to four years); $500 million consisted of a revolving credit line provided by Ford, which currently expires in June 2006; $215 million consisted of asset-backed letters of credit, and $814 million consisted of 364-day asset-backed commercial paper facilities.
## Total Company
Stockholders’ Equity. Our stockholders’ equity was $16 billion at December 31, 2004, up $4.4 billion compared with December 31, 2003. The increase primarily reflected net income and foreign currency translation adjustments, offset partially by dividends and the change in our minimum pension liability. For additional discussion of foreign currency translation adjustments, see Note 2 of the Notes to the Financial Statements.
Pension. We sponsor defined benefit pension plans for our employees in many countries. Pursuant to our collective bargaining agreement with the UAW, under which most of our U.S. hourly employees are covered, we are contractually committed to provide specified levels of pension benefits to retirees covered by the contract. These obligations give rise to significant expenses that are highly dependent on assumptions discussed in Note 22 of the Notes to the Financial Statements and under “Critical Accounting Estimates” below.
Included in our stockholders’ equity was a $4 billion adjustment for our worldwide minimum pension liability as of December 31, 2004. This was about $500 million greater than the 2003 adjustment, due to the decline in the funded status of our worldwide pension plans (i.e., the amount by which the present value of projected benefit obligations exceeded the market value of pension plan assets) as of December 31, 2004, compared with December 31, 2003. The primary factor that contributed to the decline in the funded status was the decrease in discount rates at December 31, 2004 used to calculate the present value of benefit obligations compared with the prior year, partially offset by the actual return on plan assets for 2004 in excess of the expected asset return.
Credit Ratings. Our short- and long-term debt is rated by four credit rating agencies designated as nationally recognized statistical rating organizations (“NRSROs”) by the Securities and Exchange Commission:
• Dominion Bond Rating Service Limited (“DBRS”);
• Fitch, Inc. (“Fitch”);
• Moody’s Investors Service, Inc. (“Moody’s”); and
• Standard & Poor’s Rating Services, a division of McGraw-Hill Companies, Inc. (“S&P”).
In several markets, locally recognized rating agencies also rate us. A credit rating reflects an assessment by the rating agency of the credit risk associated with particular securities we issue, based on information provided by us and other sources. Credit ratings are not recommendations to buy, sell or hold securities and are subject to revision or withdrawal at any time by the assigning rating agency. Each rating agency may have different criteria for evaluating company risk, and therefore ratings should be evaluated independently for each rating agency. Lower credit ratings generally result in higher borrowing costs and reduced access to capital markets. The NRSROs have indicated that our lower ratings are primarily a reflection of the rating agencies’ concerns regarding our automotive cash flow and profitability, declining market share, excess industry capacity, industry pricing pressure and rising healthcare costs.
The following chart summarizes Ford’s a/ credit ratings and the outlook assigned by the NRSROs since 2002:
<img src='content_image/92486.jpg'>
a/ Moody’s presently rates Ford Credit’s long-term debt at “A3”, and Hertz’s long-term debt at “Baa2”. All other May 2004 ratings and outlooks shown apply equally to Ford, Ford Credit, and Hertz.
b/ NRSRO designation granted on February 27, 2003.
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## OUTLOOK
We have set and communicated certain planning assumptions, operational metrics and financial milestones for 2005, shown below:
<img src='content_image/55940.jpg'>
* At constant volume, mix and exchange; excluding special items and discontinued operations.
Our projection of first quarter 2005 production is as follows:
<img src='content_image/55937.jpg'>
Our current projection of second quarter 2005 production for Ford North America is 940,000 vehicles (290,000 cars and 650,000 trucks). In the second quarter of 2004, Ford North America produced 951,000 vehicles (252,000 cars and 699,000 trucks).
On October 22, 2004, President Bush signed into law The American Jobs Creation Act of 2004 (the “Act”). The most significant component of the Act was the repeal of the extraterritorial income (“ETI”) exclusion and the replacement of ETI with a domestic deduction for a range of broadly defined domestic production activities. The Act also provides for a one-year period to repatriate certain foreign earnings at a special tax rate. We continue to evaluate the application of the repatriation provisions. If we determine that we will repatriate earnings pursuant to these provisions, a favorable earnings impact would result. We expect to make a determination about the applicability of the repatriation provisions in the last quarter of 2005. The other provisions of the Act are not expected to have a material impact on future earnings. We expect our 2005 full-year effective tax rate to be between 25% and 28%, excluding any potential effect of the repatriation-of-foreign-earnings provisions of the Act.
As disclosed in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, we have been in discussions with Visteon regarding changes to improve the efficiency and operating results of both companies, and these discussions are ongoing. Actions that may result from these discussions could include modifications to our existing commercial arrangements with Visteon, including modifications with respect to Visteon’s present obligation to reimburse us for the costs of the approximately 17,700 Ford employees assigned to Visteon. These modifications likely would result in a significant charge to earnings in the period in which they occur, but would not be expected to have a material adverse impact on future ongoing results of operations.
In order that Visteon continues to supply certain components without cost surcharges to us, on March 10, 2005, we agreed to provide Visteon with the following financial assistance at least through the end of 2005:
• relieving Visteon of a portion (about $25 million per month) of its obligation to reimburse us for the costs of our employees assigned to Visteon (e.g., wage costs);
• reducing by about one-fourth the number of days within which we are required to make payment to Visteon for materials and components that we purchase from Visteon; and
• acquiring up to about $150 million of new machinery and equipment for use by Visteon necessary for its production of components for us.
Any broader agreement that might result from our ongoing discussions with Visteon could substantially modify this and any other existing Visteon agreements.
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## Risk Factors
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 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;
• economic distress of suppliers that may require us to provide financial support or take other measures to ensure supplies of materials;
• work stoppages at 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 postretirement benefit plans (e.g., investment returns, interest rates, health care cost trends, benefit improvements);
• currency or commodity price fluctuations, including rising steel prices;
• changes in interest rates;
• a market shift from truck sales in the U.S.;
• economic difficulties in any significant market;
• higher prices for or reduced availability of fuel;
• labor or other constraints on our ability to restructure our business;
• a change in our requirements or obligations under long-term supply arrangements pursuant to which we are obligated to purchase minimum quantities or a fixed percentage of output or pay minimum amounts;
• credit rating downgrades;
• 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, acts of war, epidemic disease or measures taken by governments in response thereto that negatively affect the travel industry; and
• our inability to implement the Revitalization Plan.
## CRITICAL ACCOUNTING ESTIMATES
We consider an accounting estimate to be critical if: 1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and 2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors and the Audit Committee has reviewed the foregoing disclosure. In addition, there are other items within our financial statements that require estimation, but are not deemed critical as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements.
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] | overall_image/4530576e4fd025c56f36c772323a703702694f2ea1772bca82bece08a683cf39.png | ## MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
## Warranty and Additional Service Actions
Nature of Estimates Required. The estimated warranty and additional service action costs are accrued for each vehicle at the time of sale. Estimates are principally based on assumptions regarding the lifetime warranty costs of each vehicle line and each model year of that vehicle line, where little or no claims experience may exist. In addition, the number and magnitude of additional service actions expected to be approved, and policies related to additional service actions, are taken into consideration. Due to the uncertainty and potential volatility of these estimated factors, changes in our assumptions could materially affect net income.
Assumptions and Approach Used. Our estimate of warranty and additional service action obligations is reevaluated on a quarterly basis. Experience has shown that initial data for any given model year can be volatile; therefore, our process relies upon long-term historical averages until sufficient data are available. As actual experience becomes available, it is used to modify the historical averages to ensure that the forecast is within the range of likely outcomes. Resulting balances are then compared with present spending rates to ensure that the accruals are adequate to meet expected future obligations.
See Note 26 of the Notes to the Financial Statements for more information regarding costs and assumptions for warranties and additional service actions.
## Pensions
Nature of Estimates Required. The measurement of our pension obligations, costs and liabilities is dependent on a variety of assumptions used by our actuaries. These assumptions include estimates of the present value of projected future pension payments to all plan participants, taking into consideration the likelihood of potential future events such as salary increases and demographic experience. These assumptions may have an effect on the amount and timing of future contributions. The plan trustee conducts an independent valuation of the fair value of pension plan assets.
Assumptions and Approach Used. The assumptions used in developing the required estimates include the following key factors:
• Discount rates
• Salary growth
• Retirement rates
• Expected contributions
• Inflation
• Expected return on plan assets
• Mortality rates
We base the discount rate assumption on investment yields available at year-end on long-term bonds rated Aa- or better. In the United States we use the Moody’s Aa long-term bond yield as the initial indicator of these yields. We also consider the yield derived from matching projected pension payments with maturities of a portfolio of available bonds rated Aa- or better. Our inflation assumption is based on an evaluation of external market indicators. The salary growth assumption reflects our long-term actual experience, the near-term outlook and assumed inflation. The expected return on plan assets assumption reflects various long-run inputs, including historical plan returns and peer data, as well as inputs from a range of internal and external advisors for capital market returns, inflation and other variables, adjusted for specific aspects of our strategy. The expected amount and timing of contributions is based on an assessment of minimum requirements, and additional amounts based on cash availability and other considerations (e.g., funded status, avoidance of Pension Benefit Guaranty Corporation (“PBGC”) penalty premiums and tax efficiency). Retirement and mortality rates are developed to reflect actual and projected plan experience. Plan obligations and costs are based on existing retirement plan provisions. No assumption is made regarding any potential future changes to benefit provisions beyond those to which we are presently committed (e.g., in labor contracts). The effects of actual results differing from our assumptions and the effects of changing assumptions are included in unamortized net gains and losses. Unamortized gains and losses are amortized over future periods and, therefore, generally affect our recognized expense in future periods.
See Note 22 of the Notes to the Financial Statements for more information regarding costs and assumptions for employee retirement benefits.
Sensitivity Analysis. The December 31, 2004 funded status of our pension plans is affected by December 31, 2004 assumptions. Pension expense for 2004 is based on the plan design and assumptions as of December 31, 2003. Note that these sensitivities may be asymmetric, and are specific to 2004. They also may not be additive, so the impact of changing multiple factors simultaneously cannot be calculated by combining the individual sensitivities shown. The effect of the indicated increase/(decrease) in selected factors is shown below (in millions).
<img src='content_image/59232.jpg'>
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The foregoing indicates that changes in the discount rate and return on assets can have a significant effect on the funded status of our pension plans, stockholders’ equity and expense. As stated above, we base the discount rate assumption on investment yields available at year-end on long-term bonds rated Aa- or better. We cannot predict these bond yields or investment returns and, therefore, cannot reasonably estimate whether adjustments to our stockholders’ equity for minimum pension liability in subsequent years will be significant.
## Other Postretirement Benefits (Retiree Health Care and Life Insurance)
Nature of Estimates Required. The measurement of our obligations, costs and liabilities associated with other postretirement benefits (i.e., retiree health care and life insurance) requires that we make use of estimates of the present value of the projected future payments to all participants, taking into consideration the likelihood of potential future events such as health care cost increases, salary increases and demographic experience, which may have an effect on the amount and timing of future payments.
Assumptions and Approach Used. The assumptions used in developing the required estimates include the following key factors:
• Discount rates
• Salary growth
• Retirement rates
• Expected contributions
• Health care cost trends
• Expected return on plan assets
• Mortality rates
Our health care cost trend assumptions are developed based on historical cost data, the near-term outlook, efficiencies and other cost-mitigation actions (including eligibility management, employee education and wellness, competitive sourcing and appropriate employee cost sharing) and an assessment of likely long-term trends. We base the discount rate assumption on investment yields available at year-end on corporate long-term bonds rated Aa- or better. We use the Moody’s Aa long- term bond yield as the initial indicator of these yields. We also consider the yield derived from matching projected other postretirement benefit payments with maturities of a portfolio of available bonds rated Aa- or better. The salary growth assumptions reflect our long-term actual experience, the near-term outlook and assumed inflation. The expected return on plan assets assumption reflects various long-run inputs, including historical plan returns and peer data, as well as inputs from a range of internal and external advisors for capital market returns, inflation and other variables, adjusted for specific aspects of our strategy. The expected amount and timing of contributions is based on an assessment of cash availability and other considerations (e.g., funded status and tax efficiency). Retirement and mortality rates are developed to reflect actual and projected plan experience. Plan obligations and costs are based on existing retirement plan provisions. No assumption is made regarding any potential future changes to benefit provisions beyond those to which we are presently committed (e.g., in labor contracts). The effects of actual results differing from our assumptions and the effects of changing assumptions are included in unamortized net gains and losses. Unamortized gains and losses are amortized over future periods and, therefore, generally affect our recognized expense in future periods.
See Note 22 of the Notes to the Financial Statements for more information regarding costs and assumptions for other postretirement benefits.
Sensitivity Analysis. The December 31, 2004 postretirement benefits obligation is affected by December 31, 2004 assumptions. Postretirement benefit expense for 2004 is based on the plan design and assumptions as of December 31, 2003. Note that these sensitivities may be asymmetric, and are specific to 2004. They are not additive, so the impact of changing multiple factors simultaneously cannot be calculated by combining the individual sensitivities shown. The effect of the indicated increase/(decrease) in selected assumptions is shown below (in millions):
<img src='content_image/108550.jpg'>
## Allowance for Credit Losses – Financial Services Sector
The allowance for credit losses is our estimate of credit losses related to impaired finance receivables and operating leases as of the date of the financial statements. We monitor credit loss performance monthly and we assess the adequacy of our allowance for credit losses quarterly. Because credit losses can vary substantially over time, estimating credit losses requires a number of assumptions about matters that are uncertain.
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Nature of Estimates Required. We estimate the credit losses related to impaired finance receivables and operating leases by evaluating several factors including historical credit loss trends, the credit quality of our present portfolio, trends in historical and projected used vehicle values and general economic measures.
Assumptions and Approach Used. We make projections of two key assumptions:
• Frequency – the number of finance receivables and operating lease contracts that we expect to default over a period of time, measured as repossessions; and
• Loss severity – the expected difference between the amount a customer owes us when we charge-off the finance contract and the amount we receive, net of expenses, from selling the repossessed vehicle, including any recoveries from the customer.
We use these assumptions to assist us in setting our allowance for credit losses. See Note 13 of the Notes to the Financial Statements for more information regarding our allowance for credit losses.
Sensitivity Analysis. We believe the present level of our allowance for credit losses adequately reflects credit losses related to impaired finance receivables and operating leases. However, changes in the assumptions used to derive frequency and severity would affect the allowance for credit losses. Over the past twenty years, repossession rates for our Ford, Lincoln and Mercury brand U.S. retail and lease portfolio have varied between 2% and 4%.
The effect of the indicated increase/decrease in the assumptions is shown below for Ford, Lincoln and Mercury brand vehicles in the U.S. (in millions):
<img src='content_image/14707.jpg'>
Changes in our assumptions affect Provision for credit losses on our income statement and the Allowance for credit and insurance losses on our balance sheet.
## Accumulated Depreciation on Vehicles Subject to Operating Leases – Financial Services Sector
Accumulated depreciation on vehicles subject to operating leases reduces the value of the leased vehicles in our operating lease portfolio from their original acquisition value to their expected residual value at the end of the lease term.
We monitor residual values each month, and we review the adequacy of our accumulated depreciation on a quarterly basis. If we believe that the expected residual values for our vehicles have changed, we revise depreciation to ensure that our net investment in the operating leases (equal to our acquisition value of the vehicles minus accumulated depreciation) will be adjusted to reflect our revised estimate of the expected residual value at the end of the lease term. Such adjustments to depreciation expense would result in a change in the depreciation rates of the vehicles subject to operating leases and are recorded on a straight-line basis.
Each lease customer has the option to buy the leased vehicle at the end of the lease or to return the vehicle to the dealer. If the customer returns the vehicle to the dealer, the dealer may buy the vehicle from us or return it to us. Over the last three years, about 60% to 70% of Ford Credit’s North America operating lease vehicles have been returned to us.
Nature of Estimates Required. Each operating lease in our portfolio represents a vehicle we own that has been leased to a customer. At the time we purchase a lease, we establish an expected residual value for the vehicle. We estimate the expected residual value by evaluating historical auction values, historical return rates for our leased vehicles, industry-wide used vehicle prices, our marketing plans and vehicle quality data.
Assumptions and Approach Used. Our accumulated depreciation on vehicles subject to operating leases is based on our assumptions of:
• Auction value – the market value of the vehicles when we sell them at the end of the lease; and
• Return rates – the percentage of vehicles that will be returned to us at lease end.
See Note 11 of the Notes to the Financial Statements for more information regarding accumulated depreciation on vehicles subject to operating leases.
Sensitivity Analysis. For returned vehicles, we face a risk that the amount we obtain from the vehicle sold at auction will be less than our estimate of the expected residual value for the vehicle. At year-end 2004, if future auction values for Ford, Lincoln
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## ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED
In December 2004, the FASB issued a revision of Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock – Based Compensation. This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. In addition, this statement amends SFAS No. 95, Statement of Cash Flows, to require that excess tax benefits be reported as a financing cash inflow rather than a reduction of taxes paid. Effective January 1, 2003, we adopted the fair value recognition provision of SFAS No. 123 under a modified prospective method to all unvested employee awards as of January 1, 2003 and all new awards granted to employees after January 1, 2003 and forward. Although we are assessing its impact, we do not expect adoption of this revision to the standard to have a material impact on our consolidated financial position or results of operations.
In November 2004, the FASB issued SFAS No. 151, Inventory Costs – an amendment of ARB No. 43, Inventory Pricing , to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. ARB No. 43 stated that the above-mentioned items under some circumstances are so abnormal that they require treatment as current period charges. SFAS No. 151 requires that items such as idle facility expense, excessive spoilage, double freight, and handling costs, be treated as current– period charges, regardless of whether they meet the criterion of “so abnormal.” We have applied ARB No. 43 consistent with SFAS No. 151 and we do not expect any impact on our consolidated financial position or results of operations.
In December 2004, the FASB issued SFAS No. 153, Accounting for Nonmonetary Assets – an amendment of APB Opinion No. 29 . APB No. 29 required that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged, with the exception for exchange of similar productive assets which should be measured based on the recorded amount. The SFAS No. 153 requires the exchange of nonmonetary assets to be measured on fair value with the exception of exchanges for such assets which lack commercial substance, the fair value is not determinable or an exchange transaction that facilitates sales to customers. We have adopted SFAS No. 153 and will apply on a prospective basis.
## OFF-BALANCE SHEET ARRANGEMENTS
We have entered into various arrangements not reflected on our balance sheet that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. These include guarantees, sales of receivables by Ford Credit, and variable interest entities, each of which is discussed below.
## Guarantees
See Note 26 of the Notes to the Financial Statements for a discussion of our guarantees.
## Sales of Receivables by Ford Credit
Securitization. Ford Credit regularly uses securitization to fund its operations. Ford Credit securitizes its receivables because the highly liquid and efficient market for securitization of financial assets provides it with a lower cost source of funding, compared with unsecured debt given its present credit ratings, diversifies its funding among different markets and investors, and provides additional liquidity. In a typical securitization transaction, Ford Credit sells a pool of finance receivables to a wholly owned, bankruptcy-remote, special purpose subsidiary that establishes an SPE, usually a trust, and transfers the receivables to the SPE in exchange for proceeds from interest-bearing securities, commonly called asset-backed securities, that are issued by the SPE and are secured by future collections on the sold receivables. Following the transfer of the sold receivables to the SPE, and if in compliance with SFAS No. 140 (discussed below), the receivables are no longer assets of Ford Credit and the sold receivables no longer appear on its balance sheet. The securities issued by the SPE are structured into senior and subordinated classes. The senior classes have priority over the subordinated classes in receiving collections from the sold receivables and may also benefit from other enhancements such as over-collateralization and cash reserve funds. These securities generally are rated by independent rating agencies and sold in public offerings or in private transactions.
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The following flow chart diagrams Ford Credit’s typical U.S. retail securitization transaction:
<img src='content_image/60203.jpg'>
Consistent with conventional practices in the securitization industry, Ford Credit uses SPEs in securitization transactions to achieve isolation of the sold receivables for the benefit of securitization investors. Some of the SPEs used in Ford Credit’s securitization transactions are classified as qualifying special purpose entities consistent with the requirements of SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities , because of the nature of the assets held by these entities and the limited nature of their activities. When these accounting rules are met, the sold receivables are removed from its balance sheet. The use of SPEs in the typical securitization structure, along with the use of various forms of credit and payment enhancements to reduce the risk of loss, allows the SPE to issue senior asset-backed securities that generally receive the highest short-term credit ratings and among the highest long-term credit ratings, thereby providing Ford Credit with a cost-effective source of funding.
Ford Credit selects receivables at random for securitization transactions using selection criteria designed for the specific transaction. The selection criteria are generally based on factors such as location of the obligor, contract term, payment schedule, interest rate, financing program, and the type of financed vehicle. In general, the criteria also require receivables to be active and in good standing.
Ford Credit retains interests in the securitized receivables. The retained interests may include senior and subordinated securities issued by the SPE, undivided interests in wholesale receivables, restricted cash held for the benefit of the SPEs (for example, a reserve fund) and residual interests in securitization transactions. Income from residual interest in securitization transactions represents the right to receive collections on the sold finance receivables in excess of amounts needed by the SPE to pay interest and principal to investors, servicing fees and other required payments. Ford Credit retains credit risk in securitizations. Ford Credit’s retained interests include the most subordinated interests in the SPE, which are the first to absorb credit losses on the sold receivables. The impact of credit losses in the pool of sold receivables will likely be limited to Ford Credit’s retained interests because securitizations are structured to protect the holders of the senior asset-backed securities.
At December 31, 2004 and 2003, the total outstanding principal amount of receivables sold by Ford Credit in securitizations was $35.6 billion and $46.9 billion, respectively. This decrease primarily reflected lower funding requirements. At December 31, 2004 and 2003, Ford Credit’s retained interests in such sold receivables were $9.2 billion and $12.6 billion, respectively.
Ford Credit generally has no obligation to repurchase or replace any receivable sold to an SPE that subsequently becomes delinquent in payment or otherwise is in default. Investors holding securities issued by a SPE have no recourse to Ford Credit or its other assets for credit losses on the sold receivables and have no right to require it to repurchase the securities. Ford Credit does not guarantee any asset-backed securities and has no obligation to provide liquidity or make monetary contributions or contributions of additional receivables to its SPEs either due to the performance of the sold receivables or the credit rating of its short-term or long-term debt. However, as the seller and servicer of the finance receivables to the SPE, Ford Credit is obligated to provide certain kinds of support to its securitizations, which are customary in the securitization industry. These obligations consist of indemnifications, receivable repurchase obligations on receivables that do not meet eligibility criteria or that have been materially modified, the mandatory sale of additional receivables in revolving transactions, and servicer advances.
Risks to Future Sales of Receivables. Some of Ford Credit’s securitization programs contain structural features that could prevent further funding from these sources if:
• the credit losses or delinquencies in a pool of sold receivables exceed specified levels;
• the delinquencies on a pool of sold receivables or our overall portfolio of receivables exceeds specified levels;
• the payment rates on wholesale receivables are lower than specified levels; or
• the amount of wholesale receivables are lower than specified levels.
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F O R
## A MESSAGE FROM THE CHAIRMAN
F ord Motor Company is moving forward fast. We’ve made substantial financial and operational progress over the past three years. During that period, we accelerated our flow of new products to the market, created ongoing efficiencies in our cost structure and business processes, and improved our cash flow. Our pre-tax profit, excluding special items, improved by more than $7 billion.*
We are determined to build on the progress we’ve made. In the short term, that means meeting the challenges of a difficult operating environment. Longer term, it means leveraging our unique strengths to differentiate ourselves in a fiercely competitive global industry.
• Cost reductions of almost $900 million. In total, we improved our automotive cost performance by more than $4 billion over the last two years.***
• Improved per-unit revenue of $745 in North America, along with improved residual values.
• Market share increases in Europe, South America and Asia.
## The Year Ahead
Even with the positive momentum these accomplishments have given us, meeting our targets for 2005 will be a challenge. Our quality continued to improve last year,
Our efforts to move forward will benefit from our achievements in 2004. Those included:
• A pre-tax profit, excluding special items, of $5.8 billion, compared to $3.4 billion in 2003.**
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Ford Credit does not expect that any of these features will have a material adverse impact on its ability to securitize receivables. In addition, Ford Credit’s ability to sell its receivables may be affected by the following factors: the amount and credit quality of receivables available to sell, the performance of receivables sold in previous transactions, general demand for the type of receivables Ford Credit offers, market capacity for Ford Credit-sponsored investments, accounting and regulatory changes, Ford Credit’s credit ratings and Ford Credit’s ability to maintain back-up liquidity facilities for certain securitization programs. If as a result of any of these or other factors, the cost of securitized funding significantly increased or securitized funding were no longer available to Ford Credit, Ford Credit’s operations, financial condition and liquidity would be adversely impacted.
## Variable Interest Entities
See Note 16 of the Notes to the Financial Statements for a discussion of our variable interest entities.
## AGGREGATE CONTRACTUAL OBLIGATIONS
We are party to many contractual obligations involving commitments to make payments to third parties. Most of these are debt obligations incurred by our Financial Services sector. In addition, as part of our normal business practices, we enter into contracts with suppliers for purchases of certain raw materials, components and services. These arrangements may contain fixed or minimum quantity purchase requirements. We enter into such arrangements to facilitate adequate supply of these materials and services. “Purchase obligations” are defined as off-balance sheet agreements to purchase goods or services that are enforceable and legally binding on the company and that specify all significant terms.
The “Other liabilities” category includes only liabilities on our balance sheet that have a definite pay-out scheme or are not contingent on a subsequent event. Other liabilities at December 31, 2004 represent a payment obligation related to our acquisition of Land Rover in 2000.
The table below summarizes our contractual obligations as of December 31, 2004 (in millions):
<img src='content_image/103559.jpg'>
* Principal obligation only.
For additional information to our long-term debt and operating lease obligations, see Notes 15 and 26 of the Notes to the Financial Statements.
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We are exposed to a variety of market and other risks, including the effects of changes in foreign currency exchange rates, commodity prices, interest rates, as well as risks to availability of funding sources, hazard events, and specific asset risks.
These risks affect our Automotive and Financial Services sectors differently. We monitor and manage these exposures as an integral part of our overall risk management program, which includes regular reports to a central management committee, the Global Risk Management Committee (“GRMC”). The GRMC is chaired by our Chief Financial Officer, and its members include our Treasurer, our Controller, and other members of senior management.
Our Automotive and Financial Services sectors are exposed to liquidity risk, or the possibility of having to curtail their businesses or being unable to meet present and future financial obligations as they come due because funding sources may be reduced or become unavailable. We, and particularly Ford Credit, which comprises substantially all of our Financial Services sector, maintain plans for sources of funding to ensure liquidity through a variety of economic or business cycles. As discussed in greater detail in the Management’s Discussion and Analysis of Financial Condition and Results of Operations, our funding sources include commercial paper, term debt, sales of receivables through securitization transactions, committed lines of credit from major banks, and other sources.
We are exposed to a variety of insurable risks, such as loss or damage to property, liability claims, and employee injury. We protect against these risks through a combination of self-insurance and the purchase of commercial insurance designed to protect against events that could generate significant losses.
Direct responsibility for the execution of our market risk management strategies resides with our Treasurer’s Office and is governed by written polices and procedures. Separation of duties is maintained between the development and authorization of derivative trades, the transaction of derivatives, and the settlement of cash flows. Regular audits are conducted to ensure that appropriate controls are in place and that they remain effective. In addition, our market risk exposures and our use of derivatives to manage these exposures are reviewed by the GRMC, and the Audit and Finance Committees of our Board of Directors.
In accordance with corporate risk management policies, we use derivative instruments, such as forward contracts, swaps and options that economically hedge certain exposures (foreign currency, commodity, and interest rates). Derivative positions are used to manage underlying exposures; we do not use derivative contracts for speculative purposes. In certain instances, we forgo hedge accounting, which results in unrealized gains and losses that are recognized currently in net income; examples of economic hedges that do not qualify for hedge accounting include foreign currency hedges of inter-company loans and dividends and certain transactions that use multiple hedge instruments. For additional information on our derivatives, see Note 19 of the Notes to the Financial Statements.
The market and counterparty risks of our Automotive sector and Ford Credit are discussed and quantified below.
## AUTOMOTIVE MARKET AND COUNTERPARTY RISK
Our Automotive sector frequently has expenditures and receipts denominated in foreign currencies, including the following: purchases and sales of finished vehicles and production parts, debt and other payables, subsidiary dividends, and investments in foreign operations. These expenditures and receipts create exposures to changes in exchange rates. We also are exposed to changes in prices of commodities used in our Automotive sector and changes in interest rates.
Foreign currency risk and commodity risk are measured and quantified using a model to calculate the changes in the value of currency and commodity derivative instruments along with the underlying cash flow exposures being hedged. Our earnings at risk (“EaR”) methodology is based on transaction exposure, which is the exposure that results from specific transactions and our related hedging activity. The methodology does not attempt to assess the impact on financial statement earnings resulting from non-cash flow risks (e.g., re-measurement of foreign currency-denominated assets or liabilities through income). EaR at a 95% confidence level is the methodology used to calculate the potential impact to pre-tax earnings related to cash flows in foreign currency and commodity price exposure. The EaR model is used as an estimation of risk and a management tool, but will not necessarily represent actual changes in earnings based on the combination of hedging and underlying exposures. The calculation of EaR combines current market data with historical data on volatilities and correlations of the underlying currencies or commodity prices. This creates hypothetical prices based on the calculation of historical volatilities; therefore, the EaR model may not accurately predict future market risk. The EaR methodology includes our hedging actions as well as the underlying exposures over a twelve-month period.
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} | https://cdla.io/permissive-1-0/ | [] | overall_image/da010ea767107fe3a5335e337d92fac380beb613ff7000c97825a59eedf36015.png | Foreign Currency Risk. Foreign currency risk is the possibility that our financial results could be better or worse than planned because of changes in foreign currency exchange rates. Accordingly, we use derivative instruments to hedge our economic exposure with respect to forecasted revenues and costs, assets, liabilities, investments in foreign operations, and firm commitments denominated in foreign currencies. In our hedging actions, we use primarily instruments commonly used by corporations to reduce foreign exchange risk (e.g., forward contracts and options).
At December 31, 2004, the EaR from foreign currency exchange movements over the next twelve months is projected at $360 million, within a 95% confidence level for the unhedged exposure. When calculated at the end of each quarter throughout the year, the high was $465 million, the low was $235 million and the average was $340 million; the risks impacting financial instruments are offset with underlying exposure being hedged. The 2004 year-end projection is approximately $10 million higher than the EaR projection for 2004 calculated as of December 31, 2003. The increased exposure results primarily from changes in the unhedged portfolio. The effect of currency movements on business units will vary based on the currency profile of the business unit (including any hedging actions taken). It can also be affected by competitive responses to currency changes.
Commodity Price Risk. Commodity price risk is the possibility of higher or lower costs due to changes in the prices of commodities, such as non-ferrous metals (e.g., aluminum) and precious metals (e.g., palladium), ferrous metals (e.g., steel and iron castings), energy (e.g., natural gas and electricity), and plastics/resins (e.g., polypropylene), which we use in the production of motor vehicles.
We use derivative instruments to hedge the price risk associated with the purchase of those commodities that we can economically hedge (primarily non-ferrous metals, precious metals and energies). In our hedging actions, we primarily use instruments commonly used by corporations to reduce commodity price risk (e.g., financially settled forward contracts, swaps, and options). Based on our financial hedging activities with derivatives and the associated underlying commodities exposures at December 31, 2004, the EaR from commodity price movements over the next twelve months is projected at $147 million, within a 95% confidence level (when calculated at the end of each quarter throughout the year, the high was $147 million, the low was $97 million and the average was $115 million); the risks impacting financial instruments are offset with underlying exposure being hedged. The year-end level is approximately $57 million higher than the EaR projection for 2004 calculated as of December 31, 2003. The increased exposure results primarily from higher commodity prices and hedging levels consistent with our overall hedging strategy.
In addition, our purchasing organization (with the oversight of the GRMC) negotiates contracts to ensure continuous supply of raw materials. In some cases, these contracts stipulate minimum purchase amounts and specific prices and as such, play a role in managing price risk.
Interest Rate Risk. Interest rate risk relates to the gain or loss we could incur in our Automotive investment portfolio due to a change in interest rates. Our interest rate sensitivity analysis on the investment portfolio includes cash and cash equivalents, marketable and loaned securities and short-term VEBA assets. At December 31, 2004, we had $23.6 billion in our automotive investment portfolio, compared to $25.9 billion at December 31, 2003. We invest the portfolio in securities of various types and maturities, the value of which are subject to fluctuations in interest rates. These securities are generally classified as either trading or available-for-sale. The trading portfolio gains and losses (unrealized and realized) are reported in the income statement. The available-for-sale portfolio realized gains or losses are reported in the income statement, and unrealized gains and losses are reported in the Consolidated Statement of Stockholders’ Equity in other comprehensive income. The investment strategy is based on clearly defined risk and liquidity guidelines to maintain liquidity, minimize risk, and earn a reasonable return on the short-term investment.
At any time, a rise in interest rates could have a material adverse impact on the fair value of our trading and available-for-sale portfolios. As of December 31, 2004, the value of our trading portfolio was $19.6 billion, which is $4.6 billion lower than December 31, 2003. The value of our available-for-sale portfolio was $4.0 billion, which is $2.3 billion higher than December 31, 2003.
Assuming a hypothetical increase in interest rates of one percentage point, the value of our trading and available-for-sale portfolios would be reduced by $88 million and $45 million, respectively. This compares to $206 million and $29 million, respectively, as calculated as of December 31, 2003. The decrease in reported exposure is the result of using actual portfolio durations instead of long-term targets. Portfolio durations have been reduced below long-term targets to help shield the portfolios from the possible adverse impact of an increase in interest rates. Using the actual duration of our trading and available-for-sale portfolios as of December 31, 2003, the value of these portfolios would have been reduced by $114 million and $25 million, respectively, by a hypothetical increase in interest rates of one percentage point. While these are our best estimates of the impact of the specified interest rate scenario, actual results could differ from those projected. The sensitivity analysis presented assumes interest rate changes are instantaneous, parallel shifts in the yield curve. In reality, interest rate changes of this magnitude are rarely instantaneous or parallel.
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Counterparty Risk. Counterparty risk relates to the loss we could incur if an obligor or counterparty defaulted on an investment or a derivative contract. We enter into master agreements with counterparties that allow netting of certain exposures in order to manage this risk. Exposures primarily relate to investments in fixed-income instruments and derivative contracts used for managing interest rate, foreign currency exchange rate and commodity price risk. We, together with Ford Credit, establish exposure limits for each counterparty to minimize risk and provide counterparty diversification. Our exposures are monitored on a regular basis and are included in monthly reporting to the Treasurer.
Our approach to managing counterparty risk is forward-looking and proactive, allowing us to take risk mitigation actions. We establish exposure limits for both mark-to-market and future potential exposure, based on our overall risk tolerance and ratings-based historical default probabilities. The exposure limits are lower for lower-rated counterparties and for longer-dated exposures. We use a Monte Carlo simulation technique to assess our potential exposure by tenor, defined at a 95% confidence level.
Substantially all of our counterparty and obligor exposures are with counterparties and obligors that are rated single-A or better.
## FORD CREDIT MARKET RISKS
Overview. Ford Credit is exposed to a variety of risks in the normal course of its business activities. In addition to counterparty risk discussed above, Ford Credit is subject to the following additional types of risks that it seeks to identify, assess, monitor and manage, in accordance with defined policies and procedures:
• Market risk – the possibility that changes in interest and currency exchange rates or prices will have an adverse impact on operating results;
• Credit risk – the possibility of loss from a customer’s failure to make payments according to contract terms;
• Residual risk – the possibility that the actual proceeds Ford Credit receives at lease termination will be lower than its projections or return rates will be higher than its projections; and,
• Liquidity risk – the possibility that Ford Credit may be unable to meet all current and future obligations in a timely manner.
Each form of risk is uniquely managed in the context of its contribution to Ford Credit’s overall global risk. Business decisions are evaluated on a risk-adjusted basis and products are priced consistent with these risks. Credit and residual risks are discussed above in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Critical Accounting Estimates” and liquidity risk is discussed above in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Liquidity and Capital Resources – Financial Services Sector – Ford Credit”. A discussion of Ford Credit’s market risks is included below.
Foreign Currency Risk. To meet funding objectives, Ford Credit issues debt or, for its international affiliates, draws on local credit lines in a variety of currencies. Ford Credit faces exposure to currency exchange rate changes if a mismatch exists between the currency of its receivables and the currency of the debt funding those receivables. When possible, receivables are funded with debt in the same currency, minimizing exposure to exchange rate movements. When a different currency is used, Ford Credit seeks to minimize the impact of currency exchange rates on operating results by executing foreign currency derivatives. These derivatives convert substantially all of its foreign currency debt obligations to the local country currency of the receivables. As a result, Ford Credit’s market risk exposure relating to currency exchange rates is believed to be immaterial.
Interest Rate Risk. Interest rate risk is the primary market risk to which Ford Credit is exposed and consists principally of “re-pricing risk” or differences in the re-pricing characteristics of assets and liabilities. An instrument’s re-pricing period is a term used by financial institutions to describe how an interest rate-sensitive instrument responds to changes in interest rates. It refers to the time it takes an instrument’s interest rate to reflect a change in market interest rates. For fixed-rate instruments, the re-pricing period is equal to the maturity for repayment of the instrument’s principal because, with a fixed interest rate, the principal is considered to re-price only when re-invested in a new instrument. For a floating-rate instrument, the re-pricing period is the period of time before the interest rate adjusts to the market rate. For instance, a floating-rate loan whose interest rate is reset to a market index annually on December 31st would have a re-pricing period of one year on January 1st, regardless of the instrument’s maturity.
Ford Credit’s receivables consist primarily of fixed-rate retail installment sale and lease contracts and floating-rate wholesale receivables. Fixed-rate retail installment sale and lease contracts are originated principally with maturities ranging between two and six years and generally require customers to make equal monthly payments over the life of the contract. Ford Credit’s funding sources consist primarily of short- and long-term unsecured debt and sales of receivables in securitizations. In the case of unsecured term debt, and in an effort to have funds available throughout the business cycle, Ford Credit may issue debt with five- to ten-year maturities, which is generally longer than the terms of its assets. These debt instruments are principally fixed- rate and require fixed and equal interest payments over the life of the instrument and a single principal payment at maturity.
Ford Credit is exposed to interest rate risk to the extent that a difference exists between the re-pricing profile of its assets and debt. Specifically, without derivatives, Ford Credit’s assets would re-price more quickly than its debt.
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Ford Credit’s interest rate risk management objective is to maximize its financing margin while limiting fluctuations caused by changes in interest rates. Ford Credit achieves this objective by setting an established risk tolerance range and staying within this tolerance range through an interest rate risk management program that includes entering into derivatives commonly known as interest rate swaps.
On a monthly basis, Ford Credit determines the sensitivity of the economic value of its portfolio of interest rate-sensitive assets and liabilities (its economic value) to hypothetical changes in interest rates. Economic value is a measure of the present value of all future expected cash flows, discounted by market interest rates, and is equal to the present value of interest rate-sensitive assets minus the present value of interest rate-sensitive liabilities. Ford Credit then enters into interest rate swaps, effectively converting portions of its floating-rate debt to fixed or its fixed-rate debt to floating, to ensure that the sensitivity of its economic value falls within an established target range. Ford Credit also monitors the sensitivity of its earnings to interest rates using pre-tax net interest income simulation techniques. These simulations calculate the projected pre-tax net interest income of its portfolio of interest rate-sensitive assets and liabilities under various interest rate scenarios, including both parallel and non-parallel shifts in the yield curve. These quantifications of interest rate risk are reported to the Treasurer each month.
The process described above is used to measure and manage the interest rate risk of Ford Credit’s operations in the United States, Canada and the United Kingdom, which together represented approximately 80% of its total on-balance sheet finance receivables at December 31, 2004. For its other international affiliates, Ford Credit uses a technique commonly referred to as “gap analysis,” to measure re-pricing mismatch. This process uses re-pricing schedules, which group assets, debt, and swaps into discrete time bands based on their re-pricing characteristics. Under this process, Ford Credit enters into interest rate swaps, which effectively change the re-pricing profile of its debt, to ensure that any re-pricing mismatch (between assets and liabilities) existing in a particular time band falls within an established tolerance.
As a result of its interest rate risk management process, including derivatives, Ford Credit’s debt re-prices faster than its assets. Other things being equal, this means that during a period of rising interest rates, the interest rates paid on Ford Credit’s debt will increase more rapidly than the interest rates earned on its assets, thereby initially reducing Ford Credit’s pre-tax net interest income. Correspondingly, during a period of falling interest rates, Ford Credit’s pre-tax net interest income would be expected to initially increase. To provide a quantitative measure of the sensitivity of its pre-tax net interest income to changes in interest rates, Ford Credit uses interest rate scenarios that assume a hypothetical, instantaneous increase or decrease in interest rates of one percentage point across all maturities (a “parallel shift”), as well as a base case that assumes that interest rates remain constant at existing levels. The differences between these scenarios and the base case over a twelve-month period represent an estimate of the sensitivity of Ford Credit’s pre-tax net interest income. The sensitivity as of year-end 2004 and 2003 was as follows:
<img src='content_image/34301.jpg'>
Based on assumptions included in the analysis, sensitivity to a one percentage point instantaneous change in interest rates was lower at year-end 2004 than at year-end 2003. This change primarily reflects the results of normal fluctuations within the approved tolerances of risk management strategy. While the sensitivity analysis presented is Ford Credit’s best estimate of the impacts of specified assumed interest rate scenarios, the model Ford Credit uses for this analysis is heavily dependent on assumptions, so that actual results could differ from those projected. Embedded in the model Ford Credit uses are assumptions regarding the reinvestment of maturing asset principal, refinancing of maturing debt, and predicted repayment of retail installment sale and lease contracts ahead of contractual maturity. Ford Credit’s repayment projections of retail installment sale and lease contracts ahead of contractual maturity are based on historical experience. If interest rates or other factors were to change, the actual prepayment experience could be different than projected.
Additionally, interest rate changes of one percentage point or more are rarely instantaneous or parallel, and rates could move more or less than the one percentage point assumed in Ford Credit’s analysis. As a result, the actual impact to pre-tax net interest income could be higher or lower than the results detailed above. The model used to conduct this analysis also relies heavily on assumptions regarding the reinvestment of maturing asset principal, refinancing of maturing debt, and predicted repayment of sale and lease contracts ahead of contractual maturity.
The fair value of Ford Credit’s net derivative financial instruments (derivative assets less derivative liabilities) as reported in Note 19 of the Notes to the Financial Statements as of December 31, 2004 was $6.0 billion. This was approximately $2.5 billion lower than a year ago. This decrease primarily reflects the maturity of swaps that were significantly in the money and lower mark-to-market adjustments resulting from interest rate changes. Increases related to the continued strengthening of foreign currencies relative to the U.S. dollar were a partial offset. For additional information on Ford Credit derivatives, please refer to the “Financial Services Sector” of Note 19 of the Notes to the Financial Statements.
|
51 | {
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"ori_meta": null,
"doc_id": "NYSE_F_2004.pdf",
"page_id": "55",
"date_download": "2024-3-24",
"oi_source": "ori",
"source_dataset": "DocLayNet"
} | {
"doc_length": 266,
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} | https://cdla.io/permissive-1-0/ | [
"content_image/103208.jpg"
] | overall_image/6917e79deef60538be8c9bcd455ac9a658165325af01e88518923fead019e712.png | ## SECTOR STATEMENT OF INCOME
Ford Motor Company and Subsidiaries For the Years Ended December 31, 2004, 2003 and 2002
(in millions, except per share amounts)
<img src='content_image/103208.jpg'>
The accompanying notes are part of the financial statements.
|
52 | {
"language": "en",
"oi_exist": true,
"ori_meta": null,
"doc_id": "NYSE_F_2004.pdf",
"page_id": "56",
"date_download": "2024-3-24",
"oi_source": "ori",
"source_dataset": "DocLayNet"
} | {
"doc_length": 207,
"total_imgs": 1,
"failed_imgs": 0,
"llama3_tokens_count": 57,
"low_quality_context": false
} | https://cdla.io/permissive-1-0/ | [
"content_image/125431.jpg"
] | overall_image/b48da45555d0bb273e33f3104422f41c0d9dcb49f9a0ce02bac765bf92d90ccf.png | ## CONSOLIDATED STATEMENT OF INCOME
Ford Motor Company and Subsidiaries For the Years Ended December 31, 2004, 2003 and 2002 (in millions, except per share amounts)
<img src='content_image/125431.jpg'>
|
53 | {
"language": "en",
"oi_exist": true,
"ori_meta": null,
"doc_id": "NYSE_F_2004.pdf",
"page_id": "58",
"date_download": "2024-3-24",
"oi_source": "ori",
"source_dataset": "DocLayNet"
} | {
"doc_length": 122,
"total_imgs": 1,
"failed_imgs": 0,
"llama3_tokens_count": 32,
"low_quality_context": false
} | https://cdla.io/permissive-1-0/ | [
"content_image/106145.jpg"
] | overall_image/ce0af549b52e495b427eb9b28d7b077f47f30409ac798f7a38508af4b243597a.png | ## CONSOLIDATED BALANCE SHEET
Ford Motor Company and Subsidiaries (in millions)
<img src='content_image/106145.jpg'>
|
54 | {
"language": "en",
"oi_exist": true,
"ori_meta": null,
"doc_id": "NYSE_F_2004.pdf",
"page_id": "59",
"date_download": "2024-3-24",
"oi_source": "ori",
"source_dataset": "DocLayNet"
} | {
"doc_length": 74,
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} | https://cdla.io/permissive-1-0/ | [
"content_image/118534.jpg"
] | overall_image/9535d6be6bcfeb06b2174b2f6dbf5eb8af26cb59345f46225fe1b434cde46ff7.png | ## SECTOR STATEMENT OF CASH FLOWS
<img src='content_image/118534.jpg'>
|
55 | {
"language": "en",
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"ori_meta": null,
"doc_id": "NYSE_F_2004.pdf",
"page_id": "60",
"date_download": "2024-3-24",
"oi_source": "ori",
"source_dataset": "DocLayNet"
} | {
"doc_length": 391,
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} | https://cdla.io/permissive-1-0/ | [
"content_image/49075.jpg"
] | overall_image/6c745c2297adb865672431c314876deef762d13e6739625277d898802ea3899b.png | Ford Motor Company and Subsidiaries
For the Years Ended December 31, 2004, 2003 and 2002 (in millions)
We have revised the presentation of our 2003 and 2002 Consolidated Statement of Cash Flows to conform to our 2004 presentation. (See Note 1 of the Notes to the Financial Statements)
<img src='content_image/49075.jpg'>
The accompanying notes are part of the financial statements.
|
56 | {
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"date_download": "2024-3-24",
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"source_dataset": "DocLayNet"
} | {
"doc_length": 142,
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} | https://cdla.io/permissive-1-0/ | [
"content_image/14164.jpg"
] | overall_image/50c33c58e72571b7bb50dfbd9bc55c3e07ee9c462dd231182b427b108c65bb25.png | Ford Motor Company and Subsidiaries For the Years Ended December 31, 2004, 2003 and 2002 (in millions)
<img src='content_image/14164.jpg'>
|
57 | {
"language": "en",
"oi_exist": true,
"ori_meta": null,
"doc_id": "NYSE_F_2004.pdf",
"page_id": "62",
"date_download": "2024-3-24",
"oi_source": "ori",
"source_dataset": "DocLayNet"
} | {
"doc_length": 4554,
"total_imgs": 1,
"failed_imgs": 0,
"llama3_tokens_count": 882,
"low_quality_context": false
} | https://cdla.io/permissive-1-0/ | [
"content_image/97684.jpg"
] | overall_image/b6173f045b881b9ad1d39028873253475d32e84508687368a1bfdccee91aa17a.png | ## NOTE 1. PRINCIPLES OF PRESENTATION AND CONSOLIDATION
We present our financial statements on two bases: 1) sector basis for Automotive and Financial Services and 2) consolidated basis. We believe the additional information provided in the sector basis statements enables the reader to better understand the operating performance, financial position, cash flow and liquidity of our two very different businesses.
Our financial statements include consolidated majority-owned subsidiaries and, beginning July 1, 2003, consolidated Variable Interest Entities (“VIEs”) of which we are the primary beneficiary. Affiliates that we do not consolidate, but for which we have significant influence over operating and financial policies, are accounted for using the equity method. Described below are accounting policies applicable to us and our consolidated majority-owned subsidiaries.
We have reclassified certain prior-year amounts to conform to current year presentation and certain amounts previously disclosed in our Current Report on Form 8-K dated January 20, 2005 have been revised, including Revenues and Operating and other expenses due to a reclassification by Hertz.
## Transactions Between Automotive and Financial Services Sectors
Intersector transactions occur in the ordinary course of business. We formally documented certain long-standing business practices with Ford Motor Credit Company (“Ford Credit”), a wholly owned subsidiary, in a 2001 agreement. Additional details on certain transactions and the effect on each sector’s balance sheet at December 31 is shown below (in billions):
<img src='content_image/97684.jpg'>
a/ Automotive sector receivables (generated primarily from vehicle and parts sales to third parties) sold to Ford Credit. These receivables have been reclassified from Finance receivables, net to Receivables , net for presentation on our Consolidated Balance Sheet.
b/ Primarily Automotive sector vehicles used by Hertz for rental ($3.1 billion in 2004 and $3.2 billion in 2003) and Ford Credit vehicles leased to employees ($0.9 billion in 2004 and $0.9 billion in 2003).
c/ Primarily used vehicles purchased by Ford Credit pursuant to the Automotive sector’s obligation to repurchase such vehicles from daily rental car companies, including Hertz. These vehicles are subsequently sold at auction by Ford Credit.
d/ Primarily amounts due Ford Credit from the Automotive sector under a tax sharing agreement.
e/ Net result of all other transactions including receivables of Ford Credit from the Automotive Sector’s consolidated dealerships and a tax sharing agreement between the Automotive sector and Hertz.
Additionally, amounts recorded as revenue by the Financial Services sector and billed to the Automotive sector for interest and special financing and leasing programs were $3.3 billion in 2004, $3.3 billion in 2003, and $3.5 billion in 2002.
Beginning with our year ended December 31, 2004 Consolidated Statement of Cash Flows, we have changed our presentation of cash flows from wholesale finance receivables. The change stemmed from concerns raised by the staff of the Securities and Exchange Commission about the previous presentation. Prior-year amounts have been reclassified to conform to current year presentation.
Wholesale finance receivables are generated by Ford Credit’s financing of dealer purchases of vehicles. The vehicles financed are primarily vehicles sold by our Automotive sector to the dealers. Dealer purchases of our inventory financed by Ford Credit do not generate cash on a consolidated basis until settlement of the wholesale receivable by the dealer. Historically, in the period in which we sold a vehicle to a dealer and the dealer financed the purchase through Ford Credit, we had presented the related cash flows as separate transactions in our Consolidated Statement of Cash Flows. The cash inflow resulting from the sale of inventory was presented as an operating cash flow. The cash outflow from the origination by Ford Credit of a wholesale finance receivable was presented as an investing cash flow.
In our revised presentation, our Consolidated Statement of Cash Flows has been adjusted to reflect the fact that there was no cash received by the consolidated entity upon the initial sale of inventory, to reflect the elimination of the effects of the intercompany transactions and to properly classify cash receipts from the settlement of Ford Credit’s wholesale receivables related to the sale of inventory as operating activities.
|
58 | {
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"doc_id": "NYSE_F_2004.pdf",
"page_id": "63",
"date_download": "2024-3-24",
"oi_source": "ori",
"source_dataset": "DocLayNet"
} | {
"doc_length": 3948,
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"failed_imgs": 0,
"llama3_tokens_count": 728,
"low_quality_context": false
} | https://cdla.io/permissive-1-0/ | [
"content_image/123217.jpg"
] | overall_image/e36205618826ac85e3f7b341a700f137301c1bb266f2d152b17550bb275aae4c.png | ## NOTE 1. Principles of Presentation and Consolidation (Continued)
The table below reconciles the revised presentation of our Consolidated Statement of Cash Flows for the years ended December 31, 2004, 2003 and 2002 to the prior presentation (in millions):
<img src='content_image/123217.jpg'>
* In addition to vehicles sold by us, the cash flows from wholesale finance receivables being reclassified from investing to operating include financing by Ford Credit of used and non-Ford vehicles. 100% of cash flows from wholesale finance receivables have been reclassified for consolidated presentation as the portion of these
cash flows from used and non-Ford vehicles are impracticable to separate.
## NOTE 2. SUMMARY OF ACCOUNTING POLICIES
## Cash and Cash Equivalents
Cash and all highly liquid investments with a maturity of three months or less at the date of purchase, including short-term time deposits and government agency and corporate obligations, are classified as Cash and cash equivalents.
## Revenue Recognition - Automotive Sector
Sales are generally recorded when products are shipped to customers (primarily dealers) and ownership is transferred. Sales to daily rental car companies with a guaranteed repurchase option are accounted for as operating leases. The lease revenue is recognized over the term of the lease and a gain or loss on the remaining residual value is recognized when the vehicles are sold at auction. The carrying value of these vehicles is included in other current assets and, as of December 31, 2004, was $2.9 billion.
Income generated from cash and cash equivalents, investments in marketable securities, loaned securities and other miscellaneous receivables is reported as Interest income and other non-operating income/(expense), net.
## Revenue Recognition - Financial Services Sector
Revenue from finance receivables, including interest, net of certain deferred loan origination costs that are included as a reduction of financing revenue, is recognized over the term of the receivable using the interest method. Revenue from operating leases, net of certain deferred origination costs, is recognized on a straight-line basis over the term of the lease. The accrual of interest on receivables is discontinued at the time a receivable is determined to be uncollectible. Subsequent amounts of interest collected are recognized in income only if full recovery of the remaining principal is probable. Interest supplements paid by the Automotive sector are recognized over the term of the receivable or operating lease.
## Use of Estimates
The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported. Estimates are used when accounting for certain items such as marketing accruals, warranty costs, employee benefit programs, etc. Estimates are based on historical experience, where applicable, and other assumptions that management believes are reasonable under the circumstances. Due to the inherent uncertainty involved in marketing estimates, actual results may differ from those estimates under different assumptions or conditions.
## Marketing Incentives
Automotive marketing incentives, including customer and dealer cash payments and costs for special financing and leasing programs paid to the Financial Services sector are recognized as revenue reductions and are accrued at the later of the date the related vehicle sales are recorded or the date the incentive program is both approved and communicated. Costs for marketing incentives are based on assumptions regarding the number of vehicles that will have a specific incentive applied against them.
|
59 | {
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"oi_exist": true,
"ori_meta": null,
"doc_id": "NYSE_F_2004.pdf",
"page_id": "64",
"date_download": "2024-3-24",
"oi_source": "ori",
"source_dataset": "DocLayNet"
} | {
"doc_length": 4935,
"total_imgs": 1,
"failed_imgs": 0,
"llama3_tokens_count": 978,
"low_quality_context": false
} | https://cdla.io/permissive-1-0/ | [
"content_image/120773.jpg"
] | overall_image/3badb7ca561d6f5ddc900e2a18cc7b33659d4d7c0b6bf33a0bef949d10695193.png | ## Selected Other Costs
Freight costs are included in cost of sales. Advertising and engineering, research and development costs are expensed as incurred and were as follows (in billions):
<img src='content_image/120773.jpg'>
## Sale of Receivables
Ford Credit periodically sells finance receivables in securitization transactions. In many of our securitization transactions, we surrender control over these assets by selling finance receivables to securitization special purpose entities (“SPEs”). Securitization entities are a common, required element of securitization transactions to meet certain legal and transaction requirements that assure that the sold assets have been isolated from our creditors and us.
Receivables are considered sold for accounting purposes when the receivables are transferred beyond the reach of our creditors, the transferee has the right to pledge or exchange the assets and we have surrendered control over the rights and obligations of the receivables. If these criteria are satisfied, the receivables are removed from our balance sheet at the time they are sold.
For off-balance sheet sales of receivables, estimated gains or losses are recognized in the period in which the sale occurs. We retain certain interests in receivables sold in securitization transactions. These interests are recorded at fair value with unrealized gains or losses recorded, net of tax, as Accumulated other comprehensive income/(loss) , a component of stockholder’s equity.
Certain sales of receivables do not qualify for off-balance sheet treatment, and sold receivables and associated debt are not removed from our balance sheet. As a result, no gain or loss is recorded for these transactions.
## Foreign Currency Translation
Results of operations and cash flows of foreign subsidiaries are, in most cases, translated to U.S. dollars at average-period currency exchange rates. Assets and liabilities are translated at end-of-period exchange rates.
Included in the statement of income is the impact of re-measuring assets and liabilities of foreign subsidiaries using U.S. dollars as their functional currency, gains and losses arising from transactions denominated in a currency other than the functional currency of a location, and the results of our foreign currency hedging activities (Note 19). The net income effects of these adjustments were gains of $596 million and $454 million, and losses of $19 million in 2004, 2003, and 2002 respectively.
Foreign currency translation adjustments related to foreign subsidiaries using the local currency as their functional currency are included in Accumulated other comprehensive income/(loss). Net adjustments increased $2.2 billion, $2.9 billion and $2.9 billion in 2004, 2003 and 2002 respectively. The adjustments include a $23 million gain, a $1 million loss and a $32 million loss for 2004, 2003 and 2002, respectively that were reclassified from Accumulated other comprehensive income/ (loss) and included in determining the gain or loss on entities sold.
## Depreciation and Amortization of Property, Plant and Equipment
Property and equipment are stated at cost and depreciated primarily using the straight-line method over the estimated useful life of the asset. The estimated useful lives generally are 30 years for buildings and land improvements and 14.5 years for machinery and equipment. Special tools placed in service before January 1, 1999 are amortized using an accelerated method over the estimated life of those tools. Special tools placed in service beginning in 1999 are amortized using the units-of-production method over the expected vehicle model cycle life. Maintenance, repairs, and rearrangement costs are expensed as incurred.
## Impairment of Long-Lived Assets
We test for impairment when events and circumstances warrant such a review. We evaluate the carrying value of long-lived assets for potential impairment generally on an operating business unit basis or at the individual asset (or asset group) level, if held for sale, using undiscounted after-tax estimated cash flows. An asset group is considered impaired when the anticipated separately identifiable cash flows from the asset group are less than the carrying value.
## Stock Options
Effective January 1, 2003, we adopted the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation , for stock-based employee compensation. Under the modified prospective method of adoption provisions of SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure , stock-based employee compensation expense recognized in 2004 and 2003 equals the expense that would have been recognized had the fair value recognition provisions of SFAS No. 123 been applied to all awards from its original effective date. Results of prior years have not been restated.
|
60 | {
"language": "en",
"oi_exist": true,
"ori_meta": null,
"doc_id": "NYSE_F_2004.pdf",
"page_id": "65",
"date_download": "2024-3-24",
"oi_source": "ori",
"source_dataset": "DocLayNet"
} | {
"doc_length": 564,
"total_imgs": 2,
"failed_imgs": 0,
"llama3_tokens_count": 115,
"low_quality_context": false
} | https://cdla.io/permissive-1-0/ | [
"content_image/23218.jpg",
"content_image/23219.jpg"
] | overall_image/2329258ff8e23b08546183831589771a644679c7011c02638b068ee51ad37913.png | ## NOTE 2. Summary of Accounting Policies (Continued)
The following table illustrates the effect on net income and earnings per share had the fair value method been applied to all unvested outstanding stock option awards in each year (in millions):
<img src='content_image/23218.jpg'>
## NOTE 3. INCOME TAXES
Components of income taxes, excluding discontinued operations, cumulative effects of changes in accounting principles and equity in net results of affiliated companies accounted for after-tax, are as follows:
<img src='content_image/23219.jpg'>
|
61 | {
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"ori_meta": null,
"doc_id": "NYSE_F_2004.pdf",
"page_id": "66",
"date_download": "2024-3-24",
"oi_source": "ori",
"source_dataset": "DocLayNet"
} | {
"doc_length": 3476,
"total_imgs": 1,
"failed_imgs": 0,
"llama3_tokens_count": 702,
"low_quality_context": false
} | https://cdla.io/permissive-1-0/ | [
"content_image/131871.jpg"
] | overall_image/19e14e378aec30f067192b79322f6a7ac96a28bb5181b27260562136643c74d4.png | ## NOTES TO THE FINANCIAL STATEMENTS
Annual tax provisions include amounts considered sufficient to pay probable assessments for examination of prior-year tax returns by federal, foreign, state and local jurisdictions. Actual assessments may differ; however, we do not expect that such an outcome would have a material effect on the future financial statements for a particular year, although such an outcome is possible. No provision for deferred taxes has been made on $860 million of unremitted earnings (primarily earnings for periods prior to 1998) that are considered to be indefinitely invested in non-U.S. subsidiaries. Deferred taxes for these unremitted earnings are not practicable to estimate.
The components of deferred tax assets and liabilities at December 31 were as follows (in millions):
<img src='content_image/131871.jpg'>
Operating loss carryforwards for tax purposes were $7.5 billion at December 31, 2004. A substantial portion of these losses has an indefinite carryforward period; the remaining losses will begin to expire in 2005. Tax credits available to offset future tax liabilities are $2.5 billion. A substantial portion has an indefinite carryforward period; the remainder begins to expire in 2010. Tax benefits of operating loss and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances. Management believes that it is more likely than not that the deferred tax assets will be realized.
On October 4, 2004, President Bush signed the Working Families Tax Relief Act of 2004 , which retroactively reinstated the research tax credit from the June 30, 2004 expiration date. The reinstatement of the research tax credit was reflected in our fourth quarter 2004 results.
During the fourth quarter, we settled various issues related to federal and state audits of the period 1990 to 2000. The primary settlement relates to foreign sales corporation claims. The acceptance by the Internal Revenue Service of these claims, as well as the settlement of other issues related to the tax years ended 1999 to 2000, resulted in a tax benefit of $270 million.
## NOTE 4. DISCONTINUED AND HELD-FOR-SALE OPERATIONS
## Automotive Sector
Held-for-sale Operations. Consistent with our objectives to build on the basics and focus on core businesses, management committed in December 2004 to sell certain consolidated dealerships in the Asia Pacific and Africa/Mazda segment. The sale of these dealerships will allow us to concentrate on the production and marketing of our products in the Asia Pacific region rather than the day-to-day retailing operations. We expect to sell these operations during the next twelve months and have reported them as held for sale. We recorded a pre-tax charge of $16 million reflected in Income/(loss) before income taxes related to the anticipated loss on the sale of the net assets. The charge represents the difference between the anticipated selling price of the net assets, less costs to sell them, and their recorded book values. We also recorded a pre-tax goodwill impairment of $64 million reflected in Income/(loss) before income taxes related to the disposal of these operations.
At December 31, 2004, the assets of the held-for-sale operations consisted primarily of receivables and inventory totaling approximately $49 million and $114 million, respectively.
|
PIN-100M
The full version of the dataset, related to the paper "PIN: A Knowledge-Intensive Dataset for Paired and Interleaved Multimodal Documents"
Paper: https://arxiv.org/abs/2406.13923
This dataset contains 100M samples with PIN format.
Please note that the required storage space exceeds 150TB!!
🚀 News
[ 2024.12.20 ] !NEW! 🔥The currently available version is not the complete version; this project is still ongoing! (It has been released early because we reached the private storage limit on Hugging Face.)
0 Usage
Download ALL files
huggingface-cli download m-a-p/PIN-100M --repo-type=dataset --resume-download --local-dir "your_local_path"
Download ONLY Jsonl files
huggingface-cli download m-a-p/PIN-100M --repo-type=dataset --resume-download --include "*.jsonl" --local-dir "your_local_path"
Decompression
cat data.tar.part* > data.tar
tar -xvf data.tar
1 Dataset statistics
Working
Storage space statistics may have some error, so these values are for reference only.
2 Data Structure
2.1 Subsets
We process 8 subsets, including PIN-PMC, DocLayNet, Linux-CN, chinese-markdown, OBELICS, MMC4, leetcode, and PG19.
Note: We do not release the PIN-arXiv subset in the preview version.
2.2 Folder Structure
The directory content images
holds the images mentioned within the markdown text, and overall images
display the overall visual representation of the markdown files. Moreover, the JSONL
file encapsulate the textual content along with associated data details.
An example subset:
example_dataset/
│
├── content_image/
├── overall_image/
└── example_dataset.jsonl
A subset with multiple parts:
example_dataset/
│
├── part00/
│ ├── content_image/
│ ├── overall_image/
│ └── part00.jsonl
│
├── part01/
│ ├── content_image/
│ ├── overall_image/
│ └── part01.jsonl
│
... - More similar parts
2.3 content_image Folder
This folder contains all the content images used in the markdown files.
Note: All images need to be converted to PNG format. The filename should be unique within the folder.
content_image/
│
├── 1.png
├── 2.png
...
2.4 overall_image Folder
This folder contains all the overall images for each sample.
Note: All images need to be converted to PNG format. The filename should be unique within the folder.
overall_image/
│
├── 1.png
├── 2.png
...
2.5 JSON Lines Format
we provide a detailed example of the annotations included with each data entry.
{
"id": 1919,
"meta": {
"language": "en",
"oi_exist": true,
"oi_source": "compiling",
"source_dataset": "example_source (e.g. OBELICS)",
"ori_meta": {
"document_url": "https://www.example.com/2022/02/21/example/",
...
}
},
"doc_id": 1997,
"page_id": 0,
"date_download": "2024-03-01"
},
"license": "CC-BY-4.0",
"quality_signals": {
"doc_length": 100,
...
},
"content_image": [
"content_image/1997-0.png",
"content_image/1997-1.png"
],
"md": "<img src='/datasets/m-a-p/PIN-100M/resolve/main/content_image/1997-0.png'>\n\nThis is a fake sample data line, just for show.\n\nThis is a fake sample data line, just for show.\n\n<img src='/datasets/m-a-p/PIN-100M/resolve/main/content_image/1997-1.png'>\n\nThis is a fake sample data line, just for show.",
"overall_image": "overall_image/1997.png"
}
Field Descriptions:
Field Descriptions:
- id: Unique identifier for each entry.
- meta: Metadata for each multimodal document entry.
- language: The document's language, such as Chinese (zh) or English (en).
- source_dataset: If the document is converted from another dataset, the original dataset name is noted here; otherwise, it is None.
- doc_id: A unique document identifier providing name and other details.
- page_id: A unique page identifier indicating the document's page number. If there is only one page, this is None. Page IDs are usually numbered starting from 1 in multi-page documents.
- date_download: date (download), the date the document was downloaded.
- ori_meta: Original metadata from the dataset, if available; otherwise, None.
- oi_exist: Indicates whether an overall image exists. True or False.
- oi_source: Source of the overall image; 'ori' for images taken from the original dataset and 'compiling' for images generated through code compilation. If this tag is missing, the image is likely compiled.
- ...
- quality_signals: Quality indicators inspired by the design of redpajama v2.
- doc_length: Length of the document.
- ...
- content_image: List of images mentioned in the document; None if no images are present.
- overall_image: Path to the corresponding overall image. (A list or a single path)
- md: Contains the markdown content.
- license: License information for the current sample.
3 Examples of jsonl files
We selected samples consisting of short markdown documents.
3.1 An example of DocLynet
Notably, the dataset's overall images are converted from the original dataset's PDFs into PNG format.
{
"id": 0,
"meta": {
"language": "en",
"oi_exist": true,
"oi_source": "ori",
"source_dataset": "DocLayNet",
"ori_meta": null,
"doc_id": "NYSE_F_2004.pdf",
"page_id": "0",
"date_download": "2024-3-24"
},
"quality_signals": null,
"license": "https://cdla.io/permissive-1-0/",
"content_image": [
"content_image/34102.jpg"
],
"overall_image": "overall_image/3562e47265520f7a72f3eac73aadfe19a78531698c3b50d7670b8ad9b214106b.png",
"md": "<img src='/datasets/m-a-p/PIN-100M/resolve/main/content_image/34102.jpg'>\n\n# Ford Motor Company / 2004 Annual Report \n\n# R W A R D F O R W A R D \n\n"
}
3.2 An example of OBELICS
{
"id": 466502,
"meta": {
"language": "en",
"oi_exist": true,
"oi_source": "compiling",
"source_dataset": "OBELICS",
"ori_meta": {
"document_url": "https://www.donegaldaily.com/2022/02/21/watch-incredible-storm-surge-at-portsalon-golf-club/",
"unformatted_src": "https://www.donegaldaily.com/wp-content/uploads/2022/02/Screenshot-2022-02-21-at-17.54.30.jpg",
"src": "https://www.donegaldaily.com/wp-content/uploads/2022/02/Screenshot-2022-02-21-at-17.54.30.jpg",
"formatted_filename": "Screenshot at",
"rendered_width": 817,
"rendered_height": 419,
"original_width": 817,
"original_height": 419,
"format": "jpeg",
"general_meta": {
"url": "https://www.donegaldaily.com/2022/02/21/watch-incredible-storm-surge-at-portsalon-golf-club/",
"warc_filename": "crawl-data/CC-MAIN-2022-27/segments/1656103271864.14/warc/CC-MAIN-20220626192142-20220626222142-00308.warc.gz",
"warc_record_offset": 795020636,
"warc_record_length": 31271
}
},
"doc_id": 98496,
"page_id": 0,
"date_download": "2024-4-22"
},
"md": "<img src='/datasets/m-a-p/PIN-100M/resolve/main/content_image/98496-0.png'>\n\nThe golf course at Portsalon Golf Club took a battering today as a result of Storm Franklin.\n\nDonegal had been left battered and bruised overnight after Storm Franklin ripped across the county.\n\nThere were trees down on the approach roads to Donegal Town and in Gartan.\n\nThere were also trees down in Inishowen while there is also heavy water reported along the sides of roads with motorists asked to slow down and not put themselves in danger.\n\nDonegal’s coastline took a huge impact with massive waves reported along the coastline around the county.\n\nThe video, taken by Johnny Shields was taken from the tee box of the third hole.",
"license": "CC-BY-4.0",
"quality_signals": null,
"content_image": [
"content_image/98496-0.png"
],
"overall_image": "overall_image/98496-0.png"
}
3.3 An example of chinese-markdown
{
"id": 7,
"meta": {
"language": "zh",
"oi_exist": true,
"oi_source": "compiling",
"source_dataset": "chinese-markdown",
"ori_meta": null,
"doc_id": 7,
"page_id": null,
"date_download": "2024-04-30"
},
"md": "---\ntitle: 常见问题 QA\ncategory: 其它\norder: 1\n---\n\n> 持续更新中...\n> 如有问题可以到 <https://github.com/alibaba/ice/issues/new> 反馈\n\n## ICE 的浏览器兼容策略是什么\n\n由于 ICE 优先使用 React 16+,其需要的最低 IE 版本为 11,如果您需要在以下的版本使用,您可能需要引入一些 polyfill 来支持 `Map`, `Set` 等特性。参考[React 官网说明](https://reactjs.org/blog/2017/09/26/react-v16.0.html#javascript-environment-requirements)。\n\n以下代码可以帮助你在低版本 IE 下自动跳转到我们提供的提示浏览器升级页面。当然您也可以使用自定义的浏览器升级页面。\n\n```\n<!--[if lt IE 11]>\n<script>location.href = \"//www.taobao.com/markets/tbhome/ali-page-updater\"; </script>\n<![endif]-->\n```\n\n添加如上代码后,如果使用 IE11 及以下浏览器访问页面,则会自动跳转到统一引导升级浏览器的页面。\n\n## WebStorm/IDEA 编辑器卡顿现象\n\n由于项目在安装依赖后,产生文件夹 `node_modules` 含有较多的碎小文件,编辑器在索引文件引起的卡顿。\nWebStorm 中尤为明显,可通过 exclude `node_modules` 目录,不需要检索该文件夹下的内容。\n\n## 如何设置网页在浏览器 Tab 上面的 Icon (favicon)\n\n细心的同学可能会看到页面在浏览器 Tab 上面会有自定义的 Icon:\n\n![](//img.alicdn.com/tfs/TB1ct6bPpXXXXXYXFXXXXXXXXXX-484-82.png)\n\n如果你想要在自己站点上面加上这个 Icon 可以按照如下步骤添加:\n\n1. 准备一个 Icon,文件格式可以为 `.png` 或者 `.ico`,正方形,分辨率可以是 32x32px 或者 64x64px 文件体积要求尽可能小。\n2. 上传 CDN 拿到一个 url 或者在自己服务器配置静态资源服务\n3. 在 HTML 页面 `<head>` 标签里面添加如下代码:`<link rel=\"shortcut icon\" href=\"your-icon-url\">`\n ![](//img.alicdn.com/tfs/TB1IC53PpXXXXbmXVXXXXXXXXXX-1834-774.png)\n\n这样就添加成功啦!\n\n## 如何在页面显示原始的 HTML 内容\n\n出于安全方面的考虑,React 默认会将节点中 html 代码进行转义,比如:\n\n```jsx\nclass Demo extends Component {\n render() {\n const content = 'hello <span>world</span>';\n return <div>{content}</div>;\n }\n}\n\n// 输出 hello <span>world</span>\n```\n\n如上,`<span>` 标签并不会在页面上被解析,而是被当成字符串输出了。React 提供了 `dangerouslySetInnerHTML` 属性帮助我们进行类似 `innerHTML` 的操作:\n\n```jsx\nclass Demo extends Component {\n render() {\n const content = 'hello <span>world</span>';\n return <div dangerouslySetInnerHTML={{ __html: content }} />;\n }\n}\n\n// 输出 hello world\n```\n\n更多内容请参考 [Dangerously Set innerHTML](https://reactjs.org/docs/dom-elements.html#dangerouslysetinnerhtml)\n\n## 之前创建的项目,遇到如下报错怎么办\n\n![截图](content_image/7-0.png)\n\n这是由于 ES6 Modules 的标准在物料中不兼容导致的。您可以把 `src/navs.js` 中最后一行修改为:\n\n```js\nexport const headerNavs = transform([\n ...autoGenHeaderNavs,\n ...customHeaderNavs,\n]);\n\nexport const asideNavs = transform([...autoGenAsideNavs, ...customAsideNavs]);\n```",
"license": "MIT",
"quality_signals": null,
"content_image": [
"content_image/7-0.png"
],
"overall_image": "overall_image/7.png"
}
3.4 An example of leetcode
{
"id": 1,
"meta": {
"language": "en",
"doc_id": 1,
"page_id": null,
"oi_exist": true,
"oi_source": "compiling",
"source_dataset": "leetcode",
"date_download": "2024-05-05",
"ori_meta": {
"slug": "two-sum",
"difficulty": "Easy"
}
},
"quality_signals": null,
"license": "MIT",
"content_image": null,
"md": "# Two Sum\n\n- slug: two-sum\n- difficulty: Easy\n\nGiven an array of integers `nums` and an integer `target`, return _indices of the two numbers such that they add up to `target`_.\n\nYou may assume that each input would have **_exactly_ one solution**, and you may not use the _same_ element twice.\n\nYou can return the answer in any order.\n\n**Example 1:**\n\n**Input:** nums = \\[2,7,11,15\\], target = 9\n**Output:** \\[0,1\\]\n**Explanation:** Because nums\\[0\\] + nums\\[1\\] == 9, we return \\[0, 1\\].\n\n**Example 2:**\n\n**Input:** nums = \\[3,2,4\\], target = 6\n**Output:** \\[1,2\\]\n\n**Example 3:**\n\n**Input:** nums = \\[3,3\\], target = 6\n**Output:** \\[0,1\\]\n\n**Constraints:**\n\n* `2 <= nums.length <= 104`\n* `-109 <= nums[i] <= 109`\n* `-109 <= target <= 109`\n* **Only one valid answer exists.**\n\n**Follow-up:** Can you come up with an algorithm that is less than `O(n2)` time complexity?\n\n## A solution in Java\n\n```java\nimport java.util.HashMap;\nimport java.util.Map;\n\npublic int[] twoSum(int[] nums, int target) {\n Map<Integer, Integer> map = new HashMap<>();\n for (int i = 0; i < nums.length; i++) {\n int complement = target - nums[i];\n if (map.containsKey(complement)) {\n return new int[]{map.get(complement), i};\n }\n map.put(nums[i], i);\n }\n throw new IllegalArgumentException(\"No two sum solution\");\n}\n```\nThe algorithm leverages a hash map (unordered_map in C++, HashMap in Java, dictionary in Python, and Map in JavaScript). It iterates through the given 'nums' array and calculates the complementary value (target - current value). If the complementary value is already in the hash map, it means that we found a solution, and we return those indices. If the complement is not in the hash map, we store the current element in the hash map with its index. If the algorithm doesn't find the solution, it returns an empty array or throws an exception (in Java).\n\nThis approach has a time complexity of O(n) and a space complexity of O(n) as well.\n \n\n## A solution in C++\n\n```cpp\n#include <vector>\n#include <unordered_map>\n\nstd::vector<int> twoSum(std::vector<int>& nums, int target) {\n std::unordered_map<int, int> map;\n for (int i = 0; i < nums.size(); i++) {\n int complement = target - nums[i];\n if (map.find(complement) != map.end()) {\n return {map[complement], i};\n }\n map[nums[i]] = i;\n }\n return {};\n}\n```\nThe algorithm leverages a hash map (unordered_map in C++, HashMap in Java, dictionary in Python, and Map in JavaScript). It iterates through the given 'nums' array and calculates the complementary value (target - current value). If the complementary value is already in the hash map, it means that we found a solution, and we return those indices. If the complement is not in the hash map, we store the current element in the hash map with its index. If the algorithm doesn't find the solution, it returns an empty array or throws an exception (in Java).\n\nThis approach has a time complexity of O(n) and a space complexity of O(n) as well.\n \n\n## A solution in Python\n\n```python\ndef twoSum(nums, target):\n map = {}\n for i, num in enumerate(nums):\n complement = target - num\n if complement in map:\n return [map[complement], i]\n map[num] = i\n return []\n```\nThe algorithm leverages a hash map (unordered_map in C++, HashMap in Java, dictionary in Python, and Map in JavaScript). It iterates through the given 'nums' array and calculates the complementary value (target - current value). If the complementary value is already in the hash map, it means that we found a solution, and we return those indices. If the complement is not in the hash map, we store the current element in the hash map with its index. If the algorithm doesn't find the solution, it returns an empty array or throws an exception (in Java).\n\nThis approach has a time complexity of O(n) and a space complexity of O(n) as well.\n \n\n## A solution in Javascript\n\n```javascript\nfunction twoSum(nums, target) {\n const map = new Map();\n for (let i = 0; i < nums.length; i++) {\n const complement = target - nums[i];\n if (map.has(complement)) {\n return [map.get(complement), i];\n }\n map.set(nums[i], i);\n }\n return [];\n}\n```\nThe algorithm leverages a hash map (unordered_map in C++, HashMap in Java, dictionary in Python, and Map in JavaScript). It iterates through the given 'nums' array and calculates the complementary value (target - current value). If the complementary value is already in the hash map, it means that we found a solution, and we return those indices. If the complement is not in the hash map, we store the current element in the hash map with its index. If the algorithm doesn't find the solution, it returns an empty array or throws an exception (in Java).\n\nThis approach has a time complexity of O(n) and a space complexity of O(n) as well.\n \n",
"overall_image": "overall_image/1.png"
}
3.5 An example of linux-cn
{
"id": 8,
"meta": {
"language": "zh",
"doc_id": 134,
"page_id": null,
"oi_exist": true,
"oi_source": "compiling",
"source_dataset": "linux-cn",
"date_download": "2024-05-06",
"ori_meta": {
"title": "Ubuntu 11.04正式发布!",
"author": "",
"fromurl": "",
"summary": "刚才接到的消息,Ubuntu 11.04已经正式发布!\r\n\r\n超快!易用!免费!\r\nUbuntu操作系统为世界上数以百万计的电脑、上网本和服务器提供了动力!\r\nUbuntu可以为你完成各种工作,管理你的文件、打印机、摄像头和MP3!并且它 ...",
"pic": "/data/attachment/album/201104/28/193933lnqqwwwn8l64wbn1.jpg.thumb.jpg",
"largepic": "/data/attachment/album/201104/28/193933lnqqwwwn8l64wbn1.jpg",
"titlepic": false,
"thumb": false,
"islctt": false,
"selector": "",
"translator": "",
"reviewer": "",
"editorchoice": false,
"tags": [
"Ubuntu 11.04",
"发布"
],
"category": "新闻",
"count": {
"commentnum": 0,
"favtimes": 0,
"likes": 0,
"sharetimes": 1,
"viewnum": 6165
},
"comments_data": [
],
"related": [
],
"excerpt": "刚才接到的消息,Ubuntu 11.04已经正式发布!\r\n\r\n超快!易用!免费!\r\nUbuntu操作系统为世界上数以百万计的电脑、上网本和服务器提供了动力!\r\nUbuntu可以为你完成各种工作,管理你的文件、打印机、摄像头和MP3!并且它 ...",
"date": "2011-05-09 13:24:00",
"updated": "2011-05-09 13:24:00",
"id": 134,
"permalink": "/article-134-1.html"
}
},
"quality_signals": null,
"license": "CC-BY-NC-4.0",
"content_image": [
"content_image/album_201104_28_193933lnqqwwwn8l64wbn1.jpg",
"content_image/album_201104_28_193935sy4l3bh4bh1ycbbc.jpg",
"content_image/album_201104_28_193936lyvc36fwv91l1359.jpg",
"content_image/album_201104_28_19393800rpr8pf0s8p8w0s.jpg"
],
"md": "# Ubuntu 11.04正式发布!\n\n刚才接到的消息,Ubuntu 11.04已经正式发布! \n \n 超快!易用!免费! \n Ubuntu操作系统为世界上数以百万计的电脑、上网本和服务器提供了动力! \n Ubuntu可以为你完成各种工作,管理你的文件、打印机、摄像头和MP3!并且它还带有数千个免费程序。 \n \n <img src=\"content_image/album_201104_28_193933lnqqwwwn8l64wbn1.jpg\" alt=\"\" title=\"\"> \n **数千个免费程序** \n \n <img src=\"content_image/album_201104_28_193935sy4l3bh4bh1ycbbc.jpg\" alt=\"\" title=\"\"> \n **终生免费升级** \n \n <img src=\"content_image/album_201104_28_193936lyvc36fwv91l1359.jpg\" alt=\"\" title=\"\"> \n **内建的病毒防护** \n \n <img src=\"content_image/album_201104_28_19393800rpr8pf0s8p8w0s.jpg\" alt=\"\" title=\"\"> \n **云中的音乐** \n \n 下载地址:\n\n\n\n\n> 列表: \n> <http://releases.ubuntu.com/11.04/> \n> 桌面版: \n> <http://www.ubuntu.com/download/ubuntu/download> \n> 服务器版: \n> <http://www.ubuntu.com/download/server/download>\n\n\n\n \n BT种子地址:\n\n\n\n\n> \n> * [ubuntu-11.04-alternate-amd64.iso.torrent](http://releases.ubuntu.com/11.04/ubuntu-11.04-alternate-amd64.iso.torrent)\n> * [ubuntu-11.04-alternate-i386.iso.torrent](http://releases.ubuntu.com/11.04/ubuntu-11.04-alternate-i386.iso.torrent)\n> * [ubuntu-11.04-desktop-amd64.iso.torrent](http://releases.ubuntu.com/11.04/ubuntu-11.04-desktop-amd64.iso.torrent)\n> * [ubuntu-11.04-desktop-i386.iso.torrent](http://releases.ubuntu.com/11.04/ubuntu-11.04-desktop-i386.iso.torrent)\n> * [ubuntu-11.04-netbook-i386.iso.torrent](http://releases.ubuntu.com/11.04/ubuntu-11.04-netbook-i386.iso.torrent)\n> * [ubuntu-11.04-server-amd64.iso.torrent](http://releases.ubuntu.com/11.04/ubuntu-11.04-server-amd64.iso.torrent)\n> * [ubuntu-11.04-server-i386.iso.torrent](http://releases.ubuntu.com/11.04/ubuntu-11.04-server-i386.iso.torrent)\n> \n> \n> \n\n\n\n \n 当前尚无DVD版本出现 \n \n \n \n 该贴已经同步到 [wxy的微博](http://api.t.sina.com.cn/1747813575/statuses/9786340397) \n \n \n \n\n\n \n\n\n*[本文内容由 wxy 提供](thread-7135-1-1.html)*\n \n\n\n\n 已同步至 [wxy的微博](http://api.t.sina.com.cn/1747813575/statuses/10347235925)",
"overall_image": "overall_image/134.png"
}
3.6 An example of mmc-core-ff
{
"meta": {
"language": "en",
"oi_exist": true,
"oi_source": "compiling",
"doc_id": 11,
"page_id": 0,
"source_dataset": "mmc4-core-ff",
"source_jsonl": "mmc4-core-ff/docs_no_face_shard_10375_v3.jsonl",
"ori_meta": {
"url": "http://position-light.blogspot.com/2015/06/whats-up-with-reading-and-northern.html",
"text_list": [
"The Position Light: What's Up with the Reading and Northern?",
"The Reading and Northern has been a rare bright spot in the world of signaling.",
"A commitment to its Reading heritage has resulted in numerous signaling structures being preserved along with attempts to install \"classic\" signaling where new signaling is being installed on its mostly unsignaled territory.",
"The R&N also controls the former Conrail Lehigh Line and for one reason or another has decided not to touch the surviving LVRR signaling along that route.",
"Still, I am still not completely clear on the full extent of the R&N's signal preservation efforts as hinted at in a number of photos I have come across.",
"We begin near the town of Mach Chunk where the R&N runs a tourist operation in the Lehigh Gorge.",
"i have bicycles along the right of way a number of time and I never noticed this cantilever mast and its freshly painted (albeit turned) signals.",
"Is this a sign of a new interlocking or signaling project?",
"Pottsville is the location of some preserved Reading signal bridges and a tower.",
"Both have been out of service for decades, but then I find a photo showing what appears to be a lit Reading US&S three headed signal displaying a restricting indication.",
"Could be that the photographer is having some fun with Photoshoppe, or it could be another R&N instance of an \"island\" interlocking designed to eliminate the need for crews to hand throw switches.",
"Clearly I need to take another field trip to the area, but if anyone has any information (or photos) please let me know.",
"Yes, that dual Signal Cantilever was taken from Schuylkill Haven and refurbished and placed into service as part of the new CP COAL Interlocking aptly named for the nearby town of Coalport.",
"This new interlocking controls R&N connector feed track and switch from Nesquehoning Jct onto the NS Lehigh Line.",
"Be aware, that R&N is constructing a new Y connector bridge over the Lehigh River.",
"The switch at Nesquehoning Jct as well at the Y connecting point northwest along the old CNJ into Nesquehoning and the other apex connecting point at the old Lehigh Valley overpass will make up the new Y along with the new bridge.",
"Expect the R&N to make all 3 points new CP Interlockings as NS will also use the new route to get to Reading & Philadelphia directly off the Lehigh Line.",
"Coming attractions for 2016.",
"Also, R&N is talking about a new signaled controlled passing track siding midway between Port Clinton and Reading.",
"Believe they will leverage the siding that's already in place (don't know name of that area, but, between two grade crossings).",
"Could see even more new R&N signaling if Distants are added to the mix as well.",
"Thank you for the information!",
"I knew something was up with them.",
"Mike - Have updates with pics for R&N.",
"Can share them with you but not sure of best way via e-mail or blog address.",
"Can you provide and I can forward what I have?",
"You can drop a line to sturmovik@gmail.com Thanks!"
],
"image_info": [
{
"face_detections": null,
"image_id": "11-0.png",
"image_name": "338146395110.jpg",
"matched_sim": 0.2532651722,
"matched_text_index": 12,
"raw_url": "http://www.railpictures.net/images/d2/6/0/1/6601.1425352225.jpg"
},
{
"face_detections": null,
"image_id": "11-1.png",
"image_name": "75dca5908f72.jpg",
"matched_sim": 0.2665729225,
"matched_text_index": 18,
"raw_url": "http://www.railpictures.net/images/d2/0/3/5/5035.1411414707.jpg"
}
],
"similarity_matrix": [
[
0.2208167017,
0.2216126323,
0.2174896896,
0.2322429568,
0.1835552454,
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"date_download": "2024-05-11"
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"md": "The Position Light: What's Up with the Reading and Northern? The Reading and Northern has been a rare bright spot in the world of signaling. A commitment to its Reading heritage has resulted in numerous signaling structures being preserved along with attempts to install \"classic\" signaling where new signaling is being installed on its mostly unsignaled territory. The R&N also controls the former Conrail Lehigh Line and for one reason or another has decided not to touch the surviving LVRR signaling along that route. Still, I am still not completely clear on the full extent of the R&N's signal preservation efforts as hinted at in a number of photos I have come across. We begin near the town of Mach Chunk where the R&N runs a tourist operation in the Lehigh Gorge. i have bicycles along the right of way a number of time and I never noticed this cantilever mast and its freshly painted (albeit turned) signals. Is this a sign of a new interlocking or signaling project? Pottsville is the location of some preserved Reading signal bridges and a tower. Both have been out of service for decades, but then I find a photo showing what appears to be a lit Reading US&S three headed signal displaying a restricting indication. Could be that the photographer is having some fun with Photoshoppe, or it could be another R&N instance of an \"island\" interlocking designed to eliminate the need for crews to hand throw switches. Clearly I need to take another field trip to the area, but if anyone has any information (or photos) please let me know. Yes, that dual Signal Cantilever was taken from Schuylkill Haven and refurbished and placed into service as part of the new CP COAL Interlocking aptly named for the nearby town of Coalport.\n\n\n\n<img src='/datasets/m-a-p/PIN-100M/resolve/main/content_image/11-0.png'>\n\nThis new interlocking controls R&N connector feed track and switch from Nesquehoning Jct onto the NS Lehigh Line. Be aware, that R&N is constructing a new Y connector bridge over the Lehigh River. The switch at Nesquehoning Jct as well at the Y connecting point northwest along the old CNJ into Nesquehoning and the other apex connecting point at the old Lehigh Valley overpass will make up the new Y along with the new bridge. Expect the R&N to make all 3 points new CP Interlockings as NS will also use the new route to get to Reading & Philadelphia directly off the Lehigh Line. Coming attractions for 2016. Also, R&N is talking about a new signaled controlled passing track siding midway between Port Clinton and Reading.\n\n\n\n<img src='/datasets/m-a-p/PIN-100M/resolve/main/content_image/11-1.png'>\n\nBelieve they will leverage the siding that's already in place (don't know name of that area, but, between two grade crossings). Could see even more new R&N signaling if Distants are added to the mix as well. Thank you for the information! I knew something was up with them. Mike - Have updates with pics for R&N. Can share them wi",
"license": "ODC-BY",
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}
3.7 An example of PG19
{
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"url": "http://www.gutenberg.org/ebooks/9304",
"short_book_title": "Initiation into Philosophy by Emile Faguet",
"publication_date": 1914
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"md": "# Initiation into Philosophy by Emile Faguet \n\n Produced by Ted Garvin, Thomas Hutchinson and PG Distributed Proofreaders \n\n \n\n \n\n \n\n \n\n INITIATION INTO PHILOSOPHY \n\n \nBy Emile Faguet \n\n Of the French Academy \n\n \nAuthor of \"The Cult Of Incompetence,\" \"Initiation Into Literature,\" etc. \n\n \nTranslated from the French by Sir Homer Gordon, Bart. \n\n 1914 \n\n \n\n \nPREFACE \n\n This volume, as indicated by the title, is designed to show the way to the beginner, to satisfy and more espec ially to excite his initial curiosity. It affords an adequate idea of the march of facts and of ideas. The rea der is led, somewhat rapidly, from the remote origins to the most recent efforts of the human mind. \n\n It should be a convenient repertory to which the mind may revert in order to see broadly the general opinion o f an epoch--and what connected it with those that followed or preceded it. It aims above all at being _a frame _ in which can conveniently be inscribed, in the course of further studies, new conceptions more detailed and more thoroughly examined. \n\n It will have fulfilled its design should it incite to research and meditation, and if it prepares for them cor rectly. \n\n E. FAGUET. \n\n \n\n \nCONTENTS \n\n \nPART I ANTIQUITY \n\n \nCHAPTER I BEFORE SOCRATES \n\n Philosophical Interpreters of the Universe, of the Creation and Constitution of the World. \n\n \nCHAPTER II THE SOPHISTS \n\n Logicians and Professors of Logic, and of the Analysis of Ideas, and of Discussion. \n\n \nCHAPTER III SOCRATES \n\n Philosophy Entirely Reduced to Morality, and Morality Considered as the End of all Intellectual Activity. \n\n \nCHAPTER IV PLATO \n\n Plato, like Socrates, is Pre-eminently a Moralist, but he Reverts to General Consideration of the Universe, an d Deals with Politics and Legislation. \n\n \nCHAPTER V ARISTOTLE",
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3.8 An example of PIN-PMC
{
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"date_download": "2024-05-28"
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"md": "# A Simple Stereoscopic Endoscope\n\n## Abstract\n\nA very simple method is described for producing and viewing stereoscopic endoscopic images.\nThe addition of two simple prisms to the end of a conventional television-monitored endoscope with a simple viewing device produces a stereoscopic endoscope which appears to be suitable for surgical use......",
"license": [
"https://www.ncbi.nlm.nih.gov/pmc/tools/textmining/"
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"overall_image/PMC3015258/jsls-2-1-67_2.png"
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"id": 60827
}
4 License
For data generated or produced by us, please adhere to the Apache 2.0 License.
For data sourced from third parties, compliance with the respective third-party licenses is required.
Citation
@misc{2406.13923,
Author = {Junjie Wang and Yin Zhang and Yatai Ji and Yuxiang Zhang and Chunyang Jiang and Yubo Wang and Kang Zhu and Zekun Wang and Tiezhen Wang and Wenhao Huang and Jie Fu and Bei Chen and Qunshu Lin and Minghao Liu and Ge Zhang and Wenhu Chen},
Title = {PIN: A Knowledge-Intensive Dataset for Paired and Interleaved Multimodal Documents},
Year = {2024},
Eprint = {arXiv:2406.13923},
}
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